8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): September 9, 2010

PEBBLEBROOK HOTEL TRUST

(Exact name of registrant as specified in its charter)

Maryland	001-34571	27-1055421
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)

2 Bethesda Metro Center, Suite 1530
Bethesda, Maryland	20814
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (240) 507-1300

Not Applicable

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

Ground Lease with the United States Government

In connection with the acquisition of the Hotel Monaco Washington DC (the “Hotel”), described in Item 2.01 of this Current Report on Form 8-K (the “Acquisition”), a subsidiary of Pebblebrook Hotel Trust (the “Company”) assumed from Tariff Building Associates, L.P. (“Tariff Building Associates”), an unaffiliated third party, the noncancelable ground lease for the building property and land (the “Lease”) with the United States Government acting by and through the Administrator of General Services. Pursuant to the Lease, which expires on November 30, 2059, the Company is required to pay the greater of a base rent or a percentage of gross hotel revenues in excess of $10,000,000 (as adjusted for consumer price index (“CPI”) increases) and gross food and beverage revenues in excess of $4,000,000 (as adjusted for CPI increases), as defined in the Lease. The percentage of gross hotel revenues and food and beverage revenues ranges from 3% in the initial years to 8.5% in the later years of the Lease. Base rent is adjusted upward for the increase, if any, in the CPI. A copy of the Lease and the Assignment and Assumption of GSA Lease, pursuant to which the Lease was assumed from Tariff Building Associates, are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and is incorporated by reference herein.

Note Payable Obligation and Accompanying Agreements

Also in connection with the Acquisition, a subsidiary of the Company assumed from Tariff Building Associates, an unaffiliated third party, a note payable obligation collateralized by the Hotel (the “Promissory Note”). Cash from the Hotel’s operations account may be used to fund debt service. The outstanding principal balance on the Promissory Note is $35 million. The Promissory Note has a fixed interest rate of 5.68% per annum and requires monthly interest-only payments through March 11, 2012, the maturity date. A copy of the Promissory Note and the Assumption Agreement, pursuant to which the Promissory Note was assigned from Tariff Building Associates, are filed as Exhibits 10.3 and 10.4, respectively, to this Current Report on Form 8-K and are incorporated by reference herein. As a condition to the loan assumption, the Company’s operating partnership was required to execute a guaranty, pursuant to which it agrees to indemnify the lender for losses arising out of (a) the borrower’s failure to comply with certain “special-purpose entity” provisions in the Deed of Trust, (b) the borrower’s consent to any amendment or termination of the Lease or certain other operating leases, (c) the borrower’s failure to cause all rent payments to be deposited into the applicable rent account or, after an event of default, into a central account, or (d) the lender’s inability to exercise its remedies under the loan documents during any period of when any event of default has occurred and is continuing under the loan documents.

In addition to, and in conjunction with, the Promissory Note, the Company’s subsidiary assumed, pursuant to the Assumption Agreement, a Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing (the “Deed of Trust”), dated as of February 23, 2007, pursuant to which the Promissory Note was secured, and all of the other loan documents. A copy of the Deed of Trust is filed as Exhibit 10.5 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 2.01. Completion of Acquisition or Disposition of Assets.

On September 9, 2010, a subsidiary of the Company completed its acquisition of the 183-room Hotel Monaco Washington DC for $74.0 million from Tariff Building Associates, L.P., an unaffiliated third party. The Hotel will continue to be managed by Kimpton Hotel and Restaurants Group, LLC (“Kimpton”), the current manager of the Hotel, pursuant to a management agreement between the Company’s taxable real estate investment trust subsidiary and Kimpton. The management agreement matures on June 30, 2032 and provides for base management fees and incentive management fees within the ranges described in the Company’s final prospectus for its initial public offering filed with the Securities and Exchange Commission pursuant to Rule 424 (b) under the Securities Act of 1933, as amended (the “Securities Act”). The management agreement is terminable upon sale with the payment of a termination fee. In addition, the agreement contains other terms and provisions customarily found in hotel management agreements. The transaction was funded with $39.0 million of cash from the Company’s initial public offering and the assumption of the $35.0 million mortgage more fully described in Item 1.01 of this Current Report on Form 8-K.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this item 2.03.

Item 7.01. Regulation FD Disclosure.

The Company issued a press release on September 9, 2010 announcing that it had closed on the previously announced acquisition of the Hotel Monaco Washington DC located in Washington, D.C. A copy of that press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

A copy of materials about this property that the Company intends to distribute is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated by reference herein. Additionally, the Company has posted those materials in the investor relations section of its website at www.pebblebrookhotels.com.

This information, including the exhibits attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Current Report on Form 8-K, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act, regardless of any incorporation by reference language in any of those filings. This Current Report on Form 8-K will not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely by Regulation FD.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

In reliance on General Instruction B.3. to Form 8-K, the financial statements required by Item 9.01(a) are incorporated herein by reference to the Company’s Registration Statement on Form S-11 filed with the Securities and Exchange Commission on July 13, 2010.

(b) Pro Forma Financial Information.

In reliance on General Instruction B.3. to Form 8-K, the pro forma financial information required by Item 9.01(b) is incorporated herein by reference to the Company’s Registration Statement on Form S-11 filed with the Securities and Exchange Commission on July 13, 2010.

(d) Exhibits.

Exhibit No.	Description
10.1	Lease, dated December 1, 1999, by and between the United States of America, acting through the Administrator of General Services, and Tariff Building Associates, L.P.
10.2	Assignment and Assumption of GSA Lease, by and among the United States of America, acting by and through the Administrator of General Services and Authorized Representatives, Tariff Building Associates, L.P., and Jayhawk Owner LLC
10.3	Promissory Note by Tariff Building Associates, L.P. in favor of Wachovia Bank, National Association
10.4	Assumption Agreement, by and among Bank of America, N.A., as successor to Wells Fargo Bank, N.A., as trustee for the registered holders of COBALT CMBS Commercial Mortgage Trust 2007-C2, Commercial Mortgage Pass-Through Certificates, Series 2007-C2, Tariff Building Associates, L.P., Kimpton Development Opportunity Fund, L.P., Jayhawk Owner LLC, and Pebblebrook Hotel, L.P.
10.5	Deed of Trust, Security Agreement, Assignment of Rents and Fixtures Filing dated as of February 23, 2007 by and among Tariff Building Associates, L.P., as borrower, First American Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as lender
99.1	Press release issued on September 9, 2010
99.2	Materials about the Hotel Monaco Washington DC

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	PEBBLEBROOK HOTEL TRUST
September 13, 2010	By:	/s/ Raymond D. Martz
		Name:	Raymond D. Martz
		Title:	Executive Vice President, Chief Financial Officer, Treasurer and Secretary

EXHIBIT INDEX

Exhibit No.	Description
10.1	Lease, dated December 1, 1999, by and between the United States of America, acting through the Administrator of General Services, and Tariff Building Associates, L.P.
10.2	Assignment and Assumption of GSA Lease, by and among the United States of America, acting by and through the Administrator of General Services and Authorized Representatives, Tariff Building Associates, L.P., and Jayhawk Owner LLC
10.3	Promissory Note by Tariff Building Associates, L.P. in favor of Wachovia Bank, National Association
10.4	Assumption Agreement, by and among Bank of America, N.A., as successor to Wells Fargo Bank, N.A., as trustee for the registered holders of COBALT CMBS Commercial Mortgage Trust 2007-C2, Commercial Mortgage Pass-Through Certificates, Series 2007-C2, Tariff Building Associates, L.P., Kimpton Development Opportunity Fund, L.P., Jayhawk Owner LLC and Pebblebrook Hotel, L.P.
10.5	Deed of Trust, Security Agreement, Assignment of Rents and Fixtures Filing dated as of February 23, 2007 by and among Tariff Building Associates, L.P., as borrower, First American Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as lender
99.1	Press release issued on September 9, 2010.
99.2	Materials about the Hotel Monaco Washington DC.

EX-10.1

Exhibit 10.1

LEASE

BY AND BETWEEN

THE UNITED STATES OF AMERICA,

ACTING BY AND THROUGH
THE ADMINISTRATOR OF GENERAL SERVICES
AND

TARIFF BUILDING ASSOCIATES, L.P.

TABLE OF CONTENTS

	Page(s)
1. DEFINITIONS		2
1.1. Certain Terms Defined		2
2. PREMISES		18
2.1. Lease of Land and Improvements		18
2.2. Vault Space		19
2.3. Lease as Master Lease		19
2.4. “As Is” Condition		19
2.5. Landlord’s Access		19
2.6. Access by the Smithsonian Institution		20
2.7. Public Access		20
2.8. Signs		21
2.9. Compliance with Historic Preservation Standards		21
3. [RESERVED]		21
4. TERM		21
4.1. Commencement		21
4.2. Lease Conditional on Memorandum of Agreement		21
4.3. Holding Over		22
5. RENT AND RESERVES		22
5.1. Annual Base Rent		22
5.2. Percentage Rent		22
5.3. Participation Rent		23
5.4. Proceeds from Sale or Refinancing		23
5.5. Statements		24
5.5.1. Annual Statement		24
5.5.2. Quarterly Statement.		24
5.5.3. Statement in Connection with First Sale or Prior Refinancing		24
5.6. Audit Of Annual Statements		24
5.7. Retention Of Records		25
5.8. Contributions To Reserves		25
5.8.1. FF&E Reserve		25
5.8.2. Capital Maintenance Reserve		25
5.8.3. Tenant’s Obligation to Deliver Statements and to Make Deposits		26
5.9. Deposits and Contributions as Rent		26

TABLE OF CONTENTS (cont’d)

	Page(s)
5.10. General Rent Provisions		26
5.11. Net Lease		26
6. STANDARD OF OPERATION AND USE		26
6.1. Permitted Use		26
6.2. Certain Uses		27
6.3. No Use By Public Without Restriction		27
6.4. Continuous Occupancy		28
7. REPAIRS AND MAINTENANCE		28
7.1. Tenant		28
7.2. Landlord		29
7.3. Compliance with Laws		29
7.4. Contest of Obligation		29
7.5. Certain Termination Rights		30
7.5.1. Uneconomic or Infeasible Costs		30
7.5.2. Last Five Years		30
7.5.3. Distribution of Insurance Proceeds and Reserves		31
8. ALTERATIONS		31
8.1. Right to Make Alterations		31
8.2. Additional Requirements		31
9. TENANT’S PROPERTY, ETC.		32
9.1. Ownership of Tenant’s Property		32
9.2. Leased and Financed Property, Etc.		32
9.3. Name of Building; Intellectual Property		33
10. MECHANICS’ LIENS		33
10.1. No Liens		33
10.2. No Consent of Landlord		34
10.3. Notice of Liens		34
11. TAXES		34
11.1. Real Property Taxes		34
11.2. BID Taxes		34
11.3. Personal Property Taxes		35
11.4. Election to Pay In Installments		35
11.5. Proration		35
11.6. Contest		35
11.7. Landlord and		35

TABLE OF CONTENTS (cont’d)

	Page(s)
12. UTILITIES AND SERVICES		36
12.1. Tenant Pays For Its Utilities		36
12.2. Steam Service		36
12.3. Landlord’s Liability		36
13. INSURANCE		37
13.1. Tenant’s Fire and Extended Coverage		37
13.2. Tenant’s Worker’s Compensation, Employer Liability, Commercial General Liability and Commercial Automobile Liability Coverage		38
13.3. Policies and Certificates		38
13.4. Blanket Coverage		39
13.5. Subrogation Waiver		39
13.6. Tenant Insurance Primary		39
14. INDEMNIFICATION OF LANDLORD		39
14.1. Tenant’s Obligation		39
14.2. Survival of Provision		39
14.3. Obligation Not Affected By Failure of Insurance Carriers		40
14.4. Tenant to Defend Claims Against Landlord		40
15. ASSIGNMENT AND SUBLETTING		40
15.1. Operator		40
15.2. Assignment or Major Sublease		40
15.3. Deemed Assignments		41
15.4. Costs and Expenses		42
15.5. Reasonable Consent		42
15.6. Subleases and Restaurant Leases		43
15.7. Anti-Assignment Acts Limitation		44
16. SALE OR MORTGAGE OF LANDLORD’S INTEREST;
TENANT’S RIGHT OF FIRST REFUSAL; TENANT’S OPTION		44
16.1. Landlord’s Right to Assign		44
16.2. Right of First Offer		45
16.2.1. Notice		45
16.2.2. Option Exercise		45
16.2.3. Option Not Exercised		45
16.2.4. Delayed Sale		45
16.2.5. Less Favorable Offer		45
16.2.6. Exclusions		46
16.2.7. Foreclosure		46
16.2.8. Default		46

TABLE OF CONTENTS (cont’d)

	Page(s)
16.2.9. Non-Assignable		46
16.3. Sale by Landlord		46
16.4. Merger		47
17. LEASE STATUS REPORTS; LEGAL OPINIONS		47
17.1. Lease Status Reports		47
17.2. Legal Opinions		48
17.2.1. Landlord’s Legal Opinion		48
17.2.2. Tenant’s Legal Opinion		48
18. LEASEHOLD MORTGAGES		48
18.1. Definitions		48
18.1.1. Assignment For Security		48
18.1.2. Leasehold Mortgage		49
18.1.3. Leasehold Mortgagee		49
18.1.4. Mortgaged Premises		49
18.2. Permitted Assignments For Security		49
18.3. No Merger or Termination By Reason Of Foreclosure, Sale or Surrender		49
18.4. Leasehold Mortgagee Succeeds to Tenant’s Interest; Liability of Leasehold Mortgagee Limited		50
18.5. Right of Leasehold Mortgagee To Cure Default		50
18.5.1. Notice		50
18.5.2. Failure to Cure		51
18.5.3. Certain Limitations on Liability of Leasehold Mortgagee		52
18.6. Assignment After Cure		52
18.6.1. Notice		52
18.6.2. Failure to Cure		52
18.7. Continuing Offer		53
18.8. New Lease and Survival		53
18.9. Additional Rights of Leasehold Mortgagee		54
18.10. Multiple Mortgagees		54
18.11. Condemnation Proceeds		54
18.12. Execution of Documents		55
18.13. Notice		55
18.14. Disputes Over Lien Priority		55
19. NOTICE; APPROVALS		55
19.1. Procedure		55
19.2. Form and Effect of Notice		56
19.3. Approvals		57

TABLE OF CONTENTS (cont’d)

	Page(s)
20. RECORDATION, COVENANTS RUNNING WITH THE LAND		57
20.1. Recordation of Memorandum of Lease		57
20.2. Covenants Running With the Land		57
21. NO PARTNERSHIP		58
22. DAMAGE OR DESTRUCTION OF PREMISES; CONSTRUCTION OBLIGATIONS AND STANDARDS		58
22.1. Insured Casualty		58
22.1.1. Tenant’s Obligation to Repair		58
22.1.2. Termination Right on Certain Casualties		58
22.1.3. Use of Proceeds		59
23. APPROPRIATION		59
23.1. Total Taking		59
23.2. Partial Taking: Repair and Restoration By Tenant		59
23.3. Rights Of Termination		58
23.4. Allocation Of Award		60
23.5. Temporary Appropriation		61
23.6. Representation		61
24. SURRENDER OF PREMISES		61
24.1. Required Condition		61
24.2. Termination Before Substantial Completion		62
24.3. Other Contracts and Subleases		64
25. INSOLVENCY OR BANKRUPTCY		65
26. QUIET ENJOYMENT BY TENANT		65
26.1. Quiet Enjoyment		65
26.2. Compliance With Applicable Laws		65
27. DEFAULT; RIGHTS ON CERTAIN TERMINATION EVENTS		65
27.1. Tenant’s Default		65
27.1.1. Monetary Breach		65
27. 1.2. Non-Monetary Breach		66
27.1.3. Insolvency		66
27.1.4. Remedy on Occurrence of Event of Default		66
27.1.5. Computation of Rent for Purposes of Default		67
27.1.6. Remedy on Occurrence of a Non-Monetary Breach		68
27.1.7. No Termination; Waiver of Remedies; Certain Limitations on Remedies of Landlord		68

TABLE OF CONTENTS (cont’d)

	Page(s)
27.1.8. Rights of Leasehold Mortgagee		68
27.1.9. Limitation on Recourse		68
27.1.10. Landlord’s Right to Perform on Tenant’s Breach		69
27.2. Landlord’s Default		69
27.2.1. Landlord’s Liability		69
27.2.2. Tenant’s Additional Rights		69
27.2.3. Limitation on Recourse To Premises		70
27.3. Termination Procedures		70
27.4. Waiver; Remedies Cumulative		70
28. DISPUTE RESOLUTION		71
29. OBLIGATIONS RELATING TO UNAVOIDABLE DELAY AND LANDLORD DELAY		71
30. DELIVERY OF OCCUPANCY OF PREMISES		71
30.1. Occupancy Date		71
30.2. Tenant Not Purchasing Landlord’s Business		72
31. HAZARDOUS MATERIALS		72
31.1. Abatement of Hazardous Materials		72
31.2. Landlord’s and Tenant’s Obligations		72
31.2.1. Mutual Covenants		72
31.2.2. Landlord’s Covenant Regarding Hazardous Materials		73
31.2.3. Operations and Maintenance Program		73
31.3. Tenant’s Remediation Rights and Obligations		74
31.4. Inspection; Tests		74
31.5. Termination; Abatement of Rent		74
32. MISCELLANEOUS		74
32.1. Confidentiality		74
32.2. Governing Law		75
32.3. Successors and Assigns		75
32.4. Construction and Interpretation		75
32.5. Entire Agreement and Amendment		75
32.6. Brokers’ Commissions		76
32.7. References		76
32.8. Exhibits		76
32.9. Counterparts and Signature Pages		76
32.10. Severability of Provisions		76
32.11. Number and Gender		76
32.12. Investment Tax Credit		76

TABLE OF CONTENTS (cont’d)

	Page(s)
32.13. Identity of Landlord		77
32.14. Identity of Tenant		77
32.15. Tenant’s Representations		77
32.15.1. Organization		77
32.15.2. Power and Authority		77
32.15.3. Valid and Binding		77
32.15.4. No Conflict		77
32.15.5. No Litigation		78
32.16. Landlord’s Representations		78
32.16.1. Power and Authority		78
32.16.2. Valid and Binding		78
32.16.3. No Conflict		78
32.17. No Subordination		78
32.18. Excavation and Shoring		78
32.19. Rehabilitation		79
32.20. Interested Parties		79
32.21. Governmental Role of Landlord		79
32.22. Certain Required Provisions		80
32.23. Time		80
32.24. Equal Employment Opportunity		80
32.24.1. General Covenant		80
32.24.2. Specific Covenant		80
INDEX OF EXHIBITS		85

EXHIBIT A — BUDGETED CONSTRUCTION COSTS
EXHIBIT B — WORK AGREEMENT
EXHIBIT C — MEMORANDUM OF LEASE

LEASE

     THIS LEASE (“Lease”) is executed and effective as of the 1^st day of December, 1999, by and between the UNITED STATES OF AMERICA, acting by and through the Administrator of General Services and authorized representatives (“Landlord”), and TARIFF BUILDING ASSOCIATES, L.P., a California limited partnership (“Tenant”).

RECITALS

     This Lease is entered into upon the basis of the following facts, understandings and intentions of the parties (for purposes of these Recitals, terms used shall have the meanings set forth in the Recitals and Article 1):

     A. The Premises are currently vacant.

     B. The Premises have been designated as a National Historic Landmark, and are within the area covered by The Pennsylvania Avenue Plan -1974, as amended. Landlord has determined that the Premises are not readily adaptable for use as a modem office building. After a public competition seeking proposals for proposed adaptive uses for the Premises, Landlord has determined that Tenant’s proposal for renovation and restoration of the Premises as a hotel best achieves a combination of satisfying Landlord’s historic preservation requirements, bringing economic and urban vitality to the area in which the Premises are located and satisfying other public interests in the Premises and the area. Landlord has determined that this Lease will adequately ensure the preservation of this historic landmark for purposes of Section 111 of the NHP A (defined below).

     C. The parties desire to establish provisions which will permit and require Tenant, subject to the terms and conditions of this Lease, among other things, (i) to design the Hotel; (ii) to apply for and diligently pursue certain permits for the Hotel; (iii) to renovate, furnish and equip the Premises as a Hotel conforming to the Hotel Standard and the Historic Preservation Standards; and (iv) subject to the terms of this Lease, to continuously maintain and operate the Hotel throughout the Term.

     D. Tenant desires to lease the Premises, and Landlord is willing to lease the Premises to Tenant, on the terms and conditions contained in this Lease, subject only to (i) Landlord’s obligation to deliver occupancy as provided in this Lease, (ii) the termination rights set forth in this Lease and (iii) the other terms and conditions of this Lease. Landlord acknowledges that Tenant is leasing only the Premises, and that Tenant is not assuming any obligations with respect to prior operations on the Premises except as expressly provided in this Lease.

     E. Following execution of this Lease and in accordance herewith, the parties intend that Tenant will diligently pursue the design, plans, permits and approvals for the Hotel, with which effort Landlord shall cooperate as more fully set forth herein and in the Work Agreement, and as more fully set forth herein, Tenant shall endeavor to obtain the

financing necessary to procure the funds necessary for the improvements Tenant is required to make to the Premises pursuant to the provisions of this Lease.

     F. The parties desire to enter into this Lease on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises of the parties, the parties hereto agree as follows (each provision of the foregoing Recitals is an integral part of this Lease and is incorporated as a part of this Lease as though fully set forth below):

1. DEFINITIONS

     1.1. Certain Terms Defined.

     The following words, phrases, or terms shall have the following meanings:

     Actual Construction Costs: All costs of construction incurred by Tenant in connection with the renovation and construction of the Project that are properly capitalized in accordance with generally accepted accounting principles, and are within the categories of costs set forth on Exhibit A. Notwithstanding the foregoing, the term “Actual Construction Costs” shall not include the costs associated with financing the development and construction of the Project.

     Additional Equity: All contributions of equity capital made by Tenant to pay for Project costs of any nature to the extent such contributions exceed the initial equity contributed by Tenant in the aggregate amount of $12,800,000.

     Adjustment Date: The first day of the sixth (6^th) Lease Year and the first day of each fifth (5^th) Lease Year thereafter.

     Adjustment Period: The five-year period between Adjustment Dates.

     Affiliate: With respect to Tenant, any Person or entity directly or indirectly controlling, controlled by, or under common control with Tenant or Kimpton (so long as Kimpton is the Operator). No Person shall be deemed in control of another simply by virtue of being a partner, director, officer or holder of voting securities of any Person. For purposes of this Lease, “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity.

     Alterations: Except for Tenant’s work under the Work Agreement, any additions to, alterations or renovations of the Premises (including demolition and reconstruction thereof or restoration pursuant to Article 22) and including installation or removal of any fixtures.

     Annual Base Rent: With respect to any Lease Year, the aggregate amount of Monthly Base Rent payable in such Lease Year.

     Annual Statement: With respect to any Lease Year, a statement setting forth in reasonable detail the calculation of Gross Revenues, Net Cash Flow, Percentage Rent and Participation Rent for the immediately preceding Lease Year, prepared in accordance with generally accepted accounting principles and the Uniform System, audited by a certified public accountant, selected by Tenant with Landlord’s approval, which approval shall not be unreasonably withheld or delayed. Landlord hereby approves any of PricewaterhouseCoopers LLP, Ernst & Young LLP, Arthur Andersen LLP, Deloitte & Touche LLP, KPMG Peat Marwick LLP, Pannell, Kerr, Forster and any successor of any of the foregoing. After delivery of the Annual Statement relating to the Lease Year in which the First Sale takes place, Tenant shall have no further obligation to provide to Landlord, in the Annual Statement or otherwise, any information relating to Net Cash Flow or other information necessary to calculate Participation Rent, except to the extent necessary to calculate other Rent that continues to be payable hereunder.

     Anti-Assignment Acts: Collectively, 41 U.S.C. § 15 and 31 U.S.C. §3727, and comparable successor provisions of federal law.

     Applicable Laws: As defined in the Work Agreement.

     Appropriation: The taking of or damage to the Land or Premises, or any portion thereof, by reason of any exercise of the power of eminent domain, whether by a condemnation proceeding or otherwise, or any transfer of all or any part thereof or any interest therein in avoidance of an exercise of the power of eminent domain.

     Assignment for Security: As defined in Section 18.1.1.

     Available Food and Beverage Revenues: With respect to any Lease Year, Gross Food and Beverage Revenues to the extent Gross Food and Beverage Revenues exceed Four Million Dollars ($4,000,000), as such latter amount shall increase on each of the first four Adjustment Dates during the Term by the percentage increase in the CPI during the Adjustment Period ending immediately before such Adjustment Date and shall be appropriately pro-rated for any Lease Year that is not precisely twelve (12) months. After Lease Year 21, there shall be no further CPI adjustments.

     Available Hotel Revenues: With respect to any Lease Year, Gross Hotel Revenues to the extent Gross Hotel Revenues exceed Ten Million Dollars ($10,000,000), as such latter amount shall increase on each of the first four Adjustment Dates during the Term by the percentage increase in the CPI during the Adjustment Period ending immediately before such Adjustment Date and shall be appropriately pro-rated for any Lease Year that is not precisely twelve (12) months. After Lease Year 21, there shall be no further CPI adjustments.

     BID Taxes: Business improvement district taxes and assessments payable with respect to the Land and Improvements in accordance with D.C. Code § 1-2274 et seq.

     Budgeted Construction Costs: The costs and expenses that Tenant anticipates will be incurred by Tenant in connection with the construction of the Project, as set forth on Exhibit A.

     Capital Maintenance Reserve: The reserve fund maintained by Tenant pursuant to Section 5.8.2.

     Cash Flow Level 1: $4,269,000, provided, that Cash Flow Level 1 shall be reduced by the greater of (a)$0.00 and (b) an amount equal to ten percent (10%) of the Budgeted Construction Costs minus Actual Construction Costs; and provided, further, that Cash Flow Level 1 shall be increased by an amount equal to Seventeen and 3/10 percent (17.3%) of the amount of any Additional Equity contributed to the Project by Tenant.

     Cash Flow Level 2: $5,254,000, provided, that Cash Flow Level 2 shall be reduced by the greater of(a) $0.00 and (b) an amount equal to ten percent (10%) of the Budgeted Construction Costs minus Actual Construction Costs; and provided, further, that Cash Flow Level 2 shall be increased by an amount equal to Seventeen and 3/10 percent (17.3% ) of the amount of any Additional Equity contributed to the Project by Tenant.

     Commencement Date: The date of this Lease.

     Commencement of Construction: As defined in the Work Agreement.

     Confidential Information: Any financial information or related business information obtained by either Landlord or Tenant after the Commencement Date from the other party (i) in connection with the negotiation of this Lease and the Work Agreement, (ii) contained in the Annual Statement, (iii) clearly marked “confidential” by Landlord or Tenant, as the case may be, and appropriately legended as agreed by Landlord and Tenant, or (iv) arising out of an audit or inspection by Landlord or its agents of Tenant’s records, including information regarding the amount of revenues, profits or cash flow accruing to Tenant in connection with its operation of the Premises and Proceeds from Sale or Refinancing by Tenant. Confidential Information shall also include any documents containing Confidential Information. Notwithstanding the foregoing, Confidential Information shall not include information that the party who furnished the Confidential Information has disclosed publicly.

     Construction Documents: As defined in the Work Agreement.

     Contract Disputes Act: The Contract Disputes Act of 1978, as amended, 41 U.S.C. §§ 601-613.

     CPI: The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), All Items, Washington Baltimore, DC -MD -VA -WV, CMSA, November, 1996=100, issued by the Bureau of Labor Statistics of the United States Department of Labor. If the CPI is changed so that a base year other than November 1996 is used, the CPI used herein shall be converted in accordance with the conversion factor published by the Bureau of Labor Statistics. If the CPI is discontinued during the Term, with no successor or comparable successor CPI, a similar index agreed upon by Landlord and Tenant shall be selected and substituted.

     Debt: Debt incurred by Tenant in connection with the Project.

     Default Rate: The rate of interest equal to three (3) percentage points above the prime rate of interest as published from time to time in The Wall Street Journal (or if the prime rate is no longer so published a replacement rate reasonably determined by Landlord) or the maximum rate allowed by applicable usury law, if any, whichever is lower.

     Economically Viable: The Hotel is achieving a debt coverage ratio of at least 1.30, as defined by the then-existing senior Leasehold Mortgagee, and is generating sufficient cash flow for the owners of Tenant to realize a market rate of return on their investment as reasonably determined by Tenant.

     Emergency Situation: A situation immediately impairing or threatening immediately to impair the structural support or integrity ofor cause immediate damage to the Premises or other property or causing or threatening to cause immediate injury to a Person or Persons located in or near the Premises.

     Environmental Laws: Any federal, state, or local laws or regulations relating to the use, generation, manufacture, installation, release, discharge, storage or disposal of Hazardous Materials.

     Environmental Reports: Collectively, the Asbestos Survey Report for the Tariff Building, Volume I, II, III, IV and V prepared for the Smithsonian Institution Office of Design and Construction by Versar, Inc., dated August 30, 1991, and the Limited Phase I Environmental Assessment for the General Post Office Building prepared for the General Services Administration by Greenhorne & O’Mara, Inc., dated August 1, 1997.

     Event of Default: As defined in Section 27.1.

     Excluded Contractor: Any Person debarred, suspended, proposed for debarment or suspension, or declared ineligible by any agency or instrumentality of the United States or by the General Accounting Office or otherwise excluded from procurement or nonprocurement programs of the United States or any agency or instrumentality thereof, and (i) included on the List of Parties Excluded from Federal Procurement and Nonprocurement Programs maintained by the United States General Services Administration, or successor compilation of similar information; or (ii) which Landlord

has advised Tenant within ten (10) days after request from Tenant would be an Excluded Contractor but for clause (i).

     Excluded Fixtures: All of the following items installed by Tenant or any Space Tenant, to the extent that they are affixed to the Improvements and constitute fixtures (or would constitute fixtures but for Tenant’s rights to remove them pursuant to this Lease) and are readily removable: kitchen equipment, health club equipment, audio-visual equipment, front office equipment, and communications equipment, and all other equipment reasonably agreed to by Landlord and Tenant at the time of its installation; but in any event excluding the mechanical (including heating, ventilating and air conditioning), elevator, fire detection, alarm and sprinkler, illumination, electrical, and plumbing fixtures and systems in the Improvements, and components thereof.

     Excluded Revenues: Collectively, to the extent otherwise included, as the case may be, in Gross Food and Beverage Revenues or Gross Hotel Revenues;(1) any rents or other revenues arising from or received by Tenant on account of Restaurant Leases; (2) any expense passthroughs or reimbursements received by Tenant under Subleases; (3) revenues from parking, unless Tenant makes more than fifteen (15) parking spaces available to Hotel guests and/or the general public, or Tenant receives a net profit in any Quarter from off-site parking, in which case net revenues from such on-site parking or such net profits from off-site parking, shall be included in Gross Hotel Revenues for such Quarter, (4) federal, state, district and municipal excise, sales, use, luxury or similar tax, bed taxes, taxes collected directly from patrons or guests as a part of or added to the sales price of any food, beverages, goods, services, rooms or displays, such as gross receipts, room admission, cabaret or equivalent taxes and actually paid by Tenant; (5) cash or credit refunds to customers upon transactions included in Gross Revenues or for cancellations of room reservations;(6) proceeds of any insurance, judgments, settlements or condemnation awards that do not compensate Tenant for loss of income or revenue of any kind from the sale of food and beverage items, the operation of the banquet, public meeting rooms and similar facilities, the rental of hotel rooms, Subleases, restaurants, parking (but such insurance proceeds shall be included in Gross Revenues to the extent compensating for such loss of income or revenue); (7) proceeds from the sale or other disposition (other than food and beverage inventory in the ordinary course of business)of the Hotel or any of the assets used in connection with or forming part of the Hotel; (8) any penalty or fee charged by Tenant for a returned check; (9) amounts written off by Tenant as a bad debt; (10) reimbursement of the amount paid for postage, express or delivery expense (such as room service) provided that such charge is at all times properly segregated from the regular cash price and so identified on Tenant’s records; (12) fees and expenses paid to Affiliates to the extent that the inclusion of such fees and expenses would result in double counting because they have been included as received by Tenant; (13) proceeds from any debt or equity financing or Refinancing; (14) the amount of gratuities actually paid to employees, whether mandatory or otherwise; (15) the cost of any beverages and food provided to employees on a complimentary basis; and (16) interest earned on any funds, including working capital and reserves.

     Exclusive Possession: Except as otherwise agreed pursuant to the Work Agreement, the delivery of the Premises to Tenant, free of all leases, licenses or other rights to use or occupy all or any portion of the Premises, subject to the Permitted Exceptions, Reserved Steam Rights, the Smithsonian Security Easement and the express terms of this Lease, so as to permit Tenant to undertake and complete the Project free from any claim of right of possession or use (including any right to park) by Landlord or any prior or current Space Tenant, tenant or licensee. Exclusive Possession shall not in any event be earlier than the actual date of execution and delivery of this Lease by and between Landlord and Tenant.

     Feasibility Period: As defined in the Work Agreement.

     FF&E: The furniture, furnishings, fixtures and equipment located or to be located in and used in connection with the Hotel.

     FF&E Reserve: The reserve fund maintained in a segregated bank account by Tenant pursuant to Section 5.8.1.

     First Sale: The first assignment or sublease transaction pursuant to which Tenant sells, assigns or subleases (other than to an Affiliate of Tenant or any entity in which Tenant or any Affiliate of Tenant has any direct or indirect ownership or equity interest) all of its interest in this Lease in accordance with the terms hereof, or, in the case of such a sublease, subleases the entire Premises for the entire Term less one day.

     FOIA: The Freedom of Information Act, 5 U.S.C. § 552.

     Gross Food and Beverage Revenues: The gross receipts and revenues of Tenant, Kimpton (so long as Kimpton is the Operator) or any Affiliate of Tenant or any entity in which Tenant or any Affiliate of Tenant has any material direct or indirect ownership or equity interest resulting from the sale of food and beverage items at the Hotel, and all revenues received by Space Tenants or others under Restaurant Leases (subject to deduction of Excluded Revenues), and including net revenues or concession payments from vending machines, admission fees, cover charges, catering operations conducted in or from the Hotel, in-room mini-bar sales, room service, and rentals and revenues arising from banquet, conference room and other public meeting room and similar facilities of the Hotel. Gross Food and Beverage Revenues shall be determined in accordance with generally accepted accounting principles and the Uniform System, but shall not include

(1) any amounts included in Gross Hotel Revenues or (2) Excluded Revenues.

     Gross Hotel Revenues: The gross receipts and revenues of Tenant, Kimpton (so long as Kimpton is the Operator) or any Affiliate of Tenant or any entity in which Tenant or any Affiliate of Tenant has any material direct or indirect ownership or equity interest resulting from guest room rental, health club memberships and fees, telephone services, laundry and valet services, fees collected for use of the Premises as a film location or the like, revenues arising from the use of or sublicense by Tenant of the IP Rights, and all

other rents, fees or income made in, upon, or from the Hotel or the other rights and interests granted to Tenant by Landlord pursuant to this Lease. Gross Hotel Revenues shall be determined in accordance with generally accepted accounting principles and the Uniform System, but shall not include (1) any amounts included in Gross Food and Beverage Revenues and (2) Excluded Revenues. Gross Hotel Revenues shall include rents from Subleases (other than Restaurant Leases), but not the gross receipts or revenues received by the Space Tenants under such Subleases, provided, that, if Tenant enters into a Sublease (other than a Restaurant Lease) with an Affiliate, the gross receipts received by such Affiliate under such Sublease shall be included in Gross Hotel Revenues (unless otherwise included within the definition of Excluded Revenues) and the rent received by Tenant under such Sublease shall be excluded from Gross Hotel Revenues.

     Gross Revenues: Collectively, the Gross Hotel Revenues and the Gross Food and Beverage Revenues.

     Hazardous Materials: Collectively, (i) petroleum, (ii) asbestos, (iii) polychlorinated biphenyls, (iv) radioactive materials, (v) radon gas or (vi) any chemical, material or substance defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous waste,” “restricted hazardous waste” or “toxic substances” or words of similar impact under any applicable environmental laws, including but not limited to, Federal Water Pollution Act, as amended, 33 U.S.C. § 1251 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq., the Hazardous Materials Transportation Act, as amended, 49 U.S.C. § 1801 et seq., and Applicable Laws of the District of Columbia.

     Historic Elements: Collectively, those elements of the Premises designated for retention and restoration or otherwise designated “historic elements” with reference to this Lease, in or pursuant to the Memorandum of Agreement, and otherwise consistent with Section 11 of the NHPA. However, if the requirement for a Memorandum of Agreement is waived pursuant to Section 4.2 below, then the parties shall mutually agree upon the elements of the Premises that shall constitute the “Historic Elements.” As of the Commencement Date, Landlord and Tenant contemplate that these elements will consist of the exterior and interior stone, including all architectural embellishments and original exterior openings, the General Mail Room, the Dead Letter Office, the Library, decorative ironwork throughout the Improvements, two grand stairways, window shutters, and other elements of historic significance.

     Historic Preservation Standards: The “Standards for Rehabilitation and Guidelines for Rehabilitating Historic Buildings” of the Secretary of the Interior (36 C.F.R. Part 67) as these are established from time to time by the National Park Service, U.S. Department of the Interior, or its successor, and any additional historic preservation standards applicable to and imposed on the Premises by federal, state and

local authorities, including the Advisory Council on Historic Preservation, the Historic Preservation Division of the District of Columbia Department of Consumer and Regulatory Affairs, the National Capital Planning Commission, the Commission of Fine Arts, or the District of Columbia State Historic Preservation Officer.

     Hotel: The approximately 172 room hotel with restaurants, retail spaces, meeting rooms, and other ancillary facilities to be developed on the Premises through renovation of existing Improvements, all in accordance with this Lease.

     Hotel Standard: As to the Hotel and associated restaurant, a first-class, but not deluxe, standard of operation and construction, as such standard may evolve over the Term, and in any event at least equivalent to the standard exemplified by the Hotel Monaco, San Francisco and Scala’s Restaurant, San Francisco, as of the date hereof, both of which are owned or operated by Tenant’s Affiliates.

     Immaterial Alterations: Alterations to the Premises that Landlord and Tenant agree during the Feasibility Period shall constitute Immaterial Alterations.

     Improvements: The existing Tariff Commission Building/General Post Office and all portions of the Improvements to be retained, restored and preserved in accordance with the Historic Preservation Standards, including the Historic Elements, together with all fixtures, improvements and appurtenances of every kind and description now located or hereafter erected, constructed, or placed upon the Land and any and all Alterations, renewals, and replacements thereof, additions thereto and substitutions therefor, including any basement and subgrade areas of the aforesaid Improvements, as any of the same may be reduced or diminished by any condemnation or other taking, excluding, however, the Tenant’s Property.

     Institutional Lender: Any entity that is any of the following: (1) any savings bank, commercial bank or trust company (whether acting individually, or in any trust or fiduciary capacity), savings and loan association, or building loan association that has deposits in excess of One Billion Dollars ($1,000,000,000) (which amount shall be increased in proportion to increases hereafter in the CPI) and is subject to the jurisdiction of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, or the Federal Reserve Board, and the courts of the United States of America, any state thereof, or the District of Columbia; (2) any insurance company, educational institution or state, municipal or similar public employees’ welfare, pension or retirement fund or system subject to the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq.; (3) governmental and quasi-governmental agencies; or (4) an entity that originates commercial mortgage loans either for its own account or for sale or transfer, in their entirety, to another entity in the mortgage loan business, including subsequent transferees that may hold or acquire the entire interest in the mortgage (and any custodian, trustee or other fiduciary approved by the rating agencies, or any servicer approved by the rating agencies to the extent approval is required) in connection with the sale of the mortgage in any secondary

mortgage loan market, including any mortgage-backed security or real estate investment conduit transaction or any other institutional quality rated public offering or private placement. From and after Substantial Completion, the term “Institutional Lender” shall also include any other type of commercial financing entity or vehicle that may from time to time hereafter be generally accepted in the commercial real estate market for financing commercial construction or other commercial real estate financing, including projects similar to the Improvements. In no event however shall the term “Institutional Lender” include any Affiliate of Tenant or any Excluded Contractor.

     Interest Rate: The rate of interest equal to five (5) percentage points above the discount rate charged to member banks by the Federal Reserve Bank of San Francisco or the maximum rate allowed by applicable usury law, whichever is lower.

     Internal Rate of Return: The rate of interest that, when used as the discount rate, reduces to zero the net present value of the net cash flows (excluding any income tax benefits) associated with the Project.

     IP Rights: All rights to trademarks, service marks and related intellectual property rights associated with the Premises, including the following: trademarks, service marks, and other rights, ifany, associated with the names “Tariff Commission Building”, “Tariff Building”, “The General Post Office Building”, and the image or likeness of all or any part of the exterior and interior of the Premises.

     Kimpton: Kimpton Hotel & Restaurant Group, Inc., a California corporation.

     Knowledge of Landlord: The current actual knowledge, without investigation, of any person serving as Landlord’s Contracting Officer from time to time and, solely with respect to statements made to the Knowledge of Landlord as of the Commencement Date, the current actual knowledge, without investigation, of Elizabeth Gibson.

     Land: The parcel of land owned by Landlord which is the subject of this Lease, located in the District of Columbia, between 7^th and 8^th Streets and E and F Streets, N.W., known as Square 430, together with Landlord’s right, title and interest in and to all appurtenant real property rights and hereditaments such as all easements, air rights, covenants, conditions, and restrictions as necessary in connection with the use or improvement of the Land and the Vault Space.

     Landlord’s Contracting Officer: As defined in the Work Agreement.

     Landlord Event of Default: As defined in Section 27.2.1.

     Landlord Mortgagee: As defined in Section 16.1.1.

     Landlord’s Work: As defined in the Work Agreement.

     Lease Year: The first Lease Year shall commence on the Rent Commencement

Date and shall end on the first December 31 thereafter that is at least six (6) calendar months following the Rent Commencement Date. Each succeeding Lease Year shall be the calendar year commencing immediately upon the expiration of the prior Lease Year, except that the last Lease Year shall end on the last day of the Tenn.

     Leasehold Mortgage: As defined in Section 18.1.2.

     Leasehold Mortgagee: As defined in Section 18.1.3.

     Feasibility Period: As defined in the Work Agreement.

     Major Sublease: A Sublease of the entire Premises, or a substantial portion of the hotel portion of the Premises, but excluding any sublease for providing Hotel guest services, such as parking, storage, back of the house, health club, health and wellness facility, food and beverage services, conference space, offices, bar, cafe, retail spaces, newsstand, a nightclub (whether or not featuring live entertainment), discotheque, cabaret, comedy club or other establishment featuring live performance shows of any kind.

     Management Fees: With respect to any period (for purposes of calculating Net Cash Flow and Operating Expenses in order to determine Participation Rent, and then only until the First Sale), a base management fee equal to the sum of (i) four percent (4%) of Gross Revenues and (ii) the payroll costs of salaries, wages, benefits and related administrative expenses incurred by and reimbursable to the Operator, in an aggregate amount not to exceed one percent (1% ) of Gross Revenues, for services benefiting the Hotel. Solely for purposes of calculating Management Fees, Gross Revenues shall be deemed to include interest income. (The foregoing definition is not intended to limit in any respect the amount of management fees that may be paid by Tenant in connection with the management and operation of the Premises).

     Memorandum of Agreement: Any agreement entered into under Section III (and, to the extent applicable, Section 106) of the NHPA by the parties hereto and any applicable federal or local historic preservation agencies that is intended to set forth the historic preservation standards applicable to the redevelopment of the Premises.

     Milestone Date: As defined in the Work Agreement.

     Monetary Breach: As defined in Article 27.

     Monthly Base Rent: The following amounts paid each calendar month during the following periods:

• From the Rent Commencement Date to the last day of Lease Year 5, Monthly Base Rent shall be payable in the amount of$12,500.00 per month.

• On the first Adjustment Date, and on each Adjustment Date thereafter, Monthly Base Rent shall be adjusted upward to reflect the percentage increase, if any, in the CPI during the immediately preceding Adjustment Period, calculated as follows: the Monthly Base Rent in effect as of such Adjustment Date shall be multiplied by a fraction, the numerator of which is the CPI published most recently prior to the Adjustment Date, and the denominator of which is the CPI published most recently prior to the immediately preceding Adjustment Date. (On the first Adjustment Date, the “immediately preceding Adjustment Date” shall mean the Rent Commencement Date.)In computing such upward adjustment, the percentage increase to Monthly Base Rent on any Adjustment Date shall not exceed twenty percent (20%) of the Monthly Base Rent in effect during the immediately preceding Adjustment Period.

Example: Assume that the most recent CPI published prior to Lease Years 1 and 6 is, respectively, 100 and 133. On the first Adjustment Date (at the commencement of Lease Year 6), the Monthly Base Rent would be adjusted upward to equal $15,000.

     Mortgaged Premises: As defined in Section 18.1.4.

     NHPA: The National Historic Preservation Act of 1966, as amended, 16 U.S.C. § 470 et seq. and all regulations promulgated thereunder as such statute and regulations may be amended, and any successor act or regulations.

     Net Cash Flow: With respect to any period, the amount by which Gross Revenues exceeds the sum of (i) Operating Expenses and (ii) the gross revenues arising from Restaurant Leases attributable to such period. Notwithstanding anything in this Lease to the contrary, (A) the following shall not be deducted for purposes of calculating Net Cash Flow: (1) interest and principal payments on debt, (2) any expenditure paid from the FF&E Reserve, (3) any expenditure paid from the Capital Maintenance Reserve, (4) incentive Management Fees payable to the Operator, other than the Management Fees, (5) depreciation and amortization, and (6) income taxes; and (B) Gross Revenues for purposes of calculating Net Cash Flow shall include any rents received by Tenant under Restaurant Leases (but not including any reimbursement of expense passthroughs or reimbursements received by Tenant under Restaurant Leases).

     Non-Monetary Breach: As defined in Article 27.

     Notice to Mortgagee: As defined in Section 18.5.1.

     Occupancy Date: The date of Commencement of Construction, or, if earlier, the date, if any, on which Landlord delivers Exclusive Possession of the Premises to Tenant pursuant to Section 2.1 (e.g., to commence demolition work) prior to the Commencement of Construction.

     Operating Expenses: All costs and expenses actually incurred by Tenant in operating the Premises, including costs and expenses of a nonrecurring or extraordinary nature, and including (1) all Hotel employee payroll and related costs, cost of food, beverage and merchandise sold, cost of services provided guests, including guest laundry,

telephone, room expenses, supplies, parking-related costs and expenses but only to the extent that they exceed parking revenues, restaurant and banquet expenses and reservation expenses, (2) all other operating costs, including maintenance, security, human resources, information systems, administrative and general overhead expenses, equipment rental costs, expenses related to rental property, including cost of tenant improvements to retail spaces, legal, accounting, audit and tax preparation fees related to the operation of the Hotel, utilities, steam and other energy costs, (3) fixed charges excluding interest expense and excluding principal payments,but including the cost of all insurance (4) all Rent and Vault Rent, other than Participation Rent, (5) all amounts paid into the FF &E Reserve and the Capital Maintenance Reserve, (6) federal, state, district and municipal excise, sales, use, luxury or similar tax, bed taxes, taxes collected directly from patrons or guests as a part of or added to the sales price of any goods, services, rooms or displays, such as gross receipts, room admission, cabaret or equivalent taxes, gross receipts taxes, franchise taxes, license fees, employment taxes and Personal Property Taxes, (7) Management Fees, (8) marketing and franchise fees, if any, (9) other costs and expenses payable to Operator or an Affiliate of Tenant for an allocated portion of the expenses reasonably incurred by Tenant in operating and maintaining the Premises, including insurance, advertising, central reservations and central purchasing of goods and services used in connection with the Hotel, and (10) amortization of capital expenditures not paid out of the FF&E Reserve, the Capital Maintenance Reserve, or any other reserve described above; provided that Operating Expenses shall not include any of the following: (a) amounts paid or reimbursed out of the FF&E Reserve, the Capital Maintenance Reserve, or any other reserve described above, (b) any Excluded Revenues or any expenses related thereto, (c) payments to any Affiliate of Tenant or any entity in which Tenant or any Affiliate of Tenant owns any equity interest to the extent such payments exceed reasonable market amounts, (d) expenses that properly should be capitalized, (e) amounts included in Operating Expenses in prior years, (f) penalties or any other amounts to the extent payable as a result of negligence of Tenant or any default by Tenant under any obligations, (g) amounts actually reimbursed by others, (h) costs relating to financing or sale of Tenant’s interest in the Premises (but such amounts may be taken into account in calculating Proceeds from Sale or Refinancing), and (i) Tenant’s overhead and other costs not relating to operation of the Premises, except for those included within Management Fees.

     Operator: The Person designated by Tenant to serve as the operator and manager of the operations of the Hotel

     Participation Rent: The following amounts to be paid by Tenant to Landlord pursuant to Section 5.3: With respect to each Lease Year, (i) twenty percent (20%) of Net Cash Flow for such Lease Year, to the extent Net Cash Flow for such Lease Year exceeds Cash Flow Level 1 but is less than or equal to Cash Flow Level 2, plus (ii) Twenty-Five percent (25%) of Net Cash Flow for such Lease Year in excess of Cash Flow Level 2. For purposes of determining the amount of Participation Rent payable during the first Lease Year and the Lease Year in which the First Sale occurs or the earlier termination of the Term, Cash Flow Level 1 and Cash Flow Level 2 shall be adjusted to equal the product of the respective Cash Flow Level multiplied by a fraction, the numerator of which is the number of days in such period, and the denominator of which is three hundred sixty-five (365).

     Percentage Food and Beverage Rent: The following percentage of Available Food and Beverage Revenues for such Lease Year:

Commencement Date -end of Lease Year 5	3.0	%
Lease Year 6 - Lease Year 7	3.5	%
Lease Year 8 — end of Term	4.5	%

     Percentage Rent: For any Lease Year, the Percentage Room Rent and Percentage Food and Beverage Rent for such Lease Year.

     Percentage Room Rent: Percentage Room Rent shall be the following percentage of Available Hotel Revenues for such Lease Year:

Commencement Date — end of Lease Year 5	3.0	%
Lease Year 6 - Lease Year 7	3.5	%
Lease Year 8 - Lease Year 9	4.5	%
Lease Year 10 - Lease Year 15	5.5	%
Lease Year 16 - Lease Year 25	6.5	%
Lease Year 26 - Lease Year 30	7.0	%
Lease Year 31 - Lease Year 40	7.5	%
Lease Year 41 - Lease Year 50	8.0	%
Lease Year 50 - end of Term	8.5	%

     Permitted Exceptions: Matters disclosed on the title and land survey to be obtained by Tenant during the Feasibility Period, excluding any mortgages, deeds of trust or other encumbrances securing obligations for the payment of money.

     Permitted Use: The construction and operation of the Hotel, including associated uses such as (i) retail, restaurant, reception and lobby area, (ii) banquet, conference and public meeting rooms and facilities, and (iii) other uses from time to time customarily

related to or in connection with providing Hotel guest services, including parking, storage, back of the house, health club, health and wellness facility, food and beverage services, conference space, offices, bar, cafe, retail, a nightclub (whether or not featuring live entertainment), a discotheque, cabaret, comedy club or other establishment featuring live performance shows of any kind; such associated uses being permitted to the extent that in the aggregate they do not reduce the number of hotel rooms to fewer than 145.

     Personal Property Taxes: All taxes, excises, levies, any other fees or charges of any kind foreseen or unforeseen which are levied, assessed, confirmed or imposed by any public authority upon, measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures and other personal property located in the Premises, or other personal property leased to Tenant pursuant to the terms and provisions of this Lease.

     Person or Persons: Individuals, groups, partnerships, estates, limited liability companies, joint ventures, firms, associations, corporations, trusts, any federal, state or municipal governmental bureau, department or agency thereof, governmental officials, administrative bodies or tribunals, or any other form of business or legal entity.

     Premises: The Land and the Improvements.

     Proceeds from Sale or Refinancing: The net cash realized by Tenant from the First Sale or any Refinancing that occurs at or prior to the First Sale, after deducting all transfer and recordation taxes, costs and other expenses related to the transaction, including all financing costs and all fees and expenses of attorneys, accountants, consultants, engineers, surveyors and other professionals, provided, that, if any such fees and expenses are payable to an Affiliate or to a Person in which Tenant or an Affiliate owns more than a 10% equity interest, such fees and expenses shall be deducted only to the extent such fees do not exceed the market rate payable for comparable services if rendered by unrelated third parties. In the case of the First Sale, the “net cash” realized by Tenant shall be reduced by all amounts necessary to retire any preexisting Debt, including all principal, accrued interest, origination fees, prepayment fees and penalties, makewhole premiums, exit fees and similar fees and costs associated with such Debt. In the case of a Refinancing, the “net cash” realized by Tenant shall be reduced by (i) all amounts paid to retire any preexisting Debt, including all principal, accrued interest, origination fees, prepayment fees and penalties, make-whole premiums, exit fees and similar fees and costs associated with such Debt, and in the case of the First Sale or a Refinancing, (ii) all amounts reasonably designated by Tenant for reinvestment in the Premises or Hotel, and all amounts considered reasonably appropriate by Tenant to fund the FF&E Reserve, the Capital Maintenance Reserve or any other reserve reasonably established by Tenant to provide for the repair and/or replacement of FF&E and capital expenditures, and (iii) all amounts considered reasonably appropriate by Tenant to provide for the continued timely payment ofall expenses incurred in connection with the maintenance and operation of the Premises.

     Project: As defined in the Work Agreement.

     Proposed Sale Terms: As defined in Section 16.2.1.

     Quarter: Each separate and consecutive period of three (3) full calendar months within each Lease Year beginning on the Rent Commencement Date; provided, however, if the Rent Commencement Date is not the first day of a calendar quarter (i.e., January March, April — June, July — September, or October — December), then the first Quarter of the first Lease Year shall include the period from the Rent Commencement Date to the first day of the calendar quarter next following the Rent Commencement Date, and the last Quarter shall end on the expiration or earlier termination of the Term.

     Quarterly Statement: With respect to any Quarter, an unaudited statement setting forth in reasonable detail the calculation of Gross Revenues and Percentage Rent, and, until the final distribution following the First Sale, also showing Net Cash Flow and Participation Rent (if any) for the immediately preceding Quarter, prepared in accordance with generally accepted accounting principles and the Uniform System. After delivery of the Quarterly Statement relating to the Quarter in which the First Sale takes place, Tenant shall have no further obligation to provide to Landlord in the Quarterly Statement any information relating to Net Cash Flow or other information necessary to calculate Participation Rent, except to the extent necessary to calculate other Rent that continues to be payable hereunder.

     Real Property Taxes: All taxes and assessments, general and special, ordinary and extraordinary, foreseen and unforeseen, now or hereafter levied, assessed, confirmed or imposed by any public authority upon the real property comprising the Premises, the Land, the Improvements, or any part thereof or interest therein including the leasehold estate hereunder, but excluding BID Taxes, sales and use taxes, corporate franchise taxes, unemployment compensation taxes, hotel occupancy taxes, rent for Vault Space, local, state and federal, personal, partnership or corporate income taxes measured by the gross or net income of Landlord or Tenant from all sources, inheritance or estate taxes, franchise or capital stock taxes, recordation or transfer taxes or Personal Property Taxes.

     Refinancing: Any financing that takes place prior to the First Sale which results in (i) an increase in the aggregate Debt secured by Leasehold Mortgages or (ii) any new Debt or new Leasehold Mortgage that replaces or repays in whole or in part the Debt secured by an existing Leasehold Mortgage.

     Rehabilitation: The work performed by Tenant on the Improvements in accordance with the Work Agreement.

     Release: Any release of Hazardous Materials from the Premises, or any disposal or placement or existence of any Hazardous Materials in, on or from the Premises in violation of any Environmental Laws.

     Rent: The Annual Base Rent, Percentage Rent, Participation Rent and any other payment of money that Tenant is obligated to make under this Lease.

     Rent Commencement Date: As defined in the Work Agreement.

     Reserved Steam Rights: Landlord’s rights to inspect, repair, replace, alter, add to and maintain the Steam Line pursuant to Section 2.5.

     Restaurant Lease: An instrument or agreement to which Tenant is a party, pursuant to which Tenant grants to another Person the right or license to use, occupy and possess for a specified term a portion of the Premises for the purpose ofoperating a restaurant, cafe, bar, nightclub (whether or not featuring live entertainment), cabaret or comedy club.

     Smithsonian Security Easement: As defined in Section 2.6.

     Space Tenant: Any tenant under a Sublease.

     Steam Line: the General Services Administration Heating Operations and Transmission District central steam trunk line, steam station and electric service, serving the Premises and other properties.

     Sublease: An instrument or agreement to which Tenant is a party, pursuant to which Tenant grants to another Person the right or license to use, occupy and possess for a specified term a portion of the Premises for any purpose including operating a retail store, newsstand, parking operation, health club, athletic facility, other service establishment or other use permitted by Applicable Laws, including without limitation any Restaurant Lease but excluding any Leasehold Mortgage.

     Substantial Completion: As defined in the Work Agreement.

     Temporary Appropriation: As defined in Section 23.5.

     Tenant’s Property: All (1) Excluded Fixtures; and (2) signs, equipment, appliances, furniture, furnishings, inventory, supplies and other tangible and intangible personal property installed in or used in connection with the Premises by Tenant, or any Space Tenant, except for items constituting fixtures under Applicable Laws.

     Term: The Term of this Lease determined in accordance with Article 4, subject to the provisions of this Lease regarding termination.

     Transferee: Any assignee or sublessee of all or any part of Tenant’s interest under this Lease.

     Unavoidable Delay: Delay due to federal or local governmental acts or omissions (other than rightful action of Landlord consistent with this Lease), strikes, lockouts, acts of God, inability to obtain labor or materials due to supply shortages in the construction industry, enemy action, civil commotion, shortage or interruption of utilities, fuel or power, fire, unavoidable casualty or other similar causes beyond the reasonable control of the party claiming the benefit of delay (financial inability or negligence excepted).

     Uniform System: The Uniform System of Accounts for the Lodging Industry, Ninth Revised Edition, 1996, as the same may from time to time be amended or supplemented, except to the extent that any such amendment or supplement would in any material respect adversely affect any rights of Landlord, Tenant or any Leasehold Mortgagee under this Lease or would result in any change in the amount of any payment either party is obligated to make or entitled to receive under this Lease, including the amount of Rent due and payable hereunder.

     Vault Space: All underground vault space contiguous with the Land that is available for Tenant’s use as mutually agreed in writing by Landlord and Tenant, and which Tenant in its sole discretion elects to lease or use in connection with its operation of the Premises; however in no event shall Vault Space include any space subject to the Reserved Steam Rights.

     Work Agreement: That certain Work Agreement of even date herewith by and between Landlord and Tenant, attached as Exhibit B.

2. PREMISES

     2.1. Lease of Land and Improvements. In accordance with the powers granted by Congress under Section 111 of the NHPA, as amended, 16 U.S.C. § 470h-3, Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises, on the terms, covenants, and conditions set forth in this Lease, subject to the Permitted Exceptions, the Reserved Steam Rights, and the Smithsonian Security Easement, and in consideration of the rents to be paid and the covenants specified herein to be performed by Tenant. Landlord shall deliver portions of the Premises to permit Tenant to perform certain discrete construction, demolition or Hazardous Materials abatement work at such time or times as Landlord and Tenant may mutually agree. After the expiration of the Feasibility Period, Landlord shall deliver Exclusive Possession of the entire Premises to Tenant within thirty (30) days after Tenant notifies Landlord that Tenant desires to take Exclusive Possession of the entire Premises, provided, that, in no event shall Landlord be obligated to deliver Exclusive Possession of the Premises to Tenant prior to issuance by Landlord of a notice to proceed in accordance with the terms of Section 6.4 of the Work Agreement. During the Term, Landlord also shall make available to Tenant for use in connection with the Premises any and all permits, approvals, applications, plans, conditional use permits and licenses of Landlord appurtenant to the Premises.

     2.2. Vault Space. Tenant shall have the right to enter into a lease or license agreement for Vault Space with the District of Columbia. Landlord shall join with Tenant and execute any and all documents or instruments reasonably necessary to result in Tenant having use of the Vault Space for the entire Tenn. Tenant shall pay all taxes, rent or other fees for such Vault Space.

     2.3. Lease as Master Lease. The parties acknowledge that this Lease is a lease of the Premises, with Tenant to retain ownership of Tenant’s Property during the Term of the Lease. Landlord acknowledges that any covenants which allow Landlord certain control and rights of approval over Tenant’s Property are provided only to insure conformance with the terms and conditions of this Lease, but such covenants do not vest in nor shall they be construed as vesting in Landlord an ownership interest in such property, except upon the expiration or earlier termination of this Lease to the extent provided in this Lease. Any depreciation of Tenant’s Property (including any leasehold improvements made by Tenant) shall accrue to Tenant.

     2.4. “As Is” Condition. Subject to Article 31, Landlord’s obligation to perform Landlord’s Work, and the other express obligations of Landlord under this Lease, Tenant agrees to accept the Premises on the Occupancy Date in their “as is” physical condition as of the Occupancy Date. Landlord represents that it has delivered to Tenant all material written information, data, documents, reports, notices and other materials that, to the Knowledge of Landlord, are in Landlord’s possession and control and that relate to the existence of Hazardous Materials, if any, on, in, under or about the Land and the Improvements and to the environmental, mechanical and structural condition of the Land and Improvements. To the Knowledge of Landlord, except as set forth in the Environmental Reports, the Premises are not in violation of any Environmental Laws, and there are no material Hazardous Materials on, in, or under the Land or Improvements. Tenant acknowledges that, except as expressly set forth in this Section 2.4, and subject to Landlord’s obligations with respect to Hazardous Materials in Article 31, Landlord has made no representations, statements or warranties, express or implied, in respect of the Land and the Improvements, the physical condition thereof, the income to be derived therefrom, the zoning or other laws, regulations, rules and orders applicable thereto, that Tenant has relied on no such representations, statements or warranties, and that Landlord shall in no event whatsoever be liable for any latent or patent defects in the Land and Improvements.

     2.5.Landlord’s Access. Tenant shall permit Landlord and its agents, contractors and representatives to enter the Premises at reasonable times, upon reasonable prior notice (except in an Emergency Situation in which event no notice shall be required if not reasonably possible under the circumstances), which notice may be oral, for the purpose of(a) inspecting the Premises, (b) showing the Premises to representatives of legislative or regulatory bodies, (c) inspecting, repairing, replacing, altering, adding to and maintaining the Steam Line, (d) performing Landlord’s Work in accordance with the

schedule to be agreed upon pursuant to the Work Agreement, or ( e) making any necessary repairs to the Premises and performing any work therein that may be necessary by reason of Tenant’s failure to make any such repairs or perform any such work; provided that, except in an Emergency Situation (or other situation that Landlord reasonably determines requires action before the expiration of thirty (30) days after notice), Landlord shall have given Tenant a notice specifying such repairs or work and Tenant shall have failed to make such repairs or to do such work within thirty (30) days after the giving of such notice. In connection with any such entry (except in the event of an Emergency Situation), Landlord shall (i) use reasonable efforts to minimize the interference with or disruption to Tenant’s or any Space Tenant’s business or operations on the Premises; and (ii) not exercise its rights of entry with unreasonable frequency. In any case where Landlord exercises its right to enter upon the Premises pursuant to this Section 2.5, Landlord shall, to the extent reasonably practicable, allow Tenant or its designee to accompany Landlord on the Premises while Landlord is present thereon. Except as provided in the Work Agreement, Section 7.1, Section 12.2 and Article 31, nothing in this Section or this Lease shall imply any duty upon the part of Landlord to do any work and performance thereof by Landlord shall not constitute a waiver of Tenant’s default in failing to perform the same. Landlord, during the progress of any such work, may keep and store at the Premises all necessary materials, tools, supplies and equipment. Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of business or other damage of Tenant or any Space Tenant or other party claiming by, through or under Tenant, by reason of exercising its rights pursuant to clauses (c ), (d) and ( e) of the first sentence of this Section and the obligations of Tenant under this Lease shall not be affected thereby, but nothing hereinbefore set forth shall be construed to relieve Landlord from liability for its wrongful acts or negligence or the wrongful acts or negligence of its agents or employees.

     2.6. Access by the Smithsonian Institution. The Smithsonian Institution (and its successors and assigns) shall have the right to enter the Premises to inspect, maintain, repair and replace the existing fiber optic security communications line in the Premises subject to the terms and conditions set forth in an easement agreement (the “Smithsonian Security Easement”) for such purposes to be entered into by Landlord and the Smithsonian Institution during the Feasibility Period. The Smithsonian Security Easement shall be subject to Tenant’s reasonable approval and shall not grant the Smithsonian Institution materially greater access rights than those granted to Landlord with respect to the Steam Line in Section 2.5.

     2.7. Public Access. From and after the date of Substantial Completion, Tenant shall allow organized tour groups to enter the Premises to tour the historically and architecturally significant portions of the main lobby and the courtyard of the Premises at times scheduled in advance by such groups with the Operator. All such tours shall be subject to such reasonable rules and time restrictions as Tenant may from time to time formulate; provided that no fees (except to the extent reasonably calculated to cover Tenant’s costs associated therewith) shall be charged for such tours without the prior written consent of Landlord.

     2.8. Signs. Tenant shall have the exclusive right to use the Improvements and exterior walls of the Improvements for signs pertaining to the business conducted by Tenant or Space Tenants on the Premises, which signs shall comply with all Applicable Laws and the Applicable Building Code, provided, however, that all signs visible from the exterior of the Improvements shall be subject to the prior approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.

     2.9.Compliance with Historic Preservation Standards. Tenant shall at all times during the Term maintain on staff or retain as an outside consultant an individual who is not disapproved by Landlord (which disapproval may be based only on Landlord’s reasonable good faith assertion that the selected individual has a poor reputation or lacks the requisite experience) and who has experience in the maintenance of historic buildings, who shall be responsible for ensuring that Tenant has in place and enforces rules and procedures intended to ensure that the Premises are operated, maintained and repaired by Tenant in accordance with the Historic Preservation Standards and the Memorandum of Agreement.

3. [RESERVED]

4. TERM

     4.1. Commencement. This Lease, and the terms, covenants and conditions contained herein, shall commence and be effective as of the Commencement Date. The Term shall end at 12:01 a.m. on the Sixtieth (60th) anniversary date of the Commencement Date, unless sooner terminated as provided herein.

     4.2. Lease Conditional on Memorandum of Agreement. Tenant understands that this Lease constitutes a federal undertaking for the purpose of Section 111 of the NHPA, 16 U.S.C. Section 470h-3. Subject to the remaining provisions of this Section, Landlord and Tenant shall each use its good faith efforts to cause the Memorandum of Agreement to be prepared and executed in accordance with 36 CFR Part 800. Tenant shall comply with all terms and conditions of the Memorandum of Agreement. This Lease is expressly conditioned on execution and delivery of the Memorandum of Agreement by all required parties thereto, but failure of such condition shall not deprive Tenant of its right to reimbursement for Reimbursable Project Expenses under the Work Agreement. Tenant shall not commence construction of the Project until the Memorandum of Agreement is executed and delivered by all required parties thereto and the other requirements for such commencement of construction in the Work Agreement are satisfied. Notwithstanding any other provision of this Lease, the requirement for execution of the Memorandum of Agreement may be waived as provided in Section 5.1.5 of the Work Agreement. Each of Landlord and Tenant shall have the right to approve the Memorandum of Agreement in its sole discretion.

     4.3. Holding Over. If Tenant shall hold possession of the Premises after the Term with Landlord’s consent, Tenant shall become a tenant from month-to-month upon the same terms and conditions specified in this Lease for the period immediately prior to such holding over, except that the Monthly Base Rent, Percentage Rent and Participation Rent shall be increased to 200% of the amount of such rent that would have been payable pursuant to the provisions of this Lease if the Term had continued during such holdover period. Tenant shall continue in such status until the tenancy shall be terminated by either party upon not less than thirty (30) days prior notice of intention to terminate the tenancy, subject to all of the conditions, provisions, and obligations of this Lease as existed during the last month of the Term, so far as applicable to a short-term tenancy. Notwithstanding the foregoing, if Tenant is at any time after the Term in default under the terms of this Lease, Landlord shall have the right to terminate the Lease immediately and Tenant hereby waives any and all rights and privileges, so far as is permitted by law, which Tenant might otherwise have to the service of any notice to quit or of Landlord’s intention to re-enter or to institute legal proceedings, which notice may otherwise be required to be given. In the event Landlord elects not to treat Tenant as a tenant by the month, then Tenant shall be a tenant at sufferance and Landlord’s acceptance of the above-described rent shall not in any manner adversely affect Landlord’s other rights and remedies, including Landlord’s right to evict Tenant and recover damages in accordance with this Lease and Applicable Laws.

5. RENT AND RESERVES.

     5.1. Annual Base Rent. During the Term, Tenant shall pay to Landlord the Annual Base Rent for the Premises in the amount and at the times and in the manner hereinafter specified. During the period from the Rent Commencement Date until the end of the Term, Tenant shall pay as rental for the Premises, the Annual Base Rent, in the amount of the Monthly Base Rent specified in Section 1.1 for each calendar month of each Lease Year, payable in advance on the first day of each calendar month thereafter during said Lease Year.

     5.2. Percentage Rent. Commencing on the Commencement Date, and during the remainder of the Term, Tenant shall pay to Landlord, if applicable, at the times and in the manner hereinafter specified, the Percentage Rent. Percentage Rent shall only be payable to the extent that the amount of Percentage Rent calculated during any Lease Year shall exceed the Annual Base Rent payable during such Lease Year. If the Percentage Rent so calculated is less than the Annual Base Rent for any Lease Year, then no Percentage Rent shall be due and payable by Tenant for said Lease Year. Commencing on the Commencement Date, Percentage Rent shall be calculated on a Lease Year basis and paid in quarterly installments within forty-five (45) days after the end of each Quarter during the Term. With respect to any partial or full Lease Year, the Lease Year installment of the Percentage Rent shall be: (i) the amount, if any, then due based upon the calculation of Percentage Rent provided in Section 5.2 based on the current Lease Year, less (ii) the aggregate amount of the Annual Base Rent having theretofore been payable for such Lease Year.

     5.3. Participation Rent.

          5.3.1. Commencing on the Commencement Date, and during the remainder of the Term, Tenant shall pay to Landlord, if applicable, at the times and in the manner hereinafter specified, the Participation Rent. Notwithstanding anything to the contrary in this Lease, Tenant’s obligation to pay Participation Rent shall terminate as of the date of the First Sale. Commencing on the Commencement Date, Participation Rent shall be calculated on a Lease Year basis and paid in estimated payments on a Quarterly basis within forty-five (45) days after the end of each Quarter in which, or after the date that, the Net Cash Flow for the current year exceeds Cash Flow Level 1, and Participation Rent shall be reconciled on or prior to the date that is one hundred twenty (120) days after the expiration of each Lease Year during the Term.

     5.4. Proceeds from Sale or Refinancing. Tenant shall distribute the net cash constituting Proceeds from Sale or Refinancing as follows:

          5.4.1. First, to Tenant, in an amount sufficient to return to all of Tenant’s partners, as a group, all outstanding capital contributions made by such partners to Tenant, together with an Internal Rate of Return of Seventeen and 3/10 percent (17.3%) on all invested capital; and

          5.4.2. Second, twenty percent (20%) to Landlord and eighty percent (80%) to Tenant.

          5.4.3. Notwithstanding anything to the contrary in this Lease, but subject to the remaining provisions of this Section 5.4.3, Landlord shall have no right to any Proceeds from Sale or Refinancing after the distribution of proceeds as provided herein with respect to the First Sale. In the event any amounts are placed in reserve or otherwise deducted from Proceeds from Sale or Refinancing pursuant to clauses (ii) or (iii) of the definition thereof and such reserved or deducted amounts later are distributed to or for the benefit of partners (or other equity owners) of Tenant, then Landlord’s share of such distributed amounts shall be paid to Landlord at the time of such distributions in the additional amounts which Landlord would have received had such distributed amounts not been placed in reserve or otherwise so deducted, together with any interest previously earned on such distributed reserves. In the event any proceeds of any Debt are distributed to or for the benefit of partners (or other equity owners) of Tenant, such distribution shall be treated for purposes of this Section 5.4 as if it were the Proceeds from Sale or Refinancing. The preceding sentence shall not apply to Debt that otherwise is deemed a Refinancing or to Debt which is incurred after the First Sale.

          5.4.4. Promptly after the Rent Commencement Date, Tenant shall provide Landlord a statement in reasonable detail of Tenant’s calculation of Cash Flow Level 1 and Cash Flow Level 2 and any related information reasonably requested by Landlord.

     5.5. Statements.

          5.5.1. Annual Statement. Within ninety (90) days after the end of each Lease Year, Tenant shall furnish Landlord with the Annual Statement for the preceding Lease Year. The Annual Statement shall be certified as correct by Tenant’s or Operator’s Chief Financial Officer. Tenant shall pay to Landlord with the Annual Statement the amount of any unpaid Rent due and payable in accordance with this Article 5, together with interest on such amount accrued from the forty-fifth (45^th) day following the end of the Quarter in which the Rent accrued until paid in full, at the Interest Rate. If the Annual Statement indicates that the aggregate amount of Rent paid in the preceding Lease Year exceeded Tenant’s actual liability for such Rent, then Tenant shall deduct the net overpayment from its next monthly payment(s) of Rent. In addition, Tenant shall deliver to Landlord such supporting documentation as Landlord shall reasonably request for the purpose of verifying the calculations set forth in the Annual Statement.

          5.5.2. Quarterly Statement. Within forty-five (45) days after the end of each Quarter, Tenant shall furnish Landlord with the Quarterly Statement for the preceding Quarter. The Quarterly Statement shall be certified as correct by Tenant’s or Operator’s Chief Financial Officer.

          5.5.3. Statement in Connection with First Sale or Prior Refinancing.

     Tenant shall deliver to Landlord such supporting documentation as Landlord shall reasonably request for the purpose of verifying the calculation of Landlord’s participation in Proceeds from Sale or Refinancing.

     5.6. Audit Of Annual Statements. Landlord may, once with respect to each Lease Year, but not later than four (4) years after the end of such Lease Year, cause an audit of the Gross Revenues and Net Cash Flow and the FF&E Reserve and Capital Maintenance Reserve of Tenant for the business conducted on the Premises to be made by a certified public accountant of Landlord’s selection against whom Tenant has no reasonable objection, and if any Annual Statement or Quarterly Statement made by Tenant to Landlord shall be found to be in error such that Tenant’s payment of Rent has in the aggregate been understated for any Lease Year by an amount in excess of four percent (4%) of the Rent due and payable in such Lease Year, then Tenant shall immediately pay the cost of such audit, as well as the Rent shown to be payable by Tenant to Landlord as a result thereof together with interest thereon at the Interest Rate. Otherwise, the cost of such audit shall be paid by Landlord, and additional Rent, if any, and interest thereon at the Interest Rate shall be paid promptly to Landlord. Each Annual Statement shall be conclusive and binding on Landlord and Tenant after the date that is four (4) years after Landlord’s receipt of such Annual Statement. Prior to the expiration of such four (4) year period, (i) the acceptance of Rent by Landlord shall neither bar nor preclude Landlord from claiming that it did not receive the full amount of such Rent for any particular past Lease Year and (ii) the payment of Rent by Tenant shall neither bar nor preclude Tenant from claiming that it overpaid such Rent for any particular past Lease Year.

     5.7. Retention Of Records. Tenant shall, for a period of four (4) years after the end of each Lease Year, or, for such period as an audit or proceeding relating to Rent hereunder is in progress, keep safe and intact all of the records, books, accounts and other data which are regularly kept by Tenant in the ordinary course of its business to establish Gross Revenues, Percentage Rent, Participation Rent (until the First Sale) and any authorized exceptions and deductions there from and any other amounts payable to or from Tenant pursuant to this Lease, and shall, upon reasonable advance notice, make the same available to Landlord, Landlord’s auditor, representative or agent for examination, inspection or audit at any time during said period.

     5.8. Contributions To Reserves.

          5.8.1. FF&E Reserve. Within thirty (30) days after the end of each Quarter during the Term, Tenant shall deposit an amount equal to at least three percent (3%) of the Gross Revenues attributable to such Quarter into a segregated bank account established and maintained for the benefit of the Project solely for the purpose of holding reserves to be used for the repair, replacement and maintenance of FF&E (the “FF&E Reserve”). The amounts so deposited in the FF&E Reserve, including all interest earned thereon, shall be continually maintained in such reserve account until such time(s) as Tenant deems it advisable in its discretion to withdraw such amounts for use in replacing, substituting, repairing or restoring the FF&E. Upon expiration or termination of this Lease, or the entry into any new lease pursuant to Section 18.8, the funds in the FF&E Reserve shall be the property of Tenant; provided that, upon termination of this Lease at Tenant’s option pursuant to Section 7.5 or Section 22.1.2, the FF&E Reserve shall be allocated between Landlord and Tenant in accordance with the corresponding termination provision.

          5.8.2. Capital Maintenance Reserve. Within sixty (60) days after the end of the first Quarter of the tenth (10th) Lease Year of the Term, and within sixty (60) days after the end of each Quarter thereafter during the Term, Tenant shall deposit an amount equal to two percent (2%) of the Gross Revenues attributable to such Quarter into a segregated bank account established and maintained for the benefit of the Project solely for the purpose of holding reserves to be used for the repair, replacement and maintenance of the Historic Elements and the Premises (the “Capital Maintenance Reserve”). The amounts so deposited in the Capital Maintenance Reserve, including all interest earned thereon, shall be continually maintained in such reserve account until such time(s) as Tenant deems it advisable in its discretion to withdraw such amounts for use in fulfilling its obligation to repair, make replacements to, and maintain the Historic Elements and the Premises in accordance with the terms of this Lease. Upon the expiration or termination of this Lease, or the entry into any new lease pursuant to Section 18.8, the funds in the Capital Maintenance Reserve shall be the property of Landlord and shall be transferred promptly to Landlord.

          5.8.3. Tenant’s Obligation to Deliver Statements and to Make Deposits.

     Tenant shall deliver to Landlord within forty-five (45) days after the end of each Quarter a statement setting forth the amount of funds held at the end of such Quarter in each of the FF&E Reserve and the Capital Maintenance Reserve and an accounting in reasonable detail of the flow of funds to and from such reserve accounts during such Quarter.

     5.9. Deposits and Contributions as Rent. Tenant’s obligation to make distributions to Landlord pursuant to Section 5.4 and contributions to reserves pursuant to Section 5.8 shall be deemed an obligation on the part of Tenant to pay Rent.

     5.10. General Rent Provisions. All payments of Rent, and any other sums payable by Tenant pursuant to this Lease, shall be in lawful money of the United States and payable by check without setoff (except as otherwise expressly permitted under the terms of Articles 11 and 31 of this Lease), prior notice, deduction or demand, to Landlord at General Services Administration, Post Office Box 70697, Chicago, Illinois 60673, or at such other address as Landlord may from time to time designate by notice to Tenant. At Landlord’s option, after reasonable prior notice to Tenant, payments of Rent pursuant to this Lease shall be payable by wire transfer or other electronic means to such account as Landlord may from time to time designate by notice to Tenant. If for any reason this Lease shall be terminated at any time other than the end of the month through no fault of Tenant and when Tenant shall not otherwise be in default under this Lease, Landlord shall refund to Tenant any prepaid but unearned rent allocable to the remainder of the month during which such termination shall occur. Upon expiration or earlier termination of this Lease, Tenant promptly shall pay any Rent (including Participation Rent and Percentage Rent) through the effective date of the expiration or termination. Any such amounts that cannot be determined fully shall be estimated at such time and reconciled as soon thereafter as is practicable.

     5.11. Net Lease. It is the purpose and intention of Landlord and Tenant that all Rent shall be absolutely net to Landlord without any abatement, deduction, counterclaim, set-off or offset whatsoever (except as expressly provided in Article 11 and Article 31 of this Lease and Section 6.12 of the Work Agreement), so that this Lease shall yield net, to Landlord when due hereunder, the Annual Base Rent and other Rent during the Term and that all costs, expenses and charges of every kind and nature relating to the Premises shall be paid by Tenant. Tenant shall also pay all taxes, assessments, and utility expenses in accordance with and to the extent provided in Articles 11 and 12.

6. STANDARD OF OPERATION AND USE

     6.1. Permitted Use. Tenant and any Space Tenants will only use the Premises during the Term for a Permitted Use. Notwithstanding the foregoing to the contrary, if at any time after the fifth (5^th) Lease Year, operation of the Premises for the Permitted Use is not Economically Viable, then with the prior consent of Landlord, which consent shall not be unreasonably withheld, conditioned, or delayed, Tenant shall have the right to

change the Permitted Use. Among the factors to be considered by Landlord in granting or withholding such consent (which may be conditioned on Tenant obtaining any necessary approvals of the National Capital Planning Commission or other governmental authorities) shall be compliance with the NHPA (including amendment of the Memorandum of Agreement if so required), continued reasonable public access as required by Section 2.7 and as otherwise practical, consistency with the criteria that resulted in Landlord’s selection of Tenant as tenant hereunder, and whether Tenant’s request is reasonable in light of the prevailing economic and market conditions. Landlord may condition its consent to a change in the Permitted Use upon renegotiation of the Rent to reflect the economic aspects of the changed use and amendment of the Hotel Standard to reflect the prospective use. Tenant shall cause the operation, management, maintenance and repair of the Premises to comply with the Hotel Standard (as may have been modified in the event of a change in the Permitted Use) throughout the Term.

     6.2. Certain Uses. Subject to its right of contest as provided in Section 7.4, Tenant shall not use or occupy, nor permit or suffer the Premises or any part thereof to be used or occupied for any unlawful or illegal business, use or purpose, or for any business, use or purpose deemed disreputable or extra hazardous, or in such manner as to constitute a nuisance of any kind, public or private, or for any purpose or in any way in violation of this Lease, the certificate of occupancy or of any present or future Applicable Laws or the Applicable Building Code, or which may make void or voidable any insurance then in force on the Premises. Tenant shall, immediately upon the discovery of any such unlawful, illegal, disreputable, extra hazardous or other use or purpose prohibited by this Section 6.2, take all reasonably necessary steps, legal or equitable, including the exercise of remedies available to Tenant under any Restaurant Leases or other Subleases whose subtenants are in violation of the foregoing requirements, or under Applicable Laws or the Applicable Building Code, to cause the discontinuance of such use. Tenant covenants, at Tenant’s sole cost and expense, to promptly comply with and abide by all applicable restrictions, conditions, reservations, covenants and other matters to which title to the Premises is subject. Without the prior written consent of Landlord in each instance, Tenant shall not apply for any variances, special exceptions or other changes in the zoning category, land use classification, building restrictions, parking requirements or the like for the Premises, provided that Tenant may file applications for any special exception, variance or waiver which is required in order to complete the construction and Rehabilitation work in the Premises in accordance with the Work Agreement. Tenant shall not submit its leasehold estate in the Premises to a condominium or cooperative regime or plan of ownership, except as approved by Landlord in accordance with Section 6.1.

     6.3. No Use By Public Without Restriction. Tenant shall not suffer or permit the Premises or any portion thereof to be used by the public without restriction or in such manner as might reasonably tend to impair title to the Premises or any portion thereof, or in such manner as might reasonably make possible a claim or claims of adverse usage or adverse possession by the public, as such, or of implied dedication of the Premises or any portion thereof.

     6.4. Continuous Occupancy. From and after the date of Substantial Completion, Tenant (or its permitted successors) shall, throughout the entire Term, continuously and uninterruptedly occupy and operate the hotel portion of the Premises (after Substantial Completion in accordance with the schedule set forth in the Work Agreement) for the Permitted Uses; provided, however, that Tenant’s obligations under this Section 6.4 shall be suspended during any period (i) of restoration, repair, replacement or rebuilding undertaken by Tenant pursuant to this Lease, (ii) of condemnation of the Premises or any interest therein, (iii) during which improvements are being made to any portion of the Premises or other space within the Premises prior to occupancy thereof by a new tenant or Space Tenant, (iv) of capital improvements undertaken by Tenant pursuant to Article 8, (v) of transition in connection with an assignment of the Lease, a Sublease of the Premises or space therein or a change in the Operator, or (vi) where otherwise prevented by reasons or causes reasonably beyond Tenant’s control (excluding Tenant’s financial inability), all of the foregoing limited, however, to the amount of space that reasonably and prudently in Tenant’s discretion is affected thereby and for such time as is reasonably required in any of the foregoing circumstances, or where otherwise prevented by reason or causes reasonably beyond Tenant’s control (excluding Tenant’s financial inability) and provided that Tenant shall give Landlord reasonable prior notice of any cessation or suspension of occupancy or operation pursuant to this Section. Notwithstanding anything to the contrary in this Section 6.4, after delivery of reasonable prior notice to Landlord, Tenant may reduce the number of operating guest rooms to fewer than one hundred forty five (145), but in no event to fewer than fifty (50), in the event that, and for so long as, Tenant reasonably determines in light of prevailing economic conditions that it is not economically feasible to operate more than such reduced number of guest rooms. Nothing contained in this Section 6.4 is intended to limit, reduce or otherwise affect Tenant’s obligations under Section 2.7.

7. REPAIRSANDMAINTENANCE

     7.1. Tenant. Tenant shall, at Tenant’s sole expense upon the Occupancy Date and thereafter during the Term: (i) keep and maintain the Premises and all FF&E used in connection with the Hotel (or cause the same to be kept and maintained) in good and sanitary order, condition and repair (permitting for reasonable wear and tear) in compliance with the Hotel Standard; (ii) except as provided in Section 7.4, comply with all laws, ordinances, rules, regulations, or orders of all governmental authorities now in force or which may hereafter be in force which generally control, regulate or affect the Premises; and (iii) keep clean and free from snow, ice, rubbish and obstructions the sidewalks, Vault Space, gutters and curbs comprising, in front of or adjacent to, the Premises, promptly after such items may accumulate. Tenant shall not be deemed to be in possession of the Premises or to have any obligation under this Article 7, until the Occupancy Date. Until the Occupancy Date (i) Landlord shall perform all repairs and maintenance and other work necessary to cause the Premises to comply with Applicable Laws and the Applicable Building Code to the extent applicable to a vacant building and (ii) Landlord shall manage, repair, preserve and maintain the Premises and the Historic

Elements in accordance with Landlord’s currently applicable “mothball” maintenance program, including any repairs and maintenance required by reason of casualty.

     7.2. Landlord. Subject to Landlord’s obligations under the Work Agreement and its obligation to provide Steam Service in accordance with Section 12.2, after the Occupancy Date, Landlord shall have no obligation to furnish any services, utilities or facilities whatsoever to the Premises. Upon the Occupancy Date, and subject to Landlord’s obligations under Section 7.1, Section 12.2 and Article 31, Landlord shall have no duty or obligation to make any alteration, change, improvement, replacement, restoration, Rehabilitation or repair to, or to demolish any part of, the Improvements, and Tenant shall assume sole responsibility for the condition, operation, repair, alteration, improvement, replacement, Rehabilitation, maintenance and management of the Premises during the Term.

     7.3. Compliance with Laws. From and after the Occupancy Date, Tenant, at its sole cost and expense, shall comply with the Applicable Building Code and any and all Applicable Laws, irrespective of the nature of the work required to be done, extraordinary as well as ordinary, of federal, state, city or other governmental, public or quasi-public authorities now existing or hereafter created, and of any and all of their departments and bureaus, and of any applicable fire rating bureau or other body exercising similar functions with respect to policies of insurance affecting the Premises, sidewalks comprising a part or in front thereof or adjacent thereto and/or any Vault Space, or requiring the removal of any encroachment, or affecting the construction, maintenance, use or occupation of the Premises, whether or not the same involve or require any structural changes or additions, and irrespective of whether or not such particular use to which the Premises, or any part thereof, may be put. After the Occupancy Date, Tenant also shall comply with any and all provisions and requirements of any fire, liability or other insurance policy required to be carried by Tenant under the provisions of this Lease.

     7.4. Contest of Obligation. Tenant shall have the right, in appropriate proceedings, at its sole cost and expense, diligently and in good faith to contest or seek to have reviewed or abated the application of any law, ordinance, rule or regulation which a governmental or quasi-governmental authority seeks to enforce, including the interpretation or manner of application of the Historic Preservation Standards to the Premises, provided, that, Tenant shall not challenge the general applicability of the Historic Preservation Standards to the Premises. During any such contest, Tenant shall have the right to defer its compliance with any such law, ordinance, rule or regulation upon the conditions that (i) Tenant shall furnish to Landlord prior notice of such contest and reasonable evidence that Tenant has the ability to satisfy any costs that are reasonably likely to result from Tenant’s decision to defer compliance with any such law, ordinance, rule or regulation pending resolution of such contest, (ii) no such deferral shall be permitted pursuant to this Section 7.4 with respect to actions of Landlord as landlord under this Lease, but, subject to the other requirements of this Section 7.4, such deferral shall be permitted with respect to governmental rules or regulations promulgated by

Landlord in its capacity as a governmental authority, (iii) no such deferral shall limit Tenant’s obligations as provided elsewhere in this Lease to keep, operate and maintain the Premises in good order, condition and repair and in accordance with the Hotel Standard, (iv) no such deferral shall limit Tenant’s obligations to protect and preserve the Historic Elements and structure and major systems of the Improvements (including any parts of the Improvements that are involved in any then-pending contest, review or abatement pursued or sought by Tenant), and (v) no such deferral shall be permitted if at any time the Premises or any part thereof shall be in danger of being forfeited or if Landlord shall be in danger of being subject to liability or penalty by reason of noncompliance. Any contest instituted by Tenant shall be commenced and prosecuted to final adjudication by Tenant as soon as reasonably possible. Landlord shall reasonably cooperate with Tenant in any such contest to such extent as Landlord may reasonably deem proper (including joining in any contest, application, request for review, and the like), however Landlord shall not be subject to any liability for the payment of any costs or expenses in connection with any such proceeding and Tenant covenants to indemnify and save Landlord harmless from any such costs or expenses.

     7.5. Certain Termination Rights.

          7.5.1. Uneconomic or Infeasible Costs. Except to the extent occasioned by fire or other casualty covered by Article 22, or any Release of Hazardous Materials not covered by Section 31.5 and not caused by Tenant or its agents, employees, Space Tenants, contractors or subcontractors, if, after Substantial Completion, the cost to Tenant of making the repair, alteration, addition or improvement (to the extent of available insurance proceeds and Capital Maintenance Reserve and, to the extent not reasonably required or prudently reserved for replacement of FF&E, the FF&E Reserve) would, in Tenant’s reasonable good faith business judgment, make the continuing use of the Premises not Economically Viable, and such cost to comply in the aggregate (in excess of available insurance proceeds and Capital Maintenance Reserve and, to the extent not reasonably required or prudently reserved for replacement of FF&E, the FF&E Reserve) is equal to or greater than five times the Annual Base Rent for the Lease Year during which such repair or other obligation of Tenant shall occur, then Tenant shall have the right to elect in its sole discretion to terminate this Lease by notice to Landlord given within ninety (90) days after the obligation to make such repair, alteration, addition or improvement is imposed. In the event that such obligation is anticipated in advance, Tenant shall give notice as soon as is reasonably feasible. Notice of termination given hereunder shall be accompanied by Tenant’s certificate affirming Tenant’s conclusion that the cost of the repair, alteration, addition or improvement makes continuing use of the Premises uneconomic or infeasible to Tenant under the standards herein specified. Termination of the Lease under Tenant’s notice shall be effective sixty (60) days after the date Tenant delivers such notice.

          7.5.2. Last Five Years. During the last five (5) Lease Years, if pursuant to this Article 7 Tenant becomes obligated to make or install any repairs, Alterations, additions or improvements to the Premises (including by reason of any casualty) with an

actual useful life in excess of the then remaining Term, then Tenant shall notify Landlord of such repairs, Alterations, additions or improvements and Tenant shall be obligated to pay for the portion of the reasonable cost equal to the ratio (expressed as a percentage) which the then remaining number of Lease Years (or fractional portion thereof) in the Term bears to the actual useful life of such repairs, Alterations, additions or improvements. Tenant’s notice shall state the itemized cost and useful life of the item, and Landlord’s balance as described in clause (ii) below, and shall inform Landlord of its option in the next sentence. Within forty-five (45) days after Tenant gives such notice, Landlord shall elect, at its option, by notice to Tenant either to (i) waive Tenant’s obligation to make such repairs, Alterations, additions or improvements to the extent that the basic integrity of the Building structures and systems will not be adversely affected and the cost thereof exceeds the available insurance proceeds and Capital Maintenance Reserve, or (ii) to be obligated to pay for the balance of the cost of such repairs, Alterations, additions or improvements in excess of available insurance proceeds and Capital Maintenance Reserve. In the event Landlord does not give said notice, Landlord shall be deemed to have elected option (i). In any event Tenant shall not cause or permit waste and shall preserve the integrity of the Building structures and systems, and shall preserve and reasonably protect the Historic Elements.

          7.5.3. Distribution of Insurance Proceeds and Reserves. In the event of any termination of this Lease pursuant to this Section 7.5 or Article 31, all insurance proceeds made available by the Leasehold Mortgage, the Capital Maintenance Reserve, and the FF&E Reserve, shall be distributed in accordance with the last two sentences of Section 22.1.2.

8. ALTERATIONS

     8.1. Right To Make Alterations.

          8.1.1. Tenant shall not make any Alterations without the prior approval or consent of Landlord, which shall not be unreasonably withheld; provided that Tenant shall have the right without Landlord’s consent to make Immaterial Alterations unless an uncured Event of Default then exists.

          8.1.2. All Alterations shall constitute Tenant’s Property and shall remain the property of Tenant during the Term, subject to Article 9. All Alterations, when completed, shall be consistent with the Hotel Standard and the Historic Preservation Standards and shall be of such a character as not to materially reduce the value and utility of the Premises below its value and utility immediately before construction of such Alterations was commenced.

          8.1.3. The provisions of Section 6.3 of the Work Agreement (applicable to the initial Rehabilitation) shall apply to all Alterations.

     8.2. Additional Requirements. No Alterations shall be undertaken until Tenant shall have delivered to Landlord insurance policies or certificates therefor issued by responsible insurers, bearing notations evidencing the payment of premiums or

accompanied by other evidence satisfactory to Landlord of such payments, for workers’ compensation and employer liability insurance covering all Persons employed in connection with the Alterations and with respect to whom death or bodily injury claims could be asserted against Landlord, Tenant or the Premises, and, unless the liability insurance then in effect with respect to the Premises shall cover the risk, owner’s protective liability insurance expressly covering the additional hazards resulting from the Alterations with limits not less than those, and otherwise subject to the same conditions and requirements set forth in, Article 13 with respect to the liability insurance required thereunder. If under the provisions of any fire, liability or other insurance policy or policies then covering the Premises or any part thereof any consent to such Alterations of said insurance company or companies issuing such policy or policies shall be required to continue and keep such policy or policies in full force and effect, Tenant shall obtain such consents and pay any additional premiums or charges therefor that may be imposed by said insurance company or companies. In connection with any Alterations involving demolition or substantial construction or reconstruction, Tenant shall maintain and provide to Landlord at Tenant’s sole cost and expense builder’s risk insurance required to be maintained by Tenant under the terms of the Work Agreement during the original construction and Rehabilitation work in accordance with the Work Agreement. All Alterations shall be performed in a good and workmanlike manner in accordance with the Applicable Building Code and all Applicable Laws. Promptly upon completion of any Alterations that would require a Building Permit if the Premises were privately owned, at Tenant’s cost, Tenant shall deliver to Landlord record drawings as required by Section 6.4.3 of the Work Agreement as to the initial construction of the Project.

9. TENANT’S PROPERTY, ETC.

     9.1. Ownership of Tenant’s Property. Subject to Article 8 and the other provisions of this Lease, Tenant shall have the right to install, remove, alter, add to, and/or replace in or upon the Premises such improvements, fixtures and personal property as Tenant deems desirable. All improvements, fixtures and personal property installed by Tenant in or upon the Premises, whether or not affixed to the Premises, shall remain the property of Tenant until expiration or earlier termination of this Lease. Upon expiration of the Term, or earlier termination of this Lease, Tenant shall have the right (but shall not be required) to remove all or any Excluded Fixtures, in which event Tenant shall retain its title thereto provided, however, that Tenant shall repair all damage caused by such removal at Tenant’s sole cost and expense. Title to all of Tenant’s Property not removed by Tenant shall automatically vest in Landlord upon expiration of the Term or earlier termination of this Lease.

     9.2. Leased and Financed Property, Etc. Landlord acknowledges that Tenant or a Space Tenant may lease from or finance with an unrelated third party all or a portion of the personal property or Excluded Fixtures that are removable without material damage to the Premises. Upon request, Landlord shall promptly execute and deliver any confirmations or acknowledgments that may reasonably be required by any existing or proposed lessor or financing party in connection with the leasing or financing of any such

property, which shall include only: (1) an acknowledgment by Landlord that any claims, title or interest that such lessor or financing party may have in, against or with respect to any such fixtures, equipment or other personal property are superior to any statutory right of distraint or other statutory lien of Landlord with respect thereto; and (2) the agreement, acknowledgement and confirmation of Landlord that, as between Landlord and such lessor or financing party, the lessor or financing party shall have the right to remove any or all of the leased or financed property from the Premises at any time or times at or prior to the expiration or termination of the Term, subject to reasonable requirements of Landlord to protect the balance of the Premises. Upon request by Tenant, Landlord shall enter into an agreement with any such lessor or financing party to provide it with copies of notices of defaults that might give rise to termination of this Lease.

     9.3. Name of Building; Intellectual Property. Landlord hereby grants to Tenant for the Term, to the extent Landlord has ownership rights in the IP Rights and the undersigned signatory has the right to make this grant for Landlord, a royalty-free nonexclusive license to use the IP Rights and to license to others the right to use the IP Rights in connection with Tenant’s use of the Premises, subject to Landlord’s reservation of the right to use the IP rights in books or other media describing Landlord’s real property holdings generally and not in competition with Tenant or its licensees of such IP Rights. Tenant shall have the right, but not the obligation, to use any name, including any name included in the IP Rights, in connection with the Hotel and any restaurant, business or other concession located in or on the Premises. Tenant shall have no obligation to use any name included in the IP Rights.

10. MECHANICS’ LIENS

     10.1. No Liens. If any mechanic’s lien or other lien, charge, or order for the payment of money shall be filed against the Premises or Landlord’s reversionary interest in the Land or Improvements, Tenant shall, at its own cost and expense, cause such lien, charge, or order to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or other means within thirty (30) days after notice of the filing thereof. If any mechanic’s or other lien shall at any time be filed against Landlord’s reversionary interest in the Land or Improvements for work performed by or for Tenant, and Tenant fails to have the lien discharged in the same manner as provided above, and if such lien shall continue for an additional thirty (30) days after notice by Landlord to Tenant, then, in addition to any other right or remedy, Landlord may, but shall not be obligated to, discharge the same either by paying or bonding off of record the amount claimed to be due, and any amount so paid or incurred by Landlord with all costs and expenses incurred by Landlord in connection therewith, together with interest at the Default Rate accruing from the date(s) of Landlord’s payment(s), shall be paid by Tenant to Landlord on demand.

     10.2. No Consent of Landlord. Nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials for any specific improvement, alteration to or repair of the Premises or any part thereof. Notice is hereby given, and Tenant shall cause all construction agreements pertaining to the Land or Improvements to provide that Landlord shall not be liable for any work performed or to be performed at the Premises for Tenant or any subtenant or for any materials furnished or to be furnished at the Premises for any of the foregoing, and that no mechanic’s or other lien for such work or materials shall attach to or affect the estate of Landlord in and to the Land or Improvements.

     10.3. Notice of Liens. Should any lien be filed against the Land or Improvements or should any action of any character affecting the title thereto be commenced, each party hereto shall give to the other party notice thereof as soon as notice of such lien or action comes to the knowledge of the notifying party.

11. TAXES

     11.1. Real Property Taxes. Landlord currently pays no Real Property Taxes and makes no payments in lieu of such taxes to the District of Columbia or any other jurisdiction based upon its interest in the Land and Improvements. Tenant shall not, directly or indirectly, voluntarily agree to pay any such Real Property Taxes or to make payments in lieu of such Real Property Taxes to the District of Columbia or any other jurisdiction or otherwise consent to the imposition of Real Property Taxes. Payment by Tenant of a real property tax bill presented by the District of Columbia shall not be deemed a voluntary agreement to pay, but shall be subject to Landlord’s right to contest pursuant to Section 11.6. Tenant shall give Landlord prompt notice of any real property tax assessment or bill indicating that the District of Columbia intends to tax the Premises or Tenant’s interest therein. Subject to the third (3^rd) preceding sentence, if the Land or Improvements are or become subject to Real Property Taxes during the Term, for any reason whatsoever, such taxes or payments shall be the responsibility of Landlord; provided that Landlord’s obligations to pay such amounts shall be limited to available appropriated funds of Landlord. To the extent that funds are not available for Landlord to make such payments, (A) Tenant shall pay such taxes or other payments as and when due and payable and (B) Tenant shall have the right to deduct the amount of such payments (together with interest at the Interest Rate on the outstanding amount of such payments from the date such payments are made by Tenant) from the next and succeeding payments of Rent owed by Tenant to Landlord under this Lease until exhausted.

     11.2. BID Taxes. Landlord currently does not pay BID Taxes applicable to the Land and Improvements. Tenant shall be obligated, throughout the Term, to pay BID Taxes to the extent the same are assessed against the Land, Premises and/or Improvements or are otherwise due and payable.

     11.3. Personal Property Taxes. Subject to the provisions of Section 11.4, Tenant shall pay, prior to delinquency, all Personal Property Taxes levied during the Term to the full extent of installments falling due during or with respect to the Term and shall deliver to Landlord within ten (10) days after payment thereof copies of the receipted bills or receipts endorsed by the tax collecting authority showing such payment to have been made before the date such payment would become delinquent. All such Personal Property Taxes shall be paid by Tenant directly to the levying authority. Landlord shall cooperate with Tenant in endeavoring to cause all bills for Personal Property Taxes payable by Tenant hereunder to be sent directly to Tenant, but in the event the tax collection agency will not so agree, then Landlord shall promptly tender the same to Tenant upon receipt of any such bills.

     11.4. Election To Pay In Installments. If, by law, any taxes payable by Tenant hereunder may be paid in installments at the option of the taxpayer, Tenant may exercise such option to pay the same in installments as they may become due during the Term, so long as all such installment payments are required to be made prior to the expiration of the Tenn.

     11.5. Proration. All taxes required to be paid by Tenant under this Article 11, when paid for an annual or other specified term, shall be apportioned for the first and last tax years therefor in the Term, so that the portion payable by Tenant in respect of each of such tax years shall be only such proportion as the number of days covered by the Term in such respective tax years bears to the total number of days for which such payment is payable.

     11.6. Contest. Landlord and Tenant shall each have the right, at its own cost and expense and in its own name or in the name of the other party, to seek to contest or have reviewed, reduced, equalized, or abated any assessment related to taxes payable by the contesting party. The contesting party shall post security in the amount of such contested taxes or assessments, plus estimated costs, penalties and interest, or post a bond of a responsible corporate surety in such amount or such higher amount as is required to stay the obligation to pay such taxes and prevent any penalty. Upon the termination of such proceedings, the contesting party shall pay the amount of such taxes or part thereof as finally determined in such proceedings, together with any costs, fees (including attorneys’ fees and disbursements), interest, penalties or other liabilities in connection therewith, and upon such payment, the contesting party may cause the release of any bond or other security given in connection with such contest. If at any time payment of the whole or any part of such tax or assessment shall become necessary in order to prevent the termination by sale or otherwise of the right of redemption of the Premises, or to prevent eviction of Landlord or Tenant because of nonpayment, then the contesting party shall timely pay to the taxing authority the amount necessary to prevent such termination or eviction and deliver to the non-contesting party within ten (10) days thereafter receipted bills or receipts endorsed by the tax collecting authority, and failing such delivery the non-contesting party shall have the right so to pay the taxing authority. Any such payment, and any costs or expenses incurred by the non-contesting party in connection

therewith (including reasonable attorneys’ fees) shall be promptly paid by the contesting party within twenty (20) days after demand by the non-contesting party. If required, and provided that the non-contesting party shall incur no risk or cost, the noncontesting party shall join with the contesting party and execute any and all documents, applications, petitions, instruments, or complaints necessary for any such protest, contest, review or other proceedings, desired or conducted by the contesting party; provided that upon final determination of any such contest, review or proceedings, the contesting party shall pay the taxes for which it is responsible hereunder as they are finally determined and all penalties, interests, costs, and expenses which may thereupon be due or have resulted therefrom. Any Real Property Taxes payable by Tenant as contesting party under this Section 11.6 shall be subject to reimbursement by Landlord as and to the extent provided in Section 11.1.

12. UTILITIES AND SERVICES

     12.1. Tenant Pays For Its Utilities. Tenant shall pay one hundred percent (100%) of all charges incurred by Tenant or which would be a charge or lien against the Premises for electric, gas, heat, water, telephone or other communication service, or other utilities or services provided to the Premises during the Term.

     12.2. Steam Service. During the Term, Landlord shall cause the Premises to be served with steam by the Steam Line for the purpose of providing hot water and heat to the Premises in accordance with the standards, terms and conditions to be set forth in a separate agreement to be negotiated in good faith between Landlord and Tenant during the Feasibility Period, which agreement shall be in recordable form and shall provide, among other things, that (i) so long as Landlord provides steam service to any other building located on the Steam Line in the District of Columbia, Landlord shall provide such steam service to the Premises, and in no event shall Landlord cease providing such steam service without giving Tenant at least three (3) years prior notice, and (ii) in the event that Landlord sells, delegates, assigns or otherwise transfers to a successor steam provider its rights and/or obligations to provide steam service, Landlord shall impose on such successor steam provider the obligation to provide steam service to the Premises on reasonable market terms and conditions. Notwithstanding anything to the contrary in this Section 12.2, Tenant shall have the right, upon prior notice to Landlord, as set forth in the separate steam service agreement to be negotiated between Landlord and Tenant, to terminate steam service to the Premises as of the date specified by Tenant in such notice.

     12.3. Landlord’s Liability. Landlord shall not in any event whatsoever be liable for any injury or damage to any property or to any Person happening on, in or about the Premises and its appurtenances, nor for any injury or damage to the Premises or to any property belonging to Tenant or any other Person which may be caused by any fire or breakage, or by the use, misuse or abuse of any of the elevators, hatches, openings, installations, stairways or hallways, or which may arise from any other cause whatsoever unless caused by the breach of this Lease by Landlord or the wrongful acts

or negligence of Landlord or its agents or employees for which Landlord would be liable under this Lease or Applicable Laws. During the Term, subject to Landlord’s obligation to provide steam service in accordance with Section 12.2, Landlord shall not be liable for any failure of water supply, gas or electric current, nor for any injury or damage to any property or any Person or to the Premises caused by or resulting from gasoline, oil, steam, gas, electricity, or hurricane, tornado, flood, wind or similar storms or disturbances, or water, rain or snow which may leak or flow from the street, sewer, gas mains or subsurface area or from any part of the Premises, or leakage of gasoline or oil from pipes, appliances, sewer or plumbing works therein, or from any other place, nor for interference with light or other incorporeal hereditaments by anybody, or caused by any public or quasi-public work, unless any of the foregoing results from the wrongful acts or negligence of Landlord in its capacity as a party to this Lease, or its agents or employees in their capacities as agents or employees of Landlord for which Landlord would be liable under this Lease or Applicable Laws.

13. INSURANCE

     13.1. Tenant’s Fire And Extended Coverage. Tenant at its sole expense shall procure and maintain in full force and effect from the Occupancy Date and during the entire Term thereafter, all risk property and boiler and machinery coverage, including demolition, building ordinance coverage, earthquake, flood, and business income coverage on: (a) Improvements on the Land typically and customarily insured, to the typical and customary limits of such coverage and including insurance for Tenant’s Property; (b) all risk builders risk coverage for the building materials, supplies, and equipment during construction of the Project; and (c) the improvements and leasehold improvements, in amounts not less than the full cost of replacement thereof with like kind and quality sufficient to prevent operation of co-insurance limitations from and after the date the Hotel commences operations. The amount of such insurance shall initially be no less than Forty-Five Million Seven Hundred Thousand Dollars ($45,700,000.00); provided that during such time as the Premises remain vacant prior to Tenant commencing construction work therein, all risk property insurance shall be maintained in the amount of Forty-Five Million Seven Hundred Thousand Dollars ($45,700,000.00). At least every two years Tenant shall from time to time, or upon request by Landlord, notify Landlord of the amount which a qualified appraiser selected by Tenant and reasonably acceptable to Landlord, reasonably deems to be the full insurance cost of replacement thereof with like kind and quality, which amount is subject to the dispute resolution provisions of Article 28. If Tenant so elects, such insurance may provide for a “deductible” in an amount up to the amount customarily provided in insurance carried by Kimpton (or by Tenant and its Affiliates if Kimpton no longer is an Affiliate of Tenant) but not more than One Hundred Thousand Dollars ($100,000), or such commercially reasonable deductible in excess of One Hundred Thousand Dollars ($100,000) as may from time to time after the Commencement Date be applicable. All policies evidencing such insurance (except for business interruption insurance) shall name Landlord as an additional insured and/or loss payee as appropriate, as its interest may appear, shall be

payable jointly to Tenant and Landlord for use by Tenant pursuant to the provisions of Article 22. Provided that the Leasehold Mortgagee under any Leasehold Mortgage has agreed in writing (in form and substance reasonably satisfactory to Tenant and Landlord) that insurance proceeds shall be available for use by Tenant and/or Landlord for the purpose of compliance with Article 22, and that such mortgagee or Tenant shall pay the costs, if any, required for an endorsement naming it as such an insured, such insurance may name such mortgagee or beneficiary as an additional insured and/or loss payee as appropriate, as its interest may appear.

     13.2. Tenant’s Worker’s Compensation, Employer Liability, Commercial General Liability And Commercial Automobile Liability Coverage. Tenant at its sole expense shall procure and maintain in full force and effect from the Commencement Date, and for the remaining Term: (a) workers’ compensation and employer’s liability insurance required under applicable District of Columbia laws covering all Tenant’s employee’s with such deductible limits generally set by Tenant or by hotels operated by its Affiliates; and (b) commercial general liability and commercial automobile liability insurance to provide coverage to the public, or to any invitee, Space Tenant or Landlord, arising out of or related to the use of or resulting from any accident or occurrence to Persons or loss or damage to property occurring in or upon the Premises, any perimeter sidewalks and passageways, including common areas, immediately adjacent thereto, or in Tenant-operated or licensed vehicles transporting guests, invitees, or other Persons to or from the Premises, with limits of liability of not less than: (i) Commercial General Liability (Occurrence Form -Limits Per Location) -Each Occurrence $10,000,000, Products/Completed Operations $10,000,000, Personal Injury and Advertising Injury $10,000,000, Fire Damage $1,000,000, General Aggregate $10,000,000 (such commercial general liability insurance to also include coverage for employer’s liability, employee benefits liability, innkeepers legal liability, policy/security guard liability, and liquor liability), and (ii) Commercial Automobile Liability (Occurrence Form -Any Auto, Hired Autos & Non-Owned Autos) Combined Single Limit of$10,000,000 including coverage for garage liability and garage keepers legal liability. The commercial general liability insurance shall include, without limitation, contractual liability coverage. If Tenant so elects, such commercial general liability and commercial automobile liability insurance may provide for a “deductible” in an amount not to exceed $100,000 as to any portion of the coverage required hereunder. Tenant’s commercial general liability policy and commercial automobile policy or policies shall name Landlord as an additional insured. The amounts provided in this Article shall increase each Lease Year by the percentage increase in the CPI.

     13.3. Policies And Certificates. All policies required under this Lease shall be effected under valid and enforceable policies, issued by responsible insurers licensed to do business in the District of Columbia of recognized responsibility which hold a Best’s rating of A-X or greater. Tenant shall from time to time deliver to Landlord and to any other named insured hereunder who so requests copies of policies or certificates of insurance showing that such policies are in effect. All policies providing for self-insurance or “deductibles” may permit one or more of the named insureds to assume the

right to defend or adjust claims which reasonably appear to be susceptible of settlement or final resolution within the limits of the self-insurance. The coverage provided by such policies shall not be limited, reduced or diminished by virtue of the waivers contained in Article 14 and Section 13.5. Should Tenant fail to acquire, maintain or renew any insurance required to be maintained by it under this Article 13, or to pay the premium therefor, then Landlord, at its option, but without obligation so to do, may procure such insurance, and any sums expended by it to procure any such insurance shall be forthwith repaid upon demand with interest at the Default Rate. Tenant shall obtain written agreements from each insurer under policies required to be maintained by them, to notify all additional insureds named thereunder at least ten (10) days prior to cancellation or reduction in coverage under any such policy to a level less than that required to be maintained under this Lease.

     13.4. Blanket Coverage. Any policy required to be maintained hereunder by either party may be maintained under a so-called “blanket policy” insuring other parties and other locations so long as the amount of insurance required to be provided hereunder is provided on a per location basis and is not thereby diminished.

     13.5. Subrogation Waiver. All risk property, and boiler and machinery insurance policy or policies shall provide that the insurance company waives all rights of recovery by way of subrogation against Landlord or Tenant. Commercial general liability and commercial automobile liability insurance policies shall provide that the insurance company waives all rights of recovery by way of subrogation against Landlord. In the instance of commercial general liability and commercial automobile liability insurance, the provisions of this Section 13.5 are intended to restrict Tenant (as permitted by law) to recovery against insurance carriers to the extent of such coverage, and waive fully, and for the benefit of Landlord, any rights and/or claims which might give rise to a right of subrogation in any insurance carrier.

     13.6. Tenant Insurance Primary. Tenant shall have all of the above required policies endorsed to reflect that they are primary over any other insurance or self insurance of Landlord.

14. INDEMNIFICATION OF LANDLORD

     14.1. Tenant’s Obligation. Tenant shall indemnify and hold harmless Landlord for any legal liability, suits, obligations, fines, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys’ fees and disbursements which may be imposed upon or incurred by or asserted against Landlord by reason of any tax attributable to the execution, delivery or recording of this Lease or a memorandum hereof.

     14.2. Survival of Provision. Tenant’s obligation to indemnify Landlord pursuant to Section 7.4, Section 18.14 and this Article 14 shall survive the expiration or earlier termination of this Lease, but only in respect of acts and occurrences arising on or prior to the later of the expiration or earlier termination of this Lease.

     14.3. Obligation Not Affected By Failure of Insurance Carriers. Except as otherwise expressly provided in this Lease or the Work Agreement, the obligations of Tenant under this Article shall not in any way be affected by the absence in any case of covering insurance or by the failure or refusal of any insurance carrier to perform any obligation on its part under insurance policies affecting the Premises.

     14.4. Tenant to Defend Claims Against Landlord. If any claim, action or proceeding is made or brought against Landlord by reason of any event as to which Tenant is indemnifying Landlord pursuant to this Article, then, upon demand by Landlord, Tenant, at its sole cost and expense, shall resist or defend such claim, action or proceeding in Landlord’s name, as the case may be, if necessary, by the attorneys for Tenant’s insurance carrier (if such claim, action or proceeding is covered by insurance), otherwise by such attorneys as Landlord shall approve, which approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, at its expense, Landlord may engage its own attorneys to defend it or to assist in its defense.

15. ASSIGNMENT AND SUBLETTING

     15.1. Operator. Tenant has designated Kimpton to serve as the initial Operator, and Landlord hereby acknowledges and agrees to such designation. Tenant shall have the right to retain any successor management company selected by it to serve as Operator without the consent of Landlord, provided that (a) the proposed Operator is not an Excluded Contractor and (b) Tenant provides reasonable substantiation to Landlord that the proposed Operator, or any entity or Person which owns a controlling interest in such Operator (e.g., a parent corporation or general partner) (i) has demonstrable prior successful experience in operating hotels and restaurants of similar or better quality than the Hotel and (ii) has the capability to manage a property of historic significance. Tenant shall provide Landlord with at least one hundred twenty (120) days’ prior notice of any termination of an operating agreement with an Operator, and with at least thirty (30) days’ prior notice of Tenant’s designation of a substitute Operator, which latter notice shall include the information regarding such substitute Operator as is required in accordance with this Section 15.1. For purposes of this Section 15.1, Tenant may satisfy its obligation to substantiate that the successor Operator has the capability to manage a property of historic significance by demonstrating that such successor Operator has retained a Person (such as an employee or consultant) who previously has provided facilities management services to the Project or to other properties of historic significance.

     15.2. Assignment or Major Sublease. Tenant shall have the right without approval or consent of Landlord but with fifteen (15) days prior notice to Landlord to assign this Lease or any interest herein or sublease part or all of the Premises to one or more Affiliate(s) to the extent not prohibited by the Anti-Assignment Acts and provided that the Transferee is not an Excluded Contractor. In no event, however, shall there be more than one Person comprising Tenant under this Lease at any particular time. Except as so provided, Tenant shall not voluntarily or involuntarily, by operation of law

or otherwise, assign this Lease or enter into a Major Sublease without the prior written consent of Landlord which consent shall not be unreasonably withheld, conditioned or delayed as provided in Section 15.5. Landlord’s consent to one assignment or Major Sublease shall not be deemed to be a consent to any subsequent assignment or Major Sublease. Following a permitted assignment of all right, title and interest of Tenant pursuant to this Lease, dissolution of the assignor in accordance with Applicable Laws shall not be a default by Tenant under this Lease.

     15.3. Deemed Assignments.

          15.3.1. For purposes of Section 15.2, (i) if Tenant is a Partnership, the sale, assignment or transfer of any general partner’s interest in such partnership, or (ii) if Tenant is a corporation, joint venture, limited liability company or other entity (other than a partnership), the transfer of interests in such corporation or other entity resulting in a change of control of such corporation, joint venture or other entity (excepting any corporation whose stock is listed and publicly traded on a recognized stock exchange), whether by operation of law or otherwise, and whether by sale, assignment or transfer of any issued and outstanding capital stock of any such corporation or by the issuance of any additional stock in any such corporation by sale, assignment or other transfer, shall be regarded as, and subject to the same provisions concerning, an assignment of this Lease or Sublease of the entire Premises, or substantially the entire Premises. Notwithstanding the foregoing provisions of this Section 15.3 to the contrary, (i) the sale, assignment or transfer to an Affiliate or to a Leasehold Mortgagee of any general or limited partner interest or other ownership interest in a partnership, joint venture, or other entity which is Tenant under this Lease, or (ii) any transfer in the voting control of Tenant to an Affiliate or to a Leasehold Mortgagee of any corporation (excepting a corporation whose stock is listed and publicly traded on a recognized stock exchange), which is a general partner of any partnership or is a venturer in any joint venture that is Tenant under this Lease or (iii) the formation of a new joint venture, new partnership or other new entity by a Leasehold Mortgagee and Tenant (or any Affiliate of Tenant or some or all of the general and limited partners of Tenant), said new joint venture, new partnership or other new entity thence becoming Tenant under this Lease, shall not require Landlord’s prior consent provided that (i) Tenant gives to Landlord (A) thirty (30) days advance notice of said occurrence identifying Leasehold Mortgagee, (B) executed counterparts of all instruments effecting said occurrence, (C) an executed counterpart of an instrument of assumption of all of the seller’s, assignor’s or transferor’s obligations under this Lease by said Leasehold Mortgagee, and (D) any such transaction involving a Leasehold Mortgagee is effected to further secure the Leasehold Mortgage or in enforcement of the remedies under the Leasehold Mortgage, and (E) no such party is an Excluded Contractor.

          15.3.2. Nothing contained in this Section 15.3 shall be construed to prevent a transfer of the interest of any limited partner of any limited partnership which may be Tenant hereunder, or to require Landlord’s consent to such transfer.

          15.3.3. Nothing contained in this Section 15.3 shall be construed as prohibiting the entry by Tenant into any Sublease including any Restaurant Lease or to impose any requirement that Tenant obtain Landlord’s consent to any Sublease or Restaurant Lease, other than a Major Sublease.

          15.3.4. Nothing contained in this Section 15.3 shall be construed as prohibiting the granting by Tenant of a Leasehold Mortgage that is made subject to and otherwise in accordance with the terms, covenants and provisions of this Lease, or the foreclosure (or deed in lieu thereof) of any such Leasehold Mortgage.

     15.4. Costs and Expenses. Tenant shall pay to Landlord the reasonable cost of attorneys’ and other professional fees in connection with any request for assignment or subletting up to One Thousand Dollars ($1,000) (which amount shall be increased in proportion to increases hereafter in the CPI).

     15.5. Reasonable Consent.

          15.5.1. Landlord shall not unreasonably withhold, condition or delay its consent to any proposed assignment of the Lease or a Major Sublease of the Premises or any portion thereof. Landlord shall not disapprove any proposed assignment of this Lease or Major Sublease for reasons that would not be reasonable grounds for a private Landlord to disapprove such transaction; provided that in no event shall any Transferee be an Excluded Contractor. Among the factors to be considered by Landlord in determining whether to consent may be: (i) the proposed Transferee’s proof of authority, qualification to do business, and legal status; (ii) the nature and quality of the hotel business proposed to be carried on in the Premises is in material compliance with the terms of this Lease; (iii) evidence reasonably satisfactory to Landlord submitted by Tenant or otherwise available to Landlord that the proposed Transferee or subtenant has a satisfactory business reputation; (iv) Tenant reasonably establishes that the proposed assignee has (1) demonstrable prior successful experience in operating (either itself or a Person holding a controlling interest in the assignee either directly in having directly operated or indirectly in having previously retained a hotel management company to operate) hotels and restaurants of similar or better quality than the one required to be operated on the Premises by Tenant, (2) sufficient capability (either directly or indirectly by retaining an experienced Person (such as an employee or consultant or controlling Person) to manage properties of historic significance, and (3) sufficient financial wherewithal to perform its obligations under this Lease.

          15.5.2. In the event the proposed assignee is an entity which does not itself have either direct or indirect demonstrable successful prior experience in operating hotels of similar or better quality and thus also does not have a good general business reputation as a hotel owner or Operator as required by Section 15.5. 1 (iii) and (iv), the proposed assignee may satisfy Section 15.5.I(iii) and (iv) by reasonably establishing to Landlord’s satisfaction that: (a) it or an entity or Person owning a controlling interest in it has demonstrable successful prior experience in operating an active business (other than as a mere passive investor) or in actively developing real estate of value comparable to the

Premises; (b) it has a very good general business reputation in the business in which it has been engaged; (c) it retains under a written operating agreement, a copy of which shall be provided to Landlord along with Tenant’s request for consent to assignment, a hotel management company which has demonstrable successful prior experience in operating hotels of generally comparable quality as the Hotel; and (d) such hotel management company meets the criteria set forth in Section 15.1. Landlord shall approve or disapprove any proposed assignment within twenty (20) days after request therefor from Tenant together with written presentation by Tenant of sufficiently detailed information pursuant to Section 15.5.1(i) through Section 15.5. 1 (iv) above. If Landlord shall disapprove of any such proposed assignment, such disapproval shall include Landlord’s stated reasons for such disapproval in reasonable detail. If (i) Landlord fails to approve or disapprove any proposed assignment within such twenty (20) day period, (ii) Tenant thereafter makes a second request for Landlord’s approval of the proposed assignment and (iii) Landlord fails to approve or disapprove the proposed assignment within ten (10) days after Tenant’s second request, then Tenant shall have the right to recover all reasonable additional costs and expenses incurred by Tenant (and to such other relief as may be available to Tenant at law or in equity) by reason of Landlord’s failure timely to respond or Landlord’s wrongful disapproval, and such rights shall arise immediately after the expiration of such ten (10) day period, without regard to any cure period that otherwise would be applicable pursuant to this Lease, including without limitation the cure period in Section 27.2.1. Notwithstanding the foregoing, in order for any assignment or other transfer to be effective for any purpose under this Lease, the proposed assignee must assume in writing the performance of all of the terms, covenants, and conditions on the part of Tenant to be performed hereunder from and after the date of such assignment or other transfer. In the event an assignment is approved by Landlord but not completed within one (1) year after said approval, any future assignment to the approved party shall again be subject to re-approval pursuant to this Section 15.5. Without limiting the other provisions to which Section 19.2 applies, any request for Landlord’s consent pursuant to this Section 15.5.2 shall comply with Section 19.2.

          15.5.3. Nothing contained in this Section 15.5 shall be construed as prohibiting the granting by Tenant of a Leasehold Mortgage which is made subject to and otherwise in accordance with the terms, covenants and provisions of this Lease, or the foreclosure (or deed in lieu thereof) of any such Leasehold Mortgage.

     15.6. Subleases and Restaurant Leases. Nothing in this Article 15 shall require Landlord’s consent to any bona fide Restaurant Lease or other Sublease other than a Major Sublease. Tenant shall give Landlord at least fifteen (15) days prior notice of any Sublease. In no event may the subtenant be an Excluded Contractor. Any Space Tenant and its operations shall be commensurate with the Hotel Standard. Any Sublease hereunder or assignment of this Lease shall be subject to the terms and conditions of this Lease, and the rights of any subtenant or assignee thereunder in no event shall be greater than the rights of Tenant pursuant to this Lease. If not sooner terminated, any Sublease, and the rights of any assignee of Tenant under any assignment, shall terminate upon the expiration or termination of the Term.

     15.7. Anti-Assignment Acts Limitation. To the extent that any intended assignment or Sublease that otherwise is permitted by the express provisions of this Lease, or any non-disturbance agreement or any instrument which this Lease requires Landlord to execute in connection therewith, violates or is limited by the Anti-Assignment Acts, Landlord agrees to cooperate with Tenant to avoid such violation or limitation to the extent legal and proper so to do, by waiving the pertinent provisions of the Anti-Assignment Acts applicable thereto, but only to the extent legal and proper so to do.

16.	SALE OR MORTGAGE OF LANDLORD’S INTEREST;
	TENANT’S RIGHT OF FIRST REFUSAL; TENANT’S OPTION

     16.1. Landlord’s Right To Assign. During the Term, Landlord shall have the right and power at any time and from time to time to mortgage or otherwise create one or more security interests affecting the fee estate in the Premises, and to renew, modify, replace, consolidate, extend or refinance any such mortgage or other instrument, subject, however, to the following:

          16.1.1. Nothing contained in any such mortgage shall give the holder of any such mortgage (a “Landlord Mortgagee”) any greater rights with respect to the rights and interest of Tenant under this Lease, or the covenants, conditions and restrictions set forth herein, the leasehold estate created hereunder, or any Leasehold Mortgage given by Tenant hereunder, than those of Landlord.

          16.1.2. Unless Landlord would then be entitled to do so under the terms of this Lease, the Landlord Mortgagee shall not, in the exercise of any of its rights arising or which may arise out of any such mortgage, or any instrument modifying or amending the same or entered into in substitution or replacement thereof, disturb or deprive Tenant or any Leasehold Mortgagee of its possession or right to possession of the Premises, or of any part thereof under this Lease, or any right or privilege created for or inuring to the benefit of Tenant or any Leasehold Mortgagee under this Lease or any Leasehold Mortgage except to the extent Landlord has the right to do so.

          16.1.3. Any such mortgage shall provide that the holder of such mortgage, upon serving Landlord with any notice of a material default by Landlord under such mortgage, will promptly send a copy of such notice to Tenant;

          16.1.4. Landlord and its mortgagee shall, upon request, execute, acknowledge and deliver to Tenant, an agreement, prepared at the sole cost and expense of Tenant, in form reasonably satisfactory to Tenant and its Leasehold Mortgagee, between Landlord, Tenant and the holder of such mortgage, agreeing to all of the provisions of this Section 16.1.

          16.1.5. The term “mortgage” as used in this Section 16.1 shall include a deed of trust, security agreement and financing statement, collateral assignment of leases and rent, and other similar security instruments.

     16.2. Right of First Offer. If Landlord shall at any time desire to assign Landlord’s interest in this Lease, in whole or in part, or sell or exchange all or part of the Land and Improvements (any such transaction being sometimes referred to below in this section as a “sale”), to an entity that is not an agency or instrumentality of the United States, then Tenant shall have the rights set forth in this Section 16.2.

          16.2.1. Notice. Landlord shall give notice to Tenant of Landlord’s desire to assign Landlord’s interest in this Lease, in whole or in part, or sell or exchange all or part of the Land and Improvements and the price and other essential terms and conditions of a sale which Landlord is willing to accept (“Proposed Sale Terms”).

          16.2.2. Option Exercise. For a period of ninety (90) days after the date on which Landlord gives notice to Tenant of the Proposed Sale Terms, Tenant shall have the exclusive right and option to make the purchase of the entire Premises in accordance with the Proposed Sale Terms. If Tenant desires to exercise its option, Tenant shall give Landlord notice to that effect within said ninety (90) day period, time being of the essence. If Tenant timely exercises its option, settlement shall be consummated within ninety (90) days after the expiration of said initial ninety (90) day period in strict accordance with the Proposed Sale Terms.

          16.2.3. Option Not Exercised. If the aforesaid option is not timely exercised by Tenant, then Landlord shall be free to make a sale of the Premises or other transaction on the open market to an outside party, provided that such sale or other transaction shall be made at a price and upon terms and conditions not materially less favorable to Landlord than those set out in the Proposed Sale Terms. A purchase price which is not more than five percent (5%) less than the purchase price set forth in the Proposed Sale Terms shall be deemed not materially less favorable to Landlord.

          16.2.4. Delayed Sale. If settlement of a sale of the Premises to an outside party is not consummated by Landlord within twenty-four (24) months from the expiration of said initial ninety (90) day period, then the above-specified procedures shall be repeated.

          16.2.5. Less Favorable Offer. If during said twenty-four (24)-month period Landlord shall receive or obtain a bona fide written offer acceptable to Landlord for the purchase of the Premises and the price and other terms and conditions of such written offer are materially less favorable to Landlord than those set out in the Proposed Sale Terms, then Landlord shall promptly give notice to Tenant of the purchase price and other essential terms and conditions contained in such written offer. A true copy of the written offer (except for the name of the buyer) shall be attached to the notice. For a period of sixty (60) days after the date on which such notice is given by Landlord, Tenant shall have the exclusive right and option to make the purchase of the entire Premises at

the same price and upon the same terms and conditions as are set out in the written offer. If Tenant desires to exercise its option, Tenant shall give Landlord notice to that effect within said sixty (60) day period, time being of the essence. If Tenant timely exercises its option, settlement shall be made within the same time and upon the same terms and conditions as are set forth in the written offer. If the option is not timely exercised by Tenant, then Seller shall be free to make the sale to the bona fide offeror; provided that the sale shall be made within the same time and at the same price and in substantial accordance with the other terms and conditions as are set forth in the written offer. If Tenant fails to timely exercise its option, then the right of first refusal shall be deemed extinguished upon consummation of the sale pursuant to the written offer; provided that if such sale is not consummated pursuant to the written offer, the procedures above specified shall be repeated in all respects.

          16.2.6. Exclusions. The procedures above specified shall not be applicable to (a) a sale in lieu of condemnation, (b) transfers resulting from mergers, dissolutions, liquidations, consolidations, reorganizations or contributions to capital, (c) transfers to parent, subsidiary, affiliated or related corporations or other Persons related to Landlord, (d) transfers by way of a sale, gift or devise (including a trust) to or for any Person related to Landlord (including any successor governmental agency, corporation, department, division or the like to GSA), or to any transfer from one such related Person to another. For the purpose of this Section, if the then owner of the Premises shall be an individual, a related Person shall include a wife, lineal descendant or spouse of such descendant, ancestor or sibling (whether by the whole or half blood), a partnership of which such owner is a member, a joint venture or ownership in common which includes such owner or a corporation, the majority of whose securities is owned by such owner, or anyone or more of the foregoing Persons.

          16.2.7. Foreclosure. The above-specified procedures further shall not be applicable in the event of any sale of the Premises incidental to the exercise of any remedy provided for in any mortgage of the Premises created by Landlord, including sale or transfer by deed in lieu of foreclosure.

          16.2.8. Default. If Tenant is in Default at the time Landlord desires to sell the Premises, then the above-specified procedures shall not be applicable, and Landlord may proceed to sell the Premises without negotiating with or offering to sell the Premises to Tenant.

          16.2.9. Non-Assignable. Except for a collateral assignment by Tenant to the holder of the Institutional Mortgage most senior in lien priority, Tenant’s rights under this Section 16.2 shall not be assignable or transferable separate and apart from this Lease, it being the intent of the parties that such rights and this Lease shall be owned by one and the same Person who shall be the Tenant hereunder.

     16.3. Sale by Landlord. Subject to the provisions of Section 16.2 above, Landlord may at any time freely sell, convey, assign or transfer, in whole or in part, its interest in the Premises and this Lease, so long as any such transferee shall assume

all of Landlord’s obligations under this Lease as modified pursuant to this Section 16.3, from and after the effective date of transfer; however, if there are multiple owners of Landlord’s estate in the Premises, they shall designate a single Person as their agent for purposes of collecting the Rent, receiving notices or other communications hereunder to Landlord and acting with respect to any consents or approvals required to be obtained from Landlord hereunder. In the event that Landlord at any time sells, conveys, assigns, or transfers, in whole or in part, its interest in the Premises and/or this Lease, to a transferee that does not have the sovereign powers of Landlord contemplated by this Lease, Landlord and Tenant shall amend and modify this Lease equitably so as to reflect the changed status of Landlord by reason of such transfer.

     16.4. Merger. In the eventuality of a transfer of Landlord’s interest in this Lease to Tenant, such transfer shall not terminate this Lease by merger or otherwise so long as any Leasehold Mortgage encumbers the Premises. Without limiting the generality of the foregoing, upon any such transfer Tenant shall, upon the written request of any Leasehold Mortgagee, execute, acknowledge and deliver to the Leasehold Mortgagee a new mortgage containing the same terms and conditions in recordable form covering Tenant’s fee interest in the Premises and securing the performance by Tenant of all of the obligations secured by the Leasehold Mortgage.

17. LEASE STATUS REPORTS; LEGAL OPINIONS

     17.1. Lease Status Reports. Landlord and Tenant hereby agree that within twenty (20) days after receipt of a written request from the other party, it shall execute, acknowledge and deliver a certificate certifying to the knowledge of Tenant or, as the case may be, the Landlord’s Contracting Officer, to the extent accurate: (1) that Substantial Completion has occurred, (2) that this Lease has not been modified and is in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified, and stating the modifications); (3) the date to which Rent has been paid; (4) whether or not, to the knowledge of the party executing such certificate, the requesting party under this Lease is in default under this Lease, whether any notice has been received by or delivered to said party of any event of default which has not been cured, except as to defaults specified in the certificate and whether or not any event has occurred which, but for the expiration of the applicable time period, would constitute an event of default under this Lease; and (5) such other matters as may reasonably be requested by the requesting party with respect to the status of this Lease and the performance or non-performance by the other party of its obligations hereunder. The certificate may not be relied upon except to the extent the certificate expressly provides that it may be relied upon; Landlord shall be required to provide for reliance on the certificate only to the same extent as other certificates then generally being issued by Landlord to parties to lease transactions may be relied upon. Tenant acknowledges that such certificates currently issued by Landlord would preclude Tenant or any Leasehold Mortgagee from relying on them.

     17.2. Legal Opinions.

          17.2.1. Landlord’s Legal Opinion. Within thirty (30) days after a request by Tenant, Landlord shall cause its Regional Counselor other appropriate counsel to deliver a formal written legal opinion on behalf of Landlord, addressed to and for the benefit of Tenant, any Leasehold Mortgagee, any Person or entity providing financing for the development of construction of any Improvements, and/or such other Persons or entities as Tenant may reasonably designate (including participants in any financing arrangements, and the assignee(s) of any Person or entity providing debt or equity financing), passing on the due authorization, execution and delivery of this Lease by Landlord and compliance of this Lease with the NHP A, to the extent that such counsel concurs therein, which legal opinion may contain appropriate qualifications. The opinion shall provide that it may be relied upon by all Leasehold Mortgagees.

          17.2.2. Tenant’s Legal Opinion. Within thirty (30) days after any request by Landlord, Tenant shall cause its general counselor outside law firm to deliver a formal written legal opinion on behalf of Tenant, addressed to and for the benefit of Landlord, and/or such other Persons or entities as Landlord may reasonably designate (including mortgagees or potential purchasers), passing on such legal matters relating to this Lease as Landlord shall reasonably request, including the due authorization, execution and delivery of this Lease and the enforceability of this Lease against Tenant, to the extent that such counsel concurs therein, which legal opinion may contain appropriate qualifications.

18. LEASEHOLD MORTGAGES

     18.1. Definitions. For purposes of this Article 18, the following terms shall have the meanings hereinafter set forth:

          18.1.1. Assignment For Security. “Assignment For Security” shall mean a transaction or transactions in which Tenant, in a bona fide debt financing: (a) assigns all or any portion of its interest under this Lease and/or any Construction Documents or contracts relating to the Project, to an Institutional Lender for the purpose of securing Debt; and/or (b) executes a deed of trust for the benefit of an Institutional Lender with respect to all or any portion of its interest under this Lease for the purpose of securing Debt; and/or (c) executes a mortgage for the benefit of an Institutional Lender with respect to all or any portion of its interest under this Lease for the purpose of securing Debt; and/or (d) sells and assigns to an Institutional Lender and leases or subleases back from such Institutional Lender all or any portion of its interest under this Lease, in connection with a transaction where Tenant obtains Debt, repayment of which is secured in whole or in part, or becomes an obligation in whole or in part incurred by Tenant in the transaction in which such assignment, deed of trust, mortgage or assignment and sublease back is delivered or consummated.

          18.1.2. Leasehold Mortgage. “Leasehold Mortgage” shall mean the encumbrance created by an Assignment for Security, including a mortgage, deed of trust, assignment or other instrument regardless of the form of the transaction. A Leasehold Mortgage shall include all of the instruments of encumbrance made by Tenant in connection with the Assignment for Security, including encumbrances executed by the assignee, reassignments and related transactions.

          18.1.3. Leasehold Mortgagee. “Leasehold Mortgagee” shall mean the secured party under a Leasehold Mortgage regardless of the type of interest created in such secured party by the Assignment for Security under such Leasehold Mortgage.

          18.1.4. Mortgaged Premises. “Mortgaged Premises” shall mean Tenant’s interest under this Lease and in the Improvements encumbered by a Leasehold Mortgage.

     18.2. Permitted Assignments For Security. Tenant shall have the right, subject to the terms and conditions of this Article 18, to enter into Assignments for Security so long as Tenant (or a successor taking by assignment pursuant to Article 15) remains liable to the extent provided for in this Lease for performance of all obligations on Tenant’s part to be performed hereunder, and no encumbrance is placed thereby on the Land and Improvements, other than a Leasehold Mortgage on the leasehold interest created by this Lease or by equipment or personal property leases. No Leasehold Mortgage shall encumber or otherwise cover any interest of Landlord in the Premises. No Leasehold Mortgage shall encumber or otherwise cover any interest in real property other than Tenant’s interest in the Premises and any Sublease under this Lease except that, after Substantial Completion, a Leasehold Mortgage also may cover other property of Tenant. No Leasehold Mortgagee, nor any entity claiming by, through or under such Leasehold Mortgagee, shall acquire any greater rights in the Premises, Improvements, the leasehold estate or the Subleases than Tenant has under this Lease except as otherwise provided in this Article 18. All such Leasehold Mortgages shall be subject to all of the conditions, covenants and obligations of this Lease and to the rights of Landlord hereunder, except as otherwise provided in this Article 18. Tenant shall promptly deliver to Landlord a true copy of each Leasehold Mortgage and any assignment thereof. Any Leasehold Mortgage shall provide that the Leasehold Mortgagee shall send to Landlord copies of all notices of default sent to Tenant in connection with the Leasehold Mortgage or the Debt secured thereby.

     18.3. No Merger or Termination By Reason Of Foreclosure, Sale or Surrender. Subject to the provisions of Section 18.5, (i) this Lease shall not be subject to termination by Landlord solely by reason of or upon the commencement of judicial or nonjudicial foreclosure of any Leasehold Mortgage, and (ii) this Lease shall not be subject to termination by Landlord solely by reason of the acquisition by a Leasehold Mortgagee through a foreclosure proceeding of the Mortgaged Premises, or Tenant’s interest therein by resort to any remedy for default under or pursuant to a Leasehold Mortgage or an Assignment for Security, or conveyance in lieu of foreclosure thereof, provided that upon

any such event the Leasehold Mortgagee agrees to be bound by this Lease. No sale or transfer (whether by corporate merger, consolidation, operation of law, or otherwise) of the Land and Improvements or the Premises, or any portion thereof, to Tenant, and no purchase or other acquisition of this Lease, or any interest herein by Landlord, shall terminate this Lease by merger or otherwise, so long as any Leasehold Mortgage encumbers the Mortgaged Premises. So long as a Leasehold Mortgage is in effect, Tenant shall not voluntarily surrender and Landlord shall not accept a voluntary surrender, cancellation or other voluntary termination of this Lease by Tenant without the prior written consent of the Leasehold Mortgagee unless such surrender or termination is on account of Tenant’s default hereunder and Landlord has first given each relevant Leasehold Mortgagee the opportunity to exercise its rights as provided in this Article 18 and then subject to such Leasehold Mortgagee rights.

     18.4. Leasehold Mortgagee Succeeds to Tenant’s Interest; Liability of Leasehold Mortgagee Limited. Subject to the provisions of Sections 18.5 and 18.6, upon notice from the Leasehold Mortgagee to Landlord that it is taking possession and upon the assumption of possession of the Mortgaged Premises for any purpose, prior to completion of foreclosure proceedings, a Leasehold Mortgagee shall have all of the rights of Tenant and the duty to perform all of Tenant’s obligations hereunder. Except as otherwise provided for in the immediately preceding sentence, no Leasehold Mortgagee shall be liable to perform, or be liable in damages for failure to perform, any of the obligations of Tenant, unless and until such Leasehold Mortgagee actually enters and takes possession of the Mortgaged Premises or is deemed a mortgagee in possession under Applicable Laws as a result of foreclosure or other Leasehold Mortgagee default proceedings or surrender or assignment in lieu thereof in which event the Leasehold Mortgagee shall be liable to perform all of Tenant’s obligations under the Lease, after foreclosure, including Tenant’s obligation to complete the its work. Except to the extent provided above or elsewhere in this Article, a Leasehold Mortgagee’s liability shall be dependent upon its right to possession and if any foreclosure or other possessory proceedings are terminated prior to assumption of possession, such Leasehold Mortgagee shall have no liability hereunder.

     18.5. Right of Leasehold Mortgagee To Cure Default. No act or failure to act on the part of Tenant which would entitle Landlord under the terms of this Lease, or by law, to terminate this Lease, whether as a result of a default by Tenant or as a result of Tenant’s failure to meet a Milestone Date, shall result in a termination of this Lease unless:

          18.5.1. Notice. Landlord shall have first given notice (“Notice to Mortgagee”) by certified or registered mail of Tenant’s act or failure to act, to the Leasehold Mortgagee of record that constitutes the superior lien on the leasehold estate created by this Lease (provided that Landlord shall have received notice of such Leasehold Mortgage pursuant to Section 18.14 below), and specifying the act or failure to act on the part of Tenant which could or would give basis to Landlord’s rights; and

          18.5.2. Failure To Cure. Such Leasehold Mortgagee, after receipt of such Notice to Mortgagee, has failed or refused to correct or cure the condition complained of within the time permitted hereunder. The date of delivery of the notice to the Leasehold Mortgagee shall be deemed to be the date which commences the Leasehold Mortgagee’s cure period. Such notice may be given to such Leasehold Mortgagee at any time regardless of whether Tenant’s cure period for its breach shall have lapsed. In the event of any breach that can be cured by the payment of money, the time for such cure period shall be the same period available to Tenant but not less than fifteen (15) days from receipt of such Notice to Mortgagee. In the event of any breach that cannot be cured by the payment of money, the Leasehold Mortgagee shall have a reasonable time thereafter so long as the Leasehold Mortgagee is diligently attempting to obtain possession of the Premises and thereafter diligently attempting to cure the default and subject to the limitations set forth below; provided, however, that nothing contained in this Section 18.5.2 shall be deemed to impose any obligation or liability on any such Leasehold Mortgagee to correct or cure any such breach that cannot be cured by the payment of money in the event such Leasehold Mortgagee does not obtain possession of the Premises. As used herein, “reasonable time” shall mean and include both time necessary diligently to obtain possession of the Premises, if the Leasehold Mortgagee elects to do so, which election shall be made within thirty (30) days of Landlord’s notice given under Section 18.5.1, and time to cure the breach. Such election notice shall state the period the Leasehold Mortgagee reasonably expects it will require to obtain possession and thereafter to cure such breach, that the Leasehold Mortgagee intends to diligently obtain possession (by foreclosure or enforcement of its other remedies) and thereafter to diligently cure all such breaches of Tenant. The Leasehold Mortgagee shall keep Landlord reasonably informed in writing, with at least monthly written updates, of its progress in obtaining possession and curing any such breach. “Reasonable time” shall also include, in addition to the time to elect to obtain possession, the time during which the Leasehold Mortgagee may be prevented from foreclosing and/or obtaining possession of the Premises as a result of bankruptcy proceedings, and time necessary to correct or cure the breach using due diligence; provided if such condition is determined to exist, in no event shall such cure period be less than (i) thirty (30) days after the date the Leasehold Mortgagee first obtains possession of the Premises, or (ii) if the breach of Tenant is of a nature which cannot be cured within thirty (30) days, then commencement of cure within such thirty (30) day period’ and the time necessary diligently thereafter to proceed to complete such cure. Neither an Event of Default described in Article 25, nor any other Event of Default that solely arises from the status of Tenant and therefore cannot be cured by a Leasehold Mortgagee (as opposed to breaches relating to the condition or operation of the Premises), shall be deemed a default permitting Landlord to terminate the Leasehold Mortgagee’s possession. Notwithstanding the foregoing, to the extent permitted at law, the Leasehold Mortgagee need not take possession until it forecloses. In the event of any Emergency Situation, nothing in this Article shall preclude Landlord from taking all actions available to Landlord under this Lease in connection therewith.

          18.5.3. Certain Limitations on Liability of Leasehold Mortgagee. Notwithstanding anything to the contrary herein contained, this Section 18.5 shall not be deemed to impose any obligation or liability on any Leasehold Mortgagee to correct or cure any default of Tenant or other condition herein specified in the event such Leasehold Mortgagee does not obtain possession of the Premises, but to the extent that a Leasehold Mortgagee elects to undertake cure of such default or condition pursuant hereto, such Leasehold Mortgagee shall act with diligence in accordance with the terms and conditions herein specified. Notwithstanding the foregoing, a Leasehold Mortgagee shall not be obligated to continue efforts to obtain possession of the Premises or to continue in possession of the Premises and may abandon such at any time in its sole discretion upon notice to Landlord. Abandonment by a Leasehold Mortgagee of efforts to obtain possession or to continue in possession of the Premises, or failure of a Leasehold Mortgagee to cure any default under this Lease shall be without any liability to Landlord, but immediately upon such abandonment Landlord shall be entitled to invoke its rights under this Article 18 including Landlord’s right to terminate this Lease in the event of the failure of a Leasehold Mortgagee to cure any default in accordance with the terms of this Article 18.

     18.6. Assignment After Cure. So long as a Leasehold Mortgagee has timely cured any breach that can be cured by the payment of money or has timely and diligently commenced to cure any other breach of Tenant as required of a Leasehold Mortgagee pursuant to this Article 18 and continues to perform the obligations specifically required to be performed by Tenant pursuant to this Lease, such Leasehold Mortgagee shall have, subject to Landlord’s rights under Section 18.6.2, the right to assign this Lease to any Person, upon obtaining Landlord’s prior consent pursuant to Section 15.5, which assignee shall assume all the obligations hereunder and go into possession and occupancy of the Mortgaged Premises for the uses and purposes hereof. Upon such assignment by the Leasehold Mortgagee, the Leasehold Mortgagee shall be relieved of all further liability for performance of the obligations hereof arising from and after the date of such assignment. No act or failure to act on the part of Tenant which would entitle Leasehold Mortgagee under the terms of the Leasehold Mortgage, this Lease, or by law, to assume or assign or otherwise transfer Tenant’s rights shall be effective unless:

          18.6.1. Notice. The Leasehold Mortgagee shall have given notice of Tenant’s act or failure to act to Landlord; and

          18.6.2. Failure to Cure. Landlord, after receipt of such notice, has failed to pay in full any amounts secured by the Leasehold Mortgage, within thirty (30) days after receipt of such notice and the Leasehold Mortgagee shall have the right during such thirty (30) day period to concurrently pursue all legal and equitable rights it has against Tenant; provided, however, that nothing contained in this Section 18.6.2 shall be deemed to impose any obligation or liability on Landlord to pay such amounts. Upon such payment, Landlord shall be entitled to any rights of the Leasehold Mortgagee in the Premises.

     18.7. Continuing Offer. The covenants and provisions contained in this Lease with respect to the rights, powers and benefits of a Leasehold Mortgagee constitute a continuing offer to any such Leasehold Mortgagee, which shall be deemed to have been accepted by any Leasehold Mortgagee, who by entering into an Assignment for Security and accepting a Leasehold Mortgage or requiring an Assignment for Security pursuant to a Leasehold Mortgage or by entry or foreclosure under a Leasehold Mortgage, assumes the obligations herein set forth with respect to and to the extent required of such Leasehold Mortgagee.

     18.8. New Lease and Survival. If, prior to the expiration of the stated Term, this Lease shall terminate for any reason, or be rejected or disaffirmed pursuant to any bankruptcy law or other law affecting creditors’ rights, any Transferee approved by Landlord pursuant to this Article 18 and Section 15.5 or any Leasehold Mortgagee shall have the right, exercisable by notice to Landlord within thirty (30) days after the effective date of such termination, to enter into a new written lease of the Premises with Landlord. The term of said new lease shall begin on the date of the termination of this Lease and shall continue for the remainder of the Term. Such new lease shall otherwise contain the same terms and conditions as those set forth herein except for requirements which have already been performed and are no longer applicable. The parties intend that such new lease shall have the same priority relative to other rights or interests to or in the Premises, or any portion thereof, as this Lease, and Landlord shall discharge or cause to be subordinated to such new lease any lien or encumbrance created by Landlord which is specifically required by the terms hereof to be subordinated to this Lease or enter into a subordination and nondisturbance agreement with respect thereto. In partial consideration for the new lease, the Leasehold Mortgagee (or such designee) shall pay to Landlord all amounts necessary to cure any breach that can be cured by the payment of money, and all monetary amounts due under the terms of the Lease from the date of such termination, rejection or disaffirmation through the date the new lease commences, and to commence and diligently pursue the cure of any other breach as provided in Section 18.5. Upon such payment, the Leasehold Mortgagee (or such designee) shall be subrogated to all rights of Landlord to recover the amounts so paid from Tenant. From the date on which any Leasehold Mortgagee shall serve upon Landlord a notice of the exercise of its right to a new lease, such Leasehold Mortgagee may use and enjoy the Premises without hindrance by Landlord provided such Leasehold Mortgagee performs all of Tenant’s obligations as provided in this Article 18 and subject to any right of Tenant under Applicable Laws. The provisions of this Section 18.8 shall survive the termination of this Lease and shall continue in full force and effect thereafter to the same extent as if this Article 18 were a separate and independent contract among Landlord, Tenant and such Leasehold Mortgagee. To the extent that any new lease or any instrument which this Lease requires Landlord to execute in connection therewith or in connection with any Leasehold Mortgage otherwise would be prohibited by the Anti-Assignment Acts or other Applicable Laws (but not including regulations relating to suspension or debarment of

government contractors), Landlord agrees to cooperate with the Leasehold Mortgagee (as proposed Tenant under the new lease) to avoid such violation or limitation, by waiving the pertinent provisions of the Anti-Assignment Acts applicable thereto, but only to the extent legal and proper so to do.

     18.9. Additional Rights of Leasehold Mortgagee. Any Leasehold Mortgage of the leasehold estate created hereunder may be so conditioned as to provide that as between the Leasehold Mortgagee and Tenant, the Leasehold Mortgagee, upon curing any breach on the part of Tenant that can be cured by payment of money and diligently pursuing the cure of any other breach as required under Section 18.5, shall thereby be subrogated to any or all of the rights of Tenant under this Lease. A Leasehold Mortgagee who, upon default by Tenant, cures any Monetary Breach and performs the other obligations of this Lease to be performed by Tenant in accordance with the provisions of Section 18.5 may, if it so elects in writing, pending foreclosure of its Leasehold Mortgage, enter into possession of the Premises after having first assumed the obligations of Tenant under this Lease and subject to the rights of Tenant under Applicable Laws.

     18.10. Multiple Mortgagees. If more than one Leasehold Mortgagee should request a new lease pursuant to Section 18.8, Landlord shall enter into a new lease with the Leasehold Mortgagee whose Leasehold Mortgage constitutes the superior lien on the leasehold estate created hereunder, or with the designee of such Leasehold Mortgagee. Landlord may, and in so doing shall be without liability to Tenant or any Leasehold Mortgagee, rely on a mortgagee title insurance policy issued by a title insurance company doing business within the District of Columbia in determining which Leasehold Mortgagee’s lien is the superior one entitling the Leasehold Mortgagee to a new lease under Section 18.8.

     18.11. Condemnation Proceeds. If more than one Leasehold Mortgagee asserts a right to condemnation or private sale proceeds payable to, or for the account of, Tenant in accordance with the provisions of Article 23, then subject to the provisions of Article 23 and the terms of the applicable Leasehold Mortgage, Tenant’s share of the condemnation or private sale proceeds shall be distributed in accordance with the directions of the Leasehold Mortgagee whose Leasehold Mortgage constitutes the superior lien on the leasehold estate created hereunder.

     18.12. Execution of Documents. Upon request of Tenant, Landlord shall (and shall cause any Landlord Mortgagee to) execute and deliver from time to time any agreement or document which may reasonably be deemed necessary to implement the provisions of this Article 18, provided that subordination of Landlord’s fee interest and the security interest of any Landlord Mortgagee shall not be required. Tenant shall reimburse Landlord for all reasonable attorneys’ fees paid to private outside counsel, up to One Thousand Dollars ($1,000) by reason of any such agreement (which amount shall be increased in proportion to increases hereafter in the CPI).

     18.13. Notice. Tenant shall notify Landlord in writing of the name and address of the holder of the Leasehold Mortgage of record that constitutes the superior lien on the leasehold estate created hereunder and amount of the Leasehold Mortgage held by such Leasehold Mortgagee within twenty (20) days after the Leasehold Mortgage is recorded. Any notices to any Leasehold Mortgagee by Landlord shall be given to the address specified in such notice or in any such subsequent notice received by Landlord.

     18.14. Disputes Over Lien Priority. If a dispute arises as to the priority of the lien of any Leasehold Mortgage, in the absence of any agreement among the pertinent Leasehold Mortgagees establishing a different priority, a search of the District of Columbia land records by the title company or agent from whom the most current owner’s or Leasehold Mortgagee’s policy of title insurance was obtained (or, if there is no such policy, the priority stated in a current title report issued by a title company or agent designated by Landlord and legally doing business in the District of Columbia) shall be conclusive. The cost of such title report shall be borne by the party raising such dispute. Tenant and each Leasehold Mortgagee involved in a lien priority dispute shall indemnify and hold harmless Landlord from any claim, liability, or other out-of-pocket expense (including reasonable attorney’s fees) arising from or incurred in connection with each such dispute, and each Leasehold Mortgage shall expressly so provide for the benefit of Landlord.

19. NOTICE; APPROVALS

     19.1. Procedure. Subject to the further requirements of Section 18.5.1, if applicable, all notices, payments, objections, consents, approvals, demands, submissions, deliveries, requests, and other communications pursuant to or in connection with this Lease shall be in writing and shall be deemed given upon delivery with a written receipt (or upon refusal of delivery or receipt) at the appropriate address indicated below either: (1) by registered or certified United States mail, return receipt requested, postage prepaid; or (2) by hand; or (3) by a nationally recognized overnight delivery service; or (4) by any other method agreed upon by Landlord and Tenant:

To Landlord:	U.S. General Services Administration
	Portfolio Management -Suite 7600 7th & D Streets, S.W.
	Washington, D.C. 20407
	Attn: Asset Manager, Square 430
With a copy to:	U.S. General Services Administration
	Office of Regional Counsel, Suite 7048 7th & D Streets, S.W.
	Washington, D.C. 20407
	Attn: Regional Counsel
To Tenant:	c/o Kimpton Hotel & Restaurant Group
	222 Kearny Street, Suite 200
	San Francisco, CA 94108
	Attn: Chief Financial Officer
With a copy to:	Arnold & Porter
	555 12th Street, N.W.
	Washington, D.C. 20004
	Attn: Gary E. Humes, Esq.

Either party may change its mailing address at any time by giving notice of such change to the other party in the manner provided herein at least ten (10) days prior to the date such change is effected.

     19.2. Form and Effect of Notice. Every notice (including any notice requesting a consent or approval but excluding any notice granting or withholding of consent or approval under this Lease) given to a party hereto shall comply with the following requirements. Each such notice shall state: (i) the Article and Section of this Lease pursuant to which the notice is given; (ii) the period of time within which the recipient of the notice must respond or if no response is required, a statement to that effect; (iii) if the notice requests a consent or approval, if applicable, that the reasons for any denial of consent or approval must be set forth in the response to the notice; and (iv) if applicable, that the failure to respond to the notice within the stated time period shall be deemed to be the equivalent of the recipient’s approval, consent to or satisfaction with the subject matter of the notice. In no event shall notice be deemed given nor shall a recipient’s approval of or consent to the subject matter of a notice be deemed given by recipient’s failure to object or respond thereto if such notice did not fully comply with the requirements of this Article 19. In addition, unless a time period for approval with respect to a party’s consent is otherwise specifically provided for elsewhere in this Lease, a failure to provide a required approval within the time period requested in the request for approval will not result in a waiver of the requirement of approval. No waiver of this Section 19.2 shall be inferred or implied from any act (including conditional approvals, if any) of a party hereto, unless such waiver shall be in writing, specifying the nature and extent of the waiver.

     19.3. Approvals. Unless otherwise provided in this Lease, whenever approval, consent or satisfaction is required of either party, it shall not be unreasonably withheld or delayed. If either party considers that the other has unreasonably withheld or delayed a consent, it shall so notify the other party within ten (10) days after receipt of notice of denial or, as the case may be, within twenty (20) days after making its request for the consent in the case of an alleged unreasonable delay. Failure to so notify the other party within the time periods set forth in the preceding sentence shall constitute a waiver of any right the first party might otherwise have to bring an action or proceeding to enforce any such provision or for other relief therefor (but shall not preclude a subsequent request for the same consent). Whenever approval, consent or satisfaction is required of either party hereto, and such party disapproves, the reasons therefor shall be stated in reasonable detail in writing. The consent, approval or satisfaction by a party to or of any act or request by the other party shall not be deemed to waive or render unnecessary consent, approval or satisfaction to or of any similar or subsequent acts or requests.

20. RECORDATION, COVENANTS RUNNING WITH THE LAND

     20.1. Recordation of Memorandum of Lease. Within thirty (30) days after expiration of the Feasibility Period, if this Lease has not theretofore been terminated, the parties shall simultaneously execute and acknowledge a Memorandum of Lease in the form attached hereto as Exhibit C, to be recorded by Tenant at its sole cost and expense among the land records of the District of Columbia immediately upon full execution of such Memorandum of Lease.

     20.2. Covenants Running With the Land. All of the provisions, rights, powers, covenants, agreements, obligations, conditions and restrictions set forth in this Lease are intended to be and shall be construed as covenants running with the land, binding upon, inuring to the benefit of and enforceable by the parties hereto and their heirs, successors (by merger, consolidation or otherwise), assigns, devisees, administrators, representatives, lessees and all other Persons acquiring the Premises, Land and Improvements, Landlord’s reversionary interest and/or any portion thereof, or any interest therein, whether by operation of law or in any manner whatsoever. All of the provisions of this Lease for the Term shall be covenants running with the land pursuant to Applicable Laws. It is expressly agreed that each covenant to do or refrain from doing some act on the Premises hereunder: (i) is for the benefit of the Premises and is a burden upon the Land and Improvements; (ii) runs with the Premises and the Land and Improvements; and (iii) shall benefit or be binding upon each successive owner during its ownership of the Premises and/or the Land and Improvements, or any portion thereof, and each Person having an interest therein derived in any manner through any owner of any portion thereof.

21. NO PARTNERSHIP

     Nothing contained in this Lease shall be construed as creating any type or manner of partnership or joint venture with or between Landlord and Tenant. Nothing contained in this Lease shall be construed to confer upon Landlord any ownership interest or equity stake in Tenant’s business, nor shall anything contained in this Lease be construed as creating any type or manner of partnership, joint venture or joint enterprise with or between Landlord and Tenant. Landlord shall not be liable for any debts incurred by Tenant. The provisions of Article 5 relating to Percentage Rent and Participation Rent based upon Tenant’s performance are included solely for the purpose of providing a method whereby the rent hereunder is to be measured and ascertained.

22. DAMAGE OR DESTRUCTION OF PREMISES; CONSTRUCTION OBLIGATIONS AND STANDARDS

     22.1. Insured Casualty.

          22.1.1. Tenant’s Obligation to Repair. In the event of fire or other casualty resulting in damage to or destruction of the Premises, or any portion thereof, after the Occupancy Date, from any cause covered under the property insurance carried, or required to be carried, by Tenant pursuant to Article 13, and except as otherwise provided below, Tenant shall, subject to Article 8 and further subject to any Leasehold Mortgagee not having defaulted in its obligations to make such insurance proceeds available as described in Section 22.1.3, diligently repair the Premises so that, after completion of such repair, the Premises will be of like quality and kind as the Premises prior to such damage and such damage or destruction shall in no way annul or void this Lease in whole or in part. For purposes of this Section 22.1.1 “like quality and kind” shall be construed in accordance with the applicable insurance policies. Landlord shall reasonably cooperate with Tenant and reasonably assist Tenant to the extent required in the process of adjusting and settling insurance claims at no risk or cost to Landlord. If Landlord elects to require Tenant to restore or repair the Premises to a standard higher than “like quality and kind,” Tenant shall do so if Landlord agrees in writing to pay the additional cost thereof on a mutually agreed basis (without any obligation of Landlord so to do).

          22.1.2. Termination Right on Certain Casualties. If (i) prior to the Occupancy Date the cost of repair or restoration of the Premises from fire or other casualty damage exceeds Three Million Dollars ($3,000,000), (ii) prior to Substantial Completion the cost to Tenant of remediating Hazardous Materials exceeds the aggregate available amount of: (1) the aggregate available amount of insurance proceeds; plus (2) any applicable deductible; plus (3) the amount reasonably budgeted by Tenant prior to the expiration of the Feasibility Period (or such higher amount as Tenant may budget prior to the discovery of the associated need for remediation) to pay for the remediation of Hazardous Materials; plus (4) such additional amounts as Landlord shall elect to agree

in writing to pay on a mutually agreed basis (without any obligation to do so), or (iii) after the Occupancy Date the cost of repair or restoration of any damage or destruction of the Premises covered by insurance, as specified in Section 22.1.1 above, exceeds the aggregate available amount of: (1) insurance proceeds plus any applicable deductible; plus (2) Capital Maintenance Reserve; plus (3) FF&E Reserve to extent not reasonably required for anticipated replacement of FF&E; plus (4) such additional amounts as Landlord shall elect to agree in writing to pay on a mutually agreed basis (without any obligation so to do); then, in any such event, Tenant shall have the right to terminate this Lease, and all ofits obligations hereunder, in the same manner as specified in Section 23.3. If Tenant terminates hereunder, Landlord shall receive all insurance proceeds payable to Tenant (after payment to any Leasehold Mortgagee) on account of the damage or destruction, except that portion attributable to the value of Tenant’s leasehold Alterations and additions made by Tenant to the Premises, including the Project and Tenant’s personal property, Trade Fixtures, Tenant’s Property, business interruption insurance covering Tenant’s business revenues, and other losses suffered by Tenant covered by such insurance proceeds, which portion shall be paid to Tenant. The Capital Maintenance Reserve shall be distributed to Landlord, and the FF&E Reserve shall be distributed one-half (1/2) to Landlord and one-half (1/2) to Tenant.

     22.1.3. Use of Proceeds. If Tenant does not terminate this Lease pursuant to Section 22.1.2, the proceeds of any award with respect to fire or casualty insurance (but not any award with respect to business interruption or similar insurance) shall be deposited with an account controlled by a Leasehold Mortgagee (or, if there is no Leasehold Mortgage, a separate account established by Tenant for the benefit of the Project) and applied solely to pay the cost of repair or restoration, as the work progresses and provided that a Leasehold Mortgagee may require that such proceeds shall not be disbursed unless there are sufficient sums available to complete the repair and restoration pursuant to this Lease. Upon completion of such work, any remaining fire and casualty insurance proceeds shall be payable to Tenant.

23. APPROPRIATION

     23.1. Total Taking. In the event of an Appropriation of all of the Premises, Land and Improvements this Lease shall terminate as of the date of such Appropriation, and Rent and other expenses and charges shall be prorated as of such date.

     23.2. Partial Taking: Repair and Restoration By Tenant. In the event of an Appropriation of less than all of the Premises, all expenses and charges, including the Annual Base Rent and other Rent payable by Tenant hereunder for the portion of the Premises remaining shall be equitably reduced for the remainder of the Term based on the extent to which such Appropriation interferes with the efficacious and economical use or operation of or the conduct of any business therein by Tenant, or any Person holding under Tenant. Tenant shall make all necessary repairs or Alterations to the Premises so as to constitute the remaining portion of the Premises as a complete unit, except that Tenant shall have no obligation to make such repairs when this Lease is terminated as hereinafter

provided; provided that, if the Appropriation is by Landlord, Tenant shall be obligated to perform such work described above in this sentence only to the extent of proceeds available from the award made as a result of the Appropriation.

     23.3. Rights Of Termination. If an Appropriation occurs prior to the Occupancy Date, and if such Appropriation is material in the reasonable opinion of Tenant, then Tenant, at its election, may at any time before thirty (30) days after the Occupancy Date terminate this Lease by notice to Landlord. It shall be deemed reasonable for Tenant to terminate this Lease on the ground that the Appropriation is material in the event that awards payable by reason thereof are not sufficient to pay substantially all costs to be incurred for the work of repair, replacement or restoration resulting from the Appropriation. If Tenant does not elect to terminate this Lease by reason of such Appropriation, then and in that event, occupancy shall be delivered on the terms, covenants and conditions herein set forth and all of the proceeds or other awards payable by reason thereof shall be assigned and payable as provided elsewhere in this Article. In the event (i) of any Appropriation of a portion of the Premises or Improvements of such magnitude that it is not economically or practically feasible to restore the Premises or to continue operations therein in an economically feasible or financially viable manner; or (ii) of any material Appropriation during the last five (5) years of the Term, then Tenant shall have the right to terminate this Lease. Such termination shall be effected by notice to Landlord given within thirty (30) days from the earlier of(a) the date of the exercise of Appropriation or (b) the date possession of the portion of the Premises is taken, damaged, or appropriated.

     23.4.Allocation Of Award. With respect to an Appropriation after the Commencement Date, the award shall be allocated and distributed in the following order of priority: (i) to Leasehold Mortgagees, in the order of their respective priority, in payment of the indebtedness secured by their respective Leasehold Mortgages, up to but not exceeding the portion of the award allocated to the value of Tenant’s interest in the Premises under this Lease and to Tenant in the amount of the balance of such value; (ii) to Landlord Mortgagees in the order of their respective priority, in payment of the indebtedness secured by their respective Landlord Mortgages, up to but not exceeding the portion of the award allocated to the value of Landlord’s interest in the Land and the Improvements (except for this leasehold interest) taken by the Appropriation including its reversionary interest in the Premises pursuant to the terms of this Lease, and to Landlord in the amount of balance of such value; (iii) if this Lease does terminate due to the Appropriation, to Landlord for the cost of repairing the Premises; (iv) if this Lease does not terminate due to the Appropriation, to Tenant for the cost of repairing the Premises; (v) to each party, pro rata, for any expenses or disbursements reasonably and necessarily incurred or paid by such party for or in connection with the Appropriation proceedings; and (vi) to Landlord and Tenant, the balance of the award, apportioned equitably. In the event any award or condemnation does not allocate the award to the interests of (i), (ii), (iii), (iv), (v) and (vi) above, the parties will petition the appropriate court for such a determination.

     23.5. Temporary Appropriation. If all or any portion of the Premises, and/or Tenant’s Property is taken by an Appropriation for a temporary period (a “Temporary Appropriation”), this Lease shall not terminate and Tenant shall continue to perform and observe all of its obligations (including rent) hereunder as though such Appropriation had not occurred, except only to the extent that it may be prevented from so doing by reason of such Appropriation. During the time of such Temporary Appropriation, rent and other monetary obligations of Tenant will be subject to equitable reduction, and Tenant shall have the right to terminate only on the grounds set forth in Section 23.3(ii), or as otherwise provided in this Lease. In the event of such an Appropriation for a temporary period, Tenant shall be entitled to receive the entire amount of any award made (whether paid by way of damages, rent or otherwise) and Landlord assigns such award to Tenant, unless the period of governmental occupancy extends beyond the then remaining Term, in which case the award for the Premises shall be apportioned between Landlord and Tenant as of the date of termination of the Term and, in such apportionment, Landlord shall receive the full amount, if any, of any portion of such award which represents compensation specifically awarded for the cost of restoration of the Premises at the termination of any such Temporary Appropriation. Tenant shall, at the termination of any Temporary Appropriation, restore the Premises as nearly as may be reasonably possible to the condition in which the same was prior to such taking, but Tenant shall not be required to do such restoration work if on or prior to the date of such termination the Term shall have expired.

     23.6. Representation. Landlord and Tenant shall each have the right to represent their respective interest in each Appropriation proceeding or negotiation and to make full proof of its claims. Landlord and Tenant agree not to enter into any agreement, settlement, sale or transfer to or with the condemnor without notice to and the consent of Landlord, Landlord Mortgagee, Tenant and the Leasehold Mortgagee, which consent shall not be unreasonably withheld or delayed. Landlord and Tenant shall each execute and deliver to the other any instruments that may be reasonably required to effectuate or facilitate the provisions of this Lease relating to condemnation.

24. SURRENDER OF PREMISES

     24.1. Required Condition. Subject to the provisions of Articles 22 and 23, upon expiration of the Term or earlier termination hereof, Tenant shall surrender the Premises in good order, condition and repair, reasonable wear and tear and damage by casualty excepted, free and clear of any Subleases, occupancies, liens and encumbrances arising under or as a result of Tenant’s use or occupancy, or any activities, direct or indirect of Tenant, its Affiliates, its agents, contractors, employees, subtenants, licensees, visitors, or invitees. The exception in the previous sentence for reasonable wear and tear and damage by casualty shall not limit Tenant’s obligations in the other provisions of this Lease with respect to the condition and repair of the Premises. Tenant shall remove all of Tenant’s Property constituting personal property and shall leave on the Premises all of Tenant’s Property constituting real property improvements and fixtures, provided, however, that Tenant shall have the right, but not the obligation, to remove the Excluded Fixtures, and

shall repair damages caused by such removal. Any property left by Tenant on expiration or termination of the Term, subject to the foregoing, shall automatically become the property of Landlord from and after such date. Any surrender of this Lease by Tenant, or a mutual cancellation thereof, shall terminate all or any existing Subleases or subtenancies.

     24.2. Termination Before Substantial Completion. If this Lease is terminated prior to Substantial Completion, Tenant shall assign and deliver to Landlord as Landlord’s sole property all architectural, engineering and other plans, drawings, specifications and studies performed for Tenant and relating to the Premises. In order to assure Landlord that it will have the legal right to use the aforesaid plans, drawings, specifications and the like if Landlord becomes entitled to such items as hereinabove provided, Tenant shall include in its agreements with the architects, engineers and other professionals who prepared such items and who have any proprietary rights with respect to such items (including the rights to use thereof in connection with the Premises) provisions whereby Tenant and Landlord shall have the right to use such plans and other materials in connection with the Hotel. In furtherance and not in limitation thereof, Tenant (referred to below as “Owner”) shall use commercially reasonable efforts to include as such provisions the following:

     “The drawings, specifications and other documents prepared by the Architect for this Project (“Documents”) are instruments of the Architect’s service and, unless otherwise provided, the Architect shall be deemed the author of these Documents and shall retain all common law, statutory and other reserved rights, including the copyright. For the purpose of completing this Project or for any other purpose, Architect and its sub consultants hereby (i) grant to Owner an irrevocable, fully paid-up, perpetual, worldwide license to copy and use such Documents for completion of this Project or for any other purpose and (ii) consent to the use by Owner, and of the modification by other design professionals retained by Owner, of the Documents. The Architect will have no responsibility or liability to the Owner with respect to any modification to the Documents made by the Owner or any other design professional retained by the Owner. Furthermore, except where the Architect is found to be liable for such claim, damage or loss, the Owner shall hold Architect harmless from any such claim, damage or loss arising out of (a) the modification of the Documents by Owner or another design professional retained by Owner or (b) Owner’s use of the Documents on another Project. The Owner shall be permitted to retain copies, including reproducible copies, of the Documents for information and reference in connection with the Owner’s use and occupancy of the Project.”

     “All drawings, specifications and other documents whether in tangible or intangible form including documents or computer programs, are works for hire and will remain the property of the Owner, whether the Project is completed or not. It is acknowledged by both parties that the architectural design of the Project will be unique, and the Architect will not replicate or otherwise use the

overall design for any other project. The Architect may retain other original documents not requested by Owner so long as reproducible copies of such documents are delivered to the Owner by the Architect. The Owner may use all documents prepared by the Architect or its subconsultants to complete the Project, for additions to this Project or for any other purpose, and the Architect and its subconsultants consent to the modification by other design professionals retained by the Owner of the drawings, specifications and other documents prepared by the Architect and its subconsultants. In the event the Architect is terminated prior to completion of the Project and the Owner uses the Drawings, Specifications or other documents to complete the Project, the Architect will have no liability or responsibility to the Owner with respect to any modification to the drawings, specifications or other documents made by the Owner or any other design professional retained by Owner. The Architect will have no responsibility or liability to the Owner with respect to the Owner’s use of the drawings, specifications or other documents for additions to the Project or for other projects without the Architect’s prior written consent. The Owner shall hold Architect harmless from (i) any claim to the extent caused by Owner’s use of the drawings, specifications and other documents for other projects or additions to this Project and (ii) in the event this Agreement is terminated and the Owner uses another design professional to complete the drawings, specifications and other documents, any claim to the extent caused by modification of the drawings, specifications and other documents by such other design professional.”

     “To the extent that any writings or works of authorship may not, by operation of law, be works made for hire, this Agreement shall constitute an irrevocable assignment by the Architect to the Owner of the ownership of, and all rights of copyright in, such items, and the Owner shall have the right to obtain and hold in its own name rights or copyright, copyright registrations and similar protections which may be available in such works. The Architect agrees to give the Owner or its designees all assistance reasonably required to perfect such rights. In the event Architect utilizes subconsultants in performing work for the Owner, the Architect shall obtain for the Owner ownership of, and all rights of copyright in, the writings or other works of authorship created by any such subconsultants.

     “Owner may terminate this Agreement at any time by giving ten (10) days’ notice thereof. If such termination shall be without cause, Owner shall remain liable for the amounts specified elsewhere in this Agreement. Upon any termination, all copies of the plans, specifications and working drawings shall be delivered to Owner.”

     “Notwithstanding the foregoing, Architect acknowledges and consents to the use and ownership by GSA, or its designees or assignees, of said plans and specifications in accordance with the Lease between the Owner (as Tenant) and The United States of America, acting by and through the Administrator of General Services (as Landlord) for Square 430 in Washington, D.C., and Architect agrees to deliver copies of said plans and specifications to GSA upon written request from GSA accompanied by a certification from GSA’s Regional Counselor Regional Administrator that GSA is entitled to said plans and specifications pursuant to said Lease, provided (i) GSA agrees to pay the Architect’s reasonable duplication expenses and (ii) the Architect shall have been paid the outstanding fees due the Architect from the Owner at the time of delivery to GSA. Architect agrees that GSA shall not be liable for payment of the Architect’s fees.”

     Landlord and Tenant agree that Landlord shall not have the legal right to use the aforesaid plans, drawings, specifications and the like until the architects, engineers, and other professionals who prepared such items and who have proprietary rights with respect to such items have been paid any outstanding fees to which they are entitled for the preparation of such items to the date of assignment of such plans, drawings, specifications and the like to Landlord, and Tenant may include such understanding in any agreement with its architects, engineers, and other professionals. The payment of such outstanding fees shall be the obligation of Tenant. In the event Tenant shall not have paid such fees to such professionals, Landlord may pay such fees, on behalf of Tenant, in order to obtain the legal right to use any plans, drawings, specifications and the like and Tenant shall immediately pay to Landlord, without the need for notice or demand, the amount of such fees paid by Landlord on behalf of Tenant, as additional Rent hereunder. Landlord shall pay no fees to any professionals, on behalf of Tenant, as provided herein, until thirty (30) days have elapsed from the date Landlord has given notice to Tenant of Landlord’s intention to make such payment(s) in the event Tenant shall not have paid such fees.

References to “Architect” and “plans and specifications” shall be appropriately revised if the agreement is with a professional other than an architect.

     24.3. Other Contracts and Subleases. On the last day of the Term, or upon any earlier termination of this Lease, or upon re-entry by Landlord upon the Premises pursuant to Article 27, Tenant shall deliver to Landlord Tenant’s executed counterparts of all Subleases and any service and maintenance contracts then affecting the Premises, maintenance records for the Premises for the immediately preceding Lease Year, all original licenses and permits then pertaining to the Premises, permanent certificates of occupancy then in effect for the Improvements, and copies of all warranties and guarantees then in effect which Tenant has received in connection with any work or services performed in the Premises, together with a duly executed assignment thereof to Landlord.

25. INSOLVENCY OR BANKRUPTCY.

     Upon the happening of any of the following events, Landlord shall have the rights specified under Section 27.1 upon the occurrence of an “Event of Default” thereunder: (i) the admission by Tenant in writing of its inability to pay its debts as they become due; (ii) the filing by Tenant of a petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, the filing by Tenant of an answer admitting or failing timely to contest a material allegation of a petition filed against Tenant in any such proceeding or, if within ninety (90) days after the commencement of any proceeding against Tenant seeking any reorganization, or arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall not have been dismissed; (iii) the appointment of a receiver or trustee to take possession of all or substantially all of the assets of Tenant if not discharged within ninety (90) days; (iv) a general assignment by Tenant for the benefit of creditors; (v) any action or proceeding commenced by Tenant under any insolvency or bankruptcy act, or under any other statute or regulation having as its purpose the protection of creditors, or any such action commenced against Tenant and not discharged within ninety (90) days after the date of commencement; or (vi) the attachment, execution or other judicial seizure of all or substantially all of Tenant’s assets or the Premises, if such attachment or other seizure remains undismissed or undischarged for a period of thirty (30) business days after the levy thereof.

26. QUIET ENJOYMENT BY TENANT

     26.1. Quiet Enjoyment. Landlord covenants that, upon Tenants paying the rent and performing all of the terms, covenants and conditions on Tenant’s part to be observed and performed hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises hereby demised free of claims of any Person claiming under or through Landlord.

     26.2 Compliance With Applicable Laws. At Tenant’s request, Landlord shall join in any filings necessary so that the Premises comply with the Applicable Building Code and all Applicable Laws, ordinances, rules and regulations governing the division or parcelization of real property for purposes of lease, sale or financing subject to Landlord’s right to finance pursuant to Section 16.1, so that this Lease shall constitute a lawful conveyance to Tenant of a leasehold estate in the Premises and so that Tenant shall not be disturbed in its quiet enjoyment of the Premises pursuant to this Article 26.

27. DEFAULT; RIGHTS ON CERTAIN TERMINATION EVENTS

     27.1. Tenant’s Default. The occurrence of any of the following shall constitute an “Event of Default” by Tenant:

          27.1.1. Monetary Breach.

               27.1.1.1. Any breach by Tenant of any obligation under this Lease to timely pay Rent, or any other monetary sum as required pursuant to this Lease, which breach continues uncured for a period of five (5) business days after notice of such failure by Landlord to Tenant.

               27.1.1.2. Any failure by Tenant to pay to Landlord, within five (5) days after notice by Landlord to Tenant, the full amount of any money damages awarded to Landlord pursuant to a final resolution of any dispute pursuant to Article 28 on account of the occurrence of a Non-Monetary Breach (including any action brought by Landlord on account of the expenditure by Landlord of sums to remedy a Non-Monetary Breach in accordance with the terms of Section 27.1.6.).

Interest at the Default Rate shall be payable on any amounts due from Tenant from the due date. In addition, if Landlord shall be required to give any notices of default more than two (2) times in any twelve (12) month period for Annual Base Rent or Percentage Rent which is five (5) or more calendar days late, or of any other material defaults, Tenant shall thereafter for the following twelve (12) months pay a late payment fee equal to five percent (5%) of any amount of Rent which is not paid within five (5) calendar days after its due date.

          27.1.2. Non-Monetary Breach. Any breach by Tenant of any terms, obligations, conditions, agreements or covenants under this Lease, other than a breach pursuant to Section 27.1.1 or 27.1.3, such breach continuing for thirty (30) days after notice of such breach, or if such breach is not reasonably susceptible of cure within such 30-day period, then, so long as Tenant immediately upon notice, and continuously and diligently thereafter pursues such cure until such breach is cured in fact, Tenant shall have a reasonable time thereafter to remedy such breach. As used in this Section 27.1.2, a “reasonable time” shall mean the time reasonably necessary to cure a breach (such as, by way of example, the period of time necessary to exercise Tenant’s remedies under a Sublease if a Space Tenant thereunder is in default), which period of time shall not exceed six (6) months, provided, that, such six (6) month period shall be extended to the extent additional time is reasonably necessary to obtain judicial relief or other third party or governmental actions or consents necessary to cure such breach.

          27.1.3. Insolvency. The occurrence of an event specified in Article 25.

     An Event of Default under Section 27.1.1 shall hereinafter be referred to as a “Monetary Breach”; and any Event of Default under Sections 27.1.2 or an event specified in Section 27.1.3 shall hereinafter be referred to as a “Non-Monetary Breach”.

          27.1.4. Remedy on Occurrence of Event of Default. In the event of the occurrence of an Event of Default, then Landlord shall have the following rights subject, however, to the provisions of Sections 9.2, 18 and this Article 27:

               27.1.4.1. Termination. In the event of the occurrence of an Event

of Default, Landlord shall have the right, after the giving of notice required hereunder, and subject to the rights granted in Article 18, and this Article 27 and only upon issuance of a final resolution pursuant to Article 28, to terminate this Lease, and at any time thereafter recover possession of the Premises or any part thereof and expel and remove therefrom Tenant and any other Person occupying the same, by any lawful means, and again repossess and enjoy the Premises without prejudice to any of the remedies that Landlord may have under this Lease, or at law or in equity by reason of Tenant’s default or of such termination.

               27.1.4.2. Continuation After Default. Subject to the limits set forth in Sections 27.1.7 and 27.1.9, in the event of the occurrence of an Event of Default, this Lease shall continue in effect for so long as Landlord does not terminate Tenant’s right to possession under Section 27.1.4.1, and Landlord may enforce all its rights and remedies under this Lease, including the right to recover Rent as it becomes due. Notwithstanding any such election to have this Lease remain in full force and effect, Landlord may, at any time thereafter, elect by notice to Tenant to terminate this Lease and Tenant’s right to possession of the Premises for any previous Event of Default which remains uncured, or for any subsequent uncured Event of Default. Acts of maintenance, preservation or efforts to lease the Premises or the appointment of a receiver upon application of Landlord to protect Landlord’s interest under this Lease shall not constitute an election to terminate Tenant’s right to possession. In addition, Landlord, by thirty (30) days’ prior notice to Tenant, shall have the right to terminate Tenant’s right to possession but not this Lease, in which event Tenant shall be relieved of all obligations that cannot feasibly be fulfilled without possession.

               27.1.4.3. Damages Upon Termination. If Landlord terminates this Lease pursuant to the provisions of Section 27.1.4.1, in addition to any other rights and remedies to which Landlord may be entitled under Applicable Laws, Landlord shall be entitled to recover from Tenant, subject to the limits set forth in Section 27.1.9: (i) the worth at the time of award of the unpaid Rent, and other monetary amounts payable by Tenant hereunder, including those which had been earned at the time of termination; and (ii) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom.

               27.1.4.4. Worth at the Time of Award. The “worth at the time of award” of the amounts referred to in Section 27.1.4.3(i) shall be computed with interest at the Default Rate.

               27.1.4.5. Time of Award. As used herein, the term “time of award” shall mean either the date upon which Tenant pays to Landlord the amount recoverable by Landlord as hereinabove set forth or the date of entry of determining the amount recoverable, whichever first occurs in accordance with Article 28.

          27.1.5. Computation of Rent for Purposes of Default. For purposes of Section 27.1.4.3, unpaid Rent which would have accrued and become payable under this Lease shall consist of the sum of: (i) the total Annual Base Rent for the balance of the Term, plus (ii) a computation of all other Rent for the balance of the Term present valued at the Default Rate.

          27.1.6. Remedy on Occurrence of a Non-Monetary Breach. In addition to any other rights, Landlord shall also have the right to bring an action or actions for specific performance of the obligation in default and/or for interim and permanent prohibitory or mandatory injunctive relief to restrain Tenant from committing or continuing a Non-Monetary Breach. In any event, but subject to the specific limitations contained in this Article 27, Landlord shall have recourse to all appropriate legal and equitable remedies upon an Event of Default. Any judgment for damages obtained by Landlord on account of any Event of Default hereunder shall bear interest at the Default Rate.

          27.1.7. No Termination; Waiver of Remedies; Certain Limitations on Remedies of Landlord. In no event shall any Non-Monetary Breach of this Lease by Tenant entitle Landlord (or any Person acting under Landlord) to cancel, rescind, void or otherwise terminate this Lease, or any of the terms, covenants, conditions, rights or obligations of Tenant hereunder, except in compliance with this Article 27. If Landlord brings any action or actions to recover possession of the Premises on account of an Event of Default, including a proceeding for unlawful detainer, Tenant shall be permitted an affirmative defense in any such proceeding for any continuing breach of this Lease by Landlord that prevents Tenant’s cure of such Event of Default or is a material cause thereof. Any statute or law prohibiting the assertion of such a defense in any such proceeding brought by Landlord now or hereafter in force, is hereby unconditionally and irrevocably waived by Landlord to the extent permitted by law. In any event, and notwithstanding anything to the contrary contained in this Lease or pursuant to any right or remedy available to Landlord at law or in equity, except for the provisions with respect to a Monetary Breach where Landlord shall be limited only by the law applicable to unlawful detainer, Landlord shall have no right to terminate this Lease prior to a final resolution of any dispute pursuant to Article 28 on account of the occurrence of a Non-Monetary Breach. Tenant shall abide by the final resolution pursuant to Article 28.

          27.1.8. Rights of Leasehold Mortgagee. Notwithstanding anything to the contrary contained in this Lease, any lien in favor of Landlord obtained to enforce any remedy of Landlord and any levy of execution thereon shall be subject to any applicable rights of any Leasehold Mortgagee under Article 18.

          27.1.9. Limitation on Recourse. Notwithstanding anything to the contrary contained in this Lease, Landlord shall look solely to Tenant’s estate and interest in the Premises, and Tenant’s insurance or condemnation proceeds and reserves and proceeds of the Premises for the satisfaction of Landlord’s remedies for the recovery of any judgment against Tenant for breach of Tenant’s obligations under this Lease, including any cause of action accruing on or after the Commencement Date. Tenant, or if Tenant is a partnership, its employees, partners whether general or limited, or if Tenant is a

corporation, its directors, officers or shareholders, and in any event the employees thereof and of any Operator, and the officers, directors, shareholders, and employees of all of them, shall not otherwise be personally liable for any obligations hereunder or for any such judgment or performance. There shall be no levy of execution upon such judgment against the assets of any of the Persons indicated in the preceding sentence (nor shall such Persons be named in any such action against Tenant) other than Tenant’s estate and interest in the Premises, and Tenant’s insurance or condemnation proceeds and reserves and proceeds of the Premises.

          27.1.10. Landlord’s Right to Perform on Tenant’s Breach. In addition to any other right or remedy of Landlord under this Lease upon the occurrence of any breach by Tenant that is not cured within the applicable cure period and without waiving or releasing Tenant from any obligation of Tenant under this Lease, Landlord may (but shall not be required to) upon as much advance notice to Tenant as is reasonable and practicable, enter the Premises, at reasonable times and upon reasonable prior notice (except in the event of an Emergency Situation in which case notice shall not be required if not reasonably practicable under the circumstances) and cure such Event of Default or Emergency Situation for the account of Tenant. All sums paid by Landlord and all costs and expenses incurred by Landlord in connection with such cure, together with interest thereon at the Default Rate, from the respective dates of Landlord’s incurrence of each item of cost or expense, shall be payable by Tenant on demand. If Tenant fails promptly to pay such costs and expenses, Landlord, in addition to its right to sue to recover such costs and expenses, may deduct and offset such amounts against any amounts payable pursuant to this Lease by Landlord to Tenant, if any.

     27.2. Landlord’s Default.

          27.2.1. Landlord’s Liability. If Landlord breaches any of its material obligations under this Lease (“Landlord Event of Default”) and such breach continues for longer than thirty (30) days after receipt by Landlord of notice thereof from Tenant (except that if such breach cannot reasonably be cured within such thirty (30) day period, Landlord shall not be in default if Landlord commences, within such period, such cure and thereafter diligently using all reasonable efforts prosecutes the same to completion), then, subject to the next sentence, Landlord shall be liable to Tenant for such amounts to which Tenant may be entitled in law or equity in any action brought by Tenant against Landlord on account of such breach. In no event however shall Landlord be liable for consequential or punitive damages. Subject to the foregoing limitation of liability, Tenant shall have the right to invoke all appropriate legal and equitable remedies on the occurrence of a Landlord Event of Default.

          27.2.2. Tenant’s Additional Rights. If Landlord fails to perform any of its material obligations under this Lease, and such failure continues uncured after notice and expiration of the applicable time period under Section 27.2.1, then in addition to all other rights and remedies of Tenant under this Lease and at law or equity, Tenant shall have the right (but shall not be obligated to), upon as much advance notice to Landlord as is reasonable and practicable, to cure such breach on behalf of Landlord and upon demand

by Tenant, Landlord shall promptly pay to Tenant the reasonable costs and expenses of such cure, together with interest at the Default Rate (or if lower the rate provided by Applicable Laws for late payments by Landlord). When Tenant makes demand for payment, Tenant shall furnish Landlord an itemized statement of the reasonable costs and expenses incurred for cure.

          27.2.3. Limitation on Recourse To Premises. Nothing in this Lease shall constitute an agreement by Landlord that the Premises or any part thereof or interest therein shall be subject to lien, levy, attachment, forfeiture or other process.

     27.3. Termination Procedures. Whenever Tenant is granted a specific right to terminate this Lease, Tenant shall exercise such right in accordance with the following terms and conditions. Upon the occurrence of an event or circumstance giving rise to a right of termination, Tenant shall, if Tenant elects to exercise such right, give notice of such exercise to Landlord and, if required, to any Leasehold Mortgagee or Landlord Mortgagee. Unless another time period is specified in this Lease, this Lease shall terminate thirty (30) days after such notice is given.

     27.4. Waiver; Remedies Cumulative. Failure of Landlord to declare a Tenant Event of Default or of Tenant to declare a Landlord Event of Default immediately upon the occurrence thereof, or delay in taking any action in connection therewith, shall not waive such Event of Default or default, but Landlord and Tenant shall have the right to declare any such Event of Default at any time thereafter. No waiver by either party of any default under this Lease or any agreement, term, covenant or condition contained in this Lease shall be effective or binding on such party unless made in writing by such party and no such waiver shall be implied from any omission by a party to take action with respect to such default or other such matter. No express written waiver of any default or other such matter shall affect any other default or matter or cover any other period of time other than any default and/or period of time specified in such express waiver. One or more written waivers of any default or other matter under any provision of this Lease shall not be deemed to be a waiver of any subsequent default in the performance of the same provision or any other term or provision contained in this Lease. Subject to the specific provisions to the contrary in this Lease, all of the remedies permitted or available to a party under this Lease or at law or in equity shall be cumulative and not alternative and invocation of any such right or remedy (including any termination right under this Lease) shall not constitute a waiver or election of remedies with respect to any other permitted or available right or remedy. In connection with the foregoing provisions, Landlord and Tenant each acknowledge, warrant and represent that it has been fully informed with respect to and represented by counsel of choice in connection with the rights and remedies and the waivers contained in this Article 27 and after such advice and consultation, has presently and actually intended, with full knowledge of its rights and remedies otherwise available at law or in equity, entered into this Lease.

28. DISPUTE RESOLUTION

     In the event of any disputes under this Lease, Landlord and Tenant shall follow the procedures under the Contract Disputes Act. If a dispute arises out of or relates to this Lease, or the breach thereof, and if said dispute cannot be settled through negotiation, Landlord and Tenant shall first try in good faith to settle the dispute by mediation, before resorting to litigation. Landlord agrees that Landlord’s Contracting Officer shall not issue any final determination regarding any claim by Tenant until and unless such mediation has been concluded, or either Landlord or Tenant advises the other that a resolution of the dispute by mediation does not appear likely within a reasonable time. During the Feasibility Period, Landlord and Tenant shall use reasonable efforts to agree upon more specific dispute resolution rules and procedures.

29. OBLIGATIONS RELATING TO UNAVOIDABLE DELAY AND LANDLORD DELAY

     In the event of Unavoidable Delay, performance shall be excused for the period of the delay and the period for such performance shall be extended for a period equivalent to the actual delay caused thereby, except that the foregoing shall in no way affect or apply to: (i) the length of the Term; (ii) subject to the express terms of the Work Agreement as to whether and when the Rent Commencement Date has occurred, any obligations to pay Rent or any other sums; or (iii) any other provision of this Lease specifically not subject to Unavoidable Delay; and provided further that (a) the party seeking to extend its time for performance shall give the other party written notice promptly after the first party shall have obtained knowledge of such delay, and in any event not later than twenty-one (21) days after the first party shall have obtained knowledge of such delay, and (b) nothing herein contained shall excuse any party from exercising all due diligence and taking all necessary actions reasonably possible under the circumstances to terminate any delaying cause herein specified at the earliest possible time and to mitigate the effects of such delay. As promptly as is feasible after the occurrence of an Unavoidable Delay or Landlord Delay, the party seeking the benefit of the delay shall deliver to the other party a proposed plan to mitigate the effects of any such Unavoidable Delay or Landlord Delay and the party seeking the benefit of the delay shall promptly commence and diligently pursue such mitigation plan. Upon the occurrence of any Landlord Delay or Unavoidable Delay, Landlord and Tenant shall promptly execute an amendment to this Lease correspondingly extending the time for performance.

30. DELIVERY OF OCCUPANCY OF PREMISES

     30.1. Occupancy Date.

     Landlord will be deemed to have delivered possession of the Premises to Tenant and Tenant shall be deemed to occupy the Premises upon the Occupancy Date. Notwithstanding the foregoing, Tenant shall have the right to enter upon the Premises prior to the Occupancy Date in accordance with the terms of the Work Agreement.

     30.2. Tenant Not Purchasing Landlord’s Business.

     Landlord acknowledges that Tenant is not purchasing, assuming or undertaking any assets, rights, obligations or liabilities in connection with the operation of any business in the Premises conducted by Landlord or its tenants. Specifically, but without limiting the generality of the foregoing, Tenant shall have no responsibility for any claims by employees, tenants, guests, licensees, third party creditors or any creditors of Landlord or its tenants secured by any fixtures, personal property or Improvements of Landlord contained within the Premises or obligations with respect to any employees’ unfunded vested retirement rights or other liabilities of Landlord.

31. HAZARDOUS MATERIALS

     The parties agree as follows with respect to the existence or use of Hazardous Materials on the Land, Improvements and Premises:

     31.1. Abatement of Hazardous Materials. In addition to the renovation and other work described in the Work Agreement, the Project shall include remediation of existing Hazardous Materials. Landlord’s obligations to pay or reimburse Tenant for abatement costs as provided in Section 31.2, other than Landlord’s obligation to fund the Land10rdFunded Work shall be limited to available appropriated funds of Landlord. To the extent such funds are not available to reimburse Tenant for such costs incurred by Tenant but for which Landlord is responsible as provided in Section 31.2, Tenant shall have the right to deduct the amount of such costs from succeeding Rent owed by Tenant to Landlord under this Lease, in the amounts determined by the environmental consulting firm referred to in Section 31.2 (or as otherwise agreed by the parties), together with interest at the Interest Rate accruing on the outstanding amount of such payments beginning on the date Tenant makes payment, provided that, if Tenant is unable timely to obtain financing on terms satisfactory to Tenant to fund Landlord’s remediation obligations under this Section 31.1, Tenant shall have the right to (i) terminate this Lease by notice to Landlord or (ii) to the extent consistent with Applicable Laws, defer performance of such obligations until such time as Landlord makes adequate funds available to Tenant.

     31.2. Landlord’s and Tenant’s Obligations.

          31.2.1. Mutual Covenants. If the actual or suspected Release of Hazardous Materials on, about, under or in the Premises comes to the knowledge of Tenant or the Knowledge of Landlord, then the party with such knowledge shall promptly notify the other of same. Neither Landlord nor Tenant, nor their respective agents, employees, tenants, Space Tenants, contractors or subcontractors, shall cause or permit Hazardous Materials to be brought upon, kept or used in, on, or about the Land and Premises except as permitted under and in full compliance with all Environmental Laws. Landlord and Tenant shall promptly notify the other of any inquiry, test, investigation or enforcement proceeding by or against Landlord or Tenant involving the Land and Premises and a Hazardous Material. Landlord and Tenant shall promptly provide to the other upon

receipt the results of any inquiry, test or investigation conducted by Landlord or Tenant or their respective Space Tenants, employees, agents or contractors to determine the presence of Hazardous Materials on, in, under or about the Premises. Subject to Landlord’s obligations to fund or to reimburse Tenant for a portion of the Landlord-Funded Work under the Work Agreement, Landlord and Tenant have allocated between them during the Term the responsibility for Hazardous Materials as follows: (i) Tenant shall be responsible for the cost of abatement of Hazardous Materials existing in, on, under or about the Land or Improvements on the Occupancy Date to the extent the presence and extent of such Hazardous Materials are disclosed in or reasonably inferable from the Environmental Reports; (ii) Tenant shall be responsible for the cost of abatement of all other Hazardous Materials existing in, on, under or about the Land or Improvements on the Occupancy Date to the extent that the aggregate of such costs plus the costs described in clause (i) do not exceed $1,000,000; (iii) Landlord shall be responsible for the abatement and cost of abatement of all Hazardous Materials existing in, on, under or about the Land or Improvements on the Occupancy Date other than those described in clause (i) or (ii) above except that Tenant shall be responsible for Hazardous Materials released by Tenant or its agents or employees in, on, under, about or from the Land or Improvements; (iv) Landlord shall be responsible for all Hazardous Materials released by Landlord or its agents or employees in, on, under, about or from the Land or Improvements after the Commencement Date; and (v) Tenant shall be responsible for all Hazardous Materials released in, on, under, about or from the Land or Improvements after the Occupancy Date except as provided in clause (iv) next above. If Landlord is responsible for abatement costs described in clauses (iii) or (iv) of the next preceding sentence, Landlord and Tenant shall agree on a procedure for inspecting and abating existing Hazardous Materials and for allocating the cost thereof in accordance with this Section 31.2. If possible the procedure shall include retention of an environmental consulting firm that will have discretion to determine which costs are abatement costs for which Landlord is responsible as described below and which costs are abatement or other Project costs for which Tenant is responsible. LANDLORD MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE CONDITION OR STATE OF THE LAND OR ITS EXISTING IMPROVEMENTS EXCEPT AS SET FORTH IN SECTION 2.4.

          31.2.2. Landlord’s Covenant Regarding Hazardous Materials. Landlord shall not Release or cause any Release of Hazardous Materials into the Premises in violation of any Environmental Laws.

          31.2.3. Operations and Maintenance Program. In the event any Release of Hazardous Materials shall occur on the Land or Premises, which Release or cost of cleanup of which is Tenant’s responsibility, Tenant shall promptly retain experienced consultants to prepare an operations and maintenance program (“O&M Program”) addressing in detail the manner in which Tenant will remediate such Release of Tenant Materials. Such O&M Program shall be submitted to Landlord for Landlord’s prior approval, which approval shall not be unreasonably withheld, conditioned or delayed. Promptly after Landlord approves Tenant’s O&M Program, Tenant shall remediate any

such Release of Tenant Materials in a commercially reasonable manner and within a commercially reasonable time and in any event Tenant shall remediate any Hazardous Materials at the Premises or released therefrom within the time required by Environmental Laws.

     31.3. Tenant’s Remediation Rights and Obligations. Tenant shall comply with, and shall include covenants in all Subleases with all of its subtenants to cause them to comply with, Environmental Laws relating to the Premises as a result of contamination by Tenant or its users, occupants, employees, agents, contractors, licensees, subtenants, or assignees during the period of Tenant’s actual occupancy of the Land.

     31.4. Inspection; Tests. Tenant and its consultants, agents, employees and engineers and any prospective lenders or their consultants or contractors shall have the right, after notice to Landlord, and subject to the express terms of the Work Agreement, to enter upon the Land and Improvements for the purpose of performing tests as Tenant shall reasonably deem appropriate to determine the existence and extent of Hazardous Materials in or on the Land and Improvements. A request to inspect by Tenant’s lender shall be deemed reasonable. Tenant shall promptly cause any damage to the Premises resulting from such tests to be repaired at no cost to Landlord.

     31.5. Termination; Abatement of Rent. If (a) Hazardous Materials exist in, on, under or about the Land or Premises as of the Occupancy Date or (b) Hazardous Materials are Released on the Land or Premises after the Occupancy Date, which Release or the cleanup of which is Landlord’s responsibility and the existence of or Release of Hazardous Materials pursuant to the foregoing subclauses (a) or (b) substantially interferes with Tenant’s use or occupancy of the Premises for the Permitted Use, other than a Release for which Tenant or its agents, employees, Space Tenants, contractors or subcontractors are responsible, then, in such event (i) Annual Base Rent and Tenant charges shall abate pro-rata during the period of such interference to the extent thereof, and (ii) if such interference prevents Tenant from operating its business in the Premises for a period in excess of one (1) year, Tenant, at its option, shall have the right to terminate this Lease.

32. MISCELLANEOUS

     32.1. Confidentiality. Landlord shall keep confidential, as confidential commercial or financial information, and shall not divulge to any Person any Confidential Information, provided, however, Landlord shall not be precluded from making disclosure regarding Confidential Information (i) in circumstances in which Tenant consents, which consent shall not be unreasonably withheld, (ii) to Landlord’s counsel, accountants, and other professional advisors, who are not employees of Landlord, provided that such counsel, accountants and advisors are instructed in writing not to disclose the Confidential Information, (iii) to Landlord’s employees who need to know such information in performance of their duties on behalf of the United States, and (iv) as required by law. If Landlord receives a request for Confidential Information

pursuant to FOIA, Landlord shall promptly notify Tenant of such request and shall follow its procedures for processing FOIA requests for confidential commercial or financial information in accordance with the standards set forth in 41 CFR Part 105-60 as it may be amended or any successor regulation.

     32.2. Governing Law. This Agreement shall be governed by the federal laws of the United States of America, and if such laws are not applicable to the issue in question, then this Agreement shall be governed by the laws of the District of Columbia.

     32.3. Successors and Assigns. The agreements, terms, covenants and conditions herein shall bind and inure to the benefit of Landlord and Tenant and their respective heirs, personal representatives, successors and (except as otherwise provided herein) assigns.

     32.4. Construction and Interpretation. The captions, headings or titles to the Articles and Sections of this Lease and the Table of Contents are not a part of this Lease, are for convenience of reference only, and shall have no effect upon the construction or interpretation of any part thereof. All provisions of this Lease have been negotiated by Landlord and Tenant at arm’s length and with full representation of their respective legal counsel and neither party shall be deemed the drafter of this Lease. The language of this Lease shall not be construed for or against either party by reason of the authorship or alleged authorship of any provision hereof or by reason of the status of the respective parties as Landlord or Tenant. “Including,” “includes,” and “include” or words to similar effect shall be construed as followed by “without limitation.” Certain terms used in this Lease are defined in the Exhibits hereto. Except as the context otherwise requires any reference in this Lease or the Work Agreement to a Section or Article number refers to the corresponding section or article in the respective document in which the reference appears.

     32.5. Entire Agreement and Amendment. This Lease (including the Exhibits annexed hereto and made part hereof) contains all the representations, promises, agreements, conditions, inducements and understandings between Landlord and Tenant relative to the Premises and there are no promises, agreements, conditions, understandings, inducements, warranties or representations, oral or written, expressed or implied, between them other than as herein set forth or expressly referenced herein and made a part hereof. This Lease supersedes that certain Site Access Agreement dated May 15, 1998, by and between Landlord and Tenant, to the extent such Site Access Agreement otherwise would have remained in force and effect as of the Commencement Date. This Lease may be modified only by an agreement in writing signed by each of the parties. This Lease shall not be amended, altered, modified or rescinded, or (except in accordance with the provisions contained in Article 18 following Tenant’s default) terminated prior to the expiration of the Term, without the prior written consent of the senior Leasehold Mortgagee.

     32.6. Brokers’ Commissions. Landlord represents and warrants to Tenant that Landlord has not incurred, directly or indirectly, any obligation to pay any real estate commission, brokerage commission or finder’s fee to any agent, broker, salesperson or finder in connection with this transaction. Tenant represents and warrants to Landlord that Tenant has not incurred, directly or indirectly, any obligation to pay any real estate commission, brokerage commission or finder’s fee to any agent, broker, salesperson or finder in connection with this transaction.

     32.7. References. Unless otherwise specified, all references herein to the Table of Contents, or a given Article, Section or subsection refer to the Table of Contents, Article, Section or subsection of this Lease and references to a “party” or “parties” shall refer to Landlord or Tenant, or both, as the context may require. The use herein of the words “successors and assigns” or “successors or assigns” of Landlord or Tenant shall be deemed to include the permitted assigns of any Landlord or Tenant.

     32.8. Exhibits. The Exhibits listed in the Table of Contents or to which reference is made in this Lease or the Exhibits, shall be deemed incorporated herein or in the Exhibits in full whether or not actually attached hereto or thereto.

     32.9. Counterparts and Signature Pages. This Lease may be executed in two or more counterpart copies, all of which counterparts shall have the same force and effect as if all parties hereto had executed a single copy of this Lease.

     32.10. Severability of Provisions. If any term or provision of this Lease, or the application thereof to any Person or circumstance, shall be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.

     32.11. Number and Gender. Whenever the context requires, the singular number shall include the plural, the plural the singular, and the use of any gender shall include all genders.

     32.12. Investment Tax Credit. Tenant shall exert its reasonable, diligent efforts to obtain the maximum permitted and allowable investment tax credits arising from Tenant’s Rehabilitation and construction work performed pursuant to the terms of the Work Agreement and, subject to the provisions and limitations of the United States Internal Revenue Code, Tenant shall retain all such investment tax credits. Tenant and Landlord shall cooperate to file such reasonable documents as may be required or necessary under the Internal Revenue Code, and the Regulations thereunder, for Tenant to obtain such investment tax credits at no risk or cost to Landlord and provided that Tenant obtaining such credits shall not constitute a condition to Tenant’s obligations hereunder, failure to obtain such credits shall not excuse or delay any obligations of Tenant hereunder and Landlord makes no representation or warranty that such credits will be available to Tenant.

     32.13. Identity of Landlord. On the Commencement Date, Landlord shall mean the United States of America, acting by and through the Administrator of General Services and authorized representatives. After the Commencement Date, “Landlord” shall mean only the fee owner in question of the Land and Improvements so that if the United States of America or any successor fee owner of the Land and Improvements ceases to have any interest in the Land and Improvements by reason of a sale or transfer of the same in accordance with the terms of this Lease, the seller or transferor shall be and hereby is entirely freed and relieved of all agreements, covenants and obligations of Landlord hereunder to be performed after the date of such sale or transfer, provided, that the purchaser or transferee of the Land and Improvements expressly assumes and agrees to carry out any and all agreements, covenants and obligations of Landlord hereunder accruing from and after the date of such sale or transfer. Nothing herein shall relieve Landlord from any liability with respect to agreements, covenants and obligations required to be performed prior to the date of any such sale or transfer of Landlord’s interest in the Land and Improvements.

     32.14. Identity of Tenant. On the Commencement Date, Tenant shall mean Tariff Building Associates, L.P., a California limited partnership. Thereafter, “Tenant” shall mean the initial Tenant’s permitted successors and assigns with respect to all or substantially all of the initial Tenant’s interest in and to this Lease.

     32.15. Tenant’s Representations. Tenant hereby makes the following representations and warranties, solely for the benefit of Landlord, as of the Commencement Date:

          32.15.1. Organization. Tenant is a duly organized and validly existing limited partnership in good standing under the laws of the State of California.

          32.15.2. Power and Authority. The Persons executing this Lease on behalf of Tenant have the full right, power and authority to execute and deliver this Lease as Tenant’s act and deed and to bind Tenant hereto. Tenant has the full right, power and authority, and has obtained all necessary authorizations and consents, to enter into and perform its obligations under this Lease.

          32.15.3. Valid and Binding. The Lease is a legal, valid and binding obligation of Tenant, enforceable against Tenant in accordance with its terms.

          32.15.4. No Conflict. The execution and delivery of this Lease by Tenant will not result in a breach of the terms or provisions of, or constitute a default (or a condition that, upon notice or lapse of time, or both, would constitute a default) under its organizational documents or any indenture, agreement or obligation by which Tenant is bound, and will not constitute a violation of any law, order, rule or regulation applicable to Tenant.

          32.15.5. No Litigation. No litigation is being threatened or prosecuted against Tenant or Kimpton that might impair Tenant’s ability to execute and deliver this Lease or perform any of its obligations hereunder.

     32.16. Landlord’s Representations. Landlord hereby makes the following representations and warranties, solely for the benefit of Tenant, as of the Commencement Date:

          32.16.1. Power and Authority. Landlord has full power and authority to enter into this Lease on behalf of the United States of America. The Persons executing this Lease on behalf of Landlord have the full right, power and authority to execute and deliver this Lease as Landlord’s act and deed and to bind Landlord hereto. Landlord is a valid and existing agency of the United States Federal Government and has full power and authority, and has obtained all necessary authorizations and consents, to enter into and perform its obligations under this Lease.

          32.16.2. Valid and Binding. The Lease is a legal, valid and binding obligation of Landlord, enforceable against Landlord in accordance with its terms.

          32.16.3. No Conflict. The execution and delivery of this Lease by Landlord will not result in a breach of the terms or provisions of, or constitute a default (or a condition that, upon notice or lapse of time, or both, would constitute a default) under its authorizing or other legislation or regulations, or any agreement or obligation by which Landlord is bound, and will not constitute a violation of any law, order, rule or regulation applicable to Landlord.

     32.17. No Subordination. Landlord’s fee interest in the Premises and this Lease, as the same may be modified, amended or renewed, shall not be subject or subordinate (a) to any Leasehold Mortgage now or hereafter placed upon Tenant’s interest in this Lease, or (b) any other liens or encumbrances hereafter affecting Tenant’s interest in this Lease. Nothing in this Section 32.17 shall alter Tenant’s right to create a Leasehold Mortgage affecting only Tenant’s interest in the Premises and this Lease pursuant to Article 18.

     32.18. Excavation and Shoring.

          32.18.1. General. Subject to Section 32.18.2 below, Tenant shall allow Landlord or the District of Columbia, or other governmental or quasi-governmental agency or utility company desiring to excavate an abutting street, to enter the Premises and shore up an intervening wall or foundation during such excavation, provided that Landlord or such other adjoining owner, government agency or utility company shall comply with the Applicable Building Code and all Applicable Laws, to the same extent as would be required if the Premises were privately owned and provided that no such activity shall in any way interfere with Tenant’s use of the Premises. Landlord hereby assigns to Tenant any and all rights to sue for or recover against the District of Columbia or other governmental or quasi-governmental agency or utility company, or

the parties causing such damages, the amounts expended or losses sustained by Tenant because of the provisions of this paragraph requiring Tenant to repair any damages sustained by such excavations, construction work, or other work, or, if such assignment not be permitted by law, Landlord agrees to bring any action in Landlord’s name required to enforce such rights for the benefit of Tenant, subject to reimbursement by Tenant for all reasonable costs and expenses thereof, including attorneys’ fees.

          32.18.2. Limitation. If Landlord shall excavate on adjoining property which it owns and in so doing shall cause damage to Tenant or the Premises, Landlord shall be responsible to Tenant to pay for such damage and the foregoing provisions of this Section 32.18.2 shall not be construed as a release by Tenant of any separate claim which Tenant may have against Landlord for such damage.

     32.19. Rehabilitation. Tenant recognizes that the construction and Rehabilitation work to be performed by Tenant in accordance with the terms of the Work Agreement is an especial consideration to the entry into this Lease by Landlord. Tenant agrees that in connection with any excavation of any property abutting, adjoining or otherwise affecting the Improvements, Tenant shall request the owner of the abutting, adjoining or affecting property to take all measures reasonably required in the case of structures of similar age, construction and condition to shore up any intervening or affected wall or foundation of the Improvements during such excavation, but Tenant does not make any representation that the work will not affect the Premises. In addition, in the event of such excavation by Tenant, Tenant shall be subject to all responsibilities otherwise applicable to it under this Section 32.19.

     32.20. Interested Parties. No member or delegate to Congress, or elected official of the Government of the United States or the Government of the District of Columbia, shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom; provided, however, that this provision shall not be construed as extending to any Person who may be a shareholder or other beneficial owner of any publicly held corporation or other entity, if this Lease is for the general benefit of such corporation or other entity.

     32.21. Governmental Role of Landlord. Tenant acknowledges that Landlord, and any successor public agency, in its capacity as a public agency in the pursuit of its legislative mandate, may from time to time promulgate regulations, Historic Preservation Standards and other standards, programs and policies having the force and effect of law of general applicability to property located within those areas of the District of Columbia within its jurisdiction, conduct public hearings or meetings on matters relating to such areas, undertake street widening, street narrowing, relocation of utilities and other public service facilities, repavement of streets and sidewalks, landscaping and other public improvements in the vicinity immediately adjacent to the Premises, and generally do all other things permitted or required from time to time by its enabling legislation. Tenant further acknowledges that nothing contained in this Lease shall be construed as to preclude, limit or restrain the foregoing authority of Landlord and that no actions taken

by Landlord pursuant to such authority (except to the extent as expressly provided in this Lease) shall entitle Tenant to any abatements, set-offs, or reductions in the Annual Base Rent, Percentage Rent, Participation Rent or any other rights against Landlord (in its capacity as Landlord) under this Lease, and Landlord acknowledges that nothing contained in this Lease shall be construed so as to preclude, limit or restrain Tenant from taking any action to challenge any actions taken by Landlord pursuant to such authority (except to the extent as may be expressly provided in this Lease).

     32.22. Certain Required Provisions. Tenant represents to Landlord that in connection with the negotiation and execution of this Lease, Tenant has not violated any of the provisions of Section 14 of Public Law Number 92-578, and that Tenant will not violate any of the provisions of said Section 14 of Public Law Number 92-578 during the term of this Lease or thereafter with respect to any matter pertaining to this Lease or the Premises. During the Feasibility Period, Landlord and Tenant shall agree as to any additional clauses that are required to be incorporated into this Lease by reason of any applicable federal law or regulation, and shall execute a corresponding amendment to this Lease.

     32.23. Time. Time is of the essence of each provision of this Lease in which time is an element.

     32.24. Equal Employment Opportunity.

          32.24.1. General Covenant.

     Tenant covenants and agrees that it shall neither commit nor permit discrimination or segregation by reason of race, creed, color, religion, national origin, ancestry, sex, age, disability or marital status in the sale, transfer or assignment of its interest under this Lease or in the subleasing, use or occupancy of the Premises or any part thereof including any services, privileges, accommodations, and activities provided in connection therewith, or in connection with the maintenance, repair or replacement of the Improvements and that it shall comply with all applicable federal, state and local laws, ordinances, rules and regulations from time to time in effect prohibiting any such discrimination or segregation. Tenant further agrees to include the foregoing provision in all Subleases with respect to the Premises or any portion thereof by amendment thereto if necessary.

          32.24.2. Specific Covenant

     (a) If, during any 12-month period (including the 12 months preceding the award of this contract), Tenant (referred to below as the “Contractor”) has been or is awarded nonexempt federal contracts and/or subcontracts that have an aggregate value in excess of $1 0,000, the Contractor shall comply with subparagraphs (b)(1) through (11) below. Upon request, the Contractor shall provide information necessary to determine the applicability of this clause.

(b) During performing this contract, the Contractor agrees as follows:

(1)	The Contractor shall not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. However, it shall not be a violation of this clause for the Contractor to extend a publicly announced preference in employment to Indians living on or near an Indian reservation, in connection with employment opportunities on or near an Indian reservation, as permitted by 41 CFR Part 60-1.5.
(2)	The Contractor shall take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, or national origin. This shall include, but not be limited to, (i) employment, (ii) upgrading, (iii) demotion, (iv) layoff or termination, (v) rates of payor other forms of compensation, and (vi) selection of training, including apprenticeship.
(3)	The Contractor shall post in conspicuous places available to employees and applicants for employment the notices to be provided by Landlord’s Contracting Officer that explains this clause.
(4)	The Contractor shall, in all solicitations or advertisement for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, or national origin.
(5)	The Contractor shall send, to each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding, the notice to be provided by Landlord’s Contracting Officer advising the labor union or workers’ representative of the Contractor’s commitments under this clause, and post copies of the notice in conspicuous places available to employees and applicants for employment.
(6)	The Contractor shall comply with Executive Order 11246, as amended, and the rules, regulations, and orders of the Secretary of Labor.
(7)	The Contractor shall furnish to the contracting agency all information required by Executive Order 11246, as amended, and by the rules, regulations, and orders of the Secretary of Labor. The Contractor shall also file Standard Form 100 (EEO-1), or any successor form, as prescribed in 41 CFR Part 60-1. Unless the Contractor has filed within the twelve (12) months preceding the

	date of contract award, the Contractor shall, within thirty (30) days after contract award, apply to either the regional Office of Federal Contract Compliance Programs (OFCCP) or the local office of the Equal Employment Opportunity Commission for the necessary forms.
(8)	The Contractor shall permit access to its books, records, and accounts by the contracting agency or the OFCCP for the purpose of conducting on-site compliance evaluations and complaint investigations. The Contractor shall permit the Government to inspect and copy any books, accounts, records (including computerized records), and other material that may be relevant to the matter under investigation and pertinent to compliance with Executive Order 11246, as amended, and rules and regulations that implement the Executive Order.
(9)	If the OFCCP determines that the Contractor is not in compliance with this clause or any rule, regulation, or order of the Secretary of Labor, this contract may be canceled, terminated, or suspended in whole or in part and the contractor may be declared ineligible for further Government contracts, under the procedures authorized in Executive Order 11246, as amended. In addition, sanctions may be imposed and remedies invoked against the Contractor as provided in Executive Order 11246, as amended, the rules, regulations, and orders of the Secretary of Labor, or as otherwise provided by law.
(10)	The Contractor shall include the terms and conditions of subparagraph (b)(1) through (11) of this clause in every subcontract or purchase order that is not exempted by the rules, regulations, or orders of the Secretary of Labor issued under Executive Order 11246, as amended, so that these terms and conditions will be binding upon each subcontractor or vendor.
(11)	The Contractor shall take such action with respect to any subcontract or purchase order as the contracting agency may direct as a means of enforcing these terms and conditions, including sanctions for noncompliance; provided, that if the Contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of any direction, the Contractor may request the United States to enter into the litigation to protect the interest of the United States.

(c) Notwithstanding any other clause in this Lease, disputes relative to this Section 32.24.2 will be governed by the procedures in 41 CFR Part 60-1.1.

[signature page follows]

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.

TENANT

TARIFF BUILDING ASSOCIATES, L.P.,
A California limited partnership

By: Square 430, Inc.,
a California corporation,
its General Partner

BY:	/s/ J. Kirke Wrench J. Kirke Wrench
	Chief Financial Officer

LANDLORD

UNITED STATES OF AMERICA, acting by and
through the Administrator of General Services
and authorized representatives

By:	/s/ Robert G. Roop Robert G. Roop
	Contracting Officer
	National Capital Region

INDEX OF EXHIBITS

Exhibit Description

A            Budgeted Construction Costs

B            Work Agreement

C            Memorandum of Lease

EX-10.2

Exhibit 10.2

Record and Return to:

Hunton & Williams LLP
1900 K Street, NW
Washington, DC 20006
Attn. John M. Ratino

ASSIGNMENT AND ASSUMPTION OF GSA LEASE

     This Assignment and Assumption of GSA Lease (this “Agreement”) is made and entered into as of September 9, 2010 (the “Effective Date”) by and among THE UNITED STATES OF AMERICA, ACTING BY AND THROUGH THE ADMINISTRATOR OF GENERAL SERVICES AND AUTHORIZED REPRESENTATIVES (“Landlord”), TARIFF BUILDING ASSOCIATES, L.P., a California limited partnership (“Assignor”), and JAYHAWK OWNER LLC, a Delaware limited liability company (“Assignee”).

RECITALS

     A. Assignor is the lessee, and Landlord the lessor, under that certain Lease dated as of December 1, 1999, as amended by that certain First Amendment to Lease Agreement dated as of January 29, 2001, that certain Second Amendment to Lease Agreement dated as of June 21, 2002, and that certain Third Amendment to Lease, dated as of December 20, 2002, as supplemented by the Steam Service Agreement dated as of January 29, 2001 (collectively, the “Lease”), relating to that certain real property described in Exhibit A attached hereto. A Memorandum of Lease with respect to the Lease was filed with the Recorder of Deeds of the District of Columbia on February 12, 2001, as Instrument Number 201012733 thereof. Capitalized terms used herein and not defined shall have the meanings assigned to them in the Lease.

     B. Pursuant to that certain Purchase and Sale Agreement dated as of May 14, 2010 by and between Assignor and Assignee (as amended, the “Purchase Agreement”), Assignor has agreed, to sell, and Purchaser has agreed to purchase, that certain hotel located at 700 F Street NW, Washington, DC, and commonly known as the Hotel Monaco Washington DC.

     C. In connection with the Purchase Agreement, Assignor desires to assign, and Assignee desires to assume, all of the rights and obligations of Assignor as Tenant under the Lease.

AGREEMENT

          NOW THEREFORE, in consideration of the agreements and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor, Assignee and Landlord agree as follows, with effect as of the Effective Date:

1. Assignment and Assumption of Lease.

1.1	Effective as of the Effective Date, Assignor does hereby sell, assign, transfer, grant, convey and set over unto Assignee all of its right, title, and interest in, to and under the Lease.
1.2	Assignee does hereby accept the foregoing sale, assignment, transfer, grant and conveyance of the Lease and hereby assumes and agrees to observe and perform all of the obligations, terms, covenants and conditions of the Tenant under the Lease accruing from and after the Effective Date. The Lease shall continue in full force and effect from and after the Effective Date.
1.3	From and after the date hereof, the defined term “Tenant” in the Lease shall refer to Assignee.
1.4	Each of Assignor and Assignee hereby warrant that it has full power and legal right and authority to execute this Agreement.

2. Landlord’s Consent and Release.

2.1	Landlord acknowledges and consents to the foregoing assignment to and assumption by Assignee of the Lease.
2.2	Landlord hereby releases Assignor from all obligations and liabilities of “Tenant” under and relating to the Lease that accrue from and after the Effective Date.

3. Miscellaneous.

3.1

As between Assignor and Assignee, this Agreement does not enlarge, restrict or otherwise modify the terms of the Purchase Agreement or constitute a waiver or release by Assignor or Assignee of any liabilities, duties or obligations imposed upon them (or any of their respective affiliates) by the terms of the Purchase Agreement, including without limitation the representations, warranties, covenants, agreements, indemnifications and other provisions of the Purchase Agreement. As between Assignor and Assignee, in the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern.

3.2

This Agreement may be executed in two or more counterparts, each of which so executed and delivered shall be deemed an original, but all of which taken together shall constitute but one and the same instrument.

[Remainder of Page Intentionally Left Blank]

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

“ASSIGNOR”

TARIFF BUILDING ASSOCIATES, L.P.,
a California limited partnership
 

By:	Square 430, LLC,
	a Delaware limited liability company
Its:	General Partner

By:	Kimpton Group Holding LLC,
	a Delaware limited liability company
Its:	Sole Member

By:	/s/ Judith C. Miles
	Name:	Judith C. Miles
	Title:	EVP and Secretary

“ASSIGNEE”

JAYHAWK OWNER LLC,
a Delaware limited liability company
 

By:	/s/ Thomas C. Fisher
	Name:	Thomas C. Fisher
	Title:	Vice President

“LANDLORD”

UNITED STATES OF AMERICA, acting by and through the Administrator of General Services and authorized representatives
 

By:	/s/ Daryl N. Jackson
	Name:	Daryl N. Jackson
	Title:	Contracting Officer

Signature Page to Assignment and Assumption of GSA Lease

EXHIBIT A
LEGAL DESCRIPTION

All of those lots or parcels of land lying situate and being in the District of Columbia and being more particularly described as follows:

Lots 1 through 14 in Square 430 as shown on the Original Plats and Plans of the City of Washington, recorded among the Records of the Office of the District of Columbia.

Note: the above described land is known for taxation and assessment purposes as Lot 800 in Square 430.

EX-10.3

Exhibit 10.3

Hotel Monaco

PROMISSORY NOTE

Note Amount:    $35,000,000.00

Maturity Date:    The Payment Date in March, 2012.

          THIS PROMISSORY NOTE (this “Note”), is made as of February 23, 2007 by the undersigned, as borrower (“Borrower”), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION and its successors or assigns, as lender (“Lender”).

R E C I T A L S:

     A. This Note evidences a loan (the “Loan”) made by Lender to Borrower in the original principal amount of THIRTY-FIVE MILLION AND NO/100 DOLLARS ($35,000,000.00) (the “Loan Amount”) and secured by, inter alia, that certain Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing of even date herewith (as same may hereafter be amended, modified or supplemented, the “Security Instrument”) from Borrower, as borrower, in favor of and for the benefit of Lender, as lender, as security for the Loan and the other Loan Documents;

     B. Borrower and Lender intend these Recitals to be a material part of this Note.

          NOW, THEREFORE, FOR VALUE RECEIVED, Borrower does hereby covenant and promise to pay to the order of Lender, without any counterclaim, setoff or deduction whatsoever, on the Maturity Date (as hereinafter defined), in immediately available funds, at Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075, Charlotte, North Carolina 28262 or at such other place as Lender may designate to Borrower in writing from time to time, in legal tender of the United States of America, the Loan Amount and all other amounts due or becoming due hereunder, to the extent not previously paid in accordance herewith, together with all interest accrued thereon through the date the Loan is repaid in full, at the rate of 5.68% per annum (the “Interest Rate”) to be computed on the basis of the actual number of days elapsed in a 360 day year, on so much of the Loan Amount as is from time to time outstanding on the first day of the applicable Interest Accrual Period (as hereinafter defined).

SECTION 1. DEFINITIONS

          Defined terms in this Note shall include in the singular number the plural and in the plural number the singular. All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Security Instrument.

SECTION 2.PAYMENTS AND LOAN TERMS

     Section 2.1. Interest and Amortization Payments.

               (a) Interest on the unpaid Principal Amount of the Loan for the first Interest Accrual Period computed at the Interest Rate shall be payable, without any counterclaim, setoff or deduction whatsoever, on the First Payment Date, and for each subsequent Interest Accrual Period on each Payment Date thereafter until this Note is paid in full on the Maturity Date or otherwise. The entire outstanding principal balance, to the extent not theretofore paid, together with all accrued but unpaid interest thereon and any other amounts due hereunder shall be due and payable on the Payment Date in March, 2012 (the “Maturity Date”).

               (b) To the extent any Interest Shortfall shall occur, except as otherwise provided in Section 3.2 hereof, such Interest Shortfall shall accrue additional interest at the Interest Rate.

               (c) To the extent Payments (as hereinafter defined) are or become due and payable under this Note or under any of the other Loan Documents on a day (the “Due Date”) which is not a Business Day, such Payments are and shall be due and payable on the first Business Day immediately following the Due Date for such Payments. In the event that any Payment is received after 2:00 p.m. Eastern Time on any day, it shall be deemed received and paid on the subsequent Business Day.

     Section 2.2. Application of Payments.

               (a) Each and every payment (a “Payment”) made by Borrower to Lender in accordance with the terms of this Note and/or the terms of any one or more of the other Loan Documents and all other proceeds received by Lender with respect to the Debt, shall be applied as follows:

               (1) Payments, other than Unscheduled Payments, shall be applied (i) first, to all Late Charges, Default Rate Interest or other premiums and other sums payable hereunder or under the other Loan Documents (other than those sums included in clauses (ii) and (iii) of this Section 2.2(a)(1)) in such order and priority as determined by Lender in its sole discretion (ii) second, to all interest (other than Default Rate Interest) which shall be due and payable with respect to the Loan Amount pursuant to the terms hereof as of the date the Payment is received (including any Interest Shortfalls and interest thereon to the extent permitted by applicable law) and (iii) third, on the Maturity Date, to the Loan Amount until the Loan Amount has been paid in full.

               (2) Unscheduled Payments shall be applied at the end of the Interest Accrual Period in which such Unscheduled Payments are received as a principal prepayment of the Loan Amount to amortize the Loan Amount.

               (b) To the extent that Borrower makes a Payment or Lender receives any Payment or proceeds for Borrower’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party representing the estate of Borrower under any bankruptcy law, common law or equitable cause, then, to such extent, the obligations of Borrower hereunder

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intended to be satisfied shall be revived and continue as if such Payment or proceeds had not been received by Lender.

     Section 2.3. Prepayments.

     The Debt may not be prepaid, in whole or in part, except as set forth in Section 13.03 and Article XV of the Security Instrument.

SECTION 3. DEFAULTS

     Section 3.1. Events of Default.

     This Note is secured by, among other things, the Security Instrument which specifies various Events of Default, upon the happening of which all or portions of the sums owing under this Note may be declared immediately due and payable as more specifically provided therein. Each Event of Default under the Security Instrument or any one or more of the other Loan Documents shall be an Event of Default hereunder.

     Section 3.2. Remedies.

     If an Event of Default shall occur hereunder or under any other Loan Document, the Principal Amount and, to the extent permitted by applicable law, all accrued but unpaid interest on the Principal Amount shall, commencing on the date of the occurrence of such Event of Default, at the option of Lender, immediately and without notice to Borrower, accrue interest at the Default Rate until such Event of Default is cured or if not cured or such cure is not accepted by Lender, until the repayment of the Debt. The foregoing provision shall not be construed as a waiver by Lender of its right to pursue any other remedies available to it under the Security Instrument, or any other Loan Document, nor shall it be construed to limit in any way the application of the Default Rate.

SECTION 4.EXCULPATION

     Section 4.1. Exculpation.

          Notwithstanding anything to the contrary contained in this Note or the other Loan Documents, the obligations of Borrower hereunder shall be non-recourse except with respect to the Property, and as otherwise provided in Section 18.32 of the Security Instrument, the terms of which are incorporated herein.

SECTION 5. MISCELLANEOUS

     Section 5.1. Further Assurances.

     Borrower shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Lender all documents, and take all actions, reasonably required by Lender from time to time (i) to confirm the rights created or now or hereafter intended to be created under this Note and the other Loan Documents, (ii) to protect and further the validity, priority and enforceability of this Note and the other Loan Documents, (iii) to subject to the Loan Documents any property of Borrower intended by the terms of any one or more of the Loan Documents to be encumbered by the Loan Documents, or (iv) to otherwise carry out the purposes of the Loan

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Documents and the transactions contemplated thereunder; provided, however, that no such further actions, assurances and confirmations shall increase Borrower’s obligations under this Note or any other Loan Documents.

     Section 5.2. Modification, Waiver in Writing.

     No modification, amendment, extension, discharge, termination or waiver (a “Modification”) of any provision of this Note, the Security Instrument or any one or more of the other Loan Documents, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on, Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances. Lender does not hereby agree to, nor does Lender hereby commit itself to, enter into any Modification. However, in the event Lender does ever agree to a Modification, such Modification shall only be upon the terms and conditions set forth in the Security Instrument.

     Section 5.3. Costs of Collection.

     Borrower agrees to pay all costs and expenses of collection incurred by Lender, in addition to principal, interest and late or delinquency charges (including, without limitation, reasonable attorneys’ fees and disbursements) and including all costs and expenses incurred in connection with the pursuit by Lender of any of its rights or remedies referred to in Section 3 hereof or its rights or remedies referred to in any of the Loan Documents or the protection of or realization of collateral or in connection with any of Lender’s collection efforts, whether or not suit on this Note, on any of the other Loan Documents or any foreclosure proceeding is filed, and all such costs and expenses shall be payable on demand, together with interest at the Default Rate thereon, and also shall be secured by the Security Instrument and all other collateral at any time held by Lender as security for Borrower’s obligations to Lender.

     Section 5.4. Maximum Amount.

               (a) It is the intention of Borrower and Lender to conform strictly to the usury and similar laws relating to interest and the collection of other charges from time to time in force, and all agreements between Borrower and Lender, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever, whether by acceleration of maturity hereof or otherwise, shall the amount paid or agreed to be paid in the aggregate to Lender as interest or other charges hereunder or under the other Loan Documents or in any other security agreement given to secure the Debt, or in any other document evidencing, securing or pertaining to the Debt, exceed the maximum amount permissible under applicable usury or such other laws (the “Maximum Amount”). If under any circumstances whatsoever, fulfillment of any provision hereof, or any of the other Loan Documents, at the time performance of such provision shall be due, shall involve transcending the Maximum Amount, then ipso facto, the obligation to be fulfilled shall be reduced to the Maximum Amount. For the purposes of calculating the actual amount of interest or other charges paid and/or payable hereunder, in respect of laws pertaining to usury or such other laws, all charges and other sums paid or agreed to be paid hereunder to the holder hereof for the use, forbearance or detention of the Debt, outstanding from time to time shall, to the extent permitted

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by applicable law, be amortized, prorated, allocated and spread from the date of disbursement of the proceeds of this Note until payment in full of all of the Debt, so that the actual rate of interest on account of the Debt is uniform through the term hereof. The terms and provisions of this Section 5.4 shall control and supersede every other provision of all agreements between Borrower or any endorser and Lender.

               (b) If under any circumstances Lender shall ever receive an amount which would exceed the Maximum Amount, such amount shall be deemed a payment in reduction of the Loan Amount owing hereunder and any other obligation of Borrower in favor of Lender, and shall be so applied in accordance with Section 2.2 hereof (without any prepayment fee or other fee resulting from such reduction of the Principal Amount), or if such excessive interest exceeds the unpaid balance of the Loan Amount and any other obligation of Borrower in favor of Lender, the excess shall be deemed to have been a payment made by mistake and shall be refunded to Borrower.

     Section 5.5. Waivers.

     Borrower hereby expressly and unconditionally waives presentment, demand, protest, notice of protest or notice of any kind, including, without limitation, any notice of intention to accelerate and notice of acceleration, except as expressly provided herein and in the other Loan Documents, and in connection with any suit, action or proceeding brought by Lender on this Note, any and every right it may have to (a) to the extent permitted by applicable law, a trial by jury, (b) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Lender on this Note and cannot be maintained in a separate action), except as set forth in the Loan Documents and (c) have the same consolidated with any other or separate suit, action or proceeding, except as set forth in the Loan Documents.

     Section 5.6. Governing Law.

     This Note and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the District of Columbia applicable to contracts made and performed in such State and any applicable law of the United States of America.

     Section 5.7. Headings.

     The Section headings in this Note are included herein for convenience of reference only and shall not constitute a part of this Note for any other purpose.

     Section 5.8. Assignment.

     Lender shall have the right to transfer, sell and assign this Note, the Security Instrument and/or any of the other Loan Documents or any interest therein, and the obligations hereunder, to any Person. All references to “Lender” hereunder shall be deemed to include the assigns of the Lender.

     Section 5.9. Severability.

     Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited

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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 Note.

     Section 5.10. Joint and Several.

     If Borrower consists of more than one Person or party, the obligations and liabilities of each such Person or party hereunder shall be joint and several.

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

BORROWER:
TARIFF BUILDING ASSOCIATES, L.P., a California
limited partnership
By:	Square 430, LLC, a Delaware limited
	liability company, its general partner
	By:	Kimpton Group Holding LLC, a Delaware
		limited liability company, its sole member
		By:	/s/ Gregory Wolkom
			Name: Gregory J. Wolkom
			Title: CFO

EX-10.4

Exhibit 10.4

EXECUTION COPY

ASSUMPTION AGREEMENT

     This Assumption Agreement (“Assumption Agreement”) is made this 9 day of September, 2010, by BANK OF AMERICA, N.A., as successor to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of COBALT CMBS Commercial Mortgage Trust 2007-C2, Commercial Mortgage Pass-Through Certificates, Series 2007-C2 (“Noteholder”), TARIFF BUILDING ASSOCIATES, LP, a California limited partnership (“Borrower”), Kimpton Development Opportunity Fund, L.P., a California limited partnership (“Original Guarantor”), JAYHAWK OWNER LLC, a Delaware limited liability company (“Assumptor”), and PEBBLEBROOK HOTEL, L.P. , a Delaware limited partnership (“New Guarantor”).

RECITALS

     A. Noteholder’s predecessor in interest, Wachovia Bank, National Association (in such capacity, “Original Lender”) made a loan to Borrower in the original principal amount of Thirty Five Million and no/100 Dollars ($35,000,000.00) (“Loan”), under the terms and provisions set forth in the following loan documents, all of which are dated as of February 23, 2007, unless otherwise noted:

     1. Promissory Note (“Note”) in the original principal amount of the Loan, made by Borrower and payable to Original Lender;

     2. Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing executed by Borrower to First American Title Insurance Company, as trustee, for the benefit of Original Lender which, secures the Note and other obligations of Borrower (“Security Instrument”), and which Security Instrument was recorded on February 26, 2007 as instrument number 2007026007 in the land records of the District of Columbia (“Official Records”), the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on April 30, 2008, as instrument number 2008059162, in said Official Records. The land, improvements and other real property which are subject to the Security Instrument are hereinafter referred to as the “Property” and the equipment, machinery and other personal property which are subject to the Security Instrument are hereinafter referred to as the “Collateral”;

     3. Assignment of Leases and Rents (the “Assignment of Leases”) executed by Borrower, which was recorded on February 26, 2007 as instrument number 2007026008, with said Official Records, the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on April 30, 2008, as instrument number 2008059162, in said Official Records;

     4. Guaranty executed by Original Guarantor (“Guaranty”);

     5. Consent and Agreement (“Consent and Agreement”) executed by Kimpton Hotel & Restaurant Group, LLC (“Manager”);

     6. Central Account Agreement executed by Borrower, Wachovia Bank, National Association (in such capacity, “Bank”) and Original Lender (“Central Account Agreement”);

     7. Rent Account Agreement executed by Borrower, Wachovia Bank, National Association (in such capacity, “Rent Account Bank”) and Original Lender (“Rent Account Agreement”);

     8. UCC-1 Financing Statement filed on February 27, 2007, as instrument number 07-7104479342 with the California Secretary of State (“State UCC”).

     The above documents and any other Loan Documents, including, in each case, any prior amendments thereto, together with this Assumption Agreement and all documents executed in connection herewith are hereinafter collectively defined as the “Loan Documents”.

     B. As of the Effective Date.

     1. The principal balance outstanding under the Note was $35,000,000.00;

     2. Accrued interest on the Note has been paid through August 10, 2010;

     3. The balance in the Basic Carrying Costs Escrow Account (as defined in Section 5.06 of the Security Instrument) was $00.00;

     4. The balance in the Recurring Replacement Reserve Escrow Account (as defined in Section 5.08 of the Security Instrument) was $723,352.53 and

     5. The balance in the Engineering Escrow Account (as defined in Section 5.12 of the Security Instrument) was $25,000.00.

     C. Borrower is about to sell and convey the Property and the Collateral to Assumptor, and both parties desire to obtain from Noteholder a waiver of any right Noteholder may have under the Loan Documents to accelerate the Maturity Date of the Note by virtue of such conveyance.

     D. Subject to the terms and conditions hereof, Noteholder is willing to consent to the sale and conveyance of the Property and the Collateral, and to waive any right of acceleration of the Maturity Date of the Note upon assumption by Assumptor of all obligations of Borrower under the Loan Documents.

NOW THEREFORE, FOR VALUABLE CONSIDERATION, including, without limitation, the mutual covenants and promises contained herein, the parties agree as follows:

     1. Incorporation. The foregoing recitals are incorporated herein by this reference.

     2. Assumption Fee. As consideration for Noteholder’s execution of this Assumption Agreement and in addition to any other sums due hereunder, Borrower and Assumptor agree to pay Noteholder or Noteholder’s servicer(s) (all as set forth in the escrow instructions to be

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executed in connection with the closing of this assumption) an assumption fee of $175,000.00 (0.5% of the loan balance), due on execution of this Assumption Agreement by Noteholder.

     3. Conditions Precedent. The following are conditions precedent to Noteholder’s obligations under this Assumption Agreement:

     a. The irrevocable commitment of First American Title Insurance Company (“Title Company”) to issue endorsements to Title Company’s Title Policy No. 104652666, dated February 26, 2007, in each case in form and substance reasonably acceptable to Noteholder and without deletions or exceptions other than as expressly approved by Noteholder in writing, insuring Noteholder that the priority and validity of the Security Instrument has not been and will not be impaired by this Assumption Agreement, the conveyance of the Property, or the transaction contemplated hereby;

     b. Receipt by Noteholder of: (i) the executed original of this Assumption Agreement; (ii) an executed original of a Memorandum of Assumption Agreement in the form attached hereto as EXHIBIT A, with signatures notarized, and otherwise in form and substance reasonably acceptable to Noteholder (“Memorandum of Assumption Agreement”); and (iii) any other documents and agreements which are required pursuant to this Assumption Agreement, in form and content reasonably acceptable to Noteholder;

     c. Assumptor’s delivery to Noteholder of the Memorandum of Assumption Agreement, in proper form for filing in the appropriate jurisdictions as determined by Noteholder, together with such other documents and agreements, if any, required pursuant to this Assumption Agreement or which Noteholder has requested to be recorded or filed;

     d. Assumptor’s delivery to Noteholder of UCC-1 Financing Statements in proper form for filing in the appropriate jurisdictions as reasonably determined by Noteholder, which Assumptor expressly authorizes Noteholder to file;

     e. Execution and delivery to Noteholder by New Guarantor of a new Guaranty (“New Guaranty”) in favor of Noteholder and in form and substance reasonably acceptable to Noteholder, pursuant to which New Guarantor irrevocably guarantees payment and performance of certain matters under the Loan as more specifically set forth in the New Guaranty, along with delivery to Noteholder of such resolutions or certificates of New Guarantor as Noteholder may reasonably require, in form and content reasonably acceptable to Noteholder;

     f. Receipt and approval by Noteholder of a Blocked Account Control Agreement with US Bank National Association for the new Rent Account; a Blocked Account Control Agreement with US Bank National Association for the Operating Lessee Rent Account and the execution of such amendments to the Central Account Agreement as required by Noteholder (the “New Cash Management Documents”);

     g. Noteholder’s receipt of the operating lease (the “Operating Lease”) between Assumptor and Jayhawk Lessee LLC (“Operating Lessee”) in form and substance reasonably acceptable to Noteholder;

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     h. Execution and delivery to Noteholder by Operating Lessee and Assumptor, as applicable, of an acceptable Operating Lease Subordination and Attornment Agreement (the “Operating Lessee Subordination”), an acceptable Security Agreement (the “Security Agreement”) and Collateral Assignment of Security Agreement (the “Collateral Assignment of Security Agreement”) and such other documentation as reasonably required by Noteholder;

     i. Operating Lessee’s delivery to Noteholder of UCC-1 Financing Statements (showing Operating Lessee as debtor and Assumptor as secured party) in proper form for filing in the appropriate jurisdictions as determined by Noteholder, which Assumptor expressly authorizes Noteholder to file;

     j. Delivery to Noteholder of the organizational documents and evidence of good standing of Assumptor and Operating Lessee, their constituent parties, and of New Guarantor, together with such resolutions or certificates as Noteholder may require, in form and content acceptable to Noteholder, authorizing the assumption of the Loan and executed by the appropriate persons and/or entities on behalf of Assumptor, Operating Lessee and New Guarantor;

     k. The representations and warranties contained herein are true and correct in all material respects;

     l. Receipt by Noteholder of evidence that casualty insurance and comprehensive liability insurance policies with respect to the Property, each in form and amount reasonably satisfactory to Noteholder, have been obtained with the annual premium for same to be paid at closing;

     m. Receipt by Noteholder of a copy of the Assignment and Assumption of Ground Lease by which the Borrower’s interest in the Ground Lease (as defined in the Security Instrument) will be conveyed to Assumptor, and the purchase and sale agreement (the “Purchase and Sale Agreement”) documenting the sale of the Property to Assumptor;

     n. Receipt by Noteholder of an executed Form W-9 for Assumptor;

     o. Receipt and reasonable approval by Noteholder of the Assignment and Amendment of Hotel Operating Agreement between Assumption and Manager and Manager’s execution of a new Consent and Agreement (the “New Consent and Agreement”).

     p. Noteholder shall have received an opinion of counsel to Noteholder with respect to the compliance of this Assumption Agreement, the transfer to Assumptor, and the transactions referenced herein with the provisions of the Internal Revenue Code as the same pertain to real estate mortgage investment conduits;

     q. Payment of the assumption fee provided for in Section 2 above;

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     r. Borrower’s or Assumptor’s reimbursement to Noteholder of all reasonable and documented out-of-pocket costs and expenses incurred by Noteholder (for which invoices have been presented) in connection with this Assumption Agreement and the transactions contemplated hereby, including, without limitation, title insurance costs, escrow and recording fees, reasonable and documented attorneys’ fees, appraisal, engineers’ and inspection fees and documentation costs and charges, whether such services are furnished by Noteholder’s employees, agents or independent contractors;

     s. Receipt by Noteholder of: (i) (A) the written acknowledgement of the United States of America, acting by and through the Administrator of General Services (the “Ground Lessor”) of the assignment of the Ground Lease or (B) a novation agreement from the Ground Lessor with respect to the Ground Lease; and (ii) an acceptable lease status report from the Ground Lessor indicating that the Ground Lease is in full force and effect and neither party is in default thereunder;

     t. Receipt by Noteholder of confirmation that the existing liquor license has been assigned to Assumptor (or that Assumptor has obtained a confirmation letter issued by the Alcoholic Beverage Control Board confirming approval and issuance of Assumptor’s liquor license) and that all other necessary permits and approvals have been assigned and/or obtained;

     u. Receipt by Noteholder of confirmation that the items listed on Schedules 5.1(f) and (g) of the Purchase and Sale Agreement have been resolved or are being satisfactorily defended;

     v. Receipt and reasonable approval by Noteholder of (A) Assumption opinion from Assumptor’s counsel (licensed in the District of Columbia) based on Noteholder’s standard form; (B) standard Delaware single member LLC opinion from acceptable Delaware counsel; and (C) a new Insolvency Opinion (as defined in the Security Instrument);

     w. Receipt by Noteholder of confirmations from each applicable Rating Agency (as defined in the Security Instrument);

     4. Effective Date. The effective date of this Assumption Agreement shall be the date that each condition precedent set forth in Section 3 above is either satisfied (or waived by the Lender) (“Effective Date”).

     5. Assumption. Assumptor hereby assumes and agrees to pay when due all sums due or to become due or owing under the Note, the Security Instrument and the other Loan Documents and shall hereafter faithfully perform all of Borrower’s obligations under and be bound by all of the provisions of the Loan Documents, as modified by this Assumption Agreement, and assumes all liabilities of Borrower under the Loan Documents as if Assumptor were an original signatory thereto. The execution of this Assumption Agreement by Assumptor shall be deemed its execution of the Note, the Security Instrument and the other Loan Documents.

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     6. Partial Release of Borrower; Release of Noteholder. Noteholder hereby releases (on the Effective Date) Borrower from liability under the Loan Documents other than this Assumption Agreement; provided however, that the parties hereby acknowledge and agree that Borrower is expressly not released from and nothing contained herein is intended to limit, impair, terminate or revoke, any of Borrower’s obligations with respect to the matters set forth in Section 4 of the Note and Section 18.32 of the Security Instrument, to the extent the same arise out of or in connection with any act or omission occurring on or before the Effective Date (the “Retained Obligations”), and that such obligations shall continue in full force and effect in accordance with the terms and provisions thereof and hereof. Borrower’s obligations under the Loan Documents with respect to the Retained Obligations shall not be discharged or reduced by any extension, amendment, renewal or modification to, the Note, the Security Instrument or any other Loan Documents, including, without limitation, changes to the terms of repayment thereof, modifications, extensions or renewals of repayment dates, releases or subordinations of security in whole or in part, changes in the interest rate or advances of additional funds by Noteholder in its discretion for purposes related to those set forth in the Loan Documents. Each of Borrower, Original Guarantor, Assumptor and New Guarantor hereby fully releases (on the Effective Date) Noteholder and any servicer(s) of the Loan from any liability of any kind arising out of or in connection with the Loan or the Loan Documents other than this Assumption Agreement; provided, however, this release shall not apply to any liability due to fraud, gross negligence or willful misconduct of Noteholder. Each of Borrower, Original Guarantor, Assumptor and New Guarantor, after consultation with its respective attorney, hereby expressly waives the benefits of the provisions of applicable law, if any, which provides to the effect that:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release which, if known by him, must have materially affected his settlement with the debtor.”

From time to time without first requiring performance on the part of Assumptor, Noteholder may look to and require performance by Borrower of all Retained Obligations.

     7. Confirmation of Guaranty; Partial Release of Original Guarantor. Nothing contained herein is intended to limit, impair, terminate or revoke Original Guarantor’s obligations under the Guaranty to the extent the same arise out of or in connection with any act or omission occurring on or before the Effective Date and such obligations shall continue in full force and effect in accordance with the terms and provisions of the Guaranty; provided, however, Noteholder hereby releases Original Guarantor from its obligations under the Guaranty to the extent the same arise out of or in connection with any act or omission occurring after the Effective Date.

     8. Representations and Warranties.

     a. Assignment. Borrower and Assumptor each hereby represents and warrants to Noteholder that Borrower will on the Effective Date contemporaneously with the transactions contemplated by this Assumption Agreement irrevocably and

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unconditionally transfer and assign to Assumptor all of Borrower’s right, title and interest in and to:

          i. The Property and the Collateral;

          ii. The Loan Documents;

          iii. All leases related to the Property or the Collateral;

          iv. All rights as named insured under all casualty and liability insurance policies (and all endorsements in connection therewith) relating to the Property or the Collateral (unless, but only to the extent that, Assumptor is obtaining its own such insurance policies);

          v. All reciprocal easement agreements, operating agreements, and declarations of conditions, covenants and restrictions related to the Property;

          vi. All prepaid rents and security deposits, if any, held by Borrower in connection with leases of any part of the Property or the Collateral; and

          vii. All funds, if any, deposited in impound accounts held by or for the benefit of Noteholder pursuant to the terms of the Loan Documents.

          Borrower and Assumptor each hereby further represents and warrants to Noteholder that no consent to the transfer of the Property and the Collateral to Assumptor is required under any agreement to which Borrower or Assumptor is a party, including, without limitation, under any lease, operating agreement, mortgage or security instrument (other than the Loan Documents), or if such consent is required, that the parties have obtained all such consents.

     b. No Defaults. Assumptor and Borrower each hereby represents and warrants, to its respective knowledge, that no default, event of default, breach or failure of condition has occurred, or would exist with notice or the lapse of time or both, under any of the Loan Documents, as modified by this Assumption Agreement, and all representations and warranties herein and in the other Loan Documents are true and correct in all material respects.

     c. Loan Documents. Assumptor represents and warrants to Noteholder that Assumptor has actual knowledge of all terms and conditions of the Loan Documents, and agrees that Noteholder has no obligation or duty to provide any information to Assumptor regarding the terms and conditions of the Loan Documents. Assumptor further agrees that all representations, agreements and warranties in the Loan Documents regarding Borrower (as modified by this Assumption Agreement), its status, authority, financial condition and business shall apply to Assumptor, as though Assumptor were the borrower originally named in the Loan Documents. Assumptor further understands and acknowledges that, except as expressly provided in this Assignment and Assumption Agreement or in any other writing executed by Noteholder, Noteholder has not waived any right of Noteholder or obligation of Borrower or Assumptor under the Loan

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Documents and Noteholder has not agreed to any modification of any provision of any Loan Document or to any extension of the Loan.

     d. Financial Statements. Assumptor represents and warrants to Noteholder that the financial statements of Assumptor, New Guarantor, and Pebblebrook Hotel Trust (the “REIT”), previously delivered by Borrower, Assumptor or any of such parties to Noteholder: (i) are complete and correct in all material respects; (ii) present fairly and in all material respects the financial condition of each of such parties; and (iii) have been prepared in accordance with generally accepted accounting principles consistently applied, except as expressly noted therein, or other accounting standards approved by Noteholder. Assumptor further represents and warrants to Noteholder that, since the date of such financial statements, there has been no material adverse change in the financial condition of any of such parties, nor have any assets or properties reflected on such financial statements been sold, transferred, assigned, mortgaged, pledged or encumbered except as previously disclosed in writing by Assumptor to Noteholder and approved in writing by Noteholder or disclosed in public filings prior to the Effective Date.

     e. Reports. Assumptor represents and warrants to Noteholder that all reports, documents, instruments and information (other than information of a general economic or industry nature) that Assumptor has delivered to Noteholder in connection with Assumptor’s assumption of the Loan: (i) are correct and sufficiently complete to give Noteholder accurate knowledge of their subject matter; and (ii) do not contain any misrepresentation of a material fact or omission of a material fact which omission makes the provided information misleading omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not materially misleading; provided that, with respect to projected financial information, Assumptor represents and warrants only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

     f. Assumptor Location. Assumptor represents and warrants that its chief executive office is located at the following address: c/o Pebblebrook Hotel Trust, 2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland 20814. Assumptor represents and warrants that its state of formation is Delaware. All organizational documents of Assumptor delivered to Noteholder are complete and accurate in every respect. Assumptor’s legal name is exactly as shown on page one of this Assumption Agreement. Assumptor shall not change Assumptor’s name or, as applicable, Assumptor’s chief executive office, Assumptor’s principal residence or the jurisdiction in which Assumptor is organized, without giving Noteholder at least 30 days’ prior written notice.

     g. Reserved.

     h. No Pledge of Equity Interests. Assumptor and New Guarantor represent and warrant to Noteholder that the equity interests in (i) Assumptor or (ii) any entity that, directly or indirectly, owns an equity interest in Assumptor have not been pledged, hypothecated or otherwise encumbered as security for any obligation, and that no portion of the capital contributed to Assumptor, directly or indirectly, in connection with Assumptor’s acquisition of the Property consists of borrowed funds.

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     i. Embargoed Person. Assumptor and New Guarantor represent and warrant that none of the funds or other assets of Assumptor or New Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the USA PATRIOT Act (including the anti-terrorism provisions thereof), the International Economic Powers Act, 50 U.S.C. §§ 1701, et. seq., the Trading with the Enemy Act, 50 U.S.C. App. 1 et. seq., and any Executive Orders or regulations promulgated thereunder, including those related to Specially Designated Nationals and Specially Designated Global Terrorists (“Embargoed Person”) and further warrant and represent that no Embargoed Person has any interest of any nature whatsoever in Assumptor or New Guarantor with the result that the investment in Assumptor (whether directly or indirectly) is prohibited by law.

     9. Waiver of Acceleration. Noteholder hereby consents to the sale and conveyance of the Property and Collateral and agrees that it shall not exercise its right to cause all sums secured by the Security Instrument to become immediately due and payable because of the conveyance of the Property and the Collateral from Borrower to Assumptor; provided, however, Noteholder reserves its right under the terms of the Security Instrument or any other Loan Document to accelerate all principal and interest in the event of any subsequent sale, transfer, encumbrance or other conveyance of the Property, the Collateral or any interest in Assumptor, except as permitted by the Loan Documents.

     10. Modification of Loan Documents. The Loan Documents are hereby modified as follows:

     a. The definition of “Leases” on page 3 of the Security Instrument and on page 1 of the Assignment of Leases is modified to specifically include the Operating Lease.

     b. The following definitions are hereby added to Section 1.01 of the Security Instrument:

     “Operating Lease” shall mean that certain Agreement of Lease dated as of September 9, 2010 between Borrower, as landlord, and Operating Lessee, as tenant.

     “Operating Lessee” shall mean Jayhawk Lessee LLC.

     c. The definition of “Borrower’s Knowledge” on page 8 of the Security Instrument is hereby deleted and replaced with the following:

     “Borrower’s Knowledge” or words of similar effect shall mean the actual knowledge of Borrower or Borrower’s President, Vice President, Secretary and/or Vice President or knowledge after making all due inquiry of the Property’s general manager or assistant general manager.”

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     d. The definition of “Guarantor” on page 13 of the Security Instrument is hereby modified to refer to New Guarantor as the current “Guarantor” under the Loan Documents.

     e. The definition of “Loan Documents” on page 15 of the Security Instrument is hereby modified to include this Assumption Agreement, the new Guaranty, the Operating Lessee Subordination, the Collateral Assignment of Security Agreement, Consent and Agreement, the new Cash Management Documents and the other documents executed by Assumptor, New Guarantor, Operating Lessee and Manager in connection with the assumption.

     f. The reference to “Kimpton Group Holding LLC” in the definition of “Transfer” on pages 22-24 of the Security Instrument is hereby modified to refer to “Pebblebrook Hotel Trust.”

     g. The definition of “Transfer” on pages 22-24 of the Security Instrument is hereby modified to restrict Transfers of direct interests in Operating Lessee to the same extent as Transfers of direct interests in Assumptor; provided, however, that nothing contained in the definition of “Transfer” shall prohibit the execution of the Operating Lease between the Borrower and Operating Lessee.

     h. The following is hereby added at the end of the definition of “Transfer” on pages 22-24 of the Security Instrument:

     “Notwithstanding the foregoing or anything to the contrary contained herein or in any other Loan Documents, the issuance, sale, conveyance, transfer or other disposition (the “REIT Transfer”) of any shares of stock (the “REIT Shares”) in Pebblebrook Hotel Trust (the “REIT”) shall be permitted without Lender’s prior written consent, provided that (i) the REIT Shares are publicly traded on a nationally recognized U. S. Stock Exchange; (ii) no Person or group (as that term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations thereunder) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of a percentage (based on voting power, in the event different classes of stock shall have different voting powers) of the voting stock of the REIT greater than forty nine percent (49%); and (iii) the REIT Transfer does not result in or cause: (A) Borrower no longer being the owner of the Property; (B) Operating Lessee no longer being the tenant under the Operating Lease; (C) the REIT no longer being the sole general partner and in Control of Guarantor and the owner of at least 51% of the limited partnership interests in the Guarantor; (D) the Guarantor no longer owning at least a 51% ownership interest in and maintaining Control over both DC Hotel Trust (the “Baby REIT”) and Pebblebrook Hotel Lessee, Inc. (the “TRS”); (E) the Baby REIT no longer being the sole member of and in Control of Borrower; (F) TRS no longer being the sole member of and in Control of Operating Lessee; (G) Guarantor no longer being the guarantor under the Loan Documents; or (H) a REIT Change of Control (as defined below).

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     For purposes of this Section, a “REIT Change of Control” shall occur when: (i) one Person or group of affiliated Persons acquires more than 49% of the REIT Shares in one or a series of transactions, (ii) during the twelve (12) month period immediately prior to the REIT Transfer, individuals who at the beginning of such period constituted the Board of Directors or Trustees of the REIT (the “Board”) (together with any new directors whose election by the Board or whose nomination for election by the shareholders of the REIT was approved by a vote of at least a majority of the members of the Board then in office who either were members of the Board at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board as of the date of completion of the REIT Transfer, or (iii) if the REIT enters into a merger, consolidation or other business combination, or a sale of all or substantially all of the REIT’s assets and/or ownership interests which results in Borrower, Operating Lessee and/or Guarantor no longer being controlled, directly or indirectly, by the REIT.”

     i. The following language is hereby deleted from the end of the first sentence of Section 2.02(g) (iv) on page 27 of the Security Instrument: “...have filed and will file their own tax returns or, if Borrower and/or, if applicable, General Partner is part of a consolidated group for purposes of filing tax returns, Borrower and General Partner, as applicable, have been shown and will be shown as separate members of such group.”

     j. Section 2.02(g)(vii) on page 27 of the Security Instrument is hereby amended and restated in its entirety as follows: “Borrower and, if applicable, each General Partner, have been at all times, and intend to remain, adequately capitalized in light of the nature of their respective businesses.”

     k. The reference to “California limited partnership” in Section 2.02(g)(xi) on page 28 of the Security Instrument is modified to refer to “Delaware limited liability company”.

     l. The following is hereby added as Section 2.05(y) of the Security Instrument:

     “(y) Operating Lease.

     (i) Borrower shall (A) promptly perform and observe all of the material covenants required to be performed and observed by it under the Operating Lease and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (B) promptly notify Lender of any material default under the Operating Lease; (C) promptly deliver to Lender a copy of any notice of default or other material notice under the Operating Lease delivered to Operating Lessee by Borrower; (D) promptly give notice to Lender of any notice or information that Borrower receives which indicates that Operating Lessee is terminating its Operating Lease or that Operating Lessee is otherwise

11

discontinuing its operation of the Property; and (e) promptly enforce the performance and observance of all of the material covenants required to be performed and observed by Operating Lessee under the Operating Lease.

     (ii) Borrower shall not, without the prior written consent of Lender, (A) surrender, terminate or cancel the Operating Lease or otherwise replace Operating Lessee; (B) reduce or consent to the reduction of the term of the Operating Lease; or (C) enter into, renew, amend, modify, waive any provisions of, reduce Rents under or shorten the term of the Operating Lease except in the case of clauses (B) and (C) above, to the extent the foregoing could not reasonably be expected to be materially adverse to the Noteholder.

     m. Assumptor acknowledges and agrees that the annual, quarterly and other financial statements and reports required or otherwise requested by Noteholder under Section 2.09 of the Security Instrument shall include statements and reports of Operating Lessee as applicable.

     n. The seventh and eighth sentences in Section 5.01 shall be amended and restated in their entirety as follows:

“Additionally, Borrower shall cause Operating Lessee or Manager to send each respective credit card company or credit card clearing bank with which Operating Lessee or Manager has entered into merchant’s agreements (each, a “Credit Card Company”) a direction letter in the form of Exhibit F annexed hereto and made part hereof (the “Credit Card Payment Direction Letter”) directing such Credit Card Company to make all payments due in connection with goods or services furnished at or in connection with the Property by Federal wire or through ACH directly to a bank account established by the Operating Lessee (the “Operating Lessee Rent Account”). Without the prior written consent of Lender, Borrower shall not permit Operating Lessee or Manager to (i) terminate, amend, revoke or modify any Credit Card Payment Direction Letter in any manner or (ii) direct or cause any Credit Card Company to pay any amount in any manner other than as specifically provided in the related Credit Card Payment Direction Letter.”

     o. The definition of “Management Agreement” in Section 7.02(e) on page 77 of the Security Instrument is hereby modified to include that certain Assignment of and First Amendment to Hotel Operating Agreement being executed by Operating Lessee and Manager in connection with this assumption.

     p. Assumptor shall cause Operating Lessee to comply in all material respects with all provisions of the Management Agreement and to comply with all of the provisions of the Security Instrument relating to the management and operation of the Property, including, without limitation, Section 7.02 of the Security Instrument.

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     q. Sections 13.01 (d), (f), (g), (h), (i), (j), (l) and (n) of the Security Instrument are hereby modified to include acts and omissions of the Operating Lessee to the same extent as acts and omissions of the Assumptor and/or New Guarantor, as applicable

     r. Except as specifically amended hereby, the Loan Documents shall remain unchanged and in full force and effect.

     11. Net Worth Representation of New Guarantor. As of the Effective Date, New Guarantor represents and warrants to Noteholder that New Guarantor has a Tangible Net Worth of not less than $300,000,000. For purposes of this Section 11, “Tangible Net Worth” means the sum of (a) consolidated partnership’s equity of the New Guarantor and its subsidiaries, plus (b) accumulated depreciation with respect to real assets (to the extent deducted in determining partnerships’ equity), less (c) the value of all intangible assets of New Guarantor and its consolidated subsidiaries on a consolidated basis (to the extent included in determining partnerships’ equity), in each case as determined in accordance with GAAP.

     12. Hazardous Materials. Without in any way limiting any other provision of this Assumption Agreement, Assumptor and Borrower expressly reaffirm as of the date hereof, and Assumptor reaffirms continuing hereafter: (a) each and every representation and warranty in the Loan Documents respecting “Hazardous Materials”; and (b) each and every covenant and indemnity in the Loan Documents respecting “Hazardous Materials”.

     13. Multiple Parties. If more than one person or entity has signed this Assumption Agreement as Assumptor or Borrower, then all references in this Assumption Agreement to Assumptor or Borrower shall mean each and all of the persons so signing, as applicable. The liability of all persons and entities signing shall be joint and several with all others similarly liable.

     14. Confirmation of Security Interest. Nothing contained herein shall affect or be construed to affect any lien, charge or encumbrance created by any Loan Document or the priority of that lien, charge or encumbrance. All assignments and transfers by Borrower to Assumptor are subject to any security interest(s) held by Noteholder. Assumptor shall promptly execute and deliver any further documents reasonably requested by the Noteholder to evidence the liens, charges and encumbrances created by the Loan Documents, including, without limitation, evidence of recordation of the Memorandum of Assumption Agreement after the Effective Date.

     15. Notices. All notices to be given to Assumptor and/or Operating Lessee pursuant to the Loan Documents shall be addressed as follows: c/o Pebblebrook Hotel Trust, 2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland 20814, Attn. Attn: Raymond Martz, Vice President and Secretary. All notices to be given to Noteholder pursuant to the Loan Documents shall be addressed as follows: c/o Wells Fargo Commercial Mortgage Servicing – East, 201 S. College Street, 9^th Floor, Charlotte, NC 28244-1075, MAC D1100-090, Attn. Asset Manager.

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     16. Integration; Interpretation. The Loan Documents, including this Assumption Agreement, contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated herein and supersede all prior negotiations. The Loan Documents shall not be modified except by written instrument executed by Noteholder and Assumptor. Any reference in any of the Loan Documents to the property or the Collateral shall include all or any parts of the Property or the Collateral.

     17. Successors and Assigns. This Assumption Agreement is binding upon and shall inure to the benefit of the heirs, successors and assigns of the parties but subject to all prohibitions of transfers contained in any Loan Document.

     18. Attorneys’ Fees; Enforcement. If any attorney is engaged by Noteholder to enforce, construe or defend any provision of this Assumption Agreement, or as a consequence of any default under or breach of this Assumption Agreement, with or without the filing of any legal action or proceeding, Assumptor shall pay to Noteholder, within 15 days after written demand, the amount of all attorneys’ fees and costs reasonably incurred by Noteholder in connection therewith, together with interest thereon from the date that is15 days after the date of such demand at the rate of interest applicable to the principal balance of the Note as specified therein.

     19. Right of Transfer of Property. The parties acknowledge that Section 9.04 of the Security Instrument provides that Noteholder shall consent to the voluntary sale or exchange of all of the Property, all subject, however, to the terms and conditions set forth therein. The parties agree that this Assumption Agreement and the actions to be taken as contemplated herein shall constitute one such consent.

     20. Deferred Maintenance; Liquor License. Assumptor covenants and agrees that it will, within 60 days of the Effective Date, provide Noteholder with satisfactory evidence that (a) the short term repair items listed on Exhibit D of the Security Instrument have been completed; (b) the elevator #2 repairs have been completed with no further environmental clean-up necessary; and (c) that Assumptor has obtained a permanent liquor license for the Property. Assumptor further covenants and agrees that should such items of Deferred Maintenance not be repaired as provided herein or that the permanent liquor license shall not be obtained in such time-frame, that an immediate Event of Default shall have occurred, and that Noteholder shall have all remedies available to it under the terms of the Loan Documents, including but not limited to the immediate right to accrue interest on the Loan at the Default Interest Rate.

     21. Miscellaneous.

     a. This Assumption Agreement shall be governed and interpreted in accordance with the laws of the jurisdiction(s) specified in the other Loan Documents as governing the other Loan Documents. In any action brought or arising out of this Assumption Agreement, Borrower, Original Guarantor, New Guarantor, Noteholder and Assumptor, and general partners, members and joint venturers of them, hereby consent to the jurisdiction of any state or federal court having proper venue as specified in the other Loan Documents and also consent to the service of process by any means authorized by the law of such jurisdiction(s). Except as expressly provided otherwise herein, all terms

14

used herein shall have the meaning given to them in the Loan Documents. Time is of the essence of each term of the Loan Documents, including this Assumption Agreement. If any provision of this Assumption Agreement or any of the other Loan Documents shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed therefrom and the remaining parts shall remain in full force as though the invalid, illegal, or unenforceable portion had not been a part thereof.

     b. Notwithstanding anything to the contrary herein, this Agreement is subject to the provisions of Section 4 of the Note and Section 18.32 of the Security Instrument as if such provisions were set forth at length herein.

     22. Counterparts. This Assumption Agreement may be executed in any number of counterparts, each of which when executed and delivered will be deemed an original and all of which taken together will be deemed to be one and the same instrument.

[SEE ATTACHED SIGNATURE PAGES]

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     IN WITNESS WHEREOF, Noteholder, Assumptor, New Guarantor, Borrower, and Original Guarantor have caused this Assumption Agreement to be duly executed as of the date first above written.

NOTEHOLDER:	BANK OF AMERICA, N.A., as successor to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of COBALT CMBS Commercial Mortgage Trust 2007-C2, Commercial Mortgage Pass-Through Certificates, Series 2007-C2
	By:	Wells Fargo Bank, N.A., successor by merger to Wachovia Bank, National Association, as authorized pursuant to that certain Pooling and Servicing Agreement dated as of April 1, 2007

By:	/s/  Tracy Mills-Smith
	Name:	Tracy Mills-Smith
	Title:	Vice President

ASSUMPTOR:	JAYHAWK OWNER LLC,
	a Delaware limited liability company
	By:		/s/ Raymond D. Martz
		Name:	Raymond D. Martz
		Title:	Vice President & Secretary
NEW
GUARANTOR:	PEBBLEBROOK HOTEL, L.P.,
	a Delaware limited partnership
	By: Pebblebrook Hotel Trust,
	Its general partner
	By:		/s/ Raymond D. Martz
		Name:	Raymond D. Martz
		Title:	Chief Financial Officer

BORROWER:	TARIFF BUILDING ASSOCIATES, L.P., a California limited partnership
	By:	Square 430, LLC, a Delaware limited liability company, its general partner
		By:	Kimpton Group Holding LLC, a Delaware limited liability company, its sole member
			By:		/s/ Judith C. Miles
				Name:	Judith C. Miles
				Title:	EVP and Secretary

ORIGINAL
GUARANTOR:	KIMPTON DEVELOPMENT OPPORTUNITY FUND, L.P., a California limited partnership
	By:	Kimpton Group Holding, LLC, a Delaware limited liability company, its General Partner
		By:		/s/ Ben Rowe
			Name:	Ben Rowe
			Title:	CFO

EXHIBIT A
TO ASSUMPTION AGREEMENT

PREPARED BY AND	)
WHEN RECORDED MAIL TO:	)
Alston & Bird LLP	)
Bank of America Plaza	)
101 S. Tryon Street, Suite 4000	)
Charlotte, NC 28280-4000	)
Attn: James A. L. Daniel, Jr.	)

MEMORANDUM OF ASSUMPTION AGREEMENT

     TARIFF BUILDING ASSOCIATES, LP, a California limited partnership, with a mailing address at 222 Kearny Street, Suite 200, San Francisco, CA 94108 (“Borrower”), Kimpton Development Opportunity Fund, L.P., a California limited partnership, with a mailing address at 222 Kearny Street, Suite 200, San Francisco, CA 94108 (“Original Guarantor”), JAYHAWK OWNER LLC, a Delaware limited liability company, with a mailing address at c/o Pebblebrook Hotel Trust, 2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland 20814 (“Assumptor”), PEBBLEBROOK HOTEL, L.P. , a Delaware limited partnership, with a mailing address c/o Pebblebrook Hotel Trust, 2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland 20814 (“New Guarantor”), and BANK OF AMERICA, N.A., as successor to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of COBALT CMBS Commercial Mortgage Trust 2007-C2, Commercial Mortgage Pass-Through Certificates, Series 2007-C2, with a mailing address c/o Wells Fargo Bank, N. A., Commercial Mortgage Servicing, 1901 Harrison Street, 7th Floor, Oakland, CA 94612, MAC AO227-020 “Noteholder"), are parties to that certain Assumption Agreement dated of even date herewith (“Assumption Agreement”).

     The undersigned parties agree that all obligations under that certain Promissory Note dated February 23, 2007 (“Note”) in the original principal amount of $35,000,000.00, secured by: (i) that certain Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing executed by Borrower to First American Title Insurance Company, as trustee, for the benefit of Original Lender, which Security Instrument was recorded on February 26, 2007 as instrument number 2007026007 in the land records of the District of Columbia (“Official Records”), the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on April 30, 2008, as instrument number 2008059162, in said Official Records; (ii) that certain Assignment of Leases and Rents executed by Borrower, which was recorded on February 26, 2007 as instrument number 2007026008, with said Official Records, the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on April 30, 2008, as instrument number 2008059162, in said Official Records; and (iii) all other Loan Documents (as defined in the Assumption Agreement) securing the real property described on EXHIBIT A, have been assumed by Assumptor upon the terms and conditions set forth in the Assumption Agreement. The Assumption Agreement is by this reference incorporated herein and made a part hereof. This Memorandum of Assumption Agreement may be executed in any number of

counterparts, each of which when executed and delivered will be deemed an original and all of which taken together will be deemed to be one and the same instrument.

[SEE ATTACHED SIGNATURE PAGES]

     IN WITNESS WHEREOF, Noteholder, Assumptor, New Guarantor, Borrower, and Original Guarantor have caused this Memorandum of Assumption Agreement to be duly executed as of the                      day of September, 2010.

NOTEHOLDER:	BANK OF AMERICA, N.A., as successor to Wells Fargo Bank, N.A., as Trustee for the Registered Holders of COBALT CMBS Commercial Mortgage Trust 2007-C2, Commercial Mortgage Pass-Through Certificates, Series 2007-C2
	By:	Wells Fargo Bank, N.A., successor by merger to Wachovia Bank, National Association, as authorized pursuant to that certain Pooling and Servicing Agreement dated as of April 1, 2007

By:
	Name:
	Title:

ACKNOWLEDGMENT OF NOTEHOLDER

STATE OF CALIFORNIA	)
	)	ss
COUNTY OF CONTRA COSTA	)

     On                     , 2010, before me,                                         , the undersigned Notary Public in and for said County and State, personally appeared Tracy Mills-Smith, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Notary Public

My Commission Expires:                                         

ASSUMPTOR:	JAYHAWK OWNER LLC, a Delaware limited liability company
	By:
		Name:
		Title:
NEW
GUARANTOR:	PEBBLEBROOK HOTEL, L.P., a Delaware limited partnership
	By: Pebblebrook Hotel Trust,
	Its general partner
	By:
		Name:
		Title:

BORROWER:	TARIFF BUILDING ASSOCIATES, L.P., a California limited partnership
	By:	Square 430, LLC, a Delaware limited liability company, its general partner

By:   Kimpton Group Holding LLC, a Delaware limited
liability company, its sole member  

By:
	Name:
	Title:

ORIGINAL         GUARANTOR:	KIMPTON DEVELOPMENT OPPORTUNITY FUND, L.P., a California limited partnership
	By:	Kimpton Group Holding, LLC, a Delaware limited liability company, its General Partner

By:
	Name:
	Title:

Exhibit A
Legal Description

EX-10.5

Exhibit 10.5

Hotel Monaco

TARIFF BUILDING ASSOCIATES, L.P.,

as Borrower

to

FIRST AMERICAN TITLE INSURANCE COMPANY,

as Trustee for the benefit of

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Lender

DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING

Dated: February 23, 2007

PREPARED BY AND UPON RECORDATION RETURN TO:

Proskauer Rose llp

1585 Broadway

New York, New York 10036

Attention: David J. Weinberger, Esq.

     THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE FILING (the “Security Instrument”) is made as of the 23^rd day of February, 2007, by TARIFF BUILDING ASSOCIATES, L.P., having its chief executive office at 222 Kearny Street, Suite 200, San Francisco, California 94018 (hereinafter referred to as “Borrower”), to FIRST AMERICAN TITLE INSURANCE COMPANY having an address at 1801 K Street, NW, Suite 200-K, Washington, DC 20006 (hereinafter referred to as “Trustee” for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION, having an address at Wachovia Bank, National Association, Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075, Charlotte, North Carolina 28262 (hereinafter referred to as “Lender”).

W I T N E S S E T H:

     WHEREAS, Lender has authorized a loan (hereinafter referred to as the “Loan”) to Borrower in the maximum principal sum of THIRTY-FIVE MILLION AND NO/100 DOLLARS ($35,000,000.00) (hereinafter referred to as the “Loan Amount”), which Loan is evidenced by that certain promissory note, dated the date hereof (together with any supplements, amendments, modifications or extensions thereof, hereinafter referred to as the “Note”) given by Borrower, as maker, to Lender, as payee;

     WHEREAS, in consideration of the Loan, Borrower has agreed to make payments in amounts sufficient to pay and redeem, and provide for the payment and redemption of the principal of, premium, if any, and interest on the Note when due;

     WHEREAS, Borrower desires by this Security Instrument to provide for, among other things, the issuance of the Note and for the deposit, deed and pledge by Borrower with, and the creation of a security interest in favor of, Lender, as security for Borrower’s obligations to Lender from time to time pursuant to the Note and the other Loan Documents;

     WHEREAS, Borrower and Lender intend these recitals to be a material part of this Security Instrument; and

     WHEREAS, all things necessary to make this Security Instrument the valid and legally binding obligation of Borrower in accordance with its terms, for the uses and purposes herein set forth, have been done and performed.

     NOW THEREFORE, to secure the payment of the principal of, prepayment premium (if any) and interest on the Note and all other obligations, liabilities or sums due or to become due under this Security Instrument, the Note or any other Loan Document, including, without limitation, interest on said obligations, liabilities or sums (said principal, premium, interest and other sums being hereinafter referred to as the “Debt”), and the performance of all other covenants, obligations and liabilities of Borrower pursuant to the Loan Documents, Borrower has executed and delivered this Security Instrument; and Borrower has irrevocably granted, and by these presents and by the execution and delivery hereof does hereby irrevocably grant, bargain, sell, alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge, set over, warrant, mortgage and confirm to Trustee, forever in trust WITH POWER OF SALE, all right, title and interest of Borrower, if any, in and to all of the following property, rights, interests and estates, to the greatest extent assignable by law:

     (a) the plot(s), piece(s) or parcel(s) of real property described in Exhibit A attached hereto and made a part hereof (individually and collectively, hereinafter referred to as the “Premises”);

     (b) (i) all buildings, foundations, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind or nature now or hereafter located on the Premises (hereinafter collectively referred to as the “Improvements”); and (ii) to the extent permitted by law, the name or names, if any, as may now or hereafter be used for any of the Improvements, and the goodwill associated therewith;

     (c) all easements, servitudes, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, ditches, ditch rights, reservoirs and reservoir rights, air rights and development rights, lateral support, drainage, gas, oil and mineral rights, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises or the Improvements and the reversion and reversions, remainder and remainders, whether existing or hereafter acquired, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises to the center line thereof and any and all sidewalks, drives, curbs, passageways, streets, spaces and alleys adjacent to or used in connection with the Premises and/or Improvements and all the estates, rights, titles, interests, property, possession, claim and demand whatsoever, both in law and in equity, of Borrower of, in and to the Premises and Improvements and every part and parcel thereof, with the appurtenances thereto;

     (d) all machinery, equipment, systems, fittings, apparatus, appliances, furniture, furnishings, tools, fixtures, Inventory (as hereinafter defined) and articles of personal property and accessions thereof and renewals, replacements thereof and substitutions therefor (including, but not limited to, all plumbing, lighting and elevator fixtures, office furniture, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, wall coverings, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, flatware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, telephone systems, computerized accounting systems, engineering equipment, vehicles, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, theft prevention equipment, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washers and dryers), other customary hotel equipment, inventory and other property of every kind and nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon, or in, and used in connection with the Premises or the Improvements, or appurtenant thereto, and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now

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or hereafter located upon, or in, and used in connection with the Premises or the Improvements or appurtenant thereto, (hereinafter, all of the foregoing items described in this paragraph (d) are collectively called the “Equipment”), all of which, and any replacements, modifications, alterations and additions thereto, to the extent permitted by applicable law, shall be deemed to constitute fixtures (the “Fixtures”), and are part of the real estate and security for the payment of the Debt and the performance of Borrower’s obligations. To the extent any portion of the Equipment is not real property or fixtures under applicable law, it shall be deemed to be personal property, and this Security Instrument shall constitute a security agreement creating a security interest therein in favor of Lender under the UCC;

     (e) all awards or payments, including interest thereon, which may hereafter be made with respect to the Premises, the Improvements, the Fixtures, or the Equipment, whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of said right), or for a change of grade, or for any other injury to or decrease in the value of the Premises, the Improvements or the Equipment or refunds with respect to the payment of property taxes and assessments, and all other proceeds of the conversion, voluntary or involuntary, of the Premises, Improvements, Equipment, Fixtures or any other Property or part thereof into cash or liquidated claims;

     (f) all leases, tenancies, franchises, licenses and permits, Property Agreements and other agreements affecting the use, enjoyment or occupancy of the Premises, the Improvements, the Fixtures, or the Equipment or any portion thereof now or hereafter entered into, whether before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code and all reciprocal easement agreements, license agreements (hereinafter collectively referred to as the “Leases”), together with all receivables, revenues, rentals, credit card receipts, receipts and all payments received which relate to the rental, lease, franchise and use of space at the Premises and rental and use of guest rooms or meeting rooms or banquet rooms or recreational facilities or bars, beverage or food sales, vending machines, mini-bars, room service, telephone, video and television systems, electronic mail, internet connections, guest laundry, bars, the provision or sale of other goods and services, and all other payments received from guests or visitors of the Premises, and other items of revenue, receipts or income as identified in the Uniform System of Accounts (as hereinafter defined), all cash or security deposits, lease termination payments, advance rentals and payments of similar nature and guarantees or other security held by, or issued in favor of, Borrower in connection therewith to the extent of Borrower’s right or interest therein and all remainders, reversions and other rights and estates appurtenant thereto, and all base, fixed, percentage or additional rents, and other rents, oil and gas or other mineral royalties, and bonuses, issues, profits and rebates and refunds or other payments made by any Governmental Authority from or relating to the Premises, the Improvements, the Fixtures or the Equipment plus all rents, common area charges and other payments now existing or hereafter arising, whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (the “Rents”) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt subject in all events to the provisions hereof;

     (g) all proceeds of and any unearned premiums on any insurance policies covering the Premises, the Improvements, the Fixtures, the Rents or the Equipment, including, without

3

limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Premises, the Improvements, the Fixtures or the Equipment and all refunds or rebates of Impositions, and interest paid or payable with respect thereto;

     (h) all deposit accounts, securities accounts, funds or other accounts maintained or deposited with Lender, or its assigns, in connection herewith, including, without limitation, the Escrow Accounts, the Central Account, the Rent Account, and the Sub-Accounts and all monies and investments deposited or to be deposited in such accounts;

     (i) all accounts receivable, contract rights, franchises, interests, estate or other claims, both at law and in equity, now existing or hereafter arising, and relating to the Premises, the Improvements, the Fixtures or the Equipment, not included in Rents;

     (j) all now existing or hereafter arising claims against any Person with respect to any damage to the Premises, the Improvements, the Fixtures or the Equipment, including, without limitation, damage arising from any defect in or with respect to the design or construction of the Improvements, the Fixtures or the Equipment and any damage resulting therefrom;

     (k) all deposits or other security or advance payments, including rental payments now or hereafter made by or on behalf of Borrower to others, with respect to (i) insurance policies, (ii) utility services, (iii) cleaning, maintenance, repair or similar services, (iv) refuse removal or sewer service, (v) parking or similar services or rights and (vi) rental of Equipment, if any, relating to or otherwise used in the operation of the Premises, the Improvements, the Fixtures or the Equipment;

     (l) all intangible property now or hereafter relating to the Premises, the Improvements, the Fixtures or the Equipment or its operation, including, without limitation, software, letter of credit rights, trade names, trademarks (including, without limitation, any licenses of or agreements to license trade names or trademarks now or hereafter entered into by Borrower), logos, building names and goodwill to the greatest extent assignable pursuant to the terms thereof;

     (m) all now existing or hereafter arising advertising material, guaranties, warranties, building permits, other permits, licenses, plans and specifications, shop and working drawings, soil tests, appraisals and other documents, materials and/or personal property of any kind now or hereafter existing in or relating to the Premises, the Improvements, the Fixtures, and the Equipment, to the greatest extent assignable pursuant to the terms thereof;

     (n) all now existing or hereafter arising drawings, designs, plans and specifications prepared by architects, engineers, interior designers, landscape designers and any other consultants or professionals for the design, development, construction, repair and/or improvement of the Property, as amended from time to time;

     (o) the right, in the name of and on behalf of Borrower, to appear in and defend any now existing or hereafter arising action or proceeding brought with respect to the Premises, the Improvements, the Fixtures or the Equipment and to commence any action or proceeding to

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protect the interest of Lender in the Premises, the Improvements, the Fixtures or the Equipment to the greatest extent permitted pursuant to the terms of this Security Instrument;

     (p) the Ground Lease and the leasehold estate created thereby, together with all modifications, extensions and renewals of the Ground Lease and all credits, deposits, options, privileges and rights of Borrower as tenant under the Ground Lease including, without limitation, the right to renew or extend the Ground Lease for a succeeding term or terms to the extent set forth therein; and

     (q) all proceeds, products, substitutions and accessions (including claims and demands therefor) of each of the foregoing.

     All of the foregoing items (a) through (q), together with all of the right, title and interest of Borrower therein, are collectively referred to as the “Property”.

     TO HAVE AND TO HOLD the above granted and described Property unto Trustee, in trust, for the proper use and benefit of Lender, and the successors and assigns of Lender, forever.

     PROVIDED, ALWAYS, and these presents are upon this express condition, if Borrower shall well and truly pay and discharge the Debt and perform and observe the terms, covenants and conditions set forth in the Loan Documents, then these presents and the estate hereby granted shall cease and be void.

     AND Borrower covenants with and warrants to Lender that:

ARTICLE I: DEFINITIONS

     Section 1.01. Certain Definitions.

     For all purposes of this Security Instrument, except as otherwise expressly provided or unless the context clearly indicates a contrary intent:

     (i) the capitalized terms defined in this Section have the meanings assigned to them in this Section, and include the plural as well as the singular;

     (ii) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; and

     (iii) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Security Instrument as a whole and not to any particular Section or other subdivision.

     “Adjusted Net Income” shall mean trailing twelve (12) month Operating Income minus trailing twelve (12) month Operating Expenses. The Adjusted Net Income shall be calculated by Borrower and shall be subject to the reasonable review and approval of Lender.

5

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

     “Annual Budget” shall mean an annual budget submitted by Borrower to Lender in accordance with the terms of Section 2.09 hereof.

     “Appraisal” shall mean the appraisal of the Property and all supplemental reports or updates thereto previously delivered to Lender in connection with the Loan.

     “Appraiser” shall mean the Person who prepared the Appraisal.

     “Approved Annual Budget” shall mean, for purposes of Section 5.05 hereof, any Annual Budget for which Lender has not issued written notice of objections to the amount of specific line items within thirty (30) days following the receipt thereof pursuant to Section 2.09, which objections shall be in Lender’s reasonable discretion. Borrower shall not be required to alter the Annual Budget as a result of any such objections by Lender, but in the event Lender is required to fund Operating Expenses in accordance with the terms of Section 5.05 hereof, Lender shall only be required to disburse Operating Expenses to the extent Lender did not object to the same, taking into account those amounts already expended for such Operating Expenses during such Fiscal Year.

     “Approved Manager Standard” shall mean the standard of business operations, practices and procedures customarily employed by entities having a senior executive with at least seven (7) years’ experience in the management of hotels of the same class and quality as the Improvements, and which manage not less than five (5) such hotel properties having an aggregate number of hotel rooms of not less than five hundred (500) hotel rooms.

     “Approved Manager Transfer” shall mean any change of control in the ownership of Manager following which (i) Kimpton Group Holding LLC, a Delaware limited liability company, continues to control Manager or (ii) whereby Manager is controlled by a Person or an Affiliate thereof previously approved by Lender in writing.

     “Architect” shall have the meaning set forth in Section 3.04(b)(i) hereof.

     “Assignment” shall mean the Assignment of Leases and Rents and Security Deposits of even date herewith relating to the Property given by Borrower to Lender, as the same may be modified, amended or supplemented from time to time.

     “Bank” shall mean the bank, trust company, savings and loan association or savings bank designated by Lender, in its sole and absolute discretion, in which the Central Account shall be located.

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

     “Basic Carrying Costs” shall mean the sum of the following costs associated with the Property: (a) Real Estate Taxes, (b) insurance premiums and (c) ground rents.

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     “Basic Carrying Costs Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.06 hereof.

     “Basic Carrying Costs Monthly Installment” shall mean Lender’s estimate of one-twelfth (1/12th) of the annual amount for Basic Carrying Costs. “Basic Carrying Costs Monthly Installment” shall also include, if required by Lender, a sum of money which, together with such monthly installments, will be sufficient to make the payment of each such Basic Carrying Cost at least thirty (30) days prior to the date initially due. Should such Basic Carrying Costs not be ascertainable at the time any monthly deposit is required to be made, the Basic Carrying Costs Monthly Installment shall be determined by Lender in its reasonable discretion on the basis of the aggregate Basic Carrying Costs for the prior Fiscal Year or month or the prior payment period for such cost. As soon as the Basic Carrying Costs are fixed for the then current Fiscal Year, month or period, the next ensuing Basic Carrying Costs Monthly Installment shall be adjusted to reflect any deficiency or surplus in prior monthly payments. If at any time during the term of the Loan Lender reasonably determines that there will be insufficient funds in the Basic Carrying Costs Escrow Account to make payments when they become due and payable, Lender shall have the right to adjust the Basic Carrying Costs Monthly Installment such that there will be sufficient funds to make such payments, which determination shall be based on projections of those amounts of Basic Carrying Costs as are reasonably expected to become due and payable during the relevant Fiscal Year. Notwithstanding the foregoing, provided that no Event of Default has occurred and is continuing, (a) if Borrower delivers proof reasonably satisfactory to Lender that the insurance required hereunder is maintained pursuant to a blanket policy and each installment of the annual insurance premiums relating to the insurance required pursuant to Section 3.01 hereof has been paid in full prior to the applicable due date thereof, the Basic Carrying Costs Monthly Installment shall not include any amount allocable to insurance premiums and (b) if Borrower delivers proof reasonably satisfactory to Lender that all ground rent due under the Ground Lease has been paid in full prior to the applicable due date thereof, the Basic Carrying Costs Monthly Installment shall not include any amounts allocable to ground rent.

     “Basic Carrying Costs Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 into which the Basic Carrying Costs Monthly Installments shall be deposited.

     “Borrower” shall mean Borrower named herein and any successor to the obligations of Borrower.

     “Borrower Account” shall have the meaning set forth in Section 5.01 hereof.

     “Borrower’s Knowledge” or words of similar effect shall mean the actual knowledge of Borrower or knowledge after making all due inquiry of the Property’s general manager, assistant general manager and Gregory J. Wolkom.

     “Business Day” shall mean any day other than (a) a Saturday or Sunday, or (b) a day on which banking and savings and loan institutions in the State of New York or the State of North Carolina are authorized or obligated by law or executive order to be closed, or at any time during

7

which the Loan is an asset of a Securitization, the cities, states and/or commonwealths used in the comparable definition of “Business Day” in the Securitization documents.

     “Capital Expenditures” shall mean for any period, the amount expended for items capitalized under GAAP including expenditures for building improvements or major repairs, leasing commissions and tenant improvements.

     “Cash Expenses” shall mean for any period, (x) the operating expenses (excluding Capital Expenditures) for the Property as set forth in an Approved Annual Budget to the extent that such expenses are actually incurred by Borrower minus (y) payments into the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account and the Recurring Replacement Reserve Sub-Account (to the extent such sums are for the payment of sums set forth as operating expenses in the Approved Annual Budget).

     “Central Account” shall mean an Eligible Account, maintained at the Bank, in the name of Lender or its successors or assigns (as secured party) as may be designated by Lender.

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

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

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

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

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

     “CPI” shall mean “The Consumer Price Index (New Series) (Base Period 1982-84=100) (all items for all urban consumers)” issued by the Bureau of Labor Statistics of the United States Department of Labor (the “Bureau”). If the CPI ceases to use the 1982-84 average equaling 100 as the basis of calculation, or if a change is made in the term, components or number of items contained in said index, or if the index is altered, modified, converted or revised in any other way, then the index shall be adjusted to the figure that would have been arrived at had the change in the manner of computing the index in effect at the date of this Security Instrument not been made. If at any time during the term of this Security Instrument the CPI shall no longer be published by the Bureau, then any comparable index issued by the Bureau or similar agency of the United States issuing similar indices shall be used in lieu of the CPI.

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     “Credit Card Company” shall have the meaning set forth in Section 5.01 hereof.

     “Credit Card Payment Direction Letter” shall have the meaning set forth in Section 5.01 hereof.

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

     “Debt Service” shall mean the amount of interest and principal payments due and payable in accordance with the Note during an applicable period.

     “Debt Service Coverage” shall mean the quotient obtained by dividing Adjusted Net Income by the sum of the (a) aggregate payments of interest, principal and all other sums due for such specified period under the Note (determined as of the date the calculation of Debt Service Coverage is required or requested hereunder) but in all events excluding any payouts of principal due at maturity and (b) aggregate payments of interest, principal and all other sums due for such specified period pursuant to the terms of subordinate or mezzanine financing, if any, then affecting or related to the Property or, if Debt Service Coverage is being calculated in connection with a request for consent to any subordinate or mezzanine financing, then proposed.

     “Debt Service Payment Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Required Debt Service Payment shall be deposited.

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

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

     “Default Rate Interest” shall mean, to the extent the Default Rate becomes applicable, interest in excess of the interest which would have accrued on (a) the Principal Amount and (b) any accrued but unpaid interest, if the Default Rate was not applicable.

     “Development Laws” shall mean all applicable subdivision, zoning, environmental protection, wetlands protection, or land use laws or ordinances, and any and all applicable rules and regulations of any Governmental Authority promulgated thereunder or related thereto.

     “Disclosure Document” shall mean a prospectus, prospectus supplement, private placement memorandum, or similar offering memorandum or offering circular, in each case in preliminary or final form, used to offer securities in connection with a Securitization.

     “Dollar” and the sign “$” shall mean lawful money of the United States of America.

     “Eligible Account” shall mean a segregated account which is either (a) an account or accounts maintained with a federal or state chartered depository institution or trust company the long term unsecured debt obligations of which are rated by each of the Rating Agencies (or, if not rated by Fitch, Inc. (“Fitch”), otherwise acceptable to Fitch, as confirmed in writing that such

9

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

     “Engineer” shall have the meaning set forth in Section 3.04(b)(i) hereof.

     “Engineering Escrow Account” shall mean an Escrow Account established and maintained pursuant to Section 5.12 hereof relating to payments for any Required Engineering Work.

     “Environmental Problem” shall mean any of the following:

     (a) the presence of any Hazardous Material on, in, under, or above all or any portion of the Property other than substances of kinds and in amounts ordinarily and customarily used or stored in properties similar in size and type to the Property for the purpose of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Statutes;

     (b) the release or threatened release of any Hazardous Material from or onto the Property other than substances of kinds and in amounts ordinarily and customarily used or stored in properties similar in size and type to the Property for the purpose of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Statutes;

     (c) the violation or threatened violation of any Environmental Statute with respect to the Property; or

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     (d) the failure to obtain or to abide by the terms or conditions of any permit or approval required under any Environmental Statute with respect to the Property.

A condition described above shall be an Environmental Problem regardless of whether or not any Governmental Authority has taken any action in connection with the condition and regardless of whether that condition was in existence on or before the date hereof.

     “Environmental Report” shall mean, collectively, all environmental audit reports for the Property and any supplements or updates thereto, previously delivered to Lender in connection with the Loan.

     “Environmental Statute” shall mean any federal, state or local statute, ordinance, rule or regulation, any judicial or administrative order (whether or not on consent) or judgment applicable to Borrower or the Property including, without limitation, any judgment or settlement based on common law theories, and any provisions or conditions of any permit, license or other authorization binding on Borrower relating to (a) the protection of the environment, the safety and health of persons (including employees) or the public welfare from actual or potential exposure (or effects of exposure) to any actual or potential release, discharge, disposal or emission (whether past or present) of any Hazardous Materials or (b) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any Hazardous Materials, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. §6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. §1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. §2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §1101 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. §7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. §4321, the Rivers and Harbors Act of 1899, 33 U.S.C. §401 et seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et seq., and all rules, regulations and guidance documents promulgated or published thereunder.

     “Equipment” shall have the meaning set forth in granting clause (d) of this Security Instrument.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Security Instrument and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

     “ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (a) described in Section 414(b) or (c) of the Code of which Borrower or Guarantor is a member and (b) solely for purposes of potential liability under Section

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302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower or Guarantor is a member.

     “Escrow Account” shall mean each of the Engineering Escrow Account, the Basic Carrying Costs Escrow Account, the Recurring Replacement Reserve Escrow Account, the Operation and Maintenance Expense Escrow Account and the Management Fee Escrow Account, each of which shall be an Eligible Account or book entry sub-account of an Eligible Account.

     “Event of Default” shall have the meaning set forth in Section 13.01 hereof.

     “Extraordinary Expense” shall mean an extraordinary operating expense or capital expense not set forth in the Approved Annual Budget or allotted for in the Recurring Replacement Reserve Sub-Account.

     “First Payment Date” shall mean, if the Closing Date is prior to the Payment Date of the month in which the Closing Date occurs, the Payment Date in the month in which the Closing Date occurs, or, if the Closing Date is on or subsequent to the Payment Date in the month in which the Closing Date occurs, the Payment Date in the month following the month in which the Loan is initially funded.

     “Fiscal Year” shall mean the twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of this Security Instrument, or such other fiscal year of Borrower as Borrower may select from time to time with the prior written consent of Lender.

     “Fixtures” shall have the meaning set forth in granting clause (d) of this Security Instrument.

     “Franchise Agreement” shall mean any franchise or license agreement relating to the branding or operation of the Premises or any other agreement pursuant to which a franchise system, reservation system or brand affiliation is made available to the hotel operator of the Premises, together with all renewals and replacements thereof.

     “GAAP” shall mean generally accepted accounting principles in the United States of America, as of the date of the applicable financial report, consistently applied.

     “General Partner” shall mean, if Borrower is a partnership, each general partner of Borrower and, if Borrower is a limited liability company, each managing member of Borrower and in each case, each general partner or managing member of such general partner or managing member, unless the general partner of Borrower is a corporation or Delaware limited liability company, in each case, which is a Single Purpose Entity.

     “Governmental Authority” shall mean, with respect to any Person, any federal or State government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or

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administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal, in each case having jurisdiction over such applicable Person or such Person’s property and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading.

     “Ground Lease” shall mean the lease or leases of, or other interest in, the Premises more particularly described on Exhibit G hereto, together with all exhibits and renewals, modifications and extensions thereto.

     “Ground Lessor” shall mean the Person which holds the interest of lessor under the Ground Lease.

     “Guarantor” shall mean any Person guaranteeing, in whole or in part, the obligations of Borrower under the Loan Documents which shall initially be Kimpton Development Opportunity Fund, L.P., a California limited partnership.

     “Hazardous Material” shall mean any flammable, explosive or radioactive materials, hazardous materials or wastes, hazardous or toxic substances, pollutants or related materials, asbestos or any material containing asbestos, molds, spores and fungus which may pose a risk to human health or the environment or any other substance or material as defined in or regulated by any Environmental Statutes.

     “Impositions” shall mean all taxes (including, without limitation, all real estate, ad valorem, sales (including those imposed on lease rentals), use, single business, gross receipts, value added, intangible, transaction, privilege or license or similar taxes), assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Security Instrument), ground rents, water, sewer or other rents and charges, excises, levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property and/or any Rent (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien upon (a) Borrower (including, without limitation, all franchise, single business or other taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which the Property or any other collateral delivered or pledged to Lender in connection with the Loan is located) or Lender, (b) the Property or any part thereof or any Rents therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Property, or any part thereof, or the leasing or use of the Property, or any part thereof, or the acquisition or financing of the acquisition of the Property, or any part thereof, by Borrower.

     “Improvements” shall have the meaning set forth in granting clause (b) of this Security Instrument.

     “Indemnified Parties” shall have the meaning set forth in Section 12.01 hereof.

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

     “Initial Engineering Deposit” shall equal the amount set forth on Exhibit B attached hereto and made a part hereof.

     “Insolvency Opinion” shall have the meaning set forth in Section 2.02(g)(xix).

     “Institutional Lender” shall mean any of the following Persons: (a) any bank, savings and loan association, savings institution, trust company or national banking association, acting for its own account or in a fiduciary capacity, (b) any charitable foundation, (c) any insurance company or pension and/or annuity company, (d) any fraternal benefit society, (e) any pension, retirement or profit sharing trust or fund within the meaning of Title I of ERISA or for which any bank, trust company, national banking association or investment adviser registered under the Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any investment company or business development company, as defined in the Investment Company Act of 1940, as amended, (g) any small business investment company licensed under the Small Business Investment Act of 1958, as amended, (h) any broker or dealer registered under the Securities Exchange Act of 1934, as amended, or any investment adviser registered under the Investment Adviser Act of 1940, as amended, (i) any government, any public employees’ pension or retirement system, or any other government agency supervising the investment of public funds, or (j) any other entity all of the equity owners of which are Institutional Lenders; provided that each of said Persons shall have net assets in excess of $1,000,000,000 and a net worth in excess of $500,000,000, be in the business of making commercial mortgage loans, secured by properties of like type, size and value as the Property and have a long term credit rating which is not less than “BBB-” (or its equivalent) from each Rating Agency.

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

     “Insurance Requirements” shall mean all terms of any insurance policy required by this Security Instrument, all requirements of the issuer of any such policy, and all regulations and then current standards applicable to or affecting the Property 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 such other Person exercising similar functions.

     “Interest Accrual Period” shall mean the period commencing on the Closing Date through and including the tenth (10th) day of March 2007 and, thereafter, each one (1) month period,

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which shall commence on the eleventh (11th) day of each calendar month and end on and include the tenth (10th) day of the next occurring calendar month.

     “Interest Rate” shall have the meaning set forth in the Note.

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

     “Inventory” shall have the meaning as such term is defined in the Uniform Commercial Code applicable in the State in which the Property is located, including, without limitation, provisions in storerooms, refrigerators, pantries and kitchens, beverages in wine cellars and bars, other merchandise for sale, fuel, mechanical supplies, stationery and other expenses, supplies and similar items, as defined in the Uniform System of Accounts.

     “Late Charge” shall have the meaning set forth in Section 13.09 hereof.

     “Leases” shall have the meaning set forth in granting clause (f) of this Security Instrument.

     “Legal Requirement” shall mean as to any Person, the certificate of incorporation, by-laws, certificate of limited partnership, agreement of limited partnership or other organization or governing documents of such Person, and any law, statute, order, ordinance, judgement, decree, injunction, treaty, rule or regulation (including, without limitation, Environmental Statutes, Development Laws and Use Requirements) or determination of an arbitrator or a court or other Governmental Authority and all covenants, agreements, restrictions and encumbrances contained in any instruments, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

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

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

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

     “Loan Documents” shall mean this Security Instrument, the Note, the Assignment, and any and all other agreements, instruments, certificates or documents executed and delivered by Borrower or any Affiliate of Borrower in connection with the Loan, together with any supplements, amendments, modifications or extensions thereof.

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

     “Lockout Expiration Date” shall have the meaning set forth in Section 15.01 hereof.

     “Loss Proceeds” shall mean, collectively, all Insurance Proceeds and all Condemnation Proceeds.

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     “Major Space Lease” shall mean any Space Lease of a tenant or Affiliate of such tenant where such tenant, together with such Affiliate, leases, in the aggregate, greater than 5,000 square feet.

     “Management Agreement” shall have the meaning set forth in Section 7.02 hereof.

     “Management Fee Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.11 hereof relating to the payment of the Required Management Fee.

     “Management Fee Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Required Management Fee shall be deposited.

     “Manager” shall mean the Person, other than Borrower, which manages the Property on behalf of Borrower.

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

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

     “Maturity Date” shall mean the Maturity Date set forth in the Note.

     “Monthly Debt Service Payment” shall mean a monthly payment of principal and interest in an amount equal to that which is required pursuant to the Note.

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

     “Net Capital Expenditures” shall mean for any period the amount by which Capital Expenditures during such period exceed reimbursements for such items during such period from any fund established pursuant to the Loan Documents.

     “Net Operating Income” shall mean in each Fiscal Year or portion thereof during the term hereof, Operating Income less Operating Expenses.

     “Net Proceeds” shall mean the excess of (a)(i) the purchase price (at foreclosure or otherwise) actually received by Lender with respect to the Property as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default, or (ii) in the event that Lender (or Lender’s nominee) is the purchaser at foreclosure by credit bid, then the amount of such credit bid, in either case, over (b) all costs and expenses,

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including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if applicable, incurred by Lender in connection with the exercise of such remedies, including the sale of such Property after a foreclosure against the Property.

     “New Lease” shall have the meaning set forth in Section 2.05 hereof.

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

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

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

     “Operating Expenses” shall mean, in each Fiscal Year or portion thereof during the term hereof, all expenses directly attributable to the operation, repair and/or maintenance of the Property including, without limitation, (a) Impositions, (b) insurance premiums, (c) management fees, whether or not actually paid, equal to the greater of the actual management fees payable under the Management Agreement and four percent (4%) of annual gross operating income for the Property, (d) costs attributable to the operation, repair and maintenance of the systems for heating, ventilating and air conditioning the Improvements and actually paid for by Borrower and (e) any other amounts designated as operating expenses or “Out-of-Pocket Costs” in the Management Agreement, including without limitation amounts sufficient for the operation, maintenance and repair of the Property in accordance with the Approved Manager Standard for the ownership and operation of the Property, including without limitation all compensation of employees, costs of supplies and Inventory, amounts payable to vendors and suppliers. Operating Expenses shall not include interest, principal and premium, if any, due under the Note or otherwise in connection with the Debt, income taxes, extraordinary capital improvement costs, any non-cash charge or expense such as depreciation or amortization or any item of expense otherwise includable in Operating Expenses which is paid directly by any tenant except real estate taxes paid directly to any taxing authority by any tenant.

     “Operating Income” shall mean, in each Fiscal Year or portion thereof during the term hereof, all revenue derived by Borrower arising from the Property including, without limitation, room revenues, meeting and banquet room revenue, items sold from guestrooms, sales from shops, sales from restaurants, parking revenues, vending machines revenues, beverage revenues, food revenues, and packaging revenues, rental revenues (whether denominated as basic rent, additional rent, escalation payments, electrical payments or otherwise) and other fees, charges and amounts from income generating activities connected with the Property, such as income from vending machines, health club memberships, service charges, exhibit or sales space, all revenues for providing telephone services, and all rents or other fees payable by tenants, licensees and concessionaires or payable pursuant to Leases or otherwise in connection with the Property, and business interruption, rent or other similar insurance proceeds. Operating Income shall not include (a) Insurance Proceeds (other than proceeds of rent, business interruption or

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other similar insurance allocable to the applicable period) and Condemnation Proceeds (other than Condemnation Proceeds arising from a temporary taking or the use and occupancy of all or part of the applicable Property allocable to the applicable period), or interest accrued on such Condemnation Proceeds, (b) proceeds of any financing, (c) proceeds of any sale, exchange or transfer of the Property or any part thereof or interest therein, (d) capital contributions or loans to Borrower or an Affiliate of Borrower, (e) any item of income otherwise includable in Operating Income but paid directly by any tenant to a Person other than Borrower except for real estate taxes paid directly to any taxing authority by any tenant, (f) any other extraordinary, non-recurring revenues as reasonably determined by Lender, (g) Rent paid by or on behalf of any lessee under a Space Lease which is the subject of any proceeding or action relating to its bankruptcy, reorganization or other arrangement pursuant to the Bankruptcy Code or any similar federal or state law or which has been adjudicated a bankrupt or insolvent unless such Space Lease, as applicable, has been affirmed by the trustee in such proceeding or action, (h) Rent paid by or on behalf of any lessee under a Lease the demised premises of which are not occupied either by such lessee or by a sublessee thereof; (i) Rent paid by or on behalf of any lessee under a Lease in whole or partial consideration for the termination of any Lease, or (j) sales tax rebates from any Governmental Authority.

     “Operation and Maintenance Expense Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.09 hereof relating to the payment of Operating Expenses (exclusive of Basic Carrying Costs).

     “Operation and Maintenance Expense Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which sums allocated for the payment of Cash Expenses, Net Capital Expenditures and approved Extraordinary Expenses shall be deposited.

     “Payment Date” shall mean, with respect to each month, the eleventh (11th) calendar day in such month, or if such day is not a Business Day, the next following Business Day.

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

     “Permitted Encumbrances” shall have the meaning set forth in Section 2.05(a) hereof.

     “Permitted Liens” shall mean, with respect to the Property, collectively, (a) the liens created by this Security Instrument and the other Loan Documents, (b) all liens and other matters disclosed on the title insurance policy insuring the lien of this Security Instrument, (c) liens, if any, for Impositions imposed by any Governmental Authority not yet delinquent or being contested in good faith and by appropriate proceedings in accordance with the Loan Documents, (d) mechanic’s or materialmen’s liens, if any, being contested in good faith and by appropriate proceedings in accordance with the Loan Documents, (e) rights of existing and future tenants pursuant to Space Leases entered into in accordance with this Security Instrument, (f) liens relating to equipment financing which are incurred in the ordinary course of business in connection with the ownership of the Property in an amount not to exceed two percent (2%) of the Loan Amount and (g) such other title and survey exceptions as Lender has approved or may

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approve in writing in Lender’s reasonable discretion, all of which (other than the liens of the type set forth in clauses (a) and (b) above) are subordinate to the lien of this Security Instrument.

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

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

     “Premises” shall have the meaning set forth in granting clause (a) of this Security Instrument.

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

     “Principal Payments” shall mean all payments of principal made pursuant to the terms of the Note.

     “Prohibited Person” shall mean any Person and/or any Affiliate thereof identified on the OFAC List or any other Person or foreign country or agency thereof with whom a U.S. Person may not conduct business or transactions by prohibition of Federal law or Executive Order of the President of the United States of America.

     “Property” shall have the meaning set forth in the granting clauses of this Security Instrument.

     “Property Agreements” shall mean all agreements, grants of easements and/or rights-of-way, reciprocal easement agreements, permits, declarations of covenants, conditions and restrictions, disposition and development agreements, planned unit development agreements, parking agreements, party wall agreements or other instruments affecting the Property, but not including any brokerage agreements, management agreements, service contracts, Space Leases or the Loan Documents.

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

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     “Real Estate Taxes” shall mean all real estate taxes, assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Security Instrument), water, sewer or other rents and charges, and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien upon the Property or any part thereof or any estate, right, title or interest therein.

     “Realty” shall have the meaning set forth in Section 2.05(b) hereof.

     “Recurring Replacement Expenditures” shall mean expenditures related to capital repairs, replacements and improvements performed at the Property from time to time.

     “Recurring Replacement Reserve Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.08 hereof relating to the payment of Recurring Replacement Expenditures.

     “Recurring Replacement Reserve Monthly Installment” shall mean the amount per month equal to four percent (4%) of the trailing twelve (12) month gross revenues of the Property divided by twelve (12) which shall initially be the amount set forth on Exhibit B attached hereto and made a part hereof (the “Initial Recurring Installments”).

     “Recurring Replacement Reserve Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Recurring Replacement Reserve Monthly Installment shall be deposited.

     “Regulation AB” shall mean Regulation AB under the Securities Act and the Securities Exchange Act of 1934 (as amended).

     “Rent Account” shall mean an Eligible Account maintained at a bank reasonably acceptable to Lender in the name of Lender or its successors or assigns (as secured party) as may be designated by Lender, and Borrower.

     “Rents” shall have the meaning set forth in granting clause (f) of this Security Instrument.

     “Rent Roll” shall have the meaning set forth in Section 2.05 (o) hereof.

     “Required Debt Service Coverage” shall mean a Debt Service Coverage of not less than 1.2:1.

     “Required Debt Service Payment” shall mean, as of any Payment Date, (a) the amount of interest and principal then due and payable pursuant to the Note, together with any other sums due thereunder, including, without limitation, any prepayments required to be made or for which notice has been given under this Security Instrument, Default Rate Interest and premium, if any,

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paid in accordance therewith plus (b) reasonable out-of-pocket fees incurred by Lender in connection with its administration and servicing of the Central Account.

     “Required Engineering Work” shall mean the immediate engineering and/or environmental remediation work set forth on Exhibit D attached hereto and made a part hereof.

     “Required Management Fee” shall mean, as of any Payment Date, 4% of the gross revenues of the Property for the prior calendar month.

     “Retention Amount” shall have the meaning set forth in Section 3.04(b)(vii) hereof.

     “RevPAR” shall mean the average revenues per available room per day.

     “RevPAR Yield Index” shall mean the percentage amount determined by dividing the RevPAR of the Property by the RevPAR of the Property’s Competitive Set as set forth by Smith Travel Research (“STR”) as the Property’s Competitive Set is reasonably determined by Lender or if STR is no longer publishing, a successor reasonably acceptable to Lender.

     “Securities Act” shall mean the Securities Act of 1933, as the same shall be amended from time to time.

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

     “Security Instrument” shall mean this Security Instrument as originally executed or as it may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental hereto.

     “Significant Obligor” shall have the meaning set forth in Item 1101(k) of Regulation AB.

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

     “Solvent” shall mean, as to any Person, that (a) the sum of the assets of such Person, at a fair valuation, exceeds its liabilities, including contingent liabilities, (b) such Person has

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

     “Space Leases” shall mean any Lease or sublease thereunder (including, without limitation, any Major Space Lease) or any other agreement providing for the use and occupancy of a portion of the Property as the same may be amended, renewed or supplemented (other than occupancy agreements entered into with hotel guests, banquet facilities and meeting rooms in the ordinary course of business for a period of less than ninety (90) consecutive days in the aggregate or seven (7) consecutive days with respect to meeting rooms and banquet facilities).

     “State” shall mean any of the states which are members of the United States of America.

     “Stated Maturity”, when used with respect to the Note or any installment of interest and/or principal payment thereunder, shall mean the date specified in the Note as the fixed date on which a payment of all or any portion of principal and/or interest is due and payable.

     “Sub-Accounts” shall have the meaning set forth in Section 5.02 hereof.

     “Substantial Casualty” shall have the meaning set forth in Section 3.04 hereof.

     “Taking” shall mean a condemnation or taking pursuant to the lawful exercise of the power of eminent domain.

     “Transfer” shall mean the conveyance, assignment, sale, mortgaging, encumbrance, pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any legal or beneficial interest (a) in all or any portion of the Property (other than furniture, fixtures, equipment and other personal property which has become obsolete or unfit for use provided such furniture, fixtures and equipment is promptly replaced with furniture, fixtures or equipment, as applicable, of equal value and utility pursuant to Section 8.01(e) hereof or furniture, fixtures and equipment which is no longer useful in the management, operation or maintenance of the property); (b) if Borrower is a corporation or, if Borrower is a partnership and any General Partner, is a corporation, in the stock of Borrower or any General Partner; (c) in Borrower (or any trust of which Borrower is a trustee); or (d) if Borrower is a limited or general partnership, joint venture, limited liability company, trust, nominee trust, tenancy in common or other unincorporated form of business association or form of ownership interest, in any Person having

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a legal or beneficial ownership in Borrower, excluding any legal or beneficial interest in any constituent limited partner, if Borrower is a limited partnership, or in any non-managing member, if Borrower is a limited liability company, unless such interest would, or together with all other direct or indirect interests in Borrower which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in Borrower or would result in any Person who, as of the Closing Date, did not own, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower, owning, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower and excluding any legal or beneficial interest in any General Partner unless such interest would, or together with all other direct or indirect interest in the General Partner which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in the General Partner (or result in a change in control of the management of the General Partner from the individuals exercising such control immediately prior to the conveyance or other disposition of such legal or beneficial interest). “Transfer” shall also include, without limitation to the foregoing, the following: (a) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof or any interest therein for a price to be paid in installments, (b) an agreement by Borrower leasing all or substantially all of the Property to one or more Persons pursuant to a single or related transactions (outside of rentals of meeting rooms, banquet facilities or hotel rooms in the ordinary course of business), or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rent, (c) any instrument subjecting the Property to a condominium regime or transferring ownership to a cooperative corporation, and (d) the dissolution or termination of Borrower or the merger or consolidation of Borrower with any other Person. Notwithstanding the foregoing or anything to the contrary contained in any other Loan Document, “Transfer” shall not include any sale, transfer, conveyance or assignment of any direct or indirect legal or beneficial ownership interest in Borrower, or any mortgaging, encumbrance, pledging, hypothecation or granting of a security interest in any indirect ownership interest in any limited partner of Borrower, provided, in each case, that Kimpton Group Holding LLC, a Delaware limited liability company (“KGH”) continues to Control Borrower and that, in the event that any Person (a “Principal Transferee”) who does not, as of the Closing Date, own or Control, directly or indirectly, 49% or more of the stock, partnership interest or membership interest, as applicable, in Borrower acquires, directly or indirectly, 49% or more of the stock, partnership or membership interest, as applicable, in Borrower as a result of such transfer, conveyance, assignment, sale, mortgaging, encumbrance, pledging, hypothecation or granting of a security interest, Lender shall be furnished an opinion, in form and substance and from counsel reasonably satisfactory to Lender, substantially similar to the Insolvency Opinion which discusses the substantive non-consolidation of Borrower with the Principal Transferee in the event of a bankruptcy, insolvency or similar proceeding relating to the Principal Transferee and provided, further, that, in the event that any Person who does not, as of the Closing Date, own or Control, directly or indirectly, 20% or more of the stock partnership interest or membership interest, as applicable, in Borrower acquires, directly or indirectly, 20% or more of the stock, partnership interest or membership interest, as ap plicable, in Borrower as a result of such transfer, conveyance, assignment, sale, mortgaging, encumbrance, pledging, hypothecation or granting of a security interest, Lender shall be entitled to approve such Person, which approval shall not be unreasonably withheld and shall be granted or withheld in accordance with Lender’s

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then standard criteria with respect to approving borrowers for loans similar to the Loan which are to be included in a Securitization.

     “Trustee” shall mean the Person or Persons identified in this Security Instrument as the trustee hereunder and its or their successors and assigns.

     “UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in the State in which the Realty is located; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State in which the Realty is located (“Other UCC State”), “UCC” means the Uniform Commercial Code as in effect in such Other UCC State for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority.

     “Uniform System of Accounts” shall mean the Uniform System of Accounts for the Lodging Industry, 9th Revised Edition, Educational Institute of the American Hotel and Motel Association and Hotel Association of New York City (1996), as from time to time amended.

     “Unscheduled Payments” shall mean (a) all Loss Proceeds that Borrower has elected or is required to apply to the repayment of the Debt pursuant to this Security Instrument, the Note or any other Loan Documents, (b) any funds representing a voluntary or involuntary principal prepayment other than scheduled Principal Payments and (c) any Net Proceeds.

     “Use Requirements” shall mean any and all building codes, permits, certificates of occupancy or compliance, laws, regulations, or ordinances (including, without limitation, health, pollution, fire protection, medical and day-care facilities, waste product and sewage disposal regulations), restrictions of record, easements, reciprocal easements, declarations or other agreements affecting the use of the Property or any part thereof.

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

     “Work” shall have the meaning set forth in Section 3.04(a)(i) hereof.

     “Yield Maintenance Premium” shall have the meaning set forth in Section 15.01 hereof.

ARTICLE II: REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BORROWER

     Section 2.01. Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the Note and the other Loan Documents, all in lawful money of the United States of America in immediately available funds.

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     Section 2.02. Representations, Warranties and Covenants of Borrower. Borrower represents and warrants to and covenants with Lender:

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

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

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

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imposition of any lien, except those in favor of Lender as provided in the Loan Documents to which it is a party.

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

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

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

          (g) Maintenance of Existence. (i) Borrower and, if applicable, each General Partner at all times since their formation have been duly formed and existing at all times and at all times have preserved and shall preserve and has kept and shall keep in full force and effect their existence as a Single Purpose Entity, it being acknowledged by Lender that, although Borrower and General Partner conducted themselves in accordance with the provisions of this Section 2.02(g) since their formation, prior to the Loan the organizational documents of Borrower and General Partner did not contain all of the covenants as set forth in this Section 2.02(g).

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

     (iii) Borrower and, if applicable, each General Partner have done or caused to be done and will do all things necessary to observe organizational formalities and preserve their existence and Borrower and, if applicable, each General Partner will not amend, modify or otherwise change any material provisions contained in the certificate of limited partnership and agreement of limited partnership or certificate of incorporation and by-laws or articles of organization, certificate of formation and operating agreement, as applicable, or other organizational documents of Borrower and, if applicable, each General Partner (it being acknowledged that all provisions relating to the requirements of any Person to be a Single Purpose Entity shall be deemed material).

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     (iv) Borrower and, if applicable, each General Partner, have at all times accurately maintained, and will continue to accurately maintain, their respective financial statements, accounting records and other partnership, company or corporate documents separate from those of any other Person, have filed and will file their own tax returns or, if Borrower and/or, if applicable, General Partner is part of a consolidated group for purposes of filing tax returns, Borrower and, General Partner, as applicable, have been shown and will be shown as separate members of such group. Borrower and, if applicable, each General Partner have not at any time since their formation commingled, and will not commingle, their respective assets with those of any other Person and each has maintained and will maintain their assets in such a manner such that it will not be costly or difficult to segregate, ascertain or identify their individual assets from those of any other Person. Borrower and, if applicable, each General Partner has not permitted and will not permit any Affiliate independent access to their bank accounts provided that Borrower has granted Manager the ability to sign checks from its accounts. Borrower and, if applicable, each General Partner have at all times since their formation accurately maintained and utilized, and will continue to accurately maintain and utilize, their own separate bank accounts, payroll and separate books of account, stationery, invoices and checks.

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

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

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

     (viii) Borrower and, if applicable, each General Partner, (A) have not owned, do not own and will not own any assets or property other than, with respect to Borrower, the Property and any incidental personal property necessary for the ownership, management or operation of the Property and, with respect to General Partner, if applicable, its interest in Borrower, (B) have not engaged and will not engage in any business other than the ownership, management and operation of the Property or, with respect to General Partner, if applicable, its interest in Borrower, (C) other than debt secured by the Property being paid in full on the Closing Date (the “Previous Loan”), have not incurred and will

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not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than, with respect to Borrower, (X) the Loan and (Y) unsecured trade and operational debt which (1) is not evidenced by a note, (2) is incurred in the ordinary course of the operation of the Property, (3) does not exceed in the aggregate four percent (4%) of the Loan Amount, and (4) is, unless being contested in accordance with the terms of this Security Instrument, paid prior to the earlier to occur of the sixtieth (60th) day after the date incurred and the date when due, (D) other than the pledge securing the Previous Loan which shall be released on the Closing Date, have not pledged and will not pledge their assets for the benefit of any other Person, and (E) have not made and will not make any loans or advances to any Person (including any Affiliate).

     (ix) Neither Borrower nor, if applicable, any General Partner will change its name or principal place of business.

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

     (xi) Borrower has preserved and maintained and will preserve and maintain its existence as a California limited partnership and all material rights, privileges, tradenames and franchises. General Partner, if applicable, has preserved and maintained and will preserve and maintain its existence as a Delaware limited liability company and all material rights, privileges, tradenames and franchises.

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

     (xiii) Borrower and, if applicable, each General Partner, have not at any time since their formation assumed, guaranteed or held themselves out to be responsible for, and will not assume, guarantee or hold themselves out to be responsible for the liabilities or the decisions or actions respecting the daily business affairs of their partners, shareholders or members or any predecessor company, corporation or partnership, each as applicable, any Affiliates, or any other Persons. Borrower and, if applicable, each General Partner, have not at any time since their formation acquired, and will not acquire, obligations or securities of its partners or shareholders, members or any predecessor company, corporation or partnership, each as applicable, or any Affiliates (other than, with respect to General Partner, its interest in Borrower). Borrower and, if applicable, each General Partner, have not at any time (other than on arms-length market terms) since their formation made, and will not make, loans to its partners, members or shareholders or any predecessor company, corporation or partnership, each as applicable,

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or any Affiliates of any of such Persons. Borrower and, if applicable, each General Partner, have no knowledge of any contingent liabilities that could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, nor do they have any material financial liabilities under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Person is a party or by which it is otherwise bound other than under the Loan Documents.

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

     (xv) If Borrower is a limited partnership or a limited liability company, the General Partner shall be a corporation or limited liability company whose sole asset is its interest in Borrower and the General Partner will at all times comply, and will cause Borrower to comply, with each of the representations, warranties, and covenants contained in this Section 2.02(g) as if such representation, warranty or covenant was made directly by such General Partner.

     (xvi) Borrower shall at all times cause there to be at least one duly appointed member of the board of directors or board of managers or other governing board or body, as applicable (an “Independent Director”), of, if Borrower is a corporation, Borrower, and, if Borrower is a limited partnership, of the General Partner, and if Borrower is a limited liability company, of the General Partner or of Borrower, provided that such Independent Director may, for purposes hereof, be a member of the General Partner rather than of the board of directors of the General Partner, reasonably satisfactory to Lender who shall not have been at the time of such individual’s appointment, and may not be or have been at any time (A) a shareholder, officer, director, attorney, counsel, partner, member or employee of Borrower or any of the foregoing Persons or Affiliates thereof, (B) a customer or creditor of, or supplier or service provider (other than a supplier of registered agent or registered office services) to, Borrower or any of its shareholders, partners, members or their Affiliates, (C) a member of the immediate family of any Person referred to in (A) or (B) above or (D) a Person Controlling, Controlled by or under common Control with any Person referred to in (A) through (C) above.

     (xvii) General Partner and, if applicable, Borrower, shall not cause or permit the board of directors or board of managers or other governing board or body, as applicable, of General Partner or, if applicable, Borrower, to take any action which, under the terms of any certificate of incorporation, by-laws, limited liability company agreement, operating agreement, certificate of formation or articles of organization requires a vote of the board of directors or board of managers or other governing board or body of the General Partner, or, if applicable, Borrower, unless at the time of such action there shall be at least one member who is an Independent Director.

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

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

     (xx) Borrower shall not enter into any franchise agreement without Lender’s prior written consent.

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

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

     (i) Consents and Approvals. Borrower and, if applicable, each General Partner, have obtained or made all necessary (i) consents, approvals and authorizations, and registrations and filings of or with all Governmental Authorities and (ii) consents, approvals, waivers and notifications of partners, stockholders, members, creditors, lessors and other nongovernmental Persons, in each case, which are required to be obtained or made by Borrower or, if applicable, the General Partner, in connection with the execution and delivery of, and the performance by Borrower of its obligations under, the Loan Documents.

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

     (k) Compliance with Law. (i) Except as previously disclosed to Lender in the Disclosure Schedule, Borrower has received no written notice of violation of any Legal Requirements and (ii) except for such violations which would not, individually or in the aggregate, have a Material Adverse Effect, Borrower is in compliance in all material respects with all Legal Requirements to which it or the Property is subject, including, without limitation, all Environmental Statutes, the Occupational Safety and Health Act of 1970, the Americans with

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Disabilities Act and ERISA. No portion of the Property has been or will be purchased, improved, fixtured, equipped or furnished with proceeds of any illegal activity and to Borrower’s knowledge, no illegal activities are being conducted at or from the Property.

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

     (m) Transaction Brokerage Fees. Borrower has not dealt with any financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Security Instrument. All brokerage fees, commissions and other expenses payable in connection with the transactions contemplated by the Loan Documents have been paid in full by Borrower contemporaneously with the execution of the Loan Documents and the funding of the Loan. Borrower hereby agrees to indemnify and hold Lender harmless for, from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from (i) a claim by any Person that such Person acted on behalf of Borrower in connection with the transactions contemplated herein or (ii) any breach of the foregoing representation. The provisions of this subsection (m) shall survive the repayment of the Debt.

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

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

     (p) Solvency; No Bankruptcy. Each of Borrower and, if applicable, the General Partner, (i) is and has at all times been Solvent and will remain Solvent immediately upon the consummation of the transactions contemplated by the Loan Documents and (ii) is free from

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bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors and is not contemplating the filing of a petition under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of such Person’s assets or property and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or, if applicable, the General Partner. None of the transactions contemplated hereby will be or have been made with an intent to hinder, delay or defraud any present or future creditors of Borrower and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Borrower’s assets do not, and immediately upon consummation of the transaction contemplated in the Loan Documents will not, constitute unreasonably small capital to carry out its business as presently conducted or as proposed to be conducted. Borrower does not intend to, nor believes that it will, incur debts and liabilities beyond its ability to pay such debts as they may mature.

     (q) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower to, inter alia, (i) satisfy certain mortgage loans presently encumbering all or a part of the Property, (ii) pay certain transaction costs incurred by Borrower in connection with the Loan, (iii) fund the Escrow Accounts as required by this Security Instrument, and (iv) make distributions to the partners of Borrower. No portion of the proceeds of the Loan will be used for family, personal, agricultural or household use.

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

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

     (t) ERISA. (i) The assets of Borrower and Guarantor are not and will not become treated as “plan assets”, whether by operation of law or under regulations promulgated under ERISA. If any Person having a legal or beneficial ownership interest in Borrower is using (or is deemed under ERISA to be using) “plan assets”, Borrower will qualify as a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(e) at all times that the Loan is outstanding. Each Plan and Welfare Plan, and, to the knowledge of Borrower, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, its terms and the applicable provisions of ERISA, the Code and any other applicable Legal Requirement, and no event or condition has occurred and is continuing as to which Borrower would be under an obligation to furnish a report to Lender under clause (ii)(A) of this Section. Other than an application for a favorable determination letter with respect to a Plan, there are no pending issues or claims before the Internal Revenue Service, the United States Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan under which Borrower, Guarantor or any ERISA Affiliate, directly or

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indirectly (through an indemnification agreement or otherwise), could be subject to any material risk of liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code. No Welfare Plan provides or will provide benefits, including, without limitation, death or medical benefits (whether or not insured) with respect to any current or former employee of Borrower, Guarantor or any ERISA Affiliate beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by fully paid up insurance or (C) severance benefits.

     (ii) Borrower will furnish to Lender as soon as possible, and in any event within ten (10) days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC (or any other relevant Governmental Authority)) by Borrower or an ERISA Affiliate with respect to such event or condition, if such report or notice is required to be filed with the PBGC or any other relevant Governmental Authority:

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

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

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

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

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

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

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

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

     (u) Labor Matters. No organized work stoppage or labor strike is pending or threatened by employees or other laborers at the Property and neither Borrower nor Manager (i) except as otherwise disclosed in writing to Lender, is involved in or threatened with any labor dispute, grievance or litigation relating to labor matters involving any employees and other laborers at the Property, including, without limitation, violation of any federal, state or local labor, safety or employment laws (domestic or foreign) and/or charges of unfair labor practices or discrimination complaints; (ii) has engaged in any unfair labor practices within the meaning of the National Labor Relations Act or the Railway Labor Act; or (iii) is a party to, or bound by, any collective bargaining agreement or union contract with respect to employees and other laborers at the Property and no such agreement or contract is currently being negotiated by Borrower, Manager or any of their Affiliates.

     (v) Borrower’s Legal Status. Borrower’s exact legal name that is indicated on the signature page hereto, organizational identification number and place of business or, if more than one, its chief executive office, as well as Borrower’s mailing address, if different, which were

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identified by Borrower to Lender and contained in this Security Instrument, are true, accurate and complete. Borrower (i) will not change its name, its place of business or, if more than one place of business, its chief executive office, or its mailing address or organizational identification number if it has one without giving Lender at least thirty (30) days prior written notice of such change, (ii) if Borrower does not have an organizational identification number and later obtains one, Borrower shall promptly notify Lender of such organizational identification number and (iii) will not change its type of organization, jurisdiction of organization or other legal structure.

     (w) Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws. (i) None of Borrower, General Partner, any Guarantor, or any Person who owns any equity interest in or Controls Borrower, General Partner or any Guarantor currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person, and Borrower has implemented procedures, approved by Borrower and, if applicable, General Partner, to ensure that no Person who now or hereafter owns an equity interest in Borrower or General Partner is a Prohibited Person or Controlled by a Prohibited Person, (ii) no proceeds of the Loan will be used to fund any operations in, finance any investments or activities in or make any payments to, Prohibited Persons, and (iii) none of Borrower, General Partner, or any Guarantor are in violation of any Legal Requirements relating to anti-money laundering or anti-terrorism, including, without limitation, Legal Requirements related to transacting business with Prohibited Persons or the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related regulations issued thereunder, including temporary regulations, all as amended from time to time. No tenant under a Space Lease at the Property currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person, and, to Borrower’s knowledge, no tenant at the Property is owned or Controlled by a Prohibited Person. Borrower has determined that Manager has implemented procedures, approved by Borrower, to ensure that no tenant under a Space Lease at the Property is a Prohibited Person or owned or Controlled by a Prohibited Person.

     Section 2.03. Further Acts, etc. Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages or deeds of trust, as applicable, assignments, notices of assignments, transfers and assurances as Lender or Trustee shall, from time to time, reasonably require for the better assuring, conveying, assigning, transferring, and confirming unto Lender and Trustee the property and rights hereby mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated, or which Borrower may be or may hereafter become bound to convey or assign to Lender and Trustee , or for carrying out or facilitating the performance of the terms of this Security Instrument or for filing, registering or recording this Security Instrument and, on demand, will execute and deliver and hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments to evidence more effectively the lien hereof upon the Property. Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of protecting, perfecting, preserving and realizing upon the interests granted pursuant to this Security Instrument and to effect the intent hereof, all as fully and effectually as Borrower might or could do; and Borrower hereby ratifies all that Lender shall lawfully do or cause to be done by virtue hereof; provided, however, that Lender shall not exercise such power of attorney

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unless and until Borrower fails to take the required action within the five (5) Business Day time period stated above unless the failure to so exercise, could, in Lender’s reasonable judgment, result in a Material Adverse Effect. Upon (a) receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, (b) receipt of an indemnity of Lender related to losses resulting solely from the issuance of a replacement note or other applicable Loan Document and (c) in the case of any such mutilation, upon surrender and cancellation of such Note or other applicable Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other applicable Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor.

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

     Section 2.05. Representations, Warranties and Covenants Relating to the Property. Borrower represents and warrants to and covenants with Lender with respect to the Property as follows:

     (a) Lien Priority. This Security Instrument is a valid and enforceable first lien on the Property, free and clear of all encumbrances and liens having priority over the lien of this Security Instrument, except for the items set forth as exceptions to or subordinate matters in the title insurance policy insuring the lien of this Security Instrument, none of which, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by this Security Instrument, materially affect the value or marketability of the Property as presently utilized, impair the use or operation of the Property for the use currently being made thereof or impair Borrower’s ability to pay its obligations in a timely manner (such items being the “Permitted Encumbrances”).

     (b) Title. Borrower has, subject only to the Permitted Encumbrances, good, insurable and marketable leasehold title to the Premises, Improvements and Fixtures, other than Tenant’s

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Property (as defined in the Ground Lease) and good, insurable and marketable fee simple title to Tenant’s Property (the Premises, together with the Improvements and such portion of Tenant’s Property as constitutes fixtures are referred to collectively as the “Realty”) and to all easements and rights benefiting the Realty and has the right, power and authority to mortgage, encumber, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign, and hypothecate the Property. Borrower will preserve its interest in and title to the Property and will forever warrant and defend the same to Lender against any and all claims made by, through or under Borrower and will forever warrant and defend the validity and priority of the lien and security interest created herein against the claims of all Persons whomsoever claiming by, through or under Borrower. The foregoing warranty of title shall survive the foreclosure of this Security Instrument and shall inure to the benefit of and be enforceable by Lender in the event Lender acquires title to the Property pursuant to any foreclosure. In addition, except for a right of first refusal as set forth in the Management Agreement which is subordinate to the Security Instrument, there are no outstanding options or rights of first refusal to purchase the Property or Borrower’s ownership thereof.

     (c) Taxes and Impositions. All taxes and other Impositions and governmental assessments due and owing in respect of, and affecting, the Property have been paid. Borrower has paid all Impositions which constitute special governmental assessments in full, except for those assessments which are permitted by applicable Legal Requirements to be paid in installments, in which case all installments which are due and payable have been paid in full. There are no pending, or to Borrower’s knowledge, proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

     (d) Casualty; Flood Zone. The Realty is in good repair and free and clear of any damage, destruction or casualty (whether or not covered by insurance) that would materially affect the value of the Realty or the use for which the Realty was intended. There exists no structural or other material defects or, except as disclosed in the property condition report relating to the Property which was prepared by IVI Due Diligence, Inc. and delivered to Lender in connection with the origination of the Loan, damages in or to the Property and Borrower has not received any written notice from any insurance company or bonding company of any material defect or inadequacies in the Property, or any part thereof, which would materially and adversely affect 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. No portion of the Premises is located in an “area of special flood hazard,” as that term is defined in the regulations of the Federal Insurance Administration, Department of Housing and Urban Development, under the National Flood Insurance Act of 1968, as amended (24 CFR § 1909.1) or Borrower has obtained the flood insurance required by Section 3.01(a)(vi) hereof. The Premises either does not lie in a 100 year flood plain that has been identified by the Secretary of Housing and Urban Development or any other Governmental Authority or, if it does, Borrower has obtained the flood insurance required by Section 3.01(a)(vi) hereof.

     (e) Completion; Encroachment. All Improvements necessary for the use and operation of the Premises, including, without limitation, all Improvements which were included for purposes of determining the appraised value of the Property in the Appraisal, have been

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completed and none of said Improvements lie outside the boundaries and building restriction lines of the Premises, except to the extent otherwise disclosed to Lender pursuant to any title insurance policy insuring the lien of this Security Instrument or on any survey certified to Lender in connection with the Loan. Except as set forth in the title insurance policy insuring the lien of this Security Instrument, no improvements on adjoining properties encroach upon the Premises.

     (f) Separate Lot. The Premises are taxed separately without regard to any other real estate and constitute a legally subdivided lot under all applicable Legal Requirements (or, if not subdivided, no subdivision or platting of the Premises is required under applicable Legal Requirements), and for all purposes may be mortgaged, encumbered, conveyed or otherwise dealt with as an independent parcel. The Property does not benefit from any tax abatement or exemption.

     (g) Use. The existence of all Improvements, the present use and operation thereof and the access of the Premises and the Improvements to all of the utilities and other items referred to in paragraph (k) below are in compliance in all material respects with all Leases affecting the Property and all applicable Legal Requirements, including, without limitation, Environmental Statutes, Development Laws and Use Requirements. Except as previously disclosed to Lender in the Disclosure Schedule, Borrower has not received any notice from any Governmental Authority alleging any uncured violation relating to the Property of any applicable Legal Requirements. In the event that Borrower has received any written notices from any Governmental Authority alleging an uncured violation relating to the Property or any applicable Legal Requirement, no such violation could have a Material Adverse Effect.

     (h) Licenses and Permits. Borrower currently holds and will continue to hold all certificates of occupancy, licenses, registrations, permits, consents, franchises and approvals of any Governmental Authority or any other Person which are material for the lawful occupancy and operation of the Realty or which are material to the ownership or operation of the Property or the conduct of Borrower’s business. All such certificates of occupancy, licenses, registrations, permits, consents, franchises and approvals are current and in full force and effect.

     (i) Intentionally Omitted.

     (j) Property Proceedings. There are no actions, suits or proceedings pending or, to the Borrower’s knowledge, threatened in any court or before any Governmental Authority or arbitration board or tribunal (i) relating to (A) the zoning of the Premises or any part thereof, (B) any certificates of occupancy, licenses, registrations, permits, consents or approvals issued with respect to the Property or any part thereof, (C) the condemnation of the Property or any part thereof, or (D) the condemnation or relocation of any roadways abutting the Premises required for access or the denial or limitation of access to the Premises or any part thereof from any point of access to the Premises, (ii) asserting that (A) any such zoning, certificates of occupancy, licenses, registrations, permits, consents and/or approvals do not permit the operation of any material portion of the Realty as presently being conducted, (B) any material improvements located on the Property or any part thereof cannot be located thereon or operated with their intended use or (C) the operation of the Property or any part thereof is in violation in any material respect of any Environmental Statutes, Development Laws or other Legal Requirements or Space Leases or Property Agreements or (iii) which might (A) affect the validity or priority of

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any Loan Document or (B) have a Material Adverse Effect. Borrower has no knowledge of any facts or circumstances which could reasonably be expected to give rise to any actions, suits or proceedings described in the preceding sentence.

     (k) Utilities. The Premises has all necessary legal access to water, gas and electrical supply, storm and sanitary sewerage facilities, other required public utilities (with respect to each of the aforementioned items, by means of either a direct connection to the source of such utilities or through connections available on publicly dedicated roadways directly abutting the Premises or through permanent insurable easements benefiting the Premises), fire and police protection, parking, and means of direct access between the Premises and public highways over recognized curb cuts (or such access to public highways is through private roadways which may be used for ingress and egress pursuant to permanent insurable easements).

     (l) Mechanics’ Liens. The Property is free and clear of any mechanics’ liens or liens in the nature thereof, and no rights are outstanding that under law could give rise to any such liens, any of which liens are or may be prior to, or equal with, the lien of this Security Instrument, except those which are insured against by the title insurance policy insuring the lien of this Security Instrument.

     (m) Intentionally Omitted.

     (n) Insurance. The Property is insured in accordance with the requirements set forth in Article III hereof.

     (o) Space Leases.

     (i) Borrower has delivered a true, correct and complete schedule of all Space Leases as of the date hereof, if any, which accurately and completely sets forth in all material respects, for each such Space Lease, the following (collectively, the “Rent Roll”): the name and address of the tenant with the name, title and telephone number of the contact person of such tenant; the base rent and percentage rent payable; all additional rent and pass-through obligations; and the security deposit held thereunder and the location of such deposit.

     (ii) Each Space Lease constitutes the legal, valid and binding obligation of Borrower and, to the knowledge of Borrower, is enforceable against the tenant thereof. No default exists, or with the passing of time or the giving of notice would exist, (A) under any Major Space Lease (if any) or (B) under any other Space Leases which would, in the aggregate, have a Material Adverse Effect.

     (iii) No tenant under any Space Lease has, as of the date hereof, paid Rent more than thirty (30) days in advance, and the Rents under such Space Leases have not been waived, released, or otherwise discharged or compromised.

     (iv) All work to be performed by Borrower under the Space Leases has been substantially performed, all contributions to be made by Borrower to the tenants

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thereunder have been made except for any held-back amounts, and all other conditions precedent to each such tenant’s obligations thereunder have been satisfied.

     (v) Except as previously disclosed to Lender in writing, there are no options to terminate any Space Lease.

     (vi) Each tenant under a Major Space Lease (if any) has entered into occupancy of the demised premises to the extent required under the terms of its Major Space Lease (if any), and each such tenant is open and conducting business with the public in the demised premises. To the knowledge of Borrower, after due inquiry, each tenant under a Lease other than a Major Space Lease has entered into occupancy of its demised premises under its Lease to the extent required under the terms of its Lease.

     (vii) Borrower has delivered to Lender true, correct and complete copies of all Space Leases.

     (viii) Each Space Lease is in full force and effect and, except as previously disclosed in writing to Lender, to Borrower’s knowledge, has not (i) been assigned by the tenant thereunder, or (ii) modified, supplemented or amended in any way. Borrower has not assigned its interest in any Space Lease except pursuant to the terms hereof.

     (ix) To Borrower’s knowledge, each tenant under each Space Lease is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors.

     (x) No Space Lease provides any party with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Security Instrument.

     (p) Property Agreements.

     (i) Borrower has delivered to Lender true, correct and complete copies of all Property Agreements.

     (ii) No Property Agreement provides any party thereto with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Security Instrument.

     (iii) No default exists or with the passing of time or the giving of notice or both would exist under any Property Agreement which would, individually or in the aggregate, have a Material Adverse Effect.

     (iv) Borrower has not received or given any written communication which is outstanding which alleges that a default exists or, with the giving of notice or the lapse of time, or both, would exist under the provisions of any Property Agreement.

     (v) No condition exists whereby Borrower or any future owner of the Property may be required to purchase any other parcel of land which is subject to any Property Agreement or which gives any Person a right to purchase, or right of first refusal with

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respect to, the Property, except for a right of first refusal as set forth in the Management Agreement which is subordinate to the Security Instrument.

     (vi) To the knowledge of Borrower, no offset or any right of offset exists respecting continued contributions to be made by any party to any Property Agreement except as expressly set forth therein. Except as previously disclosed to Lender in writing, no material exclusions or restrictions on the utilization, leasing or improvement of the Property (including non-compete agreements) exists in any Property Agreement.

     (q) Personal Property. Borrower has delivered to Lender a depreciation schedule of the personal property, if any, owned by Borrower and located upon the Property or used in connection with the use or operation of the Realty which is true, correct and complete in all material respects and Borrower represents that it has good and marketable title to all such personal property, free and clear of any liens, except for liens created under the Loan Documents and liens which describe the equipment and other personal property owned by tenants.

     (r) Leasing Brokerage and Management Fees. Except as previously disclosed to Lender in writing or as set forth in the Management Agreement, there are no brokerage fees or commissions payable by Borrower with respect to the leasing of space at the Property and there are no management fees payable by Borrower with respect to the management of the Property.

     (s) Security Deposits. Borrower is in compliance with all Legal Requirements relating to such security deposits as to which failure to comply might, individually or in the aggregate, have a Material Adverse Effect.

     (t) Intentionally Omitted.

     (u) Representations Generally. The representations and warranties contained in this Security Instrument, and the review and inquiry made on behalf of Borrower therefor, have all been made by Persons having the requisite expertise and knowledge to provide such representations and warranties. No representation, warranty or statement of fact made by or on behalf of Borrower in this Security Instrument or in any certificate, document or schedule furnished to Lender pursuant hereto, contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading (which may be to Borrower’s knowledge where so provided herein). There are no facts presently known to Borrower which have not been disclosed to Lender which would, individually or in the aggregate, have a Material Adverse Effect nor as far as Borrower can reasonably foresee might, individually or in the aggregate, have a Material Adverse Effect.

     (v) Ground Leases.

     (i) Borrower is not prohibited under the Ground Lease from assigning its interest in any condemnation award which Borrower is entitled to receive pursuant to the Ground Lease.

     (ii) Borrower has the right, without approval or consent of Ground Lessor but with fifteen (15) days prior notice to Ground Lessor, to assign the Ground Lease or any

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interest therein or sublease part or all of the Premises to one or more Affiliate(s) (as defined in the Ground Lease) to the extent not prohibited by the Anti-Assignment Acts (as defined in the Ground Lease) and provided that the transferee is not an Excluded Contractor (as defined in the Ground Lease). Borrower has the right to sublease or otherwise encumber, all or any part of the Premises and encumber the Ground Lease and the leasehold estate created thereby with the consent of Ground Lessor, which consent is not permitted to be unreasonably withheld, conditioned or delayed.

     (iii) If any default by Borrower shall occur under the Ground Lease, Lender is entitled under the Ground Lease to receive notice of such default from Ground Lessor and an additional opportunity to cure any such default which is susceptible of cure by Lender, which in the case of any non-monetary default susceptible of cure by Lender, includes the right of Lender or its designee to acquire possession of the Premises by means of foreclosure of this Security Instrument or by other means and to become the lessee under the Ground Lease. Subject to the limitations set forth in Section 18.5.2 of the Ground Lease, so long as Lender has agreed to effectuate a cure and is proceeding to cure any such non-monetary default within applicable notice and grace periods and no monetary default remains uncured beyond any applicable notice and grace periods to which Borrower and Lender are entitled, Ground Lessor may not terminate the Ground Lease.

     (iv) The Ground Lease is in full force and effect and has not been modified or supplemented. The Ground Lease cannot be cancelled solely by Ground Lessor and requires Borrower’s consent for all modifications.

     (v) All rents (including additional rents and other charges) reserved for in the Ground Lease and payable prior to the date hereof have been paid.

     (vi) No party to the Ground Lease is in default of any obligation such party has thereunder and no event has occurred which, with the giving of notice or the lapse of time, or both, would constitute such a default.

     (vii) No notice or other written or oral communication has been provided to any party under the Ground Lease which alleges that, as of the date hereof, either a default exists or with the passage of time will exist under the provisions of such Ground Lease.

     (viii) If there shall be a Taking of the fee title to the Premises, subject to amounts which are applied to restoration, Borrower is entitled under the Ground Lease to receive such portion of the award for such Taking as equals the value of Borrower’s estate under the Ground Lease and improvements made by Borrower, provided, that, in the event of a Taking for a temporary period, Borrower is entitled to receive the entire amount of any award made (whether paid by way of damages, rent or otherwise), unless the period of governmental occupancy extends beyond the then remaining term of the Ground Lease, in which caase the award for the Premises shall be apportioned between Ground Lessor and Borrower as of the date of termination of the term and, in such apportionment, Ground Lessor is entitled to receive the full amount, if any, of any portion of such award, which represents compensation specifically awarded for the cost of

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restoration of the Premises at the termination of any such temporary taking. If there shall be a casualty under a Ground Lease, either there is an obligation to use insurance proceeds for a full restoration or Borrower is entitled to receive such portion of such proceeds as equals the value of the Improvements.

     (ix) Subject to Sections 15.5, 18.1 and 18.2 of the Ground Lease, the Ground Lease may be assigned from time to time with the consent of Ground Lessor, which consent is not permitted to be unreasonably withheld, conditioned or delayed.

     (x) Ground Lessor does not have the right to terminate the Ground Lease following a default by the Borrower thereunder unless Lender, after receipt of notice from Ground Lessor, fails to cure such default within the time periods provided in the Ground Lease. Provided that no monetary default under the Ground Lease remains uncured beyond any applicable notice and grace periods to which Borrower and Lender are entitled, the Ground Lease may not be terminated by Ground Lessor by reason of any default by Borrower which is not susceptible of cure by Lender and that solely arises from the status of Tenant and therefore cannot be cured by a leasehold mortgagee (as opposed to breaches relating to the condition or operation of the Premises).

     (xi) If the Ground Lease is terminated by reason of a default by Borrower, Lender or its designee is entitled under the Ground Lease to enter into a new lease (the “New Lease”) with Ground Lessor for the remainder of the term of the Ground Lease upon the same base rent and additional rent and other terms, covenants, conditions and agreements as are contained in the Ground Lease, provided, that in partial consideration for the new lease, the Lender or its designee is obligated under the Ground Lease to pay to Ground Lessor all amounts necessary to cure any breach that can be cured by the payment of money, and all monetary amounts due under the terms of the Ground Lease from the date of such termination through the date the New Lease commences, and to commence and diligently pursue the cure of any other breach as provided in Section 18.5 of the Ground Lease, and provided, further, that, Lender’s right to enter into such New Lease is subject to the Anti-Assignment Acts.

     (w) Liquor License. All licenses, permits, approvals and consents which are required for the sale and service of alcoholic beverages on the Premises have been obtained from the applicable Governmental Authorities.

     (x) Credit Card Companies. The only Credit Card Company that serves as a credit card clearing bank is Wells Fargo Merchant Services.

     Section 2.06. Removal of Lien. (a) Borrower shall, at its expense, maintain this Security Instrument as a first lien on the Property and shall keep the Property free and clear of all liens and encumbrances of any kind and nature other than the Permitted Encumbrances. Borrower shall, within ten (10) days following the filing thereof, promptly discharge of record, by bond or otherwise, any such liens and, promptly upon request by Lender, shall deliver to Lender evidence reasonably satisfactory to Lender of the discharge thereof.

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     (b) Without limitation to the provisions of Section 2.06(a) hereof, Borrower shall (i) pay, from time to time when the same shall become due, all claims and demands of mechanics, materialmen, laborers, and others which, if unpaid, could reasonably be expected to result in, or permit the creation of, a lien on the Property or any part thereof, (ii) cause to be removed of record (by payment or posting of bond or settlement or otherwise) any mechanics’, materialmens’, laborers’ or other lien on the Property, or any part thereof, or on the revenues, rents, issues, income or profit arising therefrom, and (iii) in general, do or cause to be done, without expense to Lender, everything reasonably necessary to preserve in full the lien of this Security Instrument. If Borrower fails to comply with the requirements of this Section 2.06(b), then, upon ten (10) Business Days’ prior notice to Borrower, Lender may, but shall not be obligated to, pay any such lien, and Borrower shall, within ten (10) Business Days after Lender’s demand therefor, reimburse Lender for all sums so expended, together with interest thereon at the Default Rate from the date advanced, all of which shall be deemed part of the Debt. Nothing contained herein shall be deemed a consent or request of Lender, express or implied, by inference or otherwise, to the performance of any alteration, repair or other work by any contractor, subcontractor or laborer or the furnishing of any materials by any materialmen in connection therewith.

     (c) Notwithstanding the foregoing, Borrower may contest any lien (other than a lien relating to non-payment of Impositions, the contest of which shall be governed by Section 4.04 hereof) of the type set forth in subparagraph (b)(ii) of this Section 2.06 provided that, following prior notice to Lender (i) Borrower is contesting the validity of such lien with due diligence and in good faith and by appropriate proceedings, without cost or expense to Lender or any of its agents, employees, officers, or directors, (ii) Borrower shall preclude the collection of, or other realization upon, any contested amount from the Property or any revenues from or interest in the Property, (iii) neither the Property nor any part thereof nor interest therein, shall be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (iv) such contest by Borrower shall not affect the ownership, use or occupancy of the Property, (v) such contest by Borrower shall not subject Lender, Trustee or Borrower to the risk of civil or criminal liability (other than the civil liability of Borrower for the amount of the lien in question), (vi) such lien is subordinate to the lien of this Security Instrument, (vii) Borrower has not consented to such lien, (viii) Borrower has given Lender prompt notice of the filing of such lien and the bonding thereof by Borrower and, upon request by Lender from time to time, notice of the status of such contest by Borrower and/or confirmation of the continuing satisfaction of the conditions set forth in this Section 2.06(c), (ix) Borrower shall promptly pay the obligation secured by such lien upon a final determination of Borrower’s liability therefor, and (x) Borrower shall deliver to Lender cash, a bond or other security acceptable to Lender equal to 125% of the contested amount pursuant to collateral arrangements reasonably satisfactory to Lender.

     Section 2.07. Cost of Defending and Upholding this Security Instrument Lien. If any action or proceeding is commenced to which Lender or Trustee is made a party relating to the Loan Documents and/or the Property or Lender’s or Trustee’s interest therein or in which it becomes necessary to defend or uphold the lien of this Security Instrument or any other Loan Document, Borrower shall, on written demand, reimburse Lender and/or Trustee, as applicable, for all expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Lender and/or Trustee, as applicable, in connection therewith, and such sum,

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together with interest thereon at the Default Rate from and after such demand until fully paid, shall constitute a part of the Debt.

     Section 2.08. Use of the Property. Borrower will use, or cause to be used, the Property for such use as is permitted pursuant to the Ground Lease and applicable Legal Requirements including, without limitation, under the certificate of occupancy applicable to the Property, and which is required by the Loan Documents. Borrower shall not suffer or permit the Property or any portion thereof to be used by the public, any tenant, or any Person not subject to a Lease, in a manner as is reasonably likely to impair Borrower’s title to the Property, or in such manner as may give rise to a claim or claims of adverse usage or adverse possession by the public, or of implied dedication of the Property or any part thereof.

     Section 2.09. Financial Reports. (a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender) consistently applied, proper and accurate books, tax returns, records and accounts reflecting (i) all of the financial affairs of Borrower and Guarantor and (ii) all items of income and expense in connection with the operation of the Property or in connection with any services, equipment or furnishings provided in connection with the operation thereof, whether such income or expense may be realized by Borrower or by any other Person whatsoever, excepting lessees unrelated to and unaffiliated with Borrower who have leased from Borrower portions of the Premises for the purpose of occupying the same. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, tax returns, records and accounts at the office of Borrower or other Person maintaining such books, tax returns, records and accounts and to make such copies or extracts thereof as Lender shall desire, provided that (i) Borrower shall have a right to have a representative present at all times and (ii) Lender shall do so in a manner so as to avoid disruption to the operation of the Hotel or to Manager’s management thereof. After the occurrence and during the continuation of an Event of Default, Borrower shall pay any reasonable costs and expenses incurred by Lender to examine Borrower’s and Guarantor’s accounting records with respect to the Property, as Lender shall determine to be necessary or appropriate in the protection of Lender’s interest.

     (b) Borrower will furnish Lender (i) annually, within one hundred twenty (120) days following the end of each Fiscal Year of Borrower and Guarantor and (ii) on a quarterly basis, within forty-five (45) days following the end of each fiscal quarter of Borrower, with a complete copy of Borrower’s financial statement consistently applied covering (i) all of the financial affairs of Borrower and Guarantor, as applicable, and (ii) the operation of the Property for such Fiscal Year or fiscal quarters, as applicable, and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower’s equity. Each annual financial statement of Guarantor shall be audited by an Independent certified public accountant that is reasonably acceptable to Lender in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender). Together with the financial statements required to be furnished pursuant to this Section 2.09(b), Borrower shall furnish to Lender (A) an Officer’s Certificate certifying as of the date thereof (1) that the financial statements accurately represent the results of operations and financial condition of Borrower, Guarantor, if applicable, and the Property all in accordance with GAAP and The

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Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender) consistently applied, provided that Lender acknowledges that Borrower’s quarterly financial statements do not include any footnote disclosures, and (2) whether there exists a Default under the Note or any other Loan Document executed and delivered by Borrower, and if such event or circumstance exists, the nature thereof, the period of time it has existed and the action then being taken to remedy such event or circumstance and (B) upon request of Lender with the financial statements delivered pursuant to Section 2.09(b)(ii) above, a statement showing (1) the Adjusted Net Income (subject to verification by Lender in its reasonable discretion) and (2) the calculation of the Debt Service Coverage.

     (c) When requested by Lender, Borrower will furnish Lender monthly, within thirty (30) days following the end of each month, with a true, complete and correct income and expense statement with respect to the Property in the form attached hereto as Exhibit C and made a part hereof calculated on an accrual basis, showing (i) all income and expenses with respect to the Property and (ii) year-to-date summaries of such cash receipts, payments and disbursements, together with a certification of Borrower stating that such income and expense statement is true, complete and correct in all material respects and a list of all litigation and proceedings affecting Borrower or the Property in which the amount involved is $500,000 or more, if not covered by insurance (or $1,000,000 or more whether or not covered by insurance). Lender hereby agrees and acknowledges that the form of cash flow statement used by Borrower as of the Closing Date and attached as Exhibit C shall be satisfactory to Lender which Lender agrees and acknowledges may not be in accordance with GAAP.

     (d) Intentionally Omitted.

     (e) Borrower will furnish Lender annually, to the extent not included in any other annual report delivered by Borrower to Lender within twenty (20) days following the end of each year and within twenty (20) days following receipt of such request therefor, with a true, complete and correct rent roll for the Property, including a list of which tenants are in default under their respective Leases, dated as of the date of Lender’s request, identifying each tenant, the monthly rent and additional rent, if any, payable by such tenant, the expiration date of such tenant’s Lease, the security deposit, if any, held by Borrower under the Lease, the space covered by the Lease, each tenant that has filed a bankruptcy, insolvency, or reorganization proceeding since delivery of the last such rent roll, and the arrearages for such tenant, if any, and , if requested by Lender, a summary of the material terms of the Leases, including, without limitation, the dates of occupancy, the dates of expiration, any Rent concessions, work obligations or other inducements granted to the tenants thereunder, and any renewal options, and such rent roll shall be accompanied by an Officer’s Certificate, dated as of the date of the delivery of such rent roll, certifying that such rent roll is true, correct and complete in all material respects as of its date.

     (f) Borrower shall furnish to Lender, within thirty (30) days after Lender’s request therefor, with such further detailed information with respect to the operation of the Property and the financial affairs of Borrower as may be reasonably requested by Lender.

     (g) To the extent any security deposits with respect to the Space Leases is then held by Manager or Borrower, Borrower shall cause Manager to furnish to Lender, within thirty (30) days following the end of each year and within thirty (30) days of Lender’s request, provided

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that Lender may not make more than two (2) requests per year unless an Event of Default exists, in which event no such limit shall apply, a schedule of tenant security deposits for such month, together with a statement of Manager as to the amount of any security deposits and that such tenant security deposits are being held in accordance with all Legal Requirements.

     (h) Borrower will furnish Lender annually, within one hundred twenty (120) days after the end of each Fiscal Year, with a report setting forth (i) the Net Operating Income for such Fiscal Year, (ii) the average occupancy rate of the Property during such Fiscal Year, (iii) the capital repairs, replacements and improvements performed at the Property during such Fiscal Year and the aggregate Recurring Replacement Expenditures made in connection therewith, and (iv) the balance contained in each of the Escrow Accounts as of the end of such Fiscal Year (which balance Lender shall provide upon Borrower’s written request therefor).

     (i) Intentionally Omitted.

     (j) Borrower will furnish Lender monthly, within thirty (30) days following the end of each month, or with respect to STR Reports, within sixty (60) days following the end of each month, an occupancy summary for the Property setting forth the occupancy rates, average daily room rates, RevPAR Yield Index (to the extent available), RevPAR (to the extent available) and room revenues for each month of the preceding calendar year, as well as annual averages of the same, and, if requested by Lender, advance booking information (excluding customer names) and such other information as may customarily be reflected thereon or reasonably requested by Lender, together with all franchise inspection reports and STR Reports received by Borrower during the preceding month.

     (k) Borrower shall and shall cause Guarantor to furnish to Lender annually, within ninety (90) days after the end of each Fiscal Year, a statement of net worth of the Guarantor.

     (l) Borrower shall submit to Lender an Annual Budget not later than thirty (30) days prior to the commencement of each Fiscal Year or, with respect to the Fiscal Year in which the Closing Date occurs, within sixty (60) days of the Closing Date, in form reasonably satisfactory to Lender setting forth in reasonable detail budgeted monthly operating income and monthly operating capital and other expenses for the Property. Each Annual Budget shall contain, among other things, management fees, third party service fees, and other expenses as Borrower may reasonably determine.

     (m) In the event that Borrower fails to deliver any of the financial statements, reports or other information required to be delivered to Lender pursuant to this Section 2.09 on or prior to their due dates, if any such failure shall continue for ten (10) days following notice thereof from Lender, Borrower shall pay to Lender an administrative fee in the amount of One Thousand Dollars ($1,000) for each due date with respect to which such a failure occurs (and not on a per-item basis). Borrower agrees that such administrative fee (i) is a fair and reasonable fee necessary to compensate Lender for its additional administrative costs and increased costs relating to Borrower’s failure to deliver the aforementioned statements, reports or other items as and when required hereunder and (ii) is not a penalty.

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     Section 2.10. Litigation. Borrower will give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened (in writing) against Borrower which could reasonably have a Material Adverse Effect.

     Section 2.11. Updates of Representations. Borrower shall deliver to Lender within ten (10) Business Days of the request of Lender an Officer’s Certificate updating all of the representations and warranties contained in this Security Instrument and the other Loan Documents and certifying that all of the representations and warranties contained in this Security Instrument and the other Loan Documents, as updated pursuant to such Officer’s Certificate, are true, accurate and complete as of the date of such Officer’s Certificate or shall set forth the exceptions to representations and/or warranties in reasonable detail, as applicable, and, upon Lender’s request for further information with respect to such exceptions, shall provide Lender such additional information as Lender may reasonably request. Notwithstanding the foregoing, provided that no Event of Default has occurred and is continuing, Borrower shall not be required to deliver the foregoing Officer’s Certificate more than three (3) times during the term of the Loan and, subsequent to a Securitization, in no event more than one (1) time in any calendar year.

     Section 2.12. Ground Lease. (a) Borrower will comply in all material respects with the terms and conditions of the Ground Lease. Borrower will not do or permit anything to be done, the doing of which, or refrain from doing anything, the omission of which, will impair or tend to impair the security of the Premises under the Ground Lease or will be grounds for declaring a forfeiture of the Ground Lease.

     (b) Borrower shall enforce the Ground Lease and will not terminate, modify, cancel, change, supplement, alter or amend the Ground Lease, or waive, excuse, condone or in any way release or discharge Ground Lessor of or from any of the material covenants and conditions to be performed or observed by Ground Lessor. Borrower does hereby bargain, sell, assign and set over to Lender, all of Borrower’s interests in the Ground Lease. The assignment of Borrower’s interest set forth in this Section 2.12(b) is an absolute, unconditional and present assignment from Borrower to Lender and not an assignment for security and the existence or exercise of Borrower’s revocable license to take all actions with respect to the Ground Lease shall not operate to subordinate this assignment to any subsequent assignment. The exercise by Lender of any of its rights or remedies pursuant to this Section 2.12(b) shall not be deemed to make Lender a mortgagee-in-possession. So long as there is no existing or continuing Event of Default, Borrower shall have a revocable license to take all actions with respect to the Ground Lease subject to the terms of this Security Instrument. Any surrender of the leasehold estate created by the Ground Lease or termination, cancellation, modification, change, supplement, alteration or amendment of the Ground Lease without the prior written consent of Lender shall be void and of no force and effect.

     (c) Lender shall have the right, but not the obligation, to perform any obligations of Borrower under the terms of the Ground Lease during the continuance of an Event of Default. All costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) so incurred, shall be treated as an advance secured by this Security Instrument, shall bear interest thereon at the Default Rate from the date of payment by Lender until paid in full and shall be

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paid by Borrower to Lender during the continuance of an Event of Default within five (5) Business Days after demand. No performance by Lender of any obligations of Borrower shall constitute a waiver of any Event of Default arising by reason of Borrower’s failure to perform the same. If Lender shall make any payment or perform any act or take action in accordance with this Section 2.12(c), Lender will notify Borrower of the making of any such payment, the performance of any such act, or the taking of any such action. In any such event, subject to the rights of lessees, sublessees and other occupants under the Leases, Lender and any Person designated by Lender shall have, and are hereby granted, the right to enter upon the Property at any time and from time to time for the purpose of taking any such action.

     (d) To the extent permitted by law, the price payable by Borrower or any other Person in the exercise of any right of redemption following foreclosure of the Property shall include all rents paid and other sums advanced by Lender on behalf of Borrower, together with interest thereon at the Default Rate.

     (e) Unless Lender shall otherwise consent, the fee title and the leasehold estate in the Premises shall not merge but shall always be kept separate and distinct, notwithstanding the union of said estates either in Ground Lessor or in Borrower, or in a third party, by purchase or otherwise.

     (f) If the Ground Lessor shall deliver to Lender a copy of any notice of default sent by the Ground Lessor to Borrower, as tenant under the Ground Lease, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender, in good faith in accordance with this Security Instrument, in reliance thereon.

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

     (h) Each Space Lease hereafter made and each renewal of any existing Space Lease shall provide that, in the event of any action for the foreclosure of this Security Instrument, such Space Lease shall not terminate or be terminable by the lessee by reason of the termination of the Ground Lease unless the lessee is specifically named and joined in any such action and unless a judgment is obtained therein against the lessee.

     (i) Borrower hereby assigns, transfers and sets over to Lender all of Borrower’s claims and rights to the payment of damages arising from any rejection by the Ground Lessor of the Ground Lease under the Bankruptcy Code. Borrower shall notify Lender promptly (and in any event within ten (10) days) of any claim, suit, action or proceeding relating to the rejection of the Ground Lease. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact,

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coupled with an interest, with exclusive power to file and prosecute, to the exclusion of Borrower, any proofs of claim, complaints, motions, applications, notices and other documents, in any case in respect of the Ground Lessor under the Bankruptcy Code during the continuance of an Event of Default. Borrower may make any compromise or settlement in connection with such proceedings (subject to Lender’s reasonable approval); provided, however, that Lender shall be authorized and entitled to compromise or settle any such proceeding if such compromise or settlement is made after the occurrence and during the continuance of an Event of Default. Borrower shall promptly execute and deliver to Lender any and all instruments reasonably required in connection with any such proceeding after request therefor by Lender. Except as set forth above, Borrower shall not adjust, compromise, settle or enter into any agreement with respect to such proceedings without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed.

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

     (k) If pursuant to Section 365(h)(2) of the Bankruptcy Code, Borrower seeks to offset against the rent reserved in the Ground Lease the amount of any damages caused by the non-performance by the Ground Lessor of any of the Ground Lessor’s obligations under the Ground Lease after the rejection by the Ground Lessor of the Ground Lease under the Bankruptcy Code, Borrower shall, prior to effecting such offset, notify Lender of its intention to do so, setting forth the amounts proposed to be so offset and the basis therefor. If Lender has failed to object as aforesaid within ten (10) days after notice from Borrower in accordance with the first sentence of this Section 2.12(k), Borrower may proceed to effect such offset in the amounts set forth in Borrower’s notice. Neither Lender’s failure to object as aforesaid nor any objection or other communication between Lender and Borrower relating to such offset shall constitute an approval of any such offset by Lender. Borrower shall indemnify and save Lender harmless from and against any and all claims, demands, actions, suits, proceedings, damages, losses, costs and expenses of every nature whatsoever (including, without limitation, reasonable attorneys’ fees and disbursements) arising from or relating to any such offset by Borrower against the rent reserved in the Ground Lease.

     (l) Borrower shall immediately, after obtaining knowledge thereof, notify Lender of any filing by or against the Ground Lessor of a petition under the Bankruptcy Code. Borrower shall thereafter forthwith give written notice of such filing to Lender, setting forth any information available to Borrower as to the date of such filing, the court in which such petition was filed, and the relief sought therein. Borrower shall promptly deliver to Lender following receipt any and all notices, summonses, pleadings, applications and other documents received by Borrower in connection with any such petition and any proceedings relating thereto.

     (m) If there shall be filed by or against Borrower a petition under the Bankruptcy Code, and Borrower, as the tenant under the Ground Lease, shall determine to reject the Ground Lease pursuant to Section 365(a) of the Bankruptcy Code, then Borrower shall give Lender not less than ten (10) days prior notice of the date on which Borrower shall apply to the bankruptcy court for authority to reject the Ground Lease. Lender shall have the right, but not the obligation,

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to serve upon Borrower within such 10-day period a notice stating that (i) Lender demands that Borrower assume and assign the Ground Lease to Lender pursuant to Section 365 of the Bankruptcy Code and (ii) Lender covenants to cure or provide adequate assurance of prompt cure of all defaults and provide adequate assurance of future performance under the Ground Lease. If Lender serves upon Borrower the notice described in the preceding sentence, Borrower shall not seek to reject the Ground Lease and shall comply with the demand provided for in clause (i) of the preceding sentence within thirty (30) days after the notice shall have been given, subject to the performance by Lender of the covenant provided for in clause (ii) of the preceding sentence.

     (n) Effective upon the entry of an order for relief in respect of Borrower under the Bankruptcy Code, Borrower hereby assigns and transfers to Lender a non-exclusive right to apply to the appropriate bankruptcy court under Section 365(d)(4) of the Bankruptcy Code for an order extending the period during which the Ground Lease may be rejected or assumed.

     (o) Borrower will give Lender prompt (and in all events within five (5) Business Days) notice of any default under the Ground Lease or of the receipt by Borrower of any notice of default from Ground Lessor. Borrower will promptly (and in all events within (5) Business Days) furnish to Lender copies of all information furnished to Ground Lessor by the terms of the Ground Lease or the provisions of this Section 2.12. Borrower will deposit with Lender an exact copy of any notice, communication, plan, specification or other instrument or document received or given by Borrower in any way relating to or affecting the Ground Lease which may concern or affect the estate of Ground Lessor or Borrower thereunder in or under the Ground Lease or in the real estate thereby demised.

     (p) Upon acquisition of the fee title or any other estate, title or interest in the Premises by Borrower, this Security Instrument shall, automatically and without the necessity of execution of any other documents, attach to and cover and be a lien upon such other estate so acquired, and such other estate shall be considered as mortgaged, assigned and conveyed to Lender and the lien hereof spread to cover such estate with the same force and effect as though specifically herein mortgaged, assigned and conveyed. The provisions of this subsection shall not apply if Lender acquires title to the Premises unless Lender shall so elect.

ARTICLE III: INSURANCE AND CASUALTY RESTORATION

     Section 3.01. Insurance Coverage. Borrower shall, at its expense, maintain the following insurance coverages with respect to the Property during the term of this Security Instrument:

(a) (i) Insurance against loss or damage by fire, casualty and other hazards included in an “all-risk” coverage endorsement or its equivalent (which, in the case of insurance during the time of any construction work (“Construction”) shall be in “builder’s risk completed value non-reporting form” together with rents, earnings and extra expense insurance covering loss due to delay in completion of the Improvements), with such endorsements as Lender may from time to time reasonably require and which are customarily required by Institutional Lenders of similar properties similarly situated, including, without limitation, if the Property constitutes a legal non-conforming use, an ordinance of law coverage endorsement which contains “Demolition Cost”, “Loss Due to

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Operation of Law” and “Increased Cost of Construction” coverages, covering the Property in an amount not less than the greater of (A) 100% of the insurable replacement value of the Property (exclusive of the Premises and footings and foundations) and (B) such other amount as is necessary to prevent any reduction in such policy by reason of and to prevent Borrower, Lender or any other insured thereunder from being deemed to be a co-insurer. Not less frequently than once every three (3) years, Borrower, at its option, shall either (A) have the Appraisal updated or obtain a new appraisal of the Property, (B) have a valuation of the Property made by or for its insurance carrier conducted by an appraiser experienced in valuing properties of similar type to that of the Property which are in the geographical area in which the Property is located or (C) provide such other evidence as will, in Lender’s sole judgment, enable Lender to determine whether there shall have been an increase in the insurable value of the Property and Borrower shall deliver such updated Appraisal, new appraisal, insurance valuation or other evidence acceptable to Lender, as the case may be, and, if such updated Appraisal, new appraisal, insurance valuation, or other evidence acceptable to Lender reflects an increase in the insurable value of the Property, the amount of insurance required hereunder shall be increased accordingly and Borrower shall deliver evidence satisfactory to Lender that such policy has been so increased.

     (ii) Commercial general liability insurance against claims for personal and bodily injury and/or death to one or more persons or property damage, occurring on, in or about the Property (including the adjoining streets, sidewalks and passageways therein) in such amounts as Lender may from time to time reasonably require (but in no event shall Lender’s requirements be increased more frequently than once during each twelve (12) month period) and which are customarily required by Institutional Lenders for similar properties similarly situated, but not less than $1,000,000 per occurrence and $2,000,000 general aggregate on a per location basis and, in addition thereto, not less than $25,000,000 excess and/or umbrella liability insurance shall be maintained for any and all claims.

     (iii) Business interruption, rent loss or other similar insurance with an unlimited restoration period (A) with loss payable to Lender, (B) covering all risks required to be covered by the insurance provided for in Section 3.01(a)(i) hereof and (C) in an amount not less than 100% of the projected total revenues derived from the Property for the succeeding eighteen (18) month period based on an occupancy rate taking into account historical and projected occupancy. The amount of such insurance shall be determined upon the execution of this Security Instrument, and not more frequently than once each calendar year thereafter based on Borrower’s reasonable estimate of projected total revenues derived from the Property for the next succeeding eighteen (18) months together with an eighteen (18) month extended period of indemnity. In the event the Property shall be damaged or destroyed, Borrower shall and hereby does assign to Lender all payment of claims under the policies of such insurance, and all amounts payable thereunder, and all net amounts, shall be collected by Lender under such policies and shall be applied in accordance with this Security Instrument; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to timely pay all amounts due under the Loan Documents.

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     (iv) Intentionally omitted.

     (v) Insurance against loss or damages from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, pressure vessels or similar apparatus now or hereafter installed at the Property, in such amounts as Lender may from time to time reasonably require and which are then customarily required by Institutional Lenders of similar properties similarly situated, but in no event less than $25,000,000.

     (vi) Flood insurance in an amount equal to the full insurable value of the Property or the maximum amount available, whichever is less, if the Improvements are located in an area designated by the Secretary of Housing and Urban Development as being “an area of special flood hazard” under the National Flood Insurance Program (i.e., having a one percent or greater chance of flooding), and if flood insurance is available under the National Flood Insurance Act.

     (vii) Worker’s compensation insurance or other similar insurance which may be required by Governmental Authorities or Legal Requirements.

     (viii) Insurance against loss resulting from mold, spores or fungus on or about the Premises to the extent maintained as of the Closing Date.

     (ix) (A) During any period of the term of the Loan that the Terrorism Risk Insurance Extension Act of 2005 (“TRIA”) is in effect in substantially the same form as its current form, if “acts of terrorism” or other similar acts or events are hereafter excluded from Borrower’s comprehensive all risk insurance policy (including business interruption, rent loss or similar insurance coverage), Borrower shall obtain an endorsement to such policy, or a separate policy insuring against all “certified acts of terrorism” as defined by TRIA and “fire following”, each in an amount equal to one hundred percent (100%) of the “Full Replacement Cost,” which for purposes of the Security Instrument shall mean actual replacement value (exclusive of the Premises, footings and foundations) with a waiver of depreciation; and

           (B) during any period of the term of the Loan that TRIA is not in effect, if “acts of terrorism” or other similar acts or events or “fire following” are hereafter excluded from Borrower’s comprehensive all risk insurance policy or business interruption insurance coverage, Borrower shall obtain an endorsement to such policy, or a separate policy insuring against all such excluded acts or events, to the extent such policy or endorsement is available, in an amount determined by Lender in its sole discretion (but in no event greater than the total insurable value plus required business interruption, rent loss or similar coverage); provided, however, Borrower shall not be required to pay annual premiums for the insurance required pursuant to this Section 3.01(a)(ix) in excess of three (3) times the premium as of the Closing Date for the insurance required pursuant to this Section 3.01(a)(ix) for such coverage.

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     (x) At all times during Construction, contractor’s liability insurance to a limit of not less than $25,000,000 on a per occurrence basis covering each contractor’s construction operation at the Premises.

     (xi) Such other insurance as may from time to time be required by Lender and which is then customarily required by Institutional Lenders for similar properties similarly situated, against other insurable hazards, including, but not limited to, war risk, malicious mischief, vandalism, sinkhole and mine subsidence, earthquake (in an amount equal to the probable maximum loss multiplied by the insurable replacement value of the Property (exclusive of the Premises and footings and foundations)) and/or windstorm, due regard to be given to the size and type of the Premises, Improvements, Fixtures and Equipment and their location, construction and use.

     (xii) If Borrower, any of its Affiliates or Manager holds a liquor license for the Premises, liquor liability insurance in the amount of no less than $10,000,000.

     (xiii) Automobile liability insurance covering owned, hired and not owned vehicles in an amount of not less than $1,000,000 per accident.

     (b) Notwithstanding anything set forth herein, Lender hereby acknowledges that the insurance coverage maintained by Borrower is, as of the Closing Date, acceptable to Lender and shall, as of the Closing Date, be deemed to comply with the provisions hereof.

     (c) Borrower shall cause any Manager of the Property to maintain fidelity insurance in an amount equal to Five Hundred Thousand Dollars ($500,000).

     Section 3.02. Policy Terms. (a) All insurance required by this Article III shall be in the form (other than with respect to Sections 3.01(a)(vi) and (vii) above when insurance in those two sub-sections is placed with a governmental agency or instrumentality on such agency’s forms) and amount and with deductibles as, from time to time, shall be reasonably acceptable to Lender, under valid and enforceable policies issued by financially responsible insurers authorized to do business in the State where the Property is located, with a general policyholder’s service rating of not less than A and a financial rating of not less than XIII as rated in the most currently available Best’s Insurance Reports (or the equivalent, if such rating system shall hereafter be altered or replaced) and shall have a claims paying ability rating and/or financial strength rating, as applicable, of not less than “AA” (or its equivalent), or such lower claims paying ability rating and/or financial strength rating, as applicable, as Lender shall, in its sole and absolute discretion, consent to, from a Rating Agency (one of which after a Securitization in which Standard & Poor’s rates any securities issued in connection with such Securitization, shall be Standard & Poor’s). Originals or certified copies of all insurance policies shall be delivered to and held by Lender. All such policies (except policies for worker’s compensation) shall name Lender, its successors and/or assigns as an additional named insured, with respect to the insurance required pursuant to Section 3.01(a)(iii) above, shall provide for loss payable to Lender, its successors and/or assigns and shall contain (or have attached): (i) standard “non-contributory mortgagee” endorsement or its equivalent relating, inter alia, to recovery by Lender notwithstanding the negligent or willful acts or omissions of Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an endorsement indicating that neither Lender nor Borrower shall be or be deemed

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to be a co-insurer with respect to any casualty risk insured by such policies and shall provide for a deductible per loss of an amount not more than $10,000, and (iv) a provision that such policies shall not be canceled, terminated, denied renewal or amended, including, without limitation, any amendment reducing the scope or limits of coverage, without at least thirty (30) days’ prior written notice to Lender in each instance. Not less than thirty (30) days, or, with respect to non-payment of premiums, ten (10) days, prior to the expiration dates of the insurance policies obtained pursuant to this Security Instrument, originals or certified copies of renewals of such policies (or certificates evidencing such renewals) bearing notations evidencing the payment of premiums or accompanied by other reasonable evidence of such payment (which premiums shall not be paid by Borrower through or by any financing arrangement which would entitle an insurer to terminate a policy unless Borrower has on deposit in the Basic Carrying Costs Escrow Account an amount, as reasonably determined by Lender, equal to not less than one-fourth of the annual insurance premium with respect to the insurance required by this Article III) shall be delivered by Borrower to Lender. Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Article III.

     (b) If Borrower fails to maintain and deliver to Lender the original policies or certificates of insurance required by this Security Instrument, or if there are insufficient funds in the Basic Carrying Costs Escrow Account to pay the premiums for same, Lender may, at its option, following five (5) days written notice to Borrower, procure such insurance, and Borrower shall pay, or as the case may be, reimburse Lender for, all premiums thereon promptly, upon demand by Lender, with interest thereon at the Default Rate from the date paid by Lender to the date of repayment and such sum shall constitute a part of the Debt.

     (c) Borrower shall notify Lender of the renewal premium of each insurance policy and, if an Event of Default has occurred and is then continuing, Lender shall be entitled to pay such amount on behalf of Borrower from the Basic Carrying Costs Escrow Account.

     (d) The insurance required by this Security Instrument may, at the option of Borrower, be effected by blanket and/or umbrella policies issued to Borrower covering the Property provided that, in each case, the policies otherwise comply with the provisions of this Security Instrument and allocate to the Property, from time to time (but in no event less than once a year), the coverage specified by this Security Instrument, without possibility of reduction or coinsurance by reason of, or damage to, any other property (real or personal) named therein. If the insurance required by this Security Instrument shall be effected by any such blanket or umbrella policies, Borrower shall furnish to Lender (i) original policies or certified copies thereof, or an original certificate of insurance together with reasonable access to the original of such policy to review such policy’s coverage of the Property, with schedules attached thereto showing the amount of the insurance provided under such policies applicable to the Property and (ii) an Officer’s Certificate setting forth (A) the number of properties covered by such policy, (B) the location by city (if available, otherwise, county) and state of the properties, (C) the average square footage of the properties, (D) a brief description of the typical construction type included in the blanket policy and (E) such other information as Lender may reasonably request.

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     Section 3.03. Assignment of Policies. (a) Borrower hereby assigns to Lender the proceeds of all insurance (other than worker’s compensation and liability insurance) obtained pursuant to this Security Instrument, all of which proceeds shall be payable to Lender as collateral and further security for the payment of the Debt and the performance of Borrower’s obligations hereunder and under the other Loan Documents, and Borrower hereby authorizes and directs the issuer of any such insurance to make payment of such proceeds directly to Lender. Except as otherwise expressly provided in Section 3.04 or elsewhere in this Article III, Lender shall have the option, in its discretion, and without regard to the adequacy of its security, to apply all or any part of the proceeds it may receive pursuant to this Article in such manner as Lender may elect to any one or more of the following: (i) the payment of the Debt, whether or not then due, in any proportion or priority as Lender, in its discretion, may elect, (ii) the repair or restoration of the Property, (iii) the cure of any Default or (iv) the reimbursement of the costs and expenses of Lender incurred pursuant to the terms hereof in connection with the recovery of the Insurance Proceeds. Nothing herein contained shall be deemed to excuse Borrower from repairing or maintaining the Property as provided in this Security Instrument or restoring all damage or destruction to the Property, regardless of the sufficiency of the Insurance Proceeds, and the application or release by Lender of any Insurance Proceeds shall not cure or waive any Default or notice of Default.

     (b) In the event of the foreclosure of this Security Instrument or any other transfer of title or assignment of all or any part of the Property in extinguishment, in whole or in part, of the Debt, all right, title and interest of Borrower in and to all policies of insurance required by this Security Instrument shall inure to the benefit of the successor in interest to Borrower or the purchaser of the Property. If, prior to the receipt by Lender of any proceeds, the Property or any portion thereof shall have been sold on foreclosure of this Security Instrument or by deed in lieu thereof or otherwise, or any claim under such insurance policy arising during the term of this Security Instrument is not paid until after the extinguishment of the Debt, and Lender shall not have received the entire amount of the Debt outstanding at the time of such extinguishment, whether or not a deficiency judgment on this Security Instrument shall have been sought or recovered or denied, then, the proceeds of any such insurance to the extent of the amount of the Debt not so received, shall be paid to and be the property of Lender, together with interest thereon at the Default Rate, and the reasonable attorney’s fees, costs and disbursements incurred by Lender in connection with the collection of the proceeds which shall be paid to Lender and Borrower hereby assigns, transfers and sets over to Lender all of Borrower’s right, title and interest in and to such proceeds. Notwithstanding any provisions of this Security Instrument to the contrary, Lender shall not be deemed to be a trustee or other fiduciary with respect to its receipt of any such proceeds, which may be commingled with any other monies of Lender; provided, however, that Lender shall use such proceeds for the purposes and in the manner permitted by this Security Instrument. Any proceeds deposited with Lender shall be held by Lender in an interest-bearing account, but Lender makes no representation or warranty as to the rate or amount of interest, if any, which may accrue on such deposit and shall have no liability in connection therewith. Interest accrued, if any, on the proceeds shall be deemed to constitute a part of the proceeds for purposes of this Security Instrument. The provisions of this Section 3.03(b) shall survive the termination of this Security Instrument by foreclosure, deed in lieu thereof or otherwise as a consequence of the exercise of the rights and remedies of Lender hereunder after a Default.

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Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to or destruction of the Property, Borrower shall give prompt written notice to Lender (which notice shall set forth Borrower’s good faith estimate of the cost of repairing or restoring such damage or destruction, or if Borrower cannot reasonably estimate the anticipated cost of restoration, Borrower shall nonetheless give Lender prompt notice of the occurrence of such damage or destruction, and will diligently proceed to obtain estimates to enable Borrower to quantify the anticipated cost and time required for such restoration, whereupon Borrower shall promptly notify Lender of such good faith estimate) and, provided that restoration does not violate any Legal Requirements, Borrower shall promptly commence and diligently prosecute to completion the repair, restoration or rebuilding of the Property so damaged or destroyed to a condition such that the Property shall be at least equal in value to that immediately prior to the damage to the extent practicable, in full compliance with all Legal Requirements and the provisions of all Leases, and in accordance with Section 3.04(b) below. Such repair, restoration or rebuilding of the Property are sometimes hereinafter collectively referred to as the “Work”.

     (ii) Borrower shall not adjust, compromise or settle any claim for Insurance Proceeds without the prior written consent of Lender, which shall not be unreasonably withheld or delayed and Lender shall have the right, at Borrower’s sole cost and expense, to participate in any settlement or adjustment of Insurance Proceeds; provided, however, that, except during the continuance of an Event of Default, Lender’s consent shall not be required with respect to the adjustment, compromising or settlement of any claim for Insurance Proceeds in an amount less than $500,000.

     (iii) Subject to Section 3.04(a)(iv), Lender shall apply any Insurance Proceeds which it may receive towards the Work in accordance with Section 3.04(b) and the other applicable sections of this Article III.

     (iv) If (A) an Event of Default shall have occurred and be continuing, (B) Lender is not reasonably satisfied that the Debt Service Coverage, within eighteen (18) months after substantial completion of the Work, will be at least equal to the Required Debt Service Coverage, (C) the cost of restoration exceeds more than thirty percent (30%) of the reasonably estimated fair market value of the Property immediately prior to the applicable damage or destruction is damaged or destroyed, (D) Lender is not reasonably satisfied that the Work can be completed six (6) months prior to Maturity, or (E) Lender is not reasonably satisfied that the Work can be completed within fifteen (15) months of the damage to or destruction of the Property (each, a “Substantial Casualty”), Lender shall have the option, in its sole discretion to apply any Insurance Proceeds it may receive pursuant to this Security Instrument (less any cost to Lender of recovering and paying out such proceeds incurred pursuant to the terms hereof and not otherwise reimbursed to Lender, including, without limitation, reasonable attorneys’ fees and expenses) to the payment of the Debt, without any prepayment fee or charge of any kind, or to allow such proceeds to be used for the Work pursuant to the terms and subject to the conditions of Section 3.04(b) hereof and the other applicable sections of this Article III.

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     (v) In the event that Lender elects or is obligated hereunder to allow Insurance Proceeds to be used for the Work, any excess proceeds remaining after completion of such Work shall be held by Lender as additional collateral for the Loan and, if the Debt Service Coverage is 1.2:1.0 or greater for two (2) consecutive calendar quarters at any time subsequent to the completion of the Work, and a Default does not exist, shall, at the request of Borrower be disbursed to Borrower.

     (b) If any Condemnation Proceeds in accordance with Section 6.01(a), or any Insurance Proceeds in accordance with Section 3.04(a), are to be applied to the repair, restoration or rebuilding of the Property, then such proceeds shall be deposited into a segregated interest-bearing bank account at the Bank (and the interest accrued thereon shall accrue to the benefit of Borrower), which shall be an Eligible Account, held by Lender and shall be paid out from time to time to Borrower as the Work progresses (less any cost to Lender of recovering and paying out such proceeds, including, without limitation, reasonable attorneys’ fees and costs allocable to inspecting the Work and the plans and specifications therefor) subject to Section 5.13 hereof and to all of the following conditions:

     (i) An Independent architect or engineer selected by Borrower and reasonably acceptable to Lender (an “Architect” or “Engineer”) or a Person (which Lender acknowledges may be personnel employed by Borrower or an Affiliate thereof experienced in such matters) otherwise reasonably acceptable to Lender, shall have delivered to Lender a certificate estimating the cost of completing the Work, and, if the amount set forth therein is more than the sum of the amount of Insurance Proceeds then being held by Lender in connection with a casualty and amounts agreed to be paid as part of a final settlement under the insurance policy upon or before completion of the Work, Borrower shall have delivered to Lender (A) cash collateral in an amount equal to such excess, (B) an unconditional, irrevocable, clean sight draft letter of credit, in form, substance and issued by a bank reasonably acceptable to Lender, in the amount of such excess and draws on such letter of credit shall be made by Lender to make payments pursuant to this Article III following exhaustion of the Insurance Proceeds therefor, (C) a completion bond in form, substance and issued by a surety company reasonably acceptable to Lender, or (D) other evidence reasonably satisfactory to Lender that any such excess shall be provided by Borrower.

     (ii) If the cost of the Work is reasonably estimated by an Architect or Engineer in a certification reasonably acceptable to Lender to be equal to or exceed five percent (5%) of the Loan Amount, such Work shall be performed under the supervision of an Architect or Engineer, it being understood that the plans and specifications with respect thereto shall provide for Work so that, upon completion thereof, the Property shall be at least equal in replacement value and general utility to the Property prior to the damage or destruction.

     (iii) Each request for payment shall be made on not less than ten (10) days’ prior notice to Lender and shall be accompanied by a certificate of an Architect or Engineer, or, if the Work is not required to be supervised by an Architect or Engineer, by an Officer’s Certificate stating (A) that payment is for Work completed in compliance

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with the plans and specifications, if required under clause (ii) above, (B) that the sum requested is required to reimburse Borrower for payments by Borrower to date, or is due to the contractors, subcontractors, materialmen, laborers, engineers, architects or other Persons rendering services or materials for the Work (giving a brief description of such services and materials), and that when added to all sums previously paid out by Lender does not exceed the value of the Work done to the date of such certificate, (C) if the sum requested is to cover payment relating to repair and restoration of personal property required or relating to the Property, that title to the personal property items covered by the request for payment is vested in Borrower (unless Borrower is lessee of such personal property), and (D) that the Insurance Proceeds and other amounts deposited by Borrower held by Lender after such payment is more than or equal to the estimated remaining cost to complete such Work; provided, however, that if such certificate is given by an Architect or Engineer, such Architect or Engineer shall certify as to clause (A) above, and such Officer’s Certificate shall certify as to the remaining clauses above, and provided, further, that Lender shall not be obligated to disburse such funds if Lender determines, in Lender’s reasonable discretion, that Borrower shall not be in compliance with this Section 3.04(b). Additionally, each request for payment shall contain a statement signed by Borrower stating that the requested payment is for Work satisfactorily done to date.

     (iv) Each request for payment shall be accompanied by waivers of lien, in customary form and substance, covering that part of the Work for which payment or reimbursement is being requested and, if required by Lender, a search prepared by a title company or licensed abstractor, or by other evidence reasonably satisfactory to Lender that there has not been filed with respect to the Property any mechanic’s or other lien or instrument for retention of title relating to any part of the Work not discharged of record. Additionally, as to any personal property covered by the request for payment, Lender shall be furnished with evidence of Borrower having incurred a payment obligation therefor and such further evidence reasonably satisfactory to assure Lender that UCC filings therefor provide a valid first lien on the personal property.

     (v) Lender shall have the right to inspect the Work at all reasonable times upon reasonable prior notice and may condition any disbursement of Insurance Proceeds upon satisfactory compliance by Borrower with the provisions hereof. Neither the approval by Lender of any required plans and specifications for the Work nor the inspection by Lender of the Work shall make Lender responsible for the preparation of such plans and specifications, or the compliance of such plans and specifications of the Work, with any applicable law, regulation, ordinance, covenant or agreement.

     (vi) Insurance Proceeds shall not be disbursed more frequently than once every thirty (30) days.

     (vii) Until such time as the Work has been substantially completed, Lender shall not be obligated to disburse up to ten percent (10%) of the cost of the Work (the “Retention Amount”) to Borrower. Upon substantial completion of the Work, Borrower shall send notice thereof to Lender and, subject to the conditions of Section 3.04(b)(i)-(iv), Lender shall disburse one-half of the Retention Amount to Borrower; provided,

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however, that the remaining one-half of the Retention Amount shall be disbursed to Borrower when Lender shall have received copies of any and all final certificates of occupancy or other certificates, licenses and permits required for the ownership, occupancy and operation of the Property in accordance with all Legal Requirements, if any. Borrower hereby covenants to diligently, and in a commercially reasonable fashion, seek to obtain any certificates, licenses and permits required for the use and occupancy of the Property in accordance with all Legal Requirements.

     (viii) Upon failure on the part of Borrower promptly to commence the Work or to proceed diligently and continuously to completion of the Work, which failure shall continue after written notice for thirty (30) days, Lender may apply any Insurance Proceeds or Condemnation Proceeds it then or thereafter holds to the payment of the Debt in accordance with the provisions of the Note; provided, however, that Lender shall be entitled to apply at any time all or any portion of the Insurance Proceeds or Condemnation Proceeds it then holds to the extent necessary to cure any Event of Default.

     (c) If Borrower (i) within one hundred twenty (120) days after the occurrence of any damage to the Property or any portion thereof (or such shorter period as may be required under any Major Space Lease) shall fail to submit to Lender for approval plans and specifications for the Work (approved by the Architect and by all Governmental Authorities whose approval is required), (ii) after any such plans and specifications are approved by all Governmental Authorities, the Architect and Lender, shall fail to promptly commence such Work or (iii) shall fail to diligently prosecute such Work to completion, then, in addition to all other rights available hereunder, at law or in equity, Lender, or any receiver of the Property or any portion thereof, upon five (5) Business Days prior notice to Borrower (except in the event of emergency in which case no notice shall be required), may (but shall have no obligation to) perform or cause to be performed such Work, and may take such other steps as it reasonably deems advisable. Borrower hereby waives, for Borrower, any claim, other than for gross negligence or willful misconduct, against Lender and any receiver arising out of any act or omission of Lender or such receiver pursuant hereto, and Lender may apply all or any portion of the Insurance Proceeds (without the need to fulfill any other requirements of this Section 3.04) to reimburse Lender and such receiver, for all costs not reimbursed to Lender or such receiver upon demand together with interest thereon at the Default Rate from the date such amounts are advanced until the same are paid to Lender or the receiver.

     (d) Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to collect and receive any Insurance Proceeds paid with respect to any portion of the Property or the insurance policies required to be maintained hereunder in accordance with the terms hereof, and to endorse any checks, drafts or other instruments representing any Insurance Proceeds whether payable by reason of loss thereunder or otherwise.

     (e) Notwithstanding the foregoing provisions of this Section 3.04, upon the occurrence of any damage to or destruction of the Property, provided that such damage or destruction is not a Substantial Casualty, if in Lender’s reasonable judgment the cost of repair of or restoration to the Property required as a result of any damage or destruction is less than

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$500,000 in the aggregate and the Work can be completed in less than one hundred twenty (120) days (but in no event beyond the date which is six (6) months prior to the Maturity Date), then Lender, upon request by Borrower, shall permit Borrower to apply for and receive the Insurance Proceeds directly from the insurer (and Lender shall advise the insurer to pay over such Insurance Proceeds directly to Borrower), to the extent required to pay for any such Work, with any excess thereof after completion of such Work to be delivered to Lender to be held by Lender as additional collateral for the Loan, and if the Debt Service Coverage is 1.2:1.0 or greater for two (2) consecutive calendar quarters at any time subsequent to the completion of the Work, and a Default does not exist, shall at the request of Borrower be disbursed to Borrower.

     Section 3.05. Compliance with Insurance Requirements. Borrower promptly shall comply with, and shall cause the Property to comply with, all Insurance Requirements, even if such compliance requires structural changes or improvements or would result in interference with the use or enjoyment of the Property or any portion thereof; provided, however, Borrower shall have a right to contest in good faith and with diligence such Insurance Requirements provided (a) no Event of Default shall exist during such contest and such contest shall not subject the Property or any portion thereof to any lien or affect the priority of the lien of this Security Instrument, (b) failure to comply with such Insurance Requirements will not subject Lender, Trustee or any of their agents, employees, officers or directors to any civil or criminal liability, (c) such contest will not cause any reduction in insurance coverage then existing on the Property, (d) such contest shall not affect the ownership, use or occupancy of the Property, (e) the Property or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (f) Borrower has given Lender prompt notice of such contest and, upon request by Lender from time to time, notice of the status of such contest by Borrower and/or information of the continuing satisfaction of the conditions set forth in clauses (a) through (e) of this Section 3.05, (g) upon a final determination of such contest, Borrower shall promptly comply with the requirements thereof, and (h) prior to and during such contest, Borrower shall furnish to Lender security satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or the non-compliance with such Insurance Requirement (and if such security is cash, Lender shall deposit the same in an interest-bearing account and interest accrued thereon, if any, shall be deemed to constitute a part of such security for purposes of this Security Instrument, but Lender (i) makes no representation or warranty as to the rate or amount of interest, if any, which may accrue thereon and shall have no liability in connection therewith and (ii) shall not be deemed to be a trustee or fiduciary with respect to its receipt of any such security and any such security may be commingled with other monies of Lender). If Borrower shall use the Property or any portion thereof in any manner which permits the insurer to cancel any insurance required to be provided hereunder, Borrower immediately shall obtain a substitute policy which shall satisfy the requirements of this Security Instrument and which shall be effective on or prior to the date on which any such other insurance policy shall be canceled. Borrower shall not by any action or omission invalidate any insurance policy required to be carried hereunder unless such policy is replaced as aforesaid, or materially increase the premiums on any such policy above the normal premium charged for such policy. Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully or equitably payable to Lender in connection with the transaction contemplated hereby.

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     Section 3.06. Event of Default During Restoration. Notwithstanding anything to the contrary contained in this Security Instrument including, without limitation, the provisions of this Article III, if, at the time of any casualty affecting the Property or any part thereof, or at any time during any Work, or at any time that Lender is holding or is entitled to receive any Insurance Proceeds pursuant to this Security Instrument, either a Default of which Borrower has been given notice or an Event of Default exists and is continuing, Lender shall then have no obligation to make such proceeds available for Work (unless, provided no Event of Default exists, the disbursement of such Insurance Proceeds will cure the Default, in which event Lender shall disburse Insurance Proceeds for Work) and Lender shall have the right and option, to be exercised in its sole and absolute discretion and election, with respect to the Insurance Proceeds, either to retain and apply such proceeds in reimbursement for the actual costs, fees and expenses incurred by Lender in accordance with the terms hereof in connection with the adjustment of the loss and, after the occurrence of an Event of Default, any balance toward payment of the Debt in such priority and proportions as Lender, in its sole discretion, shall deem proper, or towards the Work, upon such terms and conditions as Lender shall determine, or to cure such Event of Default, or to any one or more of the foregoing as Lender, in its sole and absolute discretion, may determine. If Lender shall receive and retain such Insurance Proceeds, the lien of this Security Instrument shall be reduced only by the amount thereof received, after reimbursement to Lender of expenses of collection, and actually applied by Lender in reduction of the principal sum payable under the Note in accordance with the Note.

     Section 3.07. Application of Proceeds to Debt Reduction. (a) No damage to the Property, or any part thereof, by fire or other casualty whatsoever, whether such damage be partial or total, shall relieve Borrower from its liability to pay in full the Debt and to perform its obligations under this Security Instrument and the other Loan Documents.

     (b) If any Insurance Proceeds are applied to reduce the Debt, Lender shall apply the same in accordance with the provisions of the Note.

ARTICLE IV: IMPOSITIONS

     Section 4.01. Payment of Impositions, Utilities and Taxes, etc. Subject to any right to contest pursuant to the terms of the Loan Documents and Lender’s obligations pursuant to Article V hereof, Borrower shall pay or cause to be paid all Impositions at least five (5) days prior to the date upon which any fine, penalty, interest or cost for nonpayment is imposed, and furnish to Lender, upon request, receipted bills of the appropriate taxing authority or other documentation reasonably satisfactory to Lender evidencing the payment thereof. If Borrower shall fail to pay any Imposition in accordance with this Section and is not contesting or causing a contesting of such Imposition in accordance with Section 4.04 hereof, or if there are insufficient funds in the Basic Carrying Costs Escrow Account to pay any Imposition, Lender shall have the right, but shall not be obligated, to pay that Imposition, and Borrower shall repay to Lender, on demand, any amount paid by Lender, with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument.

     (a) Borrower shall, prior to the date upon which any fine, penalty, interest or cost for the nonpayment is imposed, pay or cause to be paid all charges for electricity, power, gas, water

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and other services and utilities in connection with the Property, and shall, upon request, deliver to Lender receipts or other documentation reasonably satisfactory to Lender evidencing payment thereof. If Borrower shall fail to pay any amount required to be paid by Borrower pursuant to this Section 4.01 and is not contesting such charges in accordance with Section 4.04 hereof, Lender shall have the right, but shall not be obligated, to pay that amount, and Borrower will repay to Lender, on demand, any amount paid by Lender with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument.

     (b) Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies imposed upon Lender by reason of or in connection with its ownership of any Loan Document or any other instrument related thereto, or resulting from the execution, delivery and recording of, or the lien created by, or the obligation evidenced by, any of them, other than income, franchise and other similar taxes imposed on Lender and shall pay all corporate stamp taxes, if any, and other taxes, required to be paid on the Loan Documents. If Borrower shall fail to make any such payment within ten (10) days after written notice thereof from Lender, Lender shall have the right, but shall not be obligated, to pay the amount due, and Borrower shall reimburse Lender therefor, on demand, with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument.

     Section 4.02. Deduction from Value. In the event of the passage after the date of this Security Instrument of any Legal Requirement deducting from the value of the Property for the purpose of taxation, any lien thereon or changing in any way the Legal Requirements now in force for the taxation of this Security Instrument and/or the Debt for federal, state or local purposes, or the manner of the operation of any such taxes so as to adversely affect the interest of Lender, or imposing any tax or other charge on any Loan Document, then Borrower will pay such tax, with interest and penalties thereon, if any, within the statutory period. In the event the payment of such tax or interest and penalties by Borrower would be unlawful, or taxable to Lender or unenforceable or provide the basis for a defense of usury, then in any such event, Lender shall have the option, by written notice of not less than thirty (30) days, to declare the Debt immediately due and payable, with no prepayment fee or charge of any kind.

     Section 4.03. No Joint Assessment. Borrower shall not consent to or initiate the joint assessment of the Premises or the Improvements (a) with any other real property constituting a separate tax lot and Borrower represents and covenants that the Premises and the Improvements are and shall remain a separate tax lot or (b) with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Property as a single lien.

     Section 4.04. Right to Contest. Borrower shall have the right, after prior notice to Lender, at its sole expense, to contest by appropriate legal proceedings diligently conducted in good faith, without cost or expense to Lender or any of its agents, employees, officers or directors, the validity, amount or application of any Imposition or any charge described in Section 4.01, provided that (a) no Event of Default shall exist during such proceedings and such

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contest shall not (unless Borrower shall comply with clause (d) of this Section 4.04) subject the Property or any portion thereof to any lien or affect the priority of the lien of this Security Instrument, (b) failure to pay such Imposition or charge will not subject Lender, Trustee or any of their agents, employees, officers or directors to any civil or criminal liability, (c) the contest suspends enforcement of the Imposition or charge (unless Borrower first pays the Imposition or charge), (d) prior to and during such contest, Borrower shall furnish to Lender security satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or the non-payment of such Imposition or charge (and if such security is cash, Lender may deposit the same in an interest-bearing account and interest accrued thereon, if any, shall be deemed to constitute a part of such security for purposes of this Security Instrument, but Lender (i) makes no representation or warranty as to the rate or amount of interest, if any, which may accrue thereon and shall have no liability in connection therewith and (ii) shall not be deemed to be a trustee or fiduciary with respect to its receipt of any such security and any such security may be commingled with other monies of Lender), (e) such contest shall not affect the ownership, use or occupancy of the Property, (f) the Property or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (g) Borrower has given Lender notice of the commencement of such contest and upon request by Lender, from time to time, notice of the status of such contest by Borrower and/or confirmation of the continuing satisfaction of clauses (a) through (f) of this Section 4.04, and (h) upon a final determination of such contest, Borrower shall promptly comply with the requirements thereof. Upon completion of any contest, Borrower shall immediately pay the amount due, if any, and deliver to Lender proof of the completion of the contest and payment of the amount due, if any, following which Lender shall return the security, if any, deposited with Lender pursuant to clause (d) of this Section 4.04. Borrower shall not pay any Imposition in installments unless permitted by applicable Legal Requirements, and shall, upon the request of Lender, deliver copies of all notices and bills relating to any Imposition or other charge covered by this Article IV to Lender.

     Section 4.05. No Credits on Account of the Debt. Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Impositions assessed against the Property or any part thereof and no deduction shall otherwise be made or claimed from the taxable value of the Property, or any part thereof, by reason of this Security Instrument or the Debt. In the event such claim, credit or deduction shall be required by Legal Requirements, Lender shall have the option, by written notice of not less than thirty (30) days, to declare the Debt immediately due and payable, and Borrower hereby agrees to pay such amounts not later than thirty (30) days after such notice.

     Section 4.06. Documentary Stamps. If, at any time, the United States of America, any State or Commonwealth thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, this Security Instrument or any other Loan Document, or impose any other tax or charges on the same, Borrower will pay the same, with interest and penalties thereon, if any.

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ARTICLE V: CENTRAL CASH MANAGEMENT

     Section 5.01. Cash Flow. Borrower hereby acknowledges and agrees that the Rents (which for the purposes of this Section 5.01 shall not include security deposits from tenants under Leases held by Borrower and not applied towards Rent) derived from the Property and Loss Proceeds shall be utilized to fund the Sub-Accounts. Borrower shall give each tenant under a Space Lease an irrevocable direction in the form of Exhibit E attached hereto and made a part hereof to deliver all rent payments made by tenants and other payments constituting Rent directly into the Rent Account. All payments constituting Rent, other than payments received from tenants under a Lease and payments made by credit cards, shall be delivered to Manager. Manager shall collect all of such Rent and shall deposit such funds, within three (3) Business Days after receipt thereof in the Rent Account, the name and address of the bank in which such account is located and the account number of which to be identified in writing by Manager to Lender. Borrower shall cause Manager to give to the bank in which the Rent Account is located an irrevocable written instruction, in form and substance acceptable to Lender, that, upon receipt of notice from Lender that an Event of Default exists (the “Trigger Notice”), all funds deposited in such account shall be automatically transferred through automated clearing house funds (“ACH”) or by Federal wire to the Central Account prior to 5:00 p.m. (New York City time) on a daily basis. Provided that the bank in which the Rent Account is located has not received a Trigger Notice, all sums on deposit in the Rent Account shall be transferred on a daily basis to an account designated in writing by Borrower (the “Borrower Account”). Within two (2) Business Days of the Closing Date, Borrower shall deliver to Lender a copy of the irrevocable notice which Borrower delivered to the bank in which the Rent Account is located pursuant to the provisions of this Section 5.01, the receipt of which is acknowledged in writing by such bank. Additionally, Borrower shall, or shall cause Manager to send to each respective credit card company or credit card clearing bank with which Borrower or Manager has entered into merchant’s agreements (each, a “Credit Card Company”) a direction letter in the form of Exhibit F annexed hereto and made a part hereof (the “Credit Card Payment Direction Letter”) directing such Credit Card Company to make all payments due in connection with goods or services furnished at or in connection with the Property by Federal wire or through ACH directly to the Rent Account. Without the prior written consent of Lender, neither Borrower nor Manager shall (i) terminate, amend, revoke or modify any Credit Card Payment Direction Letter in any manner or (ii) direct or cause any Credit Card Company to pay any amount in any manner other than as specifically provided in the related Credit Card Payment Direction Letter. Lender may elect to change the financial institution in which the Central Account shall be maintained; however, Lender shall give Borrower and the bank in which the Rent Account is located not fewer than five (5) Business Days’ prior notice of such change. Neither Borrower nor Manager shall change such bank or the Rent Account without the prior written consent of Lender, which shall not be unreasonably withheld, conditioned or delayed. All fees and charges of the bank(s) in which the Rent Account and the Central Account are located shall be paid by Borrower. Promptly following the cure of any Event of Default which resulted in Lender giving a Trigger Notice, Lender shall inform the bank holding the Rent Account of the cure of such Event of Default, and at Borrower’s sole cost and expense take all such actions and execute and deliver all such documents and instruments as are reasonably required to restore Borrower’s right to daily withdrawals from the Rent Account.

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     Section 5.02. Establishment of Accounts. Lender has established the Escrow Accounts and the Central Account in the name of Lender as secured party and Borrower has established the Rent Account in the joint names of Lender, as secured party, and Borrower. The Escrow Accounts, the Rent Account and the Central Account shall be under the sole dominion and control of Lender and funds held therein shall not constitute trust funds. Borrower hereby irrevocably directs and authorizes Lender to withdraw funds from the Rent Account and to deposit into and withdraw funds from the Central Account and the Escrow Accounts, all in accordance with the terms and conditions of this Security Instrument. Borrower shall have no right of withdrawal in respect of the Central Account, the Rent Account or the Escrow Accounts, except to the extent expressly provided for in this Agreement, including without limitation as provided for in Section 5.01. Each transfer of funds to be made hereunder shall be made only to the extent that funds are on deposit in the Rent Account, the Central Account or the affected Sub-Account or Escrow Account, and Lender shall have no responsibility to make additional funds available in the event that funds on deposit are insufficient. The Central Account shall contain the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account, the Recurring Replacement Reserve Sub-Account, the Management Fee Sub-Account and the Operations and Maintenance Expense Sub-Account, each of which accounts shall be Eligible Accounts or book-entry sub-accounts of an Eligible Account (each a “Sub-Account” and collectively, the “Sub-Accounts”) to which certain funds shall be allocated and from which disbursements shall be made pursuant to the terms of this Security Instrument. Sums held in the Escrow Accounts may be commingled with other monies held by Lender.

     Section 5.03. Intentionally Omitted.

     Section 5.04. Servicing Fees. Provided that no Default has occurred and is continuing, Borrower shall have no obligation to reimburse Lender for servicing fees incurred in connection with the ordinary, routine servicing of the Loan; provided, however, that Borrower shall reimburse Lender for (a) any and all costs and expenses incurred after the occurrence of a Default of which Borrower has been given notice or an Event of Default and (b) as otherwise provided for in this Security Instrument. Additionally, in the event that Borrower requests more than one disbursement from an Escrow Account in any month and Lender, in its sole and absolute discretion, consents to such disbursement, Borrower shall pay Lender a disbursement fee in the amount of $250.00 with respect to each Escrow Account from which the additional disbursement is sought.

     Section 5.05. Monthly Funding of Sub-Accounts and Escrow Accounts. (a) On or before each Payment Date during the term of the Loan, commencing on the first (1st) Payment Date occurring after the month in which the Loan is initially funded, Borrower shall pay or cause to be paid to the Central Account all sums required to be deposited in the Sub-Accounts pursuant to this Section 5.05(a) and all funds transferred or deposited into the Central Account shall be allocated among the Sub-Accounts as follows and in the following priority:

     (i) first, to the Basic Carrying Costs Sub-Account, until an amount equal to the Basic Carrying Costs Monthly Installment for such Payment Date has been allocated to the Basic Carrying Costs Sub-Account;

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     (ii) second, but only if an Event of Default exists, to the Management Fee Sub-Account, until an amount equal to the Required Management Fee for such Payment Date has been allocated to the Management Fee Sub-Account;

     (iii) third, to the Debt Service Payment Sub-Account, until an amount equal to the Required Debt Service Payment for such Payment Date has been allocated to the Debt Service Payment Sub-Account;

     (iv) fourth, but only if an Event of Default exists, to the Operation and Maintenance Expense Sub-Account until an amount equal to the Cash Expenses, other than the Required Management Fee, for the Interest Accrual Period ending immediately prior to such Payment Date pursuant to the related Approved Annual Budget; and

     (v) fifth, the balance, if any, to the Recurring Replacement Reserve Sub-Account, until an amount equal to the Recurring Replacement Reserve Monthly Installment for such Payment Date has been allocated to the Recurring Replacement Reserve Sub-Account.

     Provided that no Event of Default has occurred and is continuing, Lender agrees that in each Interest Accrual Period any amounts deposited into or remaining in the Central Account after the Sub-Accounts have been funded as set forth in this Section 5.05(a) with respect to such Interest Accrual Period and any periods prior thereto, shall be disbursed by Lender to Borrower on each Payment Date applicable to such Interest Accrual Period. The balance of the funds distributed to Borrower after payment of all Operating Expenses by or on behalf of Borrower may be retained by Borrower. Other than as set forth in Section 5.09 and Section 5.11, after the occurrence, and during the continuance, of an Event of Default, no funds held in the Central Account shall be distributed to, or withdrawn by, Borrower and Lender shall have the right to apply all or any portion of the funds held in the Central Account or any Sub Account or any Escrow Account to the Debt in Lender’s sole discretion; provided, however, notwithstanding anything set forth herein, Lender shall disburse (i) the Required Management Fee to Manager to the extent of amounts in the Management Fee Escrow Account and (ii) Operating Expenses incurred by Borrower to the extent of amounts then in the Operations and Maintenance Expense Escrow Account pursuant to the Approved Annual Budget from the Operations and Maintenance Expense Escrow Account until the later to occur of (a) sixty (60) days after the occurrence of an Event of Default and (b) thirty (30) days following the transfer of the Loan to “special servicing” as provided in the pooling and servicing agreement, trust and servicing agreement or similar agreement entered into in connection with a Securitization.

          (b) On each Payment Date, (i) sums held in the Basic Carrying Costs Sub-Account shall be transferred to the Basic Carrying Costs Escrow Account, (ii) sums held in the Debt Service Payment Sub-Account, together with any amounts deposited into the Central Account that are either (x) Loss Proceeds that Lender has elected to apply to reduce the Debt in accordance with the terms of Article III hereof or (y) excess Loss Proceeds remaining after the completion of any restoration required hereunder that have not been transferred to Borrower in accordance with the provisions set forth in Section 5.13 hereof, shall be transferred to Lender to be applied towards the Required Debt Service Payment and (iii) sums held in the Recurring Replacement Reserve Sub-Account shall be transferred to the Recurring Replacement Reserve

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Escrow Account, (iv) sums held in the Operation and Maintenance Expense Sub-Account shall be transferred to the Operation and Maintenance Expense Escrow Account and (v) sums held in the Management Fee Sub-Account shall be transferred to the Management Fee Escrow Account.

     Section 5.06. Payment of Basic Carrying Costs. Borrower hereby agrees to pay all Basic Carrying Costs (without regard to the amount of money in the Basic Carrying Costs Sub-Account or the Basic Carrying Costs Escrow Account). At least ten (10) Business Days prior to the due date of any Basic Carrying Costs, and not more frequently than once each month, Borrower may notify Lender in writing and request that Lender pay such Basic Carrying Costs on behalf of Borrower on or prior to the due date thereof, and, provided that no Event of Default has occurred and that there are sufficient funds available in the Basic Carrying Costs Escrow Account, Lender shall make such payments out of the Basic Carrying Costs Escrow Account before same shall be delinquent. Together with each such request, Borrower shall furnish Lender with bills and all other documents necessary, as reasonably determined by Lender, for the payment of the Basic Carrying Costs which are the subject of such request. Borrower’s obligation to pay (or cause Lender to pay) Basic Carrying Costs pursuant to this Security Instrument shall include, to the extent permitted by applicable law, Impositions resulting from future changes in law which impose upon Lender an obligation to pay any property taxes or other Impositions or which otherwise adversely affect Lender’s interests. Notwithstanding the foregoing, in the event that Lender receives a tax bill directly from a Governmental Authority relating to any Real Estate Taxes, Lender shall pay all sums due thereunder prior to the date such Real Estate Taxes would accrue late charges or interest thereon or within ten (10) Business Days of the receipt of such tax bill, whichever is later. In making any payment of Real Estate Taxes, Lender may rely on any bill, statement or estimate obtained from the applicable Governmental Authority without inquiry into the accuracy of such bill, statement or estimate or into the validity of any Real Estate Taxes or claim with respect thereto.

     Provided that no Event of Default shall have occurred and be continuing, all funds deposited into the Basic Carrying Costs Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument and shall be applied in payment of Basic Carrying Costs in accordance with the terms hereof. Should an Event of Default occur and be continuing, the sums on deposit in the Basic Carrying Costs Sub-Account and the Basic Carrying Costs Escrow Account may be applied by Lender in payment of any Basic Carrying Costs or may be applied to the payment of the Debt (subject to any obligations of Lender pursuant to Section 5.05 hereof) or any other charges affecting all or any portion of the Property as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided. Notwithstanding anything set forth herein, provided no Event of Default has occurred and is continuing, to the extent all funds required to be collected as part of any future Basic Carrying Costs Monthly Installment with respect to Impositions during any Fiscal Year of the Loan exceed the amounts reasonably required by Lender to be escrowed in order to pay Impositions for such Fiscal Year in accordance with the terms of this Security Instrument at least thirty (30) days prior to their respective due dates for such Fiscal Year, such excess funds (if any) shall, if requested by Borrower in writing, be promptly released to Borrower.

     Section 5.07. Intentionally Omitted.

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     Section 5.08. Recurring Replacement Reserve Escrow Account. Borrower hereby agrees to pay all Recurring Replacement Expenditures with respect to the Property (without regard to the amount of money then available in the Recurring Replacement Reserve Sub-Account or the Recurring Replacement Reserve Escrow Account). Provided that (a) Lender has received written notice from Borrower at least five (5) Business Days prior to the due date of any payment relating to Recurring Replacement Expenditures and not more frequently than once each month, and further provided that no Event of Default has occurred and is continuing, (b) there are sufficient funds available in the Recurring Replacement Reserve Escrow Account, and (c) Borrower shall have theretofore furnished Lender with lien waivers (which lien waivers may be conditional pending final payment, if applicable), copies of bills, invoices and other reasonable documentation as may be required by Lender to establish that the Recurring Replacement Expenditures which are the subject of such request represent amounts due for completed or partially completed additions, replacements, capital work and improvements performed at the Property, then Lender shall make such payments out of the Recurring Replacement Reserve Escrow Account.

     Provided that no Event of Default shall have occurred and be continuing, all funds deposited into the Recurring Replacement Reserve Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument and shall be applied in payment of Recurring Replacement Expenditures. Should an Event of Default occur and be continuing, the sums on deposit in the Recurring Replacement Reserve Sub-Account and the Recurring Replacement Reserve Escrow Account may be applied by Lender in payment of any Recurring Replacement Expenditures or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Property, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.09. Operation and Maintenance Expense Escrow Account. Borrower hereby agrees to pay all Operating Expenses with respect to the Property (without regard to the amount of money then available in the Operation and Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow Account). All funds allocated to the Operation and Maintenance Expense Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument. Any sums held in the Operation and Maintenance Expense Escrow Account shall be disbursed to Borrower within five (5) Business Days of receipt by Lender from Borrower of (a) a written request for such disbursement which shall indicate the Operating Expenses (exclusive of Basic Carrying Costs and any Required Management Fee payable to Borrower, or to any Affiliate of Borrower) for which the requested disbursement is to pay and (b) an Officer’s Certificate stating that no Operating Expenses with respect to the Property are more than sixty (60) days past due; provided, however, in the event that Borrower legitimately disputes any invoice for an Operating Expense, and (i) no Event of Default has occurred and is continuing hereunder, (ii) Borrower shall have set aside adequate reserves for the payment of such disputed sums together with all interest and late fees thereon, (iii) Borrower has complied with all the requirements of this Security Instrument relating thereto, and (iv) the contesting of such sums shall not constitute a default under any other instrument, agreement, or document to which Borrower is a party (other than any agreement with the vendor with respect to which the unpaid Operating Expenses relates), then Borrower may, after certifying to Lender as to items (i)

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through (iv) hereof, contest such invoice. Together with each such request, Borrower shall furnish Lender with bills and all other documents necessary for the payment of the Operating Expenses which are the subject of such request. Borrower may request a disbursement from the Operation and Maintenance Expense Escrow Account no more than one (1) time per calendar month. Should an Event of Default occur and be continuing, the sums on deposit in the Operation and Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow Account shall be applied by Lender in payment of any Operating Expenses for the Property or, if Lender has accelerated the outstanding Principal Amount, may be applied to the payment of the Debt or any other charges affecting all or any portion of the Property as Lender, in its sole discretion, may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.10. Intentionally Omitted.

     Section 5.11. Management Fee Escrow Account. Borrower hereby agrees to pay all Required Management Fees (without regard to the amount of money then available in the Management Fee Sub-Account or the Management Fee Escrow Account). All funds allocated to the Management Fee Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument. Any sums held in the Management Fee Escrow Account shall be disbursed to Borrower within five (5) Business Days of receipt by Lender from Borrower of (a) a written request for such disbursement which shall indicate the Required Management Fee for which the requested disbursement is to pay and (b) an Officer’s Certificate stating that no Required Management Fees are more than sixty (60) days past due; provided, however, in the event that Borrower legitimately disputes any invoice for a Required Management Fee, and (i) no Event of Default has occurred and is continuing hereunder, (ii) Borrower shall have set aside adequate reserves for the payment of such disputed sums together with all interest and late fees thereon, (iii) Borrower has complied with all the requirements of this Security Instrument relating thereto, and (iv) the contesting of such sums shall not constitute a default under any other instrument, agreement, or document to which Borrower is a party, then Borrower may, after certifying to Lender as to items (i) through (iv) hereof, contest such invoice. Together with each such request, Borrower shall furnish Lender with bills and all other documents necessary for the payment of the Required Management Fees which are the subject of such request. Borrower may request a disbursement from the Management Fee Escrow Account no more than one (1) time per calendar month. Should an Event of Default occur, the sums on deposit in the Management Fee Sub-Account or the Management Fee Escrow Account shall be applied by Lender in payment of any Required Management Fee or, if Lender has accelerated the outstanding Principal Amount, may be applied to the payment of the Debt or any other charges affecting all or any portion of the Property as Lender, in its sole discretion, may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.12. Performance of Engineering Work. (a) Borrower shall promptly commence and diligently thereafter pursue to completion (without regard to the amount of money then available in the Engineering Escrow Account) the Required Engineering Work prior to the six (6) month anniversary of the Closing Date. After Borrower completes an item of

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Required Engineering Work, Borrower may submit to Lender an invoice therefor with lien waivers (which may be conditional pending payment, if applicable) and a statement from the Engineer, reasonably acceptable to Lender, indicating that the portion of the Required Engineering Work in question has been completed in compliance with all Legal Requirements, and Lender shall, within twenty (20) days thereafter, although in no event more frequently than once each month, reimburse such amount to Borrower from the Engineering Escrow Account; provided, however, that Borrower shall not be reimbursed out of the Engineering Escrow Account more than the amount set forth on Exhibit D hereto as the amount allocated to the portion of the Required Engineering Work for which reimbursement is sought.

     (b) From and after the date all of the Required Engineering Work is completed, Borrower may submit a written request, which request shall be delivered together with final lien waivers and a statement from the Engineer, as the case may be, reasonably acceptable to Lender, indicating that all of the Required Engineering Work has been completed in compliance with all Legal Requirements, and Lender shall, within twenty (20) days thereafter, disburse any balance of the Engineering Escrow Account to Borrower. Should an Event of Default occur and be continuing, the sums on deposit in the Engineering Escrow Account may be applied by Lender in payment of any Required Engineering Work or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Property, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.13. Loss Proceeds. In the event of a casualty to the Property, except to the extent Lender elects, or is required pursuant to Article III hereof to make all or any portion of the Insurance Proceeds available to Borrower for restoration, Lender and Borrower shall cause all such Insurance Proceeds to be paid by the insurer directly to the Central Account, whereupon Lender shall, after deducting Lender’s costs of recovering and paying out such Insurance Proceeds, including without limitation, reasonable attorneys’ fees, apply same to reduce the Debt in accordance with the terms of the Note; provided, however, that if Lender elects, or is deemed to have elected, or is otherwise required pursuant to the terms of this Security Instrument, to make all or a portion of the Insurance Proceeds available for restoration, all Insurance Proceeds in respect of rent loss, business interruption or similar coverage shall be maintained in the Central Account, to be applied by Lender in the same manner as Rent received with respect to the operation of the Property; provided, further, however, that in the event that the Insurance Proceeds with respect to such rent loss, business interruption or similar insurance policy are paid in a lump sum in advance, Lender shall hold such Insurance Proceeds in a segregated interest-bearing escrow account, which shall be an Eligible Account, shall estimate, in Lender’s reasonable discretion, the number of months required for Borrower to restore the damage caused by the casualty, shall divide the aggregate rent loss, business interruption or similar Insurance Proceeds by such number of months, and shall disburse from such bank account into the Central Account each month during the performance of such restoration such monthly installment of said Insurance Proceeds until such time as the Debt Service Coverage for two (2) consecutive calendar quarters, the first of which shall not occur prior to the applicable casualty, shall equal the Required Debt Service Coverage or greater, at which time, after receipt of a written request from Borrower, all sums held by Lender which related to rent loss, business interruption insurance or similar Insurance Proceeds shall be disbursed to Borrower. In the event that

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Insurance Proceeds are to be applied toward restoration, Lender shall hold such funds in a segregated bank account at the Bank, which shall be an Eligible Account, and shall disburse same in accordance with the provisions of Section 3.04 hereof. Except to the extent Lender elects, or is required pursuant to Section 6.01 hereof to make all or a portion of the Condemnation Proceeds available to Borrower for restoration, Lender and Borrower shall cause all such Condemnation Proceeds to be paid to the Central Account, whereupon Lender shall, after deducting Lender’s costs of recovering and paying out such Condemnation Proceeds, including without limitation, reasonable attorneys’ fees, apply same to reduce the Debt in accordance with the terms of the Note; provided, however, that any Condemnation Proceeds received in connection with a temporary Taking shall be maintained in the Central Account, to be applied by Lender in the same manner as Rent received with respect to the operation of the Property; provided, further, however, that in the event that the Condemnation Proceeds of any such temporary Taking are paid in a lump sum in advance, Lender shall hold such Condemnation Proceeds in a segregated interest-bearing bank account, which shall be an Eligible Account, shall estimate, in Lender’s reasonable discretion, the number of months that the Property shall be affected by such temporary Taking, shall divide the aggregate Condemnation Proceeds in connection with such temporary Taking by such number of months, and shall disburse from such bank account into the Central Account each month during the pendency of such temporary Taking such monthly installment of said Condemnation Proceeds. In the event that Condemnation Proceeds are to be applied toward restoration, Lender shall hold such funds in a segregated bank account at the Bank, which shall be an Eligible Account, and shall disburse same in accordance with the provisions of Section 3.04 hereof. If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrower, and shall be forthwith paid into the Central Account, or paid to Lender to hold in a segregated bank account at the Bank, in each case to be applied or disbursed in accordance with the foregoing. Any Loss Proceeds made available to Borrower for restoration in accordance herewith, to the extent not used by Borrower in connection with, or to the extent they exceed the cost of, such restoration, shall be deposited into the Central Account, to be held by Lender as additional collateral for the Loan, until such time, if any, at any time subsequent to the completion of the Work, the Debt Service Coverage is 1.2:1.0 or greater for two (2) consecutive calendar quarters and provided a Default does not exist, at the request of Borrower, such Loss Proceeds shall be disbursed to Borrower provided any such excess Loss Proceeds still remain in the Central Account.

ARTICLE VI: CONDEMNATION

     Section 6.01. Condemnation. (a) Borrower shall notify Lender promptly of the commencement or threat of any Taking of the Property or any portion thereof. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain the proceeds of any such Taking as to which Borrower is or may be entitled and to make any compromise or settlement in connection with such proceedings (subject to Borrower’s reasonable approval, except after the occurrence of an Event of Default, in which event Borrower’s approval shall not be required), subject to the provisions of this Security Instrument; provided, however, that Borrower may participate in any such proceedings (without regard to the extent of the Taking) and Borrower shall be authorized and entitled to compromise or settle any such proceeding with respect to Condemnation Proceeds in an amount

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less than five percent (5%) of the Loan Amount. Borrower shall execute and deliver to Lender any and all instruments reasonably required in connection with any such proceeding promptly after request therefor by Lender. Except as set forth above, Borrower shall not adjust, compromise, settle or enter into any agreement with respect to such proceedings without the prior consent of Lender. All Condemnation Proceeds are hereby assigned to and shall be paid to Lender to be applied in accordance with the terms hereof. With respect to Condemnation Proceeds in an amount in excess of five percent (5%) of the Loan Amount, Borrower hereby authorizes Lender to compromise, settle, collect and receive such Condemnation Proceeds, and to give proper receipts and acquittance therefor. Subject to the provisions of this Article VI, Lender may apply such Condemnation Proceeds (less any cost to Lender of recovering and paying out such proceeds, including, without limitation, reasonable attorneys’ fees and disbursements and costs allocable to inspecting any repair, restoration or rebuilding work and the plans and specifications therefor) toward the payment of the Debt or to allow such proceeds to be used for the Work.

     (b) “Substantial Taking” shall mean (i) a Taking of such portion of the Property that would, in Lender’s reasonable discretion, leave remaining a balance of the Property which would not under then current economic conditions, applicable Development Laws and other applicable Legal Requirements, permit the restoration of the Property so as to constitute a complete, rentable facility of the same type as existed prior to the Taking, having adequate ingress and egress to the Property, capable of producing a projected Net Operating Income (as reasonably determined by Lender) yielding a projected Debt Service Coverage therefrom for the next two (2) years of not less than the Required Debt Service Coverage, or (ii) a Taking which occurs less than two (2) years prior to the Maturity Date, or (iii) a Taking which Lender is not reasonably satisfied could be repaired within twelve (12) months and at least six (6) months prior to the Maturity Date, or (iv) a Taking of fifteen percent (15%) or more of the Premises.

     (c) In the case of a Substantial Taking, Condemnation Proceeds shall be payable to Lender in reduction of the Debt but without any prepayment fee or charge of any kind and, if Borrower elects to apply any Condemnation Proceeds it may receive pursuant to this Security Instrument to the payment of the Debt, Borrower may prepay the balance of the Debt without any prepayment fee or charge of any kind.

     (d) In the event of a Taking which is less than a Substantial Taking, Borrower at its sole cost and expense (whether or not the award shall have been received or shall be sufficient for restoration) shall proceed diligently to restore, or cause the restoration of, the remaining Improvements not so taken, to maintain a complete, rentable, self-contained fully operational facility of the same sort as existed prior to the Taking in as good a condition as is reasonably possible. In the event of such a Taking, Lender shall receive the Condemnation Proceeds and shall pay over the same:

          (i) first, provided no Event of Default shall have occurred and be continuing, to Borrower to the extent of any portion of the award as may be necessary to pay the reasonable cost of restoration of the Improvements remaining, and

          (ii) second, to Lender to be held as additional collateral for the Loan and, if the Debt Service Coverage is 1.2:1.0 or greater for two (2) consecutive calendar

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quarters at any time subsequent to the completion of the Work, and a Default does not exist, shall, at the request of Borrower be disbursed to Borrower.

     If one or more Takings in the aggregate create a Substantial Taking, then, in such event, the sections of this Article VI above applicable to Substantial Takings shall apply.

     (e) In the event Lender is obligated to or elects to make Condemnation Proceeds available for the restoration or rebuilding of the Property, such proceeds shall be disbursed in the manner and subject to the conditions set forth in Section 3.04(b) hereof. If, in accordance with this Article VI, any Condemnation Proceeds are used to reduce the Debt, they shall be applied in accordance with the provisions of the Note and, with no prepayment fee or charge of any kind. Borrower shall promptly execute and deliver all instruments requested by Lender for the purpose of confirming the assignment of the Condemnation Proceeds to Lender. Application of all or any part of the Condemnation Proceeds to the Debt shall be made in accordance with the provisions of Sections 3.06 and 3.07 hereof. No application of the Condemnation Proceeds to the reduction of the Debt shall have the effect of releasing the lien of this Security Instrument until the remainder of the Debt has been paid in full. In the case of any Taking, Lender, to the extent that Lender has not been reimbursed by Borrower, shall be entitled, as a first priority out of any Condemnation Proceeds, to reimbursement for all costs, fees and expenses reasonably incurred in the determination and collection of any Condemnation Proceeds. All Condemnation Proceeds deposited with Lender pursuant to this Section, until expended or applied as provided herein, shall be held in accordance with Section 3.04(b) hereof and shall constitute additional security for the payment of the Debt and the payment and performance of Borrower’s obligations, but Lender shall not be deemed a trustee or other fiduciary with respect to its receipt of such Condemnation Proceeds or any part thereof. All awards so deposited with Lender shall be held by Lender in an Eligible Account, but Lender makes no representation or warranty as to the rate or amount of interest, if any, which may accrue on any such deposit and shall have no liability in connection therewith. For purposes hereof, any reference to the award shall be deemed to include interest, if any, which has accrued thereon.

ARTICLE VII: LEASES AND RENTS

     Section 7.01. Assignment. (a) Borrower does hereby bargain, sell, assign and set over unto Lender, all of Borrower’s interest in the Leases and Rents pursuant to the terms hereof. The assignment of Leases and Rents in this Section 7.01 is an absolute, unconditional and present assignment from Borrower to Lender and not an assignment for security and the existence or exercise of Borrower’s revocable license to collect Rent shall not operate to subordinate this assignment to any subsequent assignment. The exercise by Lender of any of its rights or remedies pursuant to this Section 7.01 shall not be deemed to make Lender a mortgagee-in-possession. In addition to the provisions of this Article VII, Borrower shall comply with all terms, provisions and conditions of the Assignment.

     (b) So long as no Event of Default exists or is continuing, Borrower shall have a revocable license to take all actions with respect to all Leases and Rents, present and future, including the right to collect and use the Rents, subject to the terms of this Security Instrument and the Assignment.

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     (c) In a separate instrument Borrower shall, as requested from time to time by Lender, assign to Lender or its nominee by specific or general assignment, any and all Leases, such assignments to be in form and content reasonably acceptable to Lender, but subject to the provisions of Sections 7.01(a) and (b) hereof. Borrower agrees to deliver to Lender, within thirty (30) days after Lender’s request, a true and complete copy of every Lease.

     (d) The rights of Lender contained in this Article VII, the Assignment or any other assignment of any Lease shall not result in any obligation or liability of Lender to Borrower or any lessee under a Lease or any party claiming through any such lessee.

     (e) At any time during the continuation of an Event of Default, the license granted hereinabove may be revoked by Lender, and Lender or a receiver appointed in accordance with this Security Instrument may enter upon the Property, and collect, retain and apply the Rents toward payment of the Debt in such priority and proportions as Lender in its sole discretion shall deem proper.

     (f) In addition to the rights which Lender may have herein, upon the occurrence of any Event of Default, Lender, at its option, may require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Property as may be used and occupied by Borrower and may require Borrower to vacate and surrender possession of the Property to Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings or otherwise.

     Section 7.02. Management of Property. (a) Borrower shall manage the Property or cause the Property to be managed in a manner which is consistent with the Approved Manager Standard. All Space Leases shall provide for rental rates comparable to then existing local market rates for comparable space in hotel properties and terms and conditions which constitute good and prudent business practice and are consistent with prevailing market terms and conditions for comparable space in hotel properties, and shall be arms-length transactions. All Space Leases shall be on a form reasonably acceptable to Lender and shall provide that they are subordinate to this Security Instrument and that the lessees thereunder attorn to Lender. Borrower shall deliver copies of all Leases, amendments, modifications and renewals thereof to Lender. All proposed Leases for the Property shall be subject to the prior written approval of Lender, provided, however that Borrower may enter into new leases with unrelated third parties without obtaining the prior consent of Lender provided that: (i) the proposed leases conform with the requirements of this Section 7.02; (ii) the space to be leased pursuant to such proposed lease together with any space leased or to be leased to an Affiliate of the tenant thereunder does not exceed 5,000 square feet; and (iii) the term of the proposed lease inclusive of all extensions and renewals, does not exceed five (5) years or, if all extensions and renewals are at the then prevailing market rates, does not exceed ten (10) years.

     (b) Borrower (i) shall observe and perform all of its material obligations under the Leases pursuant to applicable Legal Requirements and shall not do or permit to be done anything to materially impair the value of the Leases as security for the Debt; (ii) shall promptly send copies to Lender of all written notices of default which Borrower shall receive under the Leases; (iii) shall, consistent with the Approved Manager Standard, enforce all of the terms, covenants and conditions contained in the Leases to be observed or performed in all material respects; (iv)

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shall not collect any of the Rents under the Leases more than one (1) month in advance (except that Borrower may collect in advance such security deposits as are permitted pursuant to applicable Legal Requirements and are commercially reasonable in the prevailing market); (v) shall not execute any other assignment of lessor’s interest in the Leases or the Rents except as otherwise expressly permitted pursuant to this Security Instrument; (vi) shall not cancel or terminate any of the Leases or accept a surrender thereof in any manner inconsistent with the Approved Manager Standard; (vii) shall not convey, transfer or suffer or permit a conveyance or transfer of all or any part of the Premises or the Improvements or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder; (viii) shall not alter, modify or change the terms of any guaranty of any Major Space Lease or cancel or terminate any such guaranty; (ix) shall, in accordance with the Approved Manager Standard, make all reasonable efforts to seek lessees for space as it becomes vacant and enter into Leases in accordance with the terms hereof; (x) shall not cancel or terminate or materially modify, alter or amend any Major Space Lease or Property Agreement without Lender’s consent, which consent will not be unreasonably withheld or delayed; (xi) shall notify Lender promptly if any agreement pursuant to which uses all or any portion of any adjacent or adjoining property is adversely affected in such a manner as would have a Material Adverse Effect; and (xii) shall, without limitation to any other provision hereof, execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Property as are required herein and as Lender shall from time to time reasonably require.

     (c) Any bond or other instrument which Borrower is permitted to hold in lieu of cash security deposits under applicable Legal Requirements shall be maintained in full force and effect unless replaced by cash deposits as hereinabove described, shall be issued by a Person reasonably satisfactory to Lender, shall, if permitted pursuant to Legal Requirements, at Lender’s option, name Lender as payee or mortgagee thereunder or be fully assignable to Lender and shall, in all respects, comply with applicable Legal Requirements and otherwise be reasonably satisfactory to Lender. Borrower shall, upon request, provide Lender with evidence reasonably satisfactory to Lender of Borrower’s compliance with the foregoing. Following the occurrence and during the continuance of any Event of Default, Borrower shall, upon Lender’s request, if permitted by applicable Legal Requirements, turn over the security deposits (and any interest thereon) to Lender to be held by Lender in accordance with the terms of the Leases and all Legal Requirements.

     (d) If requested by Lender, Borrower shall furnish, or shall cause the applicable lessee to furnish, to Lender financial data and/or financial statements in accordance with Regulation AB for any lessee of the Property if, in connection with a Securitization, Lender expects there to be, with respect to such lessee or any group of affiliated lessees, a concentration within all of the mortgage loans included or expected to be included, as applicable, in such Securitization such that such lessee or group of affiliated lessees would constitute a Significant Obligor; provided, however, that in the event the related Space Lease does not require the related lessee to provide the foregoing information, Borrower shall use commercially reasonable efforts to cause the applicable lessee to furnish such information.

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     (e) Borrower covenants and agrees with Lender that (i) the Property will be managed at all times by Manager pursuant to the management agreement approved by Lender, which management agreement at present is that certain Hotel Operating Agreement between Kimpton Hotel & Restaurant Group, LLC, a Delaware limited liability company (“Kimpton”), as “Operator” and Borrower dated as of January 15, 2001, as the same may have been amended, modified or supplemented from time to time with the consent of Lender (the “Management Agreement”), (ii) after Borrower has knowledge of a fifty percent (50%) or more change in control of the ownership of Manager, Borrower will promptly give Lender notice thereof (a “Manager Control Notice”) and (iii) the Management Agreement may be terminated by Lender if Borrower has the right to terminate pursuant to the provisions of the Management Agreement (as a result of Manager’s gross negligence, misappropriation of funds, willful misconduct or fraud) or at any time following (A) the earlier to occur of (i) the later to occur of (a) sixty (60) days after the occurrence of an Event of Default of which Manager has been given notice or (b) from and after the occurrence of a Securitization, thirty (30) days following the transfer of the Loan to “special servicing” as provided in the pooling and servicing agreement, trust and servicing agreement or similar agreement entered into in connection with a Securitization and (ii) transfer of title to the Property by foreclosure or delivery of a deed in lieu thereof, or (B) the receipt of a Manager Control Notice (except to the extent the same would be an Approved Manager Transfer) and a substitute managing agent shall be appointed by Borrower, subject to Lender’s prior written approval, which may not be unreasonably withheld and which may be conditioned on, inter alia, a letter from each Rating Agency confirming that any rating issued by the Rating Agency in connection with a Securitization will not, as a result of the proposed change of Manager, be downgraded from the then current ratings thereof, qualified or withdrawn. Lender acknowledges that, as of the Closing Date, Kimpton is an acceptable manager. Borrower may from time to time appoint a successor manager to manage the Property with Lender’s prior written consent which consent shall not be unreasonably withheld or delayed, provided that any such successor manager shall be a reputable management company which meets the Approved Manager Standard and each Rating Agency shall have confirmed in writing that any rating issued by the Rating Agency in connection with a Securitization will not, as a result of the proposed change of Manager, be downgraded from the then current ratings thereof, qualified or withdrawn. Borrower further covenants and agrees that Borrower shall require Manager (or any successor managers) to maintain at all times during the term of the Loan worker’s compensation insurance as required by Governmental Authorities.

     (f) There are no Franchise Agreements. Borrower will not enter into any Franchise Agreement without the express written consent of Lender.

     (g) Borrower covenants that it shall not, nor permit Manager, to sell or deliver rooms or suites and accept payment therefor for more than thirty (30) days in advance of delivery except in the ordinary course of business and in a manner consistent with the Approved Manager Standard.

     (h) Borrower shall fund and operate, or shall cause Manager to fund and operate, the Property in a manner consistent with a hotel of the same type and category as the Property.

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     (i) Borrower shall maintain or cause Manager to maintain Inventory in kind and amount sufficient to meet hotel industry standards for hotels comparable to the hotel located at the Premises and at levels sufficient for the operation of the hotel located at the Premises at historic occupancy levels.

     (j) Borrower shall deliver to Lender all written notices of default or termination received by Borrower or Manager with respect to any licenses and permits, contracts, Property Agreements, Leases or insurance policies within three (3) Business Days of receipt of the same.

     (k) Borrower shall not permit any Equipment or other personal property to be removed from the Property unless the removed item is consumed or sold in the ordinary course of business, removed temporarily for maintenance and repair, or, if removed permanently, replaced by an article of equivalent suitability and not materially less value, owned by Borrower free and clear of any lien.

ARTICLE VIII: MAINTENANCE AND REPAIR

     Section 8.01. Maintenance and Repair of the Property; Alterations; Replacement of Equipment. Borrower hereby covenants and agrees:

     (a) Borrower shall not (i) desert or abandon the Property, (ii) change the use of the Property or cause or permit the use or occupancy of any part of the Property to be discontinued if such discontinuance or use change would violate any zoning or other law, ordinance or regulation; (iii) consent to or seek any lowering of the zoning classification, or greater zoning restriction affecting the Property; or (iv) take any steps whatsoever to convert the Property, or any portion thereof, to a condominium or cooperative form of ownership.

     (b) Borrower shall, at its expense, (i) take good care of the Property including grounds generally, and utility systems and sidewalks, roads, alleys, and curbs therein, and shall keep the same in good, safe and insurable condition and in compliance with all applicable Legal Requirements, (ii) promptly make all repairs to the Property necessary or appropriate for the use or operation thereof, above grade and below grade, interior and exterior, structural and nonstructural, ordinary and extraordinary, unforeseen and foreseen, and maintain the Property in a manner appropriate for the facility and (iii) not commit or suffer to be committed any waste of the Property or do or suffer to be done anything which will increase the risk of fire or other hazard to the Property or impair the value thereof. Borrower shall keep the sidewalks, vaults, gutters and curbs comprising, or adjacent to, the Property, clean and free from dirt, snow, ice, rubbish and obstructions. All repairs made by Borrower shall be made with first-class materials, in a good and workmanlike manner, shall be equal or better in quality and class to the original work and shall comply with all applicable Legal Requirements and Insurance Requirements. To the extent any of the above obligations are obligations of tenants under Space Leases or other Persons under Property Agreements, Borrower may fulfill its obligations hereunder by causing such tenants or other Persons, as the case may be, to perform their obligations thereunder. As used herein, the terms “repair” and “repairs” shall be deemed to include all necessary replacements.

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     (c) Borrower shall not demolish, remove, construct, or, except as otherwise expressly provided herein, restore, or alter the Property or any portion thereof; nor consent to or permit any such demolition, removal, construction, restoration, addition or alteration which would diminish the value of the Property without Lender’s prior written consent in each instance, which consent shall not be unreasonably withheld or delayed; provided, however, Borrower may make structural or exterior alterations to the Improvements or interior alterations of a non-structural type without Lender’s prior written consent provided that the aggregate cost of such alterations does not exceed $500,000.

     (d) Borrower represents and warrants to Lender that (i) there are no fixtures, machinery, apparatus, tools, equipment or articles of personal property attached or appurtenant to, or located on, or used in connection with the management, operation or maintenance of the Property, except for the Equipment and equipment leased by Borrower for the management, operation or maintenance of the Property in accordance with the Loan Documents or that is otherwise the property of tenants or hotel guests; (ii) the Equipment and the leased equipment constitute all of the fixtures, machinery, apparatus, tools, equipment and articles of personal property necessary to the proper operation and maintenance of the Property; and (iii) all of the Equipment is free and clear of all liens, except for the lien of this Security Instrument and the Permitted Encumbrances, and further provided that Lender acknowledges that certain items of software relating to the accounting system, property management system and reservation system is presently leased to Manager, and that the foregoing lease shall terminate, and the Property shall no longer have the use thereof, in the event that Manager is no longer managing the Property pursuant to the Management Agreement. All right, title and interest of Borrower in and to all extensions, improvements, betterments, renewals and appurtenances to the Property hereafter acquired by, or released to, Borrower or constructed, assembled or placed by Borrower in the Property, and all changes and substitutions of the security constituted thereby, shall be and, in each such case, without any further mortgage, encumbrance, conveyance, assignment or other act by Lender or Borrower, shall become subject to the lien and security interest of this Security Instrument as fully and completely, and with the same effect, as though now owned by Borrower and specifically described in this Security Instrument, but at any and all times Borrower shall execute and deliver to Lender any documents Lender may reasonably deem necessary or appropriate for the purpose of specifically subjecting the same to the lien and security interest of this Security Instrument.

     (e) Notwithstanding the provisions of this Security Instrument to the contrary, Borrower shall have the right, at any time and from time to time, to remove and dispose of Equipment which may have become obsolete or unfit for use or which is no longer useful in the management, operation or maintenance of the Property. Borrower shall promptly replace any such Equipment so disposed of or removed with other Equipment of equal value and utility, free of any security interest or superior title, liens or claims; except that, if by reason of technological or other developments, replacement of the Equipment so removed or disposed of is not necessary or desirable for the proper management, operation or maintenance of the Property, Borrower shall not be required to replace the same. All such replacements or additional equipment shall be deemed to constitute “Equipment” and shall be covered by the security interest herein granted.

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ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE PROPERTY

     Section 9.01. Other Encumbrances. Borrower shall not further encumber or permit the further encumbrance in any manner (whether by grant of a pledge, security interest or otherwise) of the Property or any part thereof or interest therein, including, without limitation, of the Rents therefrom other than Permitted Liens. In addition, Borrower shall not further encumber and shall not permit the further encumbrance in any manner (whether by grant of a pledge, security interest or otherwise) of Borrower or any direct or indirect interest in Borrower except as expressly permitted pursuant to this Security Instrument.

     Section 9.02. No Transfer. Borrower acknowledges that Lender has examined and relied on the expertise of Borrower and, if applicable, each General Partner, in owning and operating properties such as the Property in agreeing to make the Loan and will continue to rely on Borrower’s ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property. Borrower shall not Transfer, nor permit any Transfer, without the prior written consent of Lender, which consent Lender may withhold in its sole and absolute discretion. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon a Transfer without Lender’s consent. This provision shall apply to every Transfer regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer.

     Section 9.03. Due on Sale. Lender may declare the Debt immediately due and payable upon any Transfer or further encumbrance without Lender’s consent without regard to whether any impairment of its security or any increased risk of default hereunder can be demonstrated. This provision shall apply to every Transfer or further encumbrance of the Property or any part thereof or interest in the Property or in Borrower regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer or further encumbrance of the Property or interest in Borrower.

     Section 9.04. Permitted Transfer. Notwithstanding the foregoing provisions of this Article IX, a sale, conveyance or transfer of the Property in its entirety (hereinafter, “Sale”) shall be permitted hereunder provided that each of the following terms and conditions are satisfied:

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

     (b) Lender shall have, in its reasonable discretion, consented to the Sale, and, if the proposed Sale is to occur at any time after a Securitization, each Rating Agency shall have delivered written confirmation that any rating issued by such Rating Agency in connection with the Securitization will not, as a result of the proposed Sale, be downgraded from the then current ratings thereof, qualified or withdrawn; provided, however, that no request for consent to the Sale will be entertained by Lender if the proposed Sale is to occur within sixty (60) days of any contemplated sale of the Loan by Lender, whether in connection with a Securitization or otherwise;

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     (c) Borrower gives Lender written notice of the terms of the proposed Sale not less than sixty (60) days before the date on which such Sale is scheduled to close and, concurrently therewith, gives Lender (i) all such information concerning the proposed transferee of the Property (hereinafter, “Buyer”) as Lender would require in evaluating an initial extension of credit to a borrower and Lender determines, in its sole discretion that the Buyer is acceptable to Lender in all respects and (ii) a non-refundable application fee equal to $7,500;

     (d) Borrower pays Lender, concurrently with the closing of such Sale, a non-refundable assumption fee in an amount equal to one-half of one percent (.5%) of the then outstanding Loan Amount together with all out-of-pocket costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by Lender in connection with the Sale;

     (e) Buyer assumes all of the obligations under the Loan Documents and, prior to or concurrently with the closing of such Sale, Buyer executes, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate said assumption and delivers such legal opinions as Lender may require;

     (f) Borrower and Buyer execute, without any cost or expense to Lender, new financing statements or financing statement amendments and any additional documents reasonably requested by Lender;

     (g) Borrower delivers to Lender, without any cost or expense to Lender, such endorsements to Lender’s title insurance policy, hazard insurance policy endorsements or certificates and other similar materials as Lender may deem necessary at the time of the Sale, all in form and substance satisfactory to Lender, including, without limitation, an endorsement or endorsements to Lender’s title insurance policy insuring the lien of this Security Instrument, extending the effective date of such policy to the date of execution and delivery (or, if later, of recording) of the assumption agreement referenced above in subparagraph (e) of this Section, with no additional exceptions added to such policy, and insuring that leasehold title to the Property is vested in Buyer;

     (h) Borrower executes and delivers to Lender, without any cost or expense to Lender, a release of Lender, its officers, directors, employees and agents, from all claims and liability relating to the transactions evidenced by the Loan Documents, through and including the date of the closing of the Sale, which agreement shall be in form and substance satisfactory to Lender and shall be binding upon Buyer;

     (i) subject to the provisions of Section 18.32 hereof, such Sale is not construed so as to relieve Borrower of any personal liability under the Note or any of the other Loan Documents for any acts or events occurring or obligations arising prior to or simultaneously with the closing of such Sale, and Borrower executes, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate the ratification of said personal liability;

     (j) such Sale is not construed so as to relieve any Guarantor of its obligations under any guaranty or indemnity agreement executed in connection with the Loan and each such Guarantor executes, without any cost or expense to Lender, such documents and agreements as

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Lender shall reasonably require to evidence and effectuate the ratification of each such guaranty agreement, provided that if Buyer or a party associated with Buyer approved by Lender in its sole discretion assumes the obligations of the current Guarantor under its guaranty and Buyer or such party associated with Buyer, as applicable, executes, without any cost or expense to Lender, a new guaranty in similar form and substance to the existing guaranty and otherwise satisfactory to Lender, then Lender shall release the current Guarantor from all obligations arising under its guaranty after the closing of such Sale; and

     (k) Buyer is a Single Purpose Entity and Lender receives a non-consolidation opinion relating to Buyer from Buyer’s counsel, which opinion is in form and substance reasonably acceptable to Lender.

ARTICLE X: CERTIFICATES

     Section 10.01. Estoppel Certificates. (a) After request by Lender, Borrower, within fifteen (15) days and at its expense, will furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, and the unpaid principal amount of the Note, (ii) the rate of interest of the Note, (iii) the date payments of interest and/or principal were last paid, (iv) any offsets or defenses to the payment of the Debt, and, if any are alleged, the nature thereof, (v) that the Note, this Security Instrument and the other Loan Documents have not been modified or if modified, giving particulars of such modification and (vi) that there has occurred and is then continuing no Event of Default or if such Event of Default exists, the nature thereof, the period of time it has existed, and the action being taken to remedy such Event of Default.

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

     (c) Borrower shall use all reasonable efforts to obtain estoppel certificates from tenants under Space Leases (if any) in form and substance reasonably acceptable to Lender upon request from Lender.

ARTICLE XI: NOTICES

     Section 11.01. Notices. Any notice, demand, statement, request or consent made hereunder shall be in writing and delivered personally or sent to the party to whom the notice, demand or request is being made by Federal Express or other nationally recognized overnight delivery service, as follows and shall be deemed given when delivered personally or one (1) Business Day after being deposited with Federal Express or such other nationally recognized delivery service:

If to Lender:	Wachovia Bank, National Association
	Commercial Real Estate Services
	8739 Research Drive URP 4
	NC 1075
	Charlotte, North Carolina 28262

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	Loan Number: 509850510
	Attention: Portfolio Management
	Fax No.: (704) 715-0036
	with a copy to:
	Proskauer Rose llp
	1585 Broadway
	New York, New York 10036
	Attn: David J. Weinberger, Esq.
	Fax No.: (212) 969-2900
If to Borrower:	To Borrower, c/o Chief Financial Officer, at the address first written above,
	with a copy to:
	Heller Ehrman LLP
	333 Bush Street
	San Francisco, California 94104
	Attn: Judith C. Miles, Esq.
	with a copy to (if a default notice):
	U.S. General Services Administration
	Portfolio Management — Suite 7600
	7th & D Streets, S.W.
	Washington, D.C. 20407
	Attn: Asset Manager, Square 430
	and with a copy to (if a default notice):
	U.S. General Services Administration
	Office of Regional Counsel, Suite 7048
	7th & D Streets, S.W.
	Washington, D.C. 20407
	Attn: Regional Counsel
If to Trustee:	To Trustee at the address first written above,

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

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ARTICLE XII: INDEMNIFICATION

     Section 12.01. Indemnification Covering Property. In addition, and without limitation, to any other provision of this Security Instrument or any other Loan Document, Borrower shall protect, indemnify and save harmless Lender, Trustee and their successors and assigns, and each of their agents, employees, officers, directors, stockholders, partners and members (collectively, “Indemnified Parties”) for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ fees and disbursements imposed upon or incurred by or asserted against any of the Indemnified Parties by reason of (a) ownership of this Security Instrument, the Assignment, the Property or any part thereof or any interest therein or receipt of any Rents; (b) any accident, injury to or death of any person or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (c) any use, nonuse or condition in, on or about, or possession, alteration, repair, operation, maintenance or management of, the Property or any part thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (d) any failure on the part of Borrower to perform or comply with any of the terms of this Security Instrument or the Assignment; (e) performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; (f) any claim by brokers, finders or similar Persons claiming to be entitled to a commission in connection with any Lease or other transaction involving the Property or any part thereof; (g) any Imposition including, without limitation, any Imposition attributable to the execution, delivery, filing, or recording of any Loan Document, Lease or memorandum thereof; (h) any lien or claim arising on or against the Property or any part thereof under any Legal Requirement or any liability asserted against any of the Indemnified Parties with respect thereto; (i) any claim arising out of or in any way relating to any tax or other imposition on the making and/or recording of this Security Instrument, the Note or any of the other Loan Documents; (j) a Default under Sections 2.02(f), 2.02(g), 2.02(k), 2.02(t) or 2.02(w) hereof, (k) the failure of any Person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with the Loan, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the Loan; (l) the claims of any lessee or any Person acting through or under any lessee or otherwise arising under or as a consequence of any Lease or (m) the failure to pay any insurance premiums. Notwithstanding the foregoing provisions of this Section 12.01 to the contrary, Borrower shall have no obligation to indemnify the Indemnified Parties pursuant to this Section 12.01 for liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses relative to the foregoing which result from Lender’s, and its successors’ or assigns’, willful misconduct or gross negligence or if the condition or event which gave rise to liability first arose or accrued following the date of transfer of title to the Property to Lender in connection with any foreclosure of the Property or acceptance by Lender of a deed-in-lieu thereof. Any amounts payable to Lender by reason of the application of this Section 12.01 shall constitute a part of the Debt secured by this Security Instrument and the other Loan Documents and shall become immediately due and payable and shall bear interest at the Default Rate from the date the liability, obligation, claim, cost or expense is sustained by Lender, as applicable, until paid. The provisions of this Section 12.01 shall survive the termination of this Security Instrument whether

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by repayment of the Debt, foreclosure or delivery of a deed in lieu thereof, assignment or otherwise. In case any action, suit or proceeding is brought against any of the Indemnified Parties by reason of any occurrence of the type set forth in (a) through (m) above, Borrower shall, at Borrower’s expense, take all commercially reasonable steps to resist and defend such action, suit or proceeding or will cause the same to be resisted and defended by counsel at Borrower’s expense for the insurer of the liability or by counsel designated by Borrower (unless reasonably disapproved by Lender promptly after Lender has been notified of such counsel); provided, however, that nothing herein shall compromise the right of Lender (or any other Indemnified Party) to appoint its own counsel at Borrower’s expense for its defense with respect to any action which, in the reasonable opinion of Lender or such other Indemnified Party, as applicable, presents a conflict or potential conflict between Lender or such other Indemnified Party that would make such separate representation advisable. Any Indemnified Party will give Borrower prompt notice after such Indemnified Party obtains actual knowledge of any potential claim by such Indemnified Party for indemnification hereunder. The Indemnified Parties shall not settle or compromise any action, proceeding or claim as to which it is indemnified hereunder without notice to Borrower.

ARTICLE XIII: DEFAULTS

     Section 13.01. Events of Default. The Debt shall become immediately due at the option of Lender upon any one or more of the following events (“Event of Default”):

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

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

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

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

     (e) if the insurance policies required hereunder are not kept in full force and effect, or if the insurance policies are not assigned and delivered to Lender as herein provided;

     (f) if Borrower or Guarantor attempts to assign its rights under this Security Instrument or any other Loan Document or any interest herein or therein, or if any Transfer occurs other than in accordance with the provisions hereof;

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     (g) if any representation or warranty of Borrower or Guarantor made herein or in any other Loan Document or in any certificate, report, financial statement or other instrument or agreement furnished to Lender shall prove false or misleading in any material respect;

     (h) if Borrower, Guarantor or any general partner of Borrower or Guarantor shall make an assignment (or with respect to Guarantor only, a general assignment or any assignment which relates to the Property or any interest in Borrower) for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due;

     (i) if a receiver, liquidator or trustee of Borrower, Guarantor or any general partner of Borrower or Guarantor shall be appointed or if Borrower, Guarantor or their respective general partners shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, Guarantor or their respective general partners or if any proceeding for the dissolution or liquidation of Borrower, Guarantor or their respective general partners shall be instituted; however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, Guarantor or their respective general partners, as applicable, upon the same not being discharged, stayed or dismissed within sixty (60) days or if Borrower, Guarantor or their respective general partners shall generally not be paying its debts as they become due;

     (j) if Borrower shall be in default beyond any notice or grace period, if any, under any other mortgage or deed of trust or security agreement covering any part of the Property without regard to its priority relative to this Security Instrument; provided, however, this provision shall not be deemed a waiver of the provisions of Article IX prohibiting further encumbrances affecting the Property or any other provision of this Security Instrument;

     (k) if the Property becomes subject (i) to any lien which is superior to the lien of this Security Instrument, other than a lien for real estate taxes and assessments not due and payable, or (ii) to any mechanic’s, materialman’s or other lien which is or is asserted to be superior to the lien of this Security Instrument, and such lien shall remain undischarged (by payment, bonding, or otherwise) for ten (10) days unless contested in accordance with the terms hereof;

     (l) if Borrower discontinues the operation of the Property or any part thereof for reasons other than repair or restoration arising from a casualty or condemnation for ten (10) consecutive days or more;

     (m) except as permitted in this Security Instrument, any material alteration, demolition or removal of any of the Improvements without the prior consent of Lender;

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

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     (o) if Borrower shall fail in the payment of any rent, additional rent or other charge mentioned in or made payable by the Ground Lease when said rent or other charge is due and payable subject to Borrower’s right, if any, to timely and properly contest said rent or other charge, so long as (i) Borrower shall not be in default under the Ground Lease for failure to pay said rent or other charge during the pendency of such contest and (ii) Borrower is diligently and continuously contesting said rent or other charge;

     (p) if there shall occur any default by Borrower in the observance or performance of any term, covenant or condition of the Ground Lease on the part of Borrower to be observed or performed, and said default is not cured prior to the expiration of any applicable grace period therein provided, or if any one or more of the events referred to in the Ground Lease shall occur which would cause the Ground Lease to terminate without notice or action by the Ground Lessor or which would entitle the Ground Lessor to terminate the Ground Lease and the term thereof by giving notice to Borrower, as lessee thereunder, or if the leasehold estate created by the Ground Lease shall be surrendered or the Ground Lease shall be terminated or cancelled for any reason or under any circumstances whatsoever, or if any of the terms, covenants or conditions of the Ground Lease shall in any manner be modified, changed, supplemented, altered, or amended without the prior written consent of Lender, or if Borrower shall fail to exercise any option to renew the Ground Lease or shall fail to or neglect to pursue diligently all actions necessary to exercise such renewal rights, if any, pursuant to the terms of the Ground Lease; or

     (q) if a default shall occur under any of the other terms, covenants or conditions of the Note, this Security Instrument or any other Loan Document, other than as set forth in (a) through (p) above, for ten (10) days after notice from Lender in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other default or an additional sixty (60) days if Borrower is diligently and continuously effectuating a cure of a curable non-monetary default, other than as set forth in (a) through (n) above.

     Section 13.02. Remedies. (a) Upon the occurrence and during the continuance of any Event of Default, Lender may, in addition to any other rights or remedies available to it hereunder or under any other Loan Document, at law or in equity, take such action, without notice or demand, as it reasonably deems advisable to protect and enforce its rights against Borrower and in and to the Property including, but not limited to, the following actions, each of which may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine, in its sole discretion, without impairing or otherwise affecting any other rights and remedies of Lender hereunder, at law or in equity: (i) declare all or any portion of the unpaid Debt to be immediately due and payable; provided, however, that upon the occurrence of any of the events specified in Section 13.01(i), the entire Debt will be immediately due and payable without notice or demand or any other declaration of the amounts due and payable; or (ii) bring, or instruct Trustee to bring, an action to foreclose this Security Instrument and without applying for a receiver for the Rents, but subject to the rights of the tenants under the Leases, enter into or upon the Property or any part thereof, either personally or by its agents, nominees or attorneys, and dispossess Borrower and its agents and servants therefrom, and thereupon Lender may (A) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Property and conduct the business thereat, (B) make alterations,

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additions, renewals, replacements and improvements to or on the Property or any part thereof, (C) exercise all rights and powers of Borrower with respect to the Property or any part thereof, whether in the name of Borrower or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all earnings, revenues, rents, issues, profits and other income of the Property and every part thereof and Borrower shall have no liability under this clause (C) for any actions taken by Lender which are grossly negligent or which constitute willful misconduct, and (D) apply the receipts from the Property or any part thereof to the payment of the Debt, after deducting therefrom all expenses (including, without limitation, reasonable attorneys’ fees and disbursements) reasonably incurred in connection with the aforesaid operations and all amounts necessary to pay the Impositions, insurance and other charges in connection with the Property or any part thereof, as well as just and reasonable compensation for the services of Lender’s third-party agents; or (iii) have an appraisal or other valuation of the Property or any part thereof performed by an Appraiser (and Borrower covenants and agrees it shall cooperate in causing any such valuation or appraisal to be performed) and any cost or expense incurred by Lender in connection therewith shall constitute a portion of the Debt and be secured by this Security Instrument and shall be immediately due and payable to Lender with interest, at the Default Rate, until the date of receipt by Lender; or (iv) sell, or instruct Trustee to sell, the Property or institute, or instruct Trustee to institute, proceedings for the complete foreclosure of this Security Instrument, or take such other action as may be allowed pursuant to Legal Requirements, at law or in equity, for the enforcement of this Security Instrument in which case the Property or any part thereof may be sold for cash or credit in one or more parcels; or (v) with or without entry, and to the extent permitted and pursuant to the procedures provided by applicable Legal Requirements, institute proceedings for the partial foreclosure of this Security Instrument, or take such other action as may be allowed pursuant to Legal Requirements, at law or in equity, for the enforcement of this Security Instrument for the portion of the Debt then due and payable, subject to the lien of this Security Instrument continuing unimpaired and without loss of priority so as to secure the balance of the Debt not then due; or (vi) sell, or instruct Trustee to sell, the Property or any part thereof and any or all estate, claim, demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, in whole or in parcels, in any order or manner, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law, at the discretion of Lender, and in the event of a sale, by foreclosure or otherwise, of less than all of the Property, this Security Instrument shall continue as a lien on the remaining portion of the Property; or (vii) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained in the Loan Documents, or any of them; or (viii) recover judgment on the Note or any guaranty either before, during or after (or in lieu of) any proceedings for the enforcement of this Security Instrument; or (ix) apply, or direct Trustee to apply, ex parte, for the appointment of a custodian, trustee, receiver, keeper, liquidator or conservator of the Property or any part thereof, irrespective of the adequacy of the security for the Debt and without regard to the solvency of Borrower or of any Person liable for the payment of the Debt, to which appointment Borrower does hereby consent and such receiver or other official shall have all rights and powers permitted by applicable law and such other rights and powers as the court making such appointment may confer, but the appointment of such receiver or other official shall not impair or in any manner prejudice the rights of Lender to receive the Rent with respect to any of the Property pursuant to this Security Instrument or the Assignment; or (x) require, at

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Lender’s option, Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of any portion of the Property occupied by Borrower and may require Borrower to vacate and surrender possession to Lender of the Property or to such receiver and Borrower may be evicted by summary proceedings or otherwise; or (xi) without notice to Borrower (A) apply all or any portion of the cash collateral in any Sub-Account and Escrow Account, including any interest and/or earnings therein, to carry out the obligations of Borrower under this Security Instrument and the other Loan Documents, to protect and preserve the Property and for any other purpose permitted under this Security Instrument and the other Loan Documents (but in all events subject to Lender’s obligations pursuant to Section 5.05 hereof) and/or (B) have all or any portion of such cash collateral immediately paid to Lender to be applied against the Debt in the order and priority set forth in the Note (but in all events subject to Lender’s obligations pursuant to Section 5.05 hereof); or (xii) pursue any or all such other rights or remedies as Lender and Trustee may have under applicable law or in equity; provided, however, that the provisions of this Section 13.02(a) shall not be construed to extend or modify any of the notice requirements or grace periods provided for hereunder or under any of the other Loan Documents. Borrower hereby waives, to the fullest extent permitted by Legal Requirements, any defense Borrower might otherwise raise or have by the failure to make any tenants parties defendant to a foreclosure proceeding and to foreclose their rights in any proceeding instituted by Lender or Trustee.

     (b) Any time after and during the continuance of an Event of Default Trustee, at the request of Lender, shall have the power to sell the Property or any part thereof at public auction, in such manner, at such time and place, upon such terms and conditions, and upon such public notice as Lender may deem best for the interest of Lender, or as may be required or permitted by applicable law, consisting of advertisement in a newspaper of general circulation in the jurisdiction and for such period as applicable law may require and at such other times and by such other methods, if any, as may be required by law to convey the Property by Lender’s assignment of ground lease with special warranty of title, to and at the cost of the purchaser, who shall not be liable to see to the application of the purchase money. The proceeds or avails of any sale made under or by virtue of this Section 13.02, together with any other sums which then may be held by Lender under this Security Instrument, whether under the provisions of this Section 13.02 or otherwise, shall be applied as follows:

First: To the payment of the third-party costs and expenses reasonably incurred in connection with any such sale and to advances, fees and expenses, including, without limitation, reasonable fees and expenses of Lender’s and Trustee’s legal counsel as applicable, and of any judicial proceedings wherein the same may be made, and of all expenses, liabilities and advances reasonably made or incurred by Lender or Trustee under this Security Instrument, together with interest as provided herein on all such advances made by Lender, and all Impositions, except any Impositions or other charges subject to which the Property shall have been sold;

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

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

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

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

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

     (d) Upon the completion of any sale or sales made by Lender or Trustee under or by virtue of this Section 13.02, Lender or Trustee, as applicable, or any officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, granting, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold. Lender is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an interest), in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the property and rights so sold and for that purpose Lender may execute all necessary instruments of conveyance, assignment, transfer and delivery, and may substitute one or more Persons with like power, Borrower hereby ratifying and confirming all that its said attorney-in-fact or such substitute or substitutes shall lawfully do by virtue hereof. Nevertheless, Borrower, if so requested by Lender, shall ratify and confirm any such sale or sales by executing and delivering to Lender, or to such purchaser or purchasers all such instruments as may be advisable, in the sole judgement of Lender, for such purpose, and as may be designated in such request. Any such sale or sales made under or by virtue of this Section 13.02, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Borrower in and to the property and rights so sold, and shall, to the fullest extent permitted under Legal Requirements, be a perpetual bar, both at law and in equity against Borrower and against any and all Persons claiming or who may claim the same, or any part thereof, from, through or under Borrower.

     (e) In the event of any sale made under or by virtue of this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), the entire Debt immediately thereupon shall, anything in the Loan Documents to the contrary notwithstanding, become due and payable.

     (f) Upon any sale made under or by virtue of this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), Lender may bid for and acquire the Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon

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the Debt the net sales price after deducting therefrom the expenses of the sale and the costs of the action.

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

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

     (i) Nothing contained in this Security Instrument or any other Loan Document shall waive any defense by Borrower that Lender and/or Trustee has failed to comply with the terms of this Security Instrument and the other Loan Documents.

     Section 13.03. Payment of Debt After Default. If, following the occurrence of any Event of Default, Borrower shall tender payment of an amount sufficient to satisfy the Debt in whole or in part at any time prior to a foreclosure sale of the Property, and if at the time of such tender prepayment of the principal balance of the Note is not permitted by the Note or this Security Instrument, Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal to (a) all accrued interest on the Note and all other fees, charges and sums due and payable hereunder, (b) all costs and expenses in connection with the enforcement of Lender’s rights hereunder, and (c) a prepayment charge (the “Prepayment Charge”) equal to the greater of (i) 2% of the Principal Amount and (ii) the present value of a series of payments each equal to the Payment Differential (as hereinafter defined) and payable on each Payment Date over the remaining original term of the Note and on the Payment Date occurring two months prior to the Maturity Date, discounted at the Reinvestment Yield (as hereinafter defined) for the number of months remaining as of the date of such prepayment to each such Payment Date and the Payment Date occurring two months prior to the Maturity Date. The term “Payment Differential” shall mean an amount equal to (i) the Interest Rate less the Reinvestment Yield, divided by (ii) twelve (12) and multiplied by (iii) the Principal Amount after application of the constant monthly payment due under the Note on the date of such prepayment, provided that the Payment Differential shall in no event be less than zero. The term “Reinvestment Yield” shall mean an amount equal to the lesser of (i) the yield on the U.S. Treasury issue (primary issue) with a maturity date closest to the Payment Date occurring two months prior to the Maturity Date, or (ii) the yield on the U.S. Treasury issue (primary issue) with a term equal to the remaining

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average life of the indebtedness evidenced by the Note, with each such yield being based on the bid price for such issue as published in the Wall Street Journal on the date that is fourteen (14) days prior to the date of such prepayment set forth in the notice of prepayment (or, if such bid price is not published on that date, the next preceding date on which such bid price is so published) and converted to a monthly compounded nominal yield. In addition to the amounts described above, if, during the first (1st) Loan Year, Borrower shall tender payment of an amount sufficient to satisfy the Debt in whole or in part following the occurrence of any Event of Default, Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal to three percent (3%) of the Principal Amount. Failure of Lender to require any of these payments shall not constitute a waiver of the right to require the same in the event of any subsequent default or to exercise any other remedy available to Lender hereunder, under any other Loan Document or at law or in equity. In the event that any prepayment charge is due hereunder, Lender shall deliver to Borrower a statement setting forth the amount and determination of the prepayment fee, and, provided that Lender shall have in good faith applied the formula described above, Borrower shall not have the right to challenge the calculation or the method of calculation set forth in any such statement in the absence of manifest error, which calculation may be made by Lender on any day during the fifteen (15) day period preceding the date of such prepayment. Lender shall not be obligated or required to have actually reinvested the prepaid principal balance at the Reinvestment Yield or otherwise as a condition to receiving the prepayment charge. If at the time of such tender, prepayment of the principal balance of the Note is permitted, such tender by Borrower shall be deemed to be a voluntary prepayment of the principal balance of the Note, and Borrower shall, in addition to the entire Debt, also pay to Lender the applicable prepayment consideration specified in the Note and this Security Instrument. Notwithstanding the foregoing, Lender acknowledges that, pursuant to Section 15.01, the Loan may be prepaid at any time in accordance with said Section 15.01 and that upon the occurrence of an Event of Default the only prepayment charge due pursuant to this Section 13.03 will be as set forth in Section 15.01.

     Section 13.04. Possession of the Property. Upon the occurrence and during the continuance of any Event of Default and the acceleration of the Debt or any portion thereof, Borrower, if an occupant of the Property or any part thereof, upon demand of Lender, shall immediately surrender possession of the Property (or the portion thereof so occupied) to Lender, and if Borrower is permitted to remain in possession, the possession shall be as a month-to-month tenant of Lender and, on demand, Borrower shall pay to Lender monthly, in advance, a reasonable rental for the space so occupied and in default thereof Borrower may be dispossessed. The covenants herein contained may be enforced by a receiver of the Property or any part thereof. Nothing in this Section 13.04 shall be deemed to be a waiver of the provisions of this Security Instrument making the Transfer of the Property or any part thereof without Lender’s prior written consent an Event of Default.

     Section 13.05. Interest After Default. If any amount due under the Note, this Security Instrument or any of the other Loan Documents is not paid within any applicable notice and grace period after same is due, whether such date is the stated due date, any accelerated due date or any other date or at any other time specified under any of the terms hereof or thereof, then, in such event, Borrower shall pay interest on the amount not so paid from and after the date on which such amount first becomes due at the Default Rate; and such interest shall be due and

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payable at such rate until the earlier of the cure of all Events of Default or the payment of the entire amount due to Lender, whether or not any action shall have been taken or proceeding commenced to recover the same or to foreclose this Security Instrument. All unpaid and accrued interest shall be secured by this Security Instrument as part of the Debt. Nothing in this Section 13.05 or in any other provision of this Security Instrument shall constitute an extension of the time for payment of the Debt.

     Section 13.06. Borrower’s Actions After Default. After the happening of any Event of Default and immediately upon the commencement of any action, suit or other legal proceedings by Lender to obtain judgment for the Debt, or of any other nature in aid of the enforcement of the Loan Documents, Borrower will (a) after receipt of notice of the institution of any such action, waive the issuance and service of process and enter its voluntary appearance in such action, suit or proceeding, and (b) if required by Lender, consent to the appointment of a receiver or receivers of the Property or any part thereof and of all the earnings, revenues, rents, issues, profits and income thereof.

     Section 13.07. Control by Lender After Default. Notwithstanding the appointment during the continuance of an Event of Default of any custodian, receiver, liquidator or trustee of Borrower, or of any of its property, or of the Property or any part thereof, to the extent permitted by Legal Requirements, Lender shall be entitled to obtain possession and control of all property now and hereafter covered by this Security Instrument and the Assignment in accordance with the terms hereof.

     Section 13.08. Right to Cure Defaults. (a) Upon the occurrence and during the continuance of any Event of Default, Lender or its agents may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, make or do the same in such manner and to such extent as Lender may deem necessary to protect the security hereof. Lender and its agents are authorized to enter upon the Property or any part thereof for such purposes, or appear in, defend, or bring any action or proceedings to protect Lender’s interest in the Property or any part thereof or to foreclose this Security Instrument or collect the Debt, and the cost and expense thereof (including reasonable attorneys’ fees to the extent permitted by law), with interest as provided in this Section 13.08, shall constitute a portion of the Debt and shall be immediately due and payable to Lender upon demand. All such costs and expenses incurred by Lender or its agents in remedying such Event of Default or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate, for the period from the date so demanded to the date of payment to Lender. All such costs and expenses incurred by Lender or its agents together with interest thereon calculated at the above rate shall be deemed to constitute a portion of the Debt and be secured by this Security Instrument.

     (b) If Lender makes any payment or advance that Lender is authorized by this Security Instrument to make in the place and stead of Borrower (i) relating to the Impositions or tax liens asserted against the Property, Lender may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of the bill, statement or estimate or into the validity of any of the Impositions or the tax liens or claims thereof; (ii) relating to any apparent or threatened adverse title, lien, claim of lien, encumbrance,

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claim or charge, Lender will be the sole judge of the legality or validity of same; or (iii) relating to any other purpose authorized by this Security Instrument but not enumerated in this Section 13.08, Lender may do so whenever, in its judgment and discretion, the payment or advance seems necessary or desirable to protect the Property and the full security interest intended to be created by this Security Instrument. In connection with any payment or advance made pursuant to this Section 13.08, Lender has the option and is authorized, but in no event shall be obligated, to obtain a continuation report of title prepared by a title insurance company. The payments and the advances made by Lender pursuant to this Section 13.08 and the cost and expenses of said title report will be due and payable by Borrower on demand, together with interest at the Default Rate, and will be secured by this Security Instrument.

     Section 13.09. Late Payment Charge. If any portion of the Debt is not paid in full on or before the day on which it is due and payable hereunder, Borrower shall pay to Lender an amount equal to five percent (5%) of such unpaid portion of the Debt (“Late Charge”) to defray the expense incurred by Lender in handling and processing such delinquent payment, and such amount shall constitute a part of the Debt.

     Section 13.10. Recovery of Sums Required to Be Paid. Lender shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due and payable hereunder (after the expiration of any grace period or the giving of any notice herein provided, if any), without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Lender thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Borrower existing at the time such earlier action was commenced.

     Section 13.11. Marshalling and Other Matters. Borrower hereby waives, to the fullest extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement, redemption (both equitable and statutory) and homestead laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Property or any part thereof or any interest therein. Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Security Instrument on behalf of Borrower, whether equitable or statutory and on behalf of each and every Person acquiring any interest in or title to the Property or any part thereof subsequent to the date of this Security Instrument and on behalf of all Persons to the fullest extent permitted by applicable law.

     Section 13.12. Tax Reduction Proceedings. During the continuance of an Event of Default, Borrower shall be deemed to have appointed Lender as its attorney-in-fact to seek a reduction or reductions in the assessed valuation of the Property for real property tax purposes or for any other purpose and to prosecute any action or proceeding in connection therewith. This power, being coupled with an interest, shall be irrevocable for so long as any part of the Debt remains unpaid and any Event of Default shall be continuing.

     Section 13.13. General Provisions Regarding Remedies.

     (a) Right to Terminate Proceedings. Lender or Trustee may terminate or rescind any proceeding or other action brought in connection with its exercise of the remedies provided in

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Section 13.02 at any time before the conclusion thereof, as determined in Lender’s sole discretion and without prejudice to Lender or Trustee.

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

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

ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS

     Section 14.01. Compliance with Legal Requirements. (a) Borrower shall promptly comply with all present and future Legal Requirements, foreseen and unforeseen, ordinary and extraordinary, whether requiring structural or nonstructural repairs or alterations including, without limitation, all zoning, subdivision, building, safety and environmental protection, land use and development Legal Requirements, all Legal Requirements which may be applicable to the curbs adjoining the Property or to the use or manner of use thereof, and all rent control, rent stabilization and all other similar Legal Requirements relating to rents charged and/or collected in connection with the Leases.

     (b) Borrower shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, without cost or expense to Lender or Trustee, the validity or application of any Legal Requirement and to suspend compliance therewith if permitted under applicable Legal Requirements, provided (i) failure to comply therewith may not subject Lender or Trustee to any civil or criminal liability, (ii) prior to and during such contest, Borrower shall furnish to Lender security reasonably satisfactory to Lender, in its discretion, against loss or injury by reason of such contest or non-compliance with such Legal Requirement, (iii) no Default or Event of Default shall exist during such proceedings and such contest shall not otherwise violate any of the provisions of any of the Loan Documents, (iv) such contest shall not, (unless Borrower shall comply with the provisions of clause (ii) of this Section 14.01(b)) subject the Property to any lien or encumbrance the enforcement of which is not suspended or otherwise affect the priority of the lien of this Security Instrument, (v) such contest shall not affect the ownership, use or occupancy of the Property, (vi) the Property or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by

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Borrower, (vii) Borrower shall give Lender prompt notice of the commencement of such proceedings and, upon request by Lender, notice of the status of such proceedings and/or confirmation of the continuing satisfaction of the conditions set forth in clauses (i) — (vi) of this Section 14.01(b), and (viii) upon a final determination of such proceeding, Borrower shall take all steps necessary to comply with any requirements arising therefrom.

     (c) Borrower shall at all times comply with all applicable Legal Requirements with respect to the construction, use and maintenance of any vaults adjacent to the Property. If by reason of the failure to pay taxes, assessments, charges, permit fees, franchise taxes or levies of any kind or nature, the continued use of the vaults adjacent to Property or any part thereof is discontinued, Borrower nevertheless shall, with respect to any vaults which may be necessary for the continued use of the Property, take such steps (including the making of any payment) to ensure the continued use of vaults or replacements.

     Section 14.02. Compliance with Recorded Documents; No Future Grants. Borrower shall promptly perform and observe or cause to be performed and observed, all of the material terms, covenants and conditions of all Property Agreements and all things necessary to preserve intact and unimpaired any and all appurtenances or other interests or rights affecting the Property.

ARTICLE XV: PREPAYMENT

     Section 15.01. Prepayment. (a) Except as set forth in this Section 15.01 or as otherwise specifically provided in the Loan Documents, no prepayment of the Debt may be made in whole or in part.

     (b) Borrower may prepay the Loan in whole, but not in part, as of the last day of an Interest Accrual Period in accordance with the following provisions:

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

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

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

     (iv) In the event that the Loan is prepaid on or prior to the Payment Date in December, 2011, Borrower shall pay to Lender, together with such prepayment and all other amounts due in connection therewith, a non-refundable amount which shall be deemed earned by Lender upon the funding of the Loan and shall not count to or be credited to payment of the Principal Amount, any interest thereon or any other amounts payable under the Note, the Security Instrument or any of the Loan Documents, equal to

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the greater of (x) one percent (1%) of the Principal Amount being repaid and (y) the Yield Maintenance Premium. For the purposes hereof, the term “Yield Maintenance Premium” shall mean the premium which shall be the product of (A) a fraction, the numerator of which is the positive excess, if any, of (1) the present value of all future payments of principal and interest due pursuant to the Note, including the principal amount due at maturity, to be made on the Note before the prepayment in question, discounted at an interest rate per annum equal to the average yield for “This Week” as reported by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (the “Treasury Constant Maturity Yield Index”) published during the second full week preceding the date on which such premium is payable for instruments having a maturity coterminous with the Payment Date occurring in December, 2011 (the “Lockout Expiration Date”), over (2) the Principal Amount evidenced by the Note immediately before such prepayment, and the denominator of which is the Principal Amount evidenced by the Note immediately prior to the prepayment, and (B) the Principal Amount evidenced by the Note being prepaid; provided, however, that if there is no Treasury Constant Maturity Yield Index for instruments having a maturity coterminous with the Lockout Expiration Date, then the index referred to in (1) above shall be equal to the weighted average yield to maturity of the Treasury Constant Maturity Yield Indices with maturities next longer and shorter than such remaining average life to maturity, calculated by averaging (and rounding upward to the nearest whole multiple of 1/100 of 1% per annum, if the average is not such a multiple) the yields of the relevant Treasury Constant Maturity Yield Indices (rounded, if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward). Subsequent to the Payment Date occurring in December, 2011, no sum shall be due pursuant to this paragraph 15.01(b)(iv).

ARTICLE XVI: ENVIRONMENTAL COMPLIANCE

     Section 16.01. Covenants, Representations and Warranties. (a) Borrower has not, at any time, and, to Borrower’s knowledge after due inquiry and investigation, except as set forth in the Environmental Report, no other Person has at any time, handled, buried, stored, retained, refined, transported, processed, manufactured, generated, produced, spilled, allowed to seep, leak, escape or leach, or pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or otherwise disposed of or dealt with Hazardous Materials on, to or from the Premises or any other real property owned and/or occupied by Borrower other than Permitted Materials, and Borrower does not intend to and shall not use the Property or any part thereof or any such other real property for the purpose of handling, burying, storing, retaining, refining, transporting, processing, manufacturing, generating, producing, spilling, seeping, leaking, escaping, leaching, pumping, pouring, emitting, emptying, discharging, injecting, dumping, transferring or otherwise disposing of or dealing with Hazardous Materials, except for use and storage for use of heating oil, cleaning fluids, pesticides and other substances customarily used in the operation of properties that are being used for the same purposes as the Property is presently being used, provided such use and/or storage for use is in compliance with the requirements hereof and the other Loan Documents and does not give rise to liability under applicable Legal Requirements or Environmental Statutes or be the basis for a lien against the Property or any part thereof (collectively, “Permitted Materials”). In addition, without limitation to the foregoing provisions,

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Borrower represents and warrants that, to the best of its knowledge, after due inquiry and investigation, except as previously disclosed in writing to Lender, including the Environmental Report, there is no asbestos in, on, over, or under all or any portion of the fire-proofing or any other portion of the Property.

     (b) Borrower, after due inquiry and investigation, knows of no seepage, leak, escape, leach, discharge, injection, release, emission, spill, pumping, pouring, emptying or dumping of Hazardous Materials into waters on, under or adjacent to the Property or any part thereof or any other real property owned and/or occupied by Borrower, or onto lands from which such Hazardous Materials might seep, flow or drain into such waters, except as disclosed in the Environmental Report and other than Permitted Materials.

     (c) Borrower shall not permit any Hazardous Materials to be handled, buried, stored, retained, refined, transported, processed, manufactured, generated, produced, spilled, allowed to seep, leak, escape or leach, or to be pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or otherwise disposed of or dealt with on, under, to or from the Property or any portion thereof at any time, except for use and storage for use of Permitted Materials.

     (d) Other than as described in the Environmental Report, Borrower represents and warrants that no actions, suits, or proceedings have been commenced, or are pending, or to the knowledge of Borrower, are threatened with respect to any Legal Requirement governing the use, manufacture, storage, treatment, transportation, or processing of Hazardous Materials with respect to the Property or any part thereof. Borrower has received no written notice of, and, except as disclosed in the Environmental Report, after due inquiry, has no knowledge of any fact, condition, occurrence or circumstance which with notice or passage of time or both would give rise to a claim under or pursuant to any Environmental Statute pertaining to Hazardous Materials on, in, under or originating from the Property or any part thereof or any other real property owned or occupied by Borrower or arising out of the conduct of Borrower, including, without limitation, pursuant to any Environmental Statute.

     (e) Borrower has not waived any Person’s liability with regard to Hazardous Materials in, on, under or around the Property, nor has Borrower retained or assumed, contractually or by operation of law, any other Person’s liability relative to Hazardous Materials or any claim, action or proceeding relating thereto.

     (f) In the event that there shall be filed a lien against the Property or any part thereof pursuant to any Environmental Statute pertaining to Hazardous Materials, Borrower shall, within sixty (60) days or, in the event that the applicable Governmental Authority has commenced steps to cause the Premises or any part thereof to be sold pursuant to the lien, within fifteen (15) days, from the date that Borrower receives notice of such lien, either (i) pay the claim and remove the lien from the Property, or (ii) furnish (A) a bond satisfactory to Lender in the amount of the claim out of which the lien arises, (B) a cash deposit in the amount of the claim out of which the lien arises, or (C) other security reasonably satisfactory to Lender in an amount sufficient to discharge the claim out of which the lien arises.

     (g) Borrower represents and warrants that (i) except as disclosed in the Environmental Report, Borrower has no knowledge of any violation of any Environmental

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Statute or any Environmental Problem in connection with the Property, nor has Borrower been requested or required by any Governmental Authority to perform any remedial activity or other responsive action in connection with any Environmental Problem, and (ii) neither the Property nor any other property owned by Borrower is included or, to Borrower’s best knowledge, after due inquiry and investigation, proposed for inclusion on the National Priorities List issued pursuant to CERCLA by the United States Environmental Protection Agency (the “EPA”) or on the inventory of other potential “Problem” sites issued by the EPA or has been identified by the EPA as a potential CERCLA site or included or, to Borrower’s knowledge, after due inquiry and investigation, proposed for inclusion on any list or inventory issued pursuant to any other Environmental Statute, if any, or issued by any other Governmental Authority. Borrower covenants that Borrower will comply with all Environmental Statutes affecting or imposed upon Borrower or the Property.

     (h) Borrower covenants that it shall promptly notify Lender of the presence and/or release of any Hazardous Materials (except for use and storage for use of Permitted Materials) and of any request for information or any inspection of the Property or any part thereof by any Governmental Authority with respect to any Hazardous Materials and provide Lender with copies of such request and any response to any such request or inspection. Borrower covenants that it shall, in compliance with applicable Legal Requirements, conduct and complete all investigations, studies, sampling and testing (and promptly shall provide Lender with copies of any such studies and the results of any such test) and all remedial, removal and other actions necessary to clean up and remove all Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof in accordance with all such Legal Requirements applicable to the Property or any part thereof to the reasonable satisfaction of Lender.

     (i) Following the occurrence and during the continuance of an Event of Default hereunder, and without regard to whether Lender shall have taken possession of the Property or a receiver has been requested or appointed or any other right or remedy of Lender has or may be exercised hereunder or under any other Loan Document, Lender shall have the right (but no obligation) to conduct such investigations, studies, sampling and/or testing of the Property or any part thereof as Lender may, in its discretion, determine to conduct, relative to Hazardous Materials. All costs and expenses incurred in connection therewith including, without limitation, consultants’ fees and disbursements and laboratory fees, shall constitute a part of the Debt and shall, upon demand by Lender, be immediately due and payable and shall bear interest at the Default Rate from the date so demanded by Lender until reimbursed. Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all such investigations, studies, samplings and/or testings including, without limitation, providing all relevant information and making knowledgeable people available for interviews.

     (j) Other than as described in the Environmental Report, Borrower represents and warrants that all paint and painted surfaces existing within the interior or on the exterior of the Improvements are not flaking, peeling, cracking, blistering, or chipping, and do not contain lead or are maintained in a condition that prevents exposure of young children to lead-based paint, as of the date hereof, and that the current inspections, operation, and maintenance program at the Property with respect to lead-based paint is consistent with FNMA guidelines and sufficient to ensure that all painted surfaces within the Property shall be maintained in a condition that

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prevents exposure of tenants to lead-based paint. To Borrower’s knowledge, there are currently no claims for adverse health effects from exposure on the Property to lead-based paint or requests for the investigation, assessment or removal of lead-based paint at the Property.

     (k) Borrower represents and warrants that except in accordance with all applicable Environmental Statutes and as disclosed in the Environmental Report, (i) no underground treatment or storage tanks or pumps or water, gas, or oil wells are or have been located about the Property, (ii) no PCBs or transformers, capacitors, ballasts or other equipment that contain dielectric fluid containing PCBs are located about the Property, (iii) no insulating material containing urea formaldehyde is located about the Property, and (iv) no asbestos-containing material is located about the Property.

     Section 16.02. Environmental Indemnification. Borrower shall defend, indemnify and hold harmless the Indemnified Parties for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ and consultants’ fees and disbursements and investigations and laboratory fees arising out of, or in any way related to any Environmental Problem, including without limitation:

     (a) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threat of release of any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof whether or not disclosed by the Environmental Report;

     (b) any personal injury (including wrongful death, disease or other health condition related to or caused by, in whole or in part, any Hazardous Materials) or property damage (real or personal) arising out of or related to any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof whether or not disclosed by the Environmental Report;

     (c) any action, suit or proceeding brought or threatened, settlement reached, or order of any Governmental Authority relating to such Hazardous Material whether or not disclosed by the Environmental Report; and/or

     (d) any violation of the provisions, covenants, representations or warranties of Section 16.01 hereof or of any Legal Requirement which is based on or in any way related to any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof including, without limitation, the cost of any work performed and materials furnished in order to comply therewith whether or not disclosed by the Environmental Report.

     Notwithstanding the foregoing provisions of this Section 16.02 to the contrary, Borrower shall have no obligation to indemnify Lender for (i) liabilities, claims, damages, penalties, causes of action, costs and expenses relative to the foregoing which result directly from (A) Lender’s willful misconduct or gross negligence or (B) any Hazardous Materials initially placed in, on or under the Property or any other condition relating to Hazardous Materials created after foreclosure, delivery of a deed in lieu or other taking of title to the Property by Lender or its successors and assigns. Any amounts payable to Lender by reason of the application of this Section 16.02 shall be secured by this Security Instrument and shall, upon demand by Lender,

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become immediately due and payable and shall bear interest at the Default Rate from the date so demanded by Lender until paid.

     This indemnification shall survive the termination of this Security Instrument whether by repayment of the Debt, foreclosure or deed in lieu thereof, assignment, or otherwise. The indemnity provided for in this Section 16.02 shall not be included in any exculpation of Borrower or its principals from personal liability provided for in this Security Instrument or in any of the other Loan Documents. Nothing in this Section 16.02 shall be deemed to deprive Lender of any rights or remedies otherwise available to Lender, including, without limitation, those rights and remedies provided elsewhere in this Security Instrument or the other Loan Documents.

ARTICLE XVII: ASSIGNMENTS

     Section 17.01. Participations and Assignments. Lender, at its sole cost and expense, shall have the right to assign this Security Instrument and/or any of the Loan Documents, and to transfer, assign or sell participations and subparticipations (including blind or undisclosed participations and subparticipations) in the Loan Documents and the obligations hereunder to any Person; provided, however, that no such participation shall increase, decrease or otherwise affect either Borrower’s or Lender’s obligations under this Security Instrument or the other Loan Documents.

ARTICLE XVIII: MISCELLANEOUS

     Section 18.01. Right of Entry. Lender and its agents shall have the right to enter and inspect the Property or any part thereof at all reasonable times, and, except in the event of an emergency, upon reasonable notice and to inspect Borrower’s books and records and to make abstracts and reproductions thereof, all at the cost and expense of Lender so long as there is no continuing Default.

     Section 18.02. Cumulative Rights. The rights of Lender under this Security Instrument shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein stated but shall be entitled, subject to the terms of this Security Instrument, to every right and remedy now or hereafter afforded by law.

     Section 18.03. Liability. If Borrower consists of more than one Person, the obligations and liabilities of each such Person hereunder shall be joint and several.

     Section 18.04. Exhibits Incorporated. The information set forth on the cover hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a part of this Security Instrument with the same effect as if set forth in the body hereof.

     Section 18.05. Severable Provisions. If any term, covenant or condition of the Loan Documents including, without limitation, the Note or this Security Instrument, is held to be

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invalid, illegal or unenforceable in any respect, such Loan Document shall be construed without such provision.

     Section 18.06. Duplicate Originals. This Security Instrument may be executed in any number of duplicate originals and each such duplicate original shall be deemed to constitute but one and the same instrument.

     Section 18.07. No Oral Change. The terms of this Security Instrument, together with the terms of the Note and the other Loan Documents, constitute the entire understanding and agreement of the parties hereto and supersede all prior agreements, understandings and negotiations between Borrower and Lender with respect to the Loan. This Security Instrument, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

     Section 18.08. Waiver of Counterclaim, Etc. BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS AGENTS, AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SECURITY INSTRUMENT OR THE DEBT.

     Section 18.09. Headings; Construction of Documents; etc. The table of contents, headings and captions of various paragraphs of this Security Instrument are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Borrower acknowledges that it was represented by competent counsel in connection with the negotiation and drafting of this Security Instrument and the other Loan Documents and that neither this Security Instrument nor the other Loan Documents shall be subject to the principle of construing the meaning against the Person who drafted same.

     Section 18.10. Sole Discretion of Lender. Whenever Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and conclusive, except as may be otherwise specifically provided herein.

     Section 18.11. Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Security Instrument or the other Loan Documents specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.

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     Section 18.12. Covenants Run with the Land. All of the grants, covenants, terms, provisions and conditions herein shall run with the Premises, shall be binding upon Borrower and shall inure to the benefit of Lender, subsequent holders of this Security Instrument and their successors and assigns. Without limitation to any provision hereof, the term “Borrower” shall include and refer to the borrower named herein, any subsequent owner of the Property, and its respective heirs, executors, legal representatives, successors and assigns. The representations, warranties and agreements contained in this Security Instrument and the other Loan Documents are intended solely for the benefit of the parties hereto, shall confer no rights hereunder, whether legal or equitable, in any other Person and no other Person shall be entitled to rely thereon.

     Section 18.13. Applicable Law. THIS SECURITY INSTRUMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE DISTRICT OF COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH DISTRICT AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.

Section 18.14. Security Agreement. (a) (i) This Security Instrument is both a real property mortgage, deed to secure debt or deed of trust, as applicable, and a “security agreement” within the meaning of the UCC. The Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Borrower in the Property. This Security Instrument is filed as a fixture filing and covers goods which are or are to become fixtures on the Property. Borrower by executing and delivering this Security Instrument has granted to Lender, as security for the Debt, a security interest in the Property to the full extent that the Property may be subject to the UCC (said portion of the Property so subject to the UCC being called in this Section 18.14 the “Collateral”). If an Event of Default shall occur and be continuing, Lender, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the UCC, including, without limiting the generality of the foregoing, the right to take possession of the Collateral or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Collateral. Upon request or demand of Lender during the continuance of an Event of Default, Borrower shall, at its expense, assemble the Collateral and make it available to Lender at a convenient place acceptable to Lender. Borrower shall pay to Lender on demand any and all expenses, including reasonable legal expenses and attorneys’ fees, incurred or paid by Lender in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Collateral. Any disposition pursuant to the UCC of so much of the Collateral as may constitute personal property shall be considered commercially reasonable if made pursuant to a public sale which is advertised at least twice in a newspaper in which sheriff’s sales are advertised in the county where the Premises is located. Any notice of sale, disposition or other intended action by Lender with respect to the Collateral given to Borrower in accordance with the provisions hereof at least ten (10) days prior to such action, shall constitute reasonable notice to Borrower. The proceeds of any disposition of the Collateral, or any part thereof, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. It is not necessary that the Collateral be present at any

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disposition thereof. Lender shall have no obligation to clean-up or otherwise prepare the Collateral for disposition.

     (ii) The mention in a financing statement filed in the records normally pertaining to personal property of any portion of the Property shall not derogate from or impair in any manner the intention of this Security Instrument. Lender hereby declares that all items of Collateral are part of the real property encumbered hereby to the fullest extent permitted by law, regardless of whether any such item is physically attached to the Improvements or whether serial numbers are used for the better identification of certain items. Specifically, the mention in any such financing statement of any items included in the Property shall not be construed to alter, impair or impugn any rights of Lender as determined by this Security Instrument or the priority of Lender’s lien upon and security interest in the Property in the event that notice of Lender’s priority of interest as to any portion of the Property is required to be filed in accordance with the UCC to be effective against or take priority over the interest of any particular class of persons, including the federal government or any subdivision or instrumentality thereof. No portion of the Collateral constitutes or is the proceeds of “Farm Products”, as defined in the UCC.

     (iii) If Borrower is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Borrower, Borrower shall promptly notify Lender thereof and, at the request and option of Lender, Borrower shall, pursuant to an agreement in form and substance satisfactory to Lender, either (A) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to Lender of the proceeds of any drawing under the letter of credit or (B) arrange for Lender to become the transferee beneficiary of the letter of credit, with Lender agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in this Security Instrument.

     (iv) Borrower and Lender acknowledge that for the purposes of Article 9 of the UCC, the law of the District of Columbia shall be the law of the jurisdiction of the bank in which the Central Account is located.

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

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

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

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

     Section 18.15. Actions and Proceedings. Lender has the right to appear in and defend any action or proceeding brought with respect to the Property in its own name or, if required by Legal Requirements or, if in Lender’s reasonable judgment, it is necessary, in the name and on behalf of Borrower, which Lender believes will adversely affect the Property or this Security Instrument and to bring any action or proceedings, in its name or in the name and on behalf of Borrower, which Lender, in its reasonable discretion, decides should be brought to protect its interest in the Property.

     Section 18.16. Usury Laws. This Security Instrument and the Note are subject to the express condition, and it is the expressed intent of the parties, that at no time shall Borrower be obligated or required to pay interest on the principal balance due under the Note at a rate which could subject the holder of the Note to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by law to contract or agree to pay. If by the terms of this Security Instrument or the Note, Borrower is at any time required or obligated to pay interest on the principal balance due under the Note at a rate in excess of such maximum rate, such rate of interest shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of the Note. No application to the principal balance of the Note pursuant to this Section 18.16 shall give rise to any requirement to pay any prepayment fee or charge of any kind due hereunder, if any.

     Section 18.17. Remedies of Borrower. In the event that a claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed acting in any case where by law or under the Note, this Security Instrument or the Loan Documents, it has an obligation to act reasonably or promptly, Lender shall not be liable for any monetary damages, and Borrower’s remedies shall be limited to injunctive relief or declaratory judgment.

     Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this Security Instrument, the Assignment and the Note shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to the Note, the Assignment or this Security Instrument which Borrower may otherwise have against any assignor of this Security Instrument, the Assignment and the Note and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Security Instrument, the Assignment or the Note and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

     Section 18.19. No Merger. If Borrower’s and Lender’s estates become the same including, without limitation, upon the delivery of a deed by Borrower in lieu of a foreclosure sale, or upon a purchase of the Property by Lender in a foreclosure sale, this Security Instrument and the lien created hereby shall not be destroyed or terminated by the application of the doctrine

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of merger and in such event Lender shall continue to have and enjoy all of the rights and privileges of Lender as to the separate estates; and, as a consequence thereof, upon the foreclosure of the lien created by this Security Instrument, any Leases or subleases then existing and created by Borrower shall not be destroyed or terminated by application of the law of merger or as a result of such foreclosure unless Lender or any purchaser at any such foreclosure sale shall so elect. No act by or on behalf of Lender or any such purchaser shall constitute a termination of any Lease or sublease unless Lender or such purchaser shall give written notice thereof to such lessee or sublessee.

     Section 18.20. Restoration of Rights. In case Lender shall have proceeded to enforce any right under this Security Instrument by foreclosure sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then, in every such case, Borrower and Lender shall be restored to their former positions and rights hereunder with respect to the Property subject to the lien hereof.

     Section 18.21. Waiver of Statute of Limitations. The pleadings of any statute of limitations as a defense to any and all obligations secured by this Security Instrument are hereby waived to the full extent permitted by Legal Requirements.

     Section 18.22. Advances. This Security Instrument shall cover any and all advances made pursuant to the Loan Documents, rearrangements and renewals of the Debt and all extensions in the time of payment thereof, even though such advances, extensions or renewals be evidenced by new promissory notes or other instruments hereafter executed and irrespective of whether filed or recorded. Likewise, the execution of this Security Instrument shall not impair or affect any other security which may be given to secure the payment of the Debt, and all such additional security shall be considered as cumulative. The taking of additional security, execution of partial releases of the security, or any extension of time of payment of the Debt shall not diminish the force, effect or lien of this Security Instrument and shall not affect or impair the liability of Borrower and shall not affect or impair the liability of any maker, surety, or endorser for the payment of the Debt.

     Section 18.23. Application of Default Rate Not a Waiver. Application of the Default Rate shall not be deemed to constitute a waiver of any Default or Event of Default or any rights or remedies of Lender under this Security Instrument, any other Loan Document or applicable Legal Requirements, or a consent to any extension of time for the payment or performance of any obligation with respect to which the Default Rate may be invoked.

     Section 18.24. Intervening Lien. To the fullest extent permitted by law, any agreement hereafter made pursuant to this Security Instrument shall be superior to the rights of the holder of any intervening lien.

     Section 18.25. No Joint Venture or Partnership. Borrower and Lender intend that the relationship created hereunder be solely that of mortgagor and mortgagee or grantor and beneficiary or borrower and lender, as the case may be. Nothing herein 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 the Property other than that of mortgagee, beneficiary or lender.

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     Section 18.26. Time of the Essence. Time shall be of the essence in the performance of all obligations of Borrower hereunder.

     Section 18.27. Borrower’s Obligations Absolute. Borrower acknowledges that Lender and/or certain Affiliates of Lender are engaged in the business of financing, owning, operating, leasing, managing, and brokering real estate and in other business ventures which may be viewed as adverse to or competitive with the business, prospect, profits, operations or condition (financial or otherwise) of Borrower. Except as set forth to the contrary in the Loan Documents, all sums payable by Borrower hereunder shall be paid without notice or demand, counterclaim, set-off, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of Borrower hereunder shall in no way be released, discharged, or otherwise affected (except as expressly provided herein) by reason of: (a) any damage to or destruction of or any Taking of the Property or any portion thereof ; (b) any restriction or prevention of or interference with any use of the Property or any portion thereof; (c) any title defect or encumbrance or any eviction from the Premises or any portion thereof by title paramount or otherwise; (d) any bankruptcy proceeding relating to Borrower, any General Partner, or any guarantor or indemnitor, or any action taken with respect to this Security Instrument or any other Loan Document by any trustee or receiver of Borrower or any such General Partner, guarantor or indemnitor, or by any court, in any such proceeding; (e) any claim which Borrower has or might have against Lender; (f) any default or failure on the part of Lender to perform or comply with any of the terms hereof or of any other agreement with Borrower; or (g) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not Borrower shall have notice or knowledge of any of the foregoing.

     Section 18.28. Publicity. All promotional news releases, publicity or advertising by Manager, Borrower or their respective Affiliates through any media intended to reach the general public shall not refer to the Loan Documents or the financing evidenced by the Loan Documents, or to Lender or to any of its Affiliates without the prior written approval of Lender or such Affiliate, as applicable, in each instance, such approval not to be unreasonably withheld or delayed. Lender shall be authorized to provide information relating to the Property, the Loan and matters relating thereto to rating agencies, underwriters, potential securities investors, auditors, regulatory authorities and to any Persons which may be entitled to such information by operation of law and may use basic transaction information (including, without limitation, the name of Borrower, the name and address of the Property and the Loan Amount) in press releases or other marketing materials.

     Section 18.29. Securitization Opinions. In the event the Loan is included as an asset of a Securitization by Lender or any of its Affiliates, Borrower shall, within ten (10) Business Days after Lender’s written request therefor, deliver opinions in form and substance and delivered by counsel reasonably acceptable to Lender and each Rating Agency, as may be reasonably required by Lender and/or the Rating Agency in connection with such securitization. Borrower’s failure to deliver the opinions required hereby within such ten (10) Business Day period shall constitute an “Event of Default” hereunder. The cost of any “bringdown” opinion of any legal opinion given in connection with the origination of the Loan will be paid by Borrower. The reasonable cost of any other opinion requested by Lender and/or any Rating Agency will be paid by Lender.

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Notwithstanding the foregoing, Borrower shall not be required to deliver a “10b-5” or “REMIC” Opinion in connection with any Securitization.

     Section 18.30. Cooperation with Rating Agencies. Borrower covenants and agrees that in the event the Loan is to be included as an asset of a Securitization, Borrower shall, so long as the following may be accomplished at no material expense to Borrower and with no more than an insignificant allocation of Borrower’s time (a) gather any information reasonably required by each Rating Agency in connection with such a Securitization to the extent in Borrower’s possession or control or reasonably obtainable by Borrower, (b) at Lender’s request, meet with representatives of each Rating Agency to discuss the business and operations of the Property, and (c) cooperate with the reasonable requests of each Rating Agency and Lender in connection with all of the foregoing as well as in connection with all other matters and the preparation of any offering documents with respect thereto, including, without limitation, entering into any amendments or modifications to this Security Instrument or to any other Loan Document which may be requested by Lender to conform to Rating Agency or market standards for a Securitization provided that no such modification shall modify (a) the interest rate payable under the Note, (b) the stated maturity of the Note, (c) the amortization of principal under the Note, (d) Section 18.32 hereof, (e) any other material economic term of the Loan, (f) expand the scope of representation made hereunder or (g) any provision, the effect of which would materially increase Borrower’s obligations or materially decrease Borrower’s rights under the Loan Documents. Borrower acknowledges that the information provided by Borrower to Lender may be incorporated into the offering documents for a Securitization and to the fullest extent permitted, Borrower irrevocably waives all rights, if any, to prohibit such disclosures including, without limitation, any right of privacy. Lender and each Rating Agency shall be entitled to rely on the information supplied by, or on behalf of, Borrower, and Borrower indemnifies and holds harmless the Indemnified Parties, their Affiliates and each Person who controls such Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as same may be amended from time to time, for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ fees and disbursements that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such information or arise out of or are based upon the omission or alleged omission (collectively, “Securities Liabilities”); provided, however, that Borrower will be liable under the foregoing indemnity only to the extent that such Securities Liabilities arise out of, or are based upon, any such untrue statement or omission made therein in reliance upon, and in conformity with, information furnished to Lender by or on behalf of Borrower or its Affiliates in connection with the preparation of the disclosure documents or in connection with the underwriting of the Loan; and provided further, however, that with respect to information provided by third parties and with respect to statements made in the disclosure documents that are based upon information provided by third parties, Borrower will be liable only if Borrower or its Affiliates knew that such information was false or omitted to state a material fact known to Borrower and necessary to make the statements made, in light of the circumstances under which they were made, not misleading.

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     Section 18.31. Securitization Financials. Borrower covenants and agrees that, upon Lender’s written request therefor in connection with a Securitization, Borrower shall, at Borrower’s sole cost and expense, promptly deliver (a) audited financial statements and related documentation prepared by an Independent certified public accountant that satisfy securities laws and requirements for use in a public registration statement (which may include up to three (3) years of historical audited financial statements) and (b) if, at the time one or more Disclosure Documents are being prepared in connection with a Securitization, Lender expects that Borrower alone or Borrower and one or more of its Affiliates collectively, or the Property alone or the Property and any other parcel(s) of real property, together with improvements thereon and personal property related thereto, that is “related”, within the meaning of the definition of Significant Obligor, to the Property (a “Related Property”) collectively, will be a Significant Obligor, Borrower shall furnish to Lender upon request (i) the selected financial data or, if applicable, net operating income, required under Item 1112(b)(1) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan, together with any loans made to an Affiliate of Borrower or secured by a Related Property that is included in a Securitization with the Loan (a “Related Loan”), as of the cut-off date for such Securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization and at any time during which the Loan and any Related Loans are included in a Securitization does, equal or exceed ten percent (10%) (but less than twenty percent (20%)) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization or (ii) the financial statements required under Item 1112(b)(2) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization and at any time during which the Loan and any Related Loans are included in a Securitization does, equal or exceed twenty percent (20%) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization. Such financial data or financial statements shall be furnished to Lender within ten (10) Business Days after notice from Lender in connection with the preparation of Disclosure Documents for the Securitization and, with respect to the data or financial statements required pursuant to clause (b) hereof, (A) not later than thirty (30) days after the end of each fiscal quarter of Borrower and (B) not later than seventy-five (75) days after the end of each Fiscal Year; provided, however, that Borrower shall not be obligated to furnish financial data or financial statements pursuant to clauses (A) or (B) of this sentence with respect to any period for which a filing pursuant to the Securities Exchange Act of 1934 in connection with or relating to the Securitization is not required.

     Section 18.32. Exculpation. Notwithstanding anything herein or in any other Loan Document to the contrary, except as otherwise set forth in this Section 18.32 to the contrary, Lender shall not enforce the liability and obligation of Borrower or (a) if Borrower or any of its direct or indirect owners is a partnership, its or their constituent partners or any of their respective partners, (b) if Borrower or any of its direct or indirect owners is a trust, its or their beneficiaries or any of their respective Partners (as hereinafter defined), (c) if Borrower or any of its direct or indirect owners is a corporation, any of its or their shareholders, directors, principals, officers or employees, or (d) if Borrower or any of its direct or indirect owners is a limited liability company, any of its or their members (the Persons described in the foregoing clauses (a)

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- (d), as the case may be, are hereinafter referred to as the “Partners”) to perform and observe the obligations contained in this Security Instrument or any of the other Loan Documents by any action or proceeding, including, without limitation, any action or proceeding wherein a money judgment shall be sought against Borrower or the Partners, except that Lender may bring a foreclosure action, action for specific performance, or other appropriate action or proceeding (including, without limitation, an action to obtain a deficiency judgment) solely for the purpose of enabling Lender to realize upon (i) Borrower’s interest in the Property, (ii) the Rent to the extent received by Borrower during the existence of an Event of Default (all Rent covered by this clause (ii) being hereinafter referred to as the “Recourse Distributions”) and not applied towards the operation or maintenance of the Property, and (iii) any other collateral then subject to the Loan Documents (the collateral described in the foregoing clauses (i) — (iii) is hereinafter referred to as the “Default Collateral”); provided, however, that any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of any such Default Collateral. The provisions of this Section shall not, however, (a) impair the validity of the Debt evidenced by the Note or in any way affect or impair the lien of this Security Instrument or any of the other Loan Documents or the right of Lender to foreclose this Security Instrument following the occurrence of an Event of Default; (b) impair the right of Lender to name Borrower as a party defendant in any action or suit for judicial foreclosure and sale under this Security Instrument; (c) affect the validity or enforceability of the Note, this Security Instrument, or any of the other Loan Documents, or impair the right of Lender to seek a personal judgment against Guarantor to the extent contained in the Guaranty; (d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement of the Assignment; (f) impair the right of Lender to bring suit for a monetary judgment with respect to fraud or material misrepresentation by Borrower, or any Affiliate of Borrower in connection with this Security Instrument, the Note or the other Loan Documents, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower with respect to same; (g) impair the right of Lender to bring suit for a monetary judgment to obtain the Recourse Distributions received by Borrower; (h) impair the right of Lender to bring suit for a monetary judgment with respect to Borrower’s misappropriation of tenant security deposits or Rent collected more than one (1) month in advance and not applied to the operation of the Property, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower; (i) impair the right of Lender to obtain Loss Proceeds due to Lender pursuant to this Security Instrument; (j) impair the right of Lender to enforce the provisions of Sections 2.02(g), 12.01, 16.01 or 16.02, inclusive of this Security Instrument, even after repayment in full by Borrower of the Debt or to bring suit for a monetary judgment against Borrower with respect to any obligation set forth in said Sections; (k) prevent or in any way hinder Lender from exercising, or constitute a defense, or counterclaim, or other basis for relief in respect of the exercise of, any other remedy against any or all of the collateral securing the Note as provided in the Loan Documents; (l) impair the right of Lender to bring suit for a monetary judgment with respect to any misapplication or conversion of Loss Proceeds, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower; (m) impair the right of Lender to sue for, seek or demand a deficiency judgment against Borrower solely for the purpose of foreclosing the Property or any part thereof, or realizing upon the Default Collateral; provided, however, that any such deficiency judgment referred to in this clause (m) shall be enforceable against Borrower only to the extent of any of the Default Collateral; (n) impair the ability of Lender to bring suit for a monetary judgment with respect to arson or waste to or of the Property or damage to the Property resulting from the gross

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negligence or willful misconduct of Borrower or, to the extent that there is sufficient cash flow, failure to pay any Imposition, or in lieu thereof, deposit a sum equal to any Impositions into the Basic Carrying Costs Sub-Account; (o) impair the right of Lender to bring a suit for a monetary judgment in the event of the exercise of any right or remedy under any federal, state or local forfeiture laws resulting in the loss of the lien of this Security Instrument, or the priority thereof, against the Property; (p) be deemed a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt; (q) impair the right of Lender to bring suit for monetary judgment with respect to any actual losses resulting from any claims, actions or proceedings initiated by Borrower (or any Affiliate of Borrower) alleging that the relationship of Borrower and Lender is that of joint venturers, partners, tenants in common, joint tenants or any relationship other than that of debtor and creditor; (r) impair the right of Lender to bring suit for a monetary judgment in the event of a Transfer in violation of the provisions of Article IX hereof; (s) impair the right of Lender to bring suit for a monetary judgment in the event that Borrower moves its principal place of business or its books and records relating to the Property which are governed by the UCC, or changes its name, its jurisdiction of organization, type of organization or other legal structure or, if it has one, organizational identification number, without first giving Lender thirty (30) days prior written notice; (t) impair the right of Lender to bring suit for a monetary judgment in the event that Borrower changes its name of otherwise does anything which would make the information set forth in any UCC Financing Statements relating to the Property materially misleading without giving Lender thirty (30) days prior written notice thereof; or impair the right of Lender to bring suit for a monetary judgment in the event that Borrower consents to any modification, change, supplement, alteration or amendment of the Ground Lease without Lender’s prior written consent, which shall not be unreasonably withheld, or termination of the Ground Lease without Lender’s prior written consent, which consent shall be subject to Lender’s sole and absolute discretion. The provisions of this Section 18.32 shall be inapplicable to Borrower if (a) any proceeding, action, petition or filing under the Bankruptcy Code, or any similar state or federal law now or hereafter in effect relating to bankruptcy, reorganization or insolvency, or the arrangement or adjustment of debts, shall be (A) filed by Borrower or Guarantor or (B) filed against Borrower or Guarantor and consented to or acquiesced in by Borrower or Guarantor or if any Affiliate of Borrower or Guarantor, or if Borrower or Guarantor or any Affiliate of either of them shall institute any proceeding for Borrower’s dissolution or liquidation, or Borrower or Guarantor shall make an assignment for the benefit of creditors, or (b) Borrower or any Affiliate contests or in any material way interferes in bad faith with, directly or indirectly (collectively, a “Contest”), any foreclosure action, UCC sale or other material remedy exercised by Lender upon the occurrence of any Event of Default whether by making any motion, bringing any counterclaim (other than a compulsory counterclaim), claiming any defense, seeking any injunction or other restraint, commencing any action, or otherwise (provided that if any such Person obtains a non-appealable order successfully asserting a Contest, Borrower shall have no liability under this clause (b) and provided, further, that the liability under this clause (b) shall be limited to the actual and consequential costs, expenses and damages of Lender which result, directly or indirectly, from any such Contest), in which event Lender shall have recourse against all of the assets of Borrower including, without limitation, any right, title and interest of Borrower in and to the Property, and any Recourse Distributions received by Guarantor or Borrower (but excluding the other assets of such Guarantor to the extent Lender

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would not have had recourse thereto other than in accordance with the provisions of this Section 18.32).

     Section 18.33. Concerning the Trustee. Trustee shall be under no duty to take any action hereunder except as expressly required hereunder or by law, or to perform any act which would involve Trustee in any expense or liability or to institute or defend any suit in respect hereof, unless properly indemnified to Trustee’s reasonable satisfaction. Trustee, by acceptance of this Security Instrument, covenants to perform and fulfill the trusts herein created, being liable, however, only for gross negligence or willful misconduct, and hereby waives any statutory fee and agrees to accept reasonable compensation, in lieu thereof, for any services rendered by Trustee in accordance with the terms hereof. Trustee may resign at any time by written instrument to that effect delivered to Lender. Lender may remove Trustee at any time or from time to time and select a successor trustee. In the event of the death, removal, resignation, refusal to act, or inability to act of Trustee, or in its sole discretion for any reason whatsoever Lender may, without notice and without specifying any reasons therefor and without applying to any court, select and appoint a successor trustee, by an instrument recorded wherever this Security Instrument is recorded, and all powers, rights, duties and authority of Trustee, as aforesaid, shall thereupon become vested in such successor. Such substitute trustee shall not be required to give bond for the faithful performance of the duties of Trustee hereunder unless required by Lender. The procedure provided for in this Section 18.33 for substitution of Trustee shall be in addition to and not in exclusion of any other provisions for substitution, by law or otherwise.

     Section 18.34. Trustee’s Fees. Borrower shall pay all costs, fees and expenses incurred by Trustee and Trustee’s agents and counsel in connection with the performance by Trustee of Trustee’s duties hereunder, and all such costs, fees and expenses shall be secured by this Security Instrument.

     Section 18.35. Mezzanine Loan Option. (a) Lender, at its sole cost and expense, shall have the right at any time to divide the Loan into two or more parts (the “Mezzanine Option”): a “mortgage loan” and one or more “mezzanine loans.” The principal amount of the mortgage loan plus the principal amount of the mezzanine loan(s) shall equal the outstanding principal balance of the Loan immediately prior to the creation of the mortgage loan and the mezzanine loan(s). In effectuating the foregoing, Lender will make one or more loans to one or more entities that will be the direct or indirect equity owner(s) of Borrower as described in Section 18.35(b) (collectively, the “Mezzanine Borrower(s)”). The Mezzanine Borrower(s) will contribute the amount of the mezzanine loan(s) to Borrower (in its capacity as borrower under the mortgage loan, “mortgage borrower”) and the mortgage borrower will apply the contribution to pay down the Loan to the mortgage loan amount. The mortgage loan and the mezzanine loan(s) will be on the same terms and subject to the same conditions set forth in the Loan Documents except as follows. The mezzanine loan(s) shall be made pursuant to Lender’s standard mezzanine loan documents.

     (b) Lender shall have the right to establish different interest rates and debt service payments for the mortgage loan and the mezzanine loan(s) and to require the payment of the mortgage loan and the mezzanine loan(s) in such order of priority as may be designated by

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Lender; provided, that (i) the total loan amounts for the mortgage loan and the mezzanine loan(s) shall equal the amount of the Loan immediately prior to the creation of the mortgage loan and the mezzanine loan(s), (ii) the weighted average interest rate of the mortgage loan and the mezzanine loan(s) shall on the date created equal the interest rate which was applicable to the Loan immediately prior to creation of the mortgage loan and mezzanine loan(s) and (iii) the debt service payments on the mortgage loan note and the mezzanine loan note(s) shall on the date created equal the debt service payment which was due under the Loan immediately prior to creation of a mortgage loan and a mezzanine loan(s).

     (c) The Mezzanine Borrower(s) shall be special purpose, bankruptcy remote entities pursuant to applicable Rating Agency criteria and shall own directly or indirectly one hundred percent (100%) of the mortgage borrower. The security for the mezzanine loan(s) shall be a pledge of one hundred percent (100%) of the direct and indirect ownership interests in the mortgage borrower.

     (d) Borrower shall cooperate with all reasonable requests of Lender in order to convert the Loan into a mortgage loan and one or more mezzanine loans and shall execute and deliver such documents as shall reasonably be required by Lender in connection therewith, including, without limitation, the delivery of non-consolidation, enforceability, authorization and execution opinions and an “Eagle 9” or “UCC plus” (or equivalent) UCC insurance policy and the modification of organizational documents and loan documents and the transfer of the membership interest in Borrower to the Mezzanine Borrower(s).

     It shall be an Event of Default if Borrower fails to comply with any of the terms, covenants or conditions of this Section 18.35 after expiration of ten (10) Business Days notice thereof.

     Section 18.36. Component Notes. Lender, without in any way limiting Lender’s other rights hereunder, in its sole and absolute discretion, shall have the right at any time to require Borrower to execute and deliver “component” notes (including senior and junior notes), which notes may be paid in such order of priority as may be designated by Lender, provided that (a) the aggregate principal amount of such “component” notes shall equal the outstanding principal balance of the Loan immediately prior to the creation of such “component” notes, (b) the weighted average interest rate of all such “component” notes shall on the date created equal the interest rate which was applicable to the Loan immediately prior to the creation of such “component” notes, (c) the debt service payments on all such “component” notes shall on the date created equal the debt service payment which was due under the Loan immediately prior to the creation of such component notes and (d) the other terms and provisions of each of the “component” notes shall be identical in substance and substantially similar in form to the Loan Documents. Borrower shall cooperate with all reasonable requests of Lender in order to establish the “component” notes and shall execute and deliver such documents as shall reasonably be required by Lender in connection therewith, all in form and substance reasonably satisfactory to Lender, including, without limitation, the severance of security documents if requested. It shall be an Event of Default if Borrower fails to comply with any of the terms, covenants or conditions of this Section 18.36 after the expiration of ten (10) Business Days after notice thereof.

* * * * *

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

Borrower’s Organizational Identification Number: 199814800015	TARIFF BUILDING ASSOCIATES, L.P., a California limited partnership
	By:	Square 430, LLC, a Delaware limited liability company, its general partner

By:   Kimpton Group Holding LLC,
a Delaware limited liability company, its sole member  

By:	/s/ Gregory Wolkom
	Name:	Gregory J. Wolkom
	Title:	CFO

EXHIBITS

EXHIBIT A            Legal Description of Premises

EXHIBIT B            Summary Of Reserves

EXHIBIT C            Cash Flow Statement

EXHIBIT D            Required Engineering Work

EXHIBIT E            Form of Direction Letter

EXHIBIT F            Underwritten Rent Escrow

EXHIBIT G            Credit Card Payment Direction Letter

2

EX-99.1

Exhibit 99.1

2 Bethesda Metro Center, Suite 1530, Bethesda, MD 20814 
T: (240) 507-1300, F: (240) 396-5626
www.pebblebrookhotels.com

News Release

Pebblebrook Hotel Trust Acquires Monaco Washington DC

Bethesda, MD, September 9, 2010 — Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today announced that it has acquired the Monaco Washington DC hotel for $74.0 million. The 183-room, AAA Four Diamond, luxury, full-service hotel is located in downtown Washington, DC in the heart of the Penn Quarter district. The hotel will continue to be managed by Kimpton Hotels and Restaurants (“Kimpton”). The transaction includes the assumption of a $35.0 million secured loan, with the remaining $39.0 million funded with proceeds from the Company’s initial public offering.

     “We are extremely excited to acquire such a unique and historically important property in the heart of Washington, DC,” said Jon Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “The hotel is in an irreplaceable location within the Penn Quarter neighborhood, which is within the East End of downtown Washington, DC, and is one of the most vibrant and dynamic areas of the city. The hotel is surrounded by an abundance of entertainment options, including museums, theaters, restaurants, bars and contemporary art galleries, as well as the Verizon Center, which all provide the hotel with an irreplaceable location. Furthermore, the Washington, DC hotel market continues to be one of the strongest markets in the nation, due to government-related travel, tourism, and associations that generate year-round demand, healthy convention activity and a dynamic office market.”

     Monaco Washington DC is located in downtown Washington, DC in the Penn Quarter, an area that is considered to be the commercial and leisure heart of the city. A vibrant, always-on neighborhood, Penn Quarter has been referred to by many as the “Times Square” of Washington, DC due to its theatre district and its quantity of first-rate museums.

     The Verizon Center Sports and Entertainment Arena is located directly across the street from the hotel. The arena, which has a capacity of over 20,000, hosts more than 220 sporting, concert and other events each year and is home to the Washington Capitals, Washington Wizards, Washington Mystics and Georgetown University’s men’s basketball team. The hotel is also conveniently located across the street from the Gallery Place Metro Station and the Smithsonian National Portrait Gallery Museum, adjacent to the Spy Museum and a short walk to the Walter E. Washington Convention Center and the National Mall.

     Monaco Washington DC initially opened in 2002; however, original construction of the building occurred in 1839 as the original United States Post Office. The building is one of the oldest buildings in Washington, DC. Separated by a courtyard, one half of the building was designed by Robert Mills, who also designed the Washington Monument, while the other half of the building was designed by Thomas Walter, one of the contributing architects to the design of the U.S. Capitol. The property is now a registered national historic landmark and an irreplaceable piece of history that offers a truly unique lodging experience. The hotel provides over 7,000 square feet of elegant meeting space and one of the area’s most popular restaurants, Poste Moderne Brasserie, which is also managed by Kimpton. The hotel also offers a fitness center, 24-hour room service and a business center.

     During 2009, the hotel achieved occupancy of 80 percent, with an average daily rate of $257. During the next 12 months, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of approximately $5.3 to $5.8 million and net operating income after capital reserves of approximately $4.5 to $5.0 million, both of which are below the levels at which the hotel operated during 2007 and 2008.

     The Company will own a leasehold interest in the property through a ground lease with the General Services Administration (“GSA”) by way of the United States of America. There are currently 49 years remaining on the lease, which expires in 2059. The $35 million secured loan that is being assumed in connection with the acquisition is a non-recourse, interest-only loan, subject to a rate of 5.68%, with a maturity of March 2012.

     The hotel will continue to be managed by Kimpton, which has managed the property since 2002. In addition to the Monaco Washington DC, Kimpton also manages the Sir Francis Drake and Scala’s Bistro in San Francisco, California for the Company.

     “Kimpton has a significant presence in the Washington, DC market and a strong track record and extensive knowledge in operating historically rich and distinctive properties such as Monaco Washington DC. We are eager to continue to grow our relationship with them,” said Mr. Bortz.

     “We are thrilled we can continue to develop our relationship with Pebblebrook Hotel Trust,” commented Michael Depatie, CEO of the Kimpton Hotel & Restaurants. “We have a tremendous history of managing hotels in Washington, DC and look forward to working with Pebblebrook on the Monaco Washington DC and future projects.”

     The Company expects to incur approximately $1.3 million of costs related to the acquisition of this hotel that will be expensed in the third quarter.

     Monaco Washington DC marks the fourth acquisition for the Company since completing its initial public offering in December of 2009.

     The Company has previously announced a signed agreement to purchase one other hotel:

     -    The Grand Hotel Minneapolis for $36.0 million

     Closing for The Grand Hotel Minneapolis, as previously disclosed, is subject to the satisfactory completion of ongoing due diligence and the satisfaction of customary closing requirements and conditions. As with any potential acquisition, the Company can give no assurance that it will elect to move forward with the purchase of the hotel or that if it does elect to move forward, that the acquisition will close under the specific terms initially disclosed.

About Pebblebrook Hotel Trust

     Pebblebrook Hotel Trust is a real estate investment trust (“REIT”) organized to opportunistically acquire and invest primarily in upper-upscale, full-service hotels located in large urban and resort markets with an emphasis on the major coastal cities. The company owns four hotels, with a total of over 1,250 guest rooms.

Click here to visit the Pebblebrook Hotel Trust website

About Kimpton

     San Francisco-based Kimpton Hotels & Restaurants, a collection of boutique hotels and chef-driven restaurants in the US, is an acknowledged industry pioneer and was the first to bring the boutique hotel concept to America. Founded in 1981 by Bill Kimpton, the company is well-known for making travelers feel welcomed and comfortable while away from home through intuitive and unscripted customer care, stylish ambience and having a certain playfulness in its approach to programs and amenities. Each hotel provides a range of exciting culinary experiences through locally loved, top-rated, destination, chef-driven

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restaurants. Kimpton leads the hospitality industry in ecological practices through its innovative EarthCare program that spans all hotels and restaurants. Market Metrix, a recognized authority and leader in feedback solutions, consistently ranks Kimpton above other hotel companies in luxury and upper upscale segments for customer satisfaction. Privately held Kimpton operates 50 hotels and 54 restaurants in 16 states.

Click here to visit the Kimpton Hotel & Restaurant website

     This press release contains certain “forward-looking” statements relating to, among other things, potential property acquisitions and projected earnings, expenses and demand. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “forecast,” “continue,” “plan” or other similar words or expressions. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Examples of forward-looking statements include the following: projections of hotel-level EBITDA and net operating income after capital reserves, the Company’s expenses, share count or other financial items; descriptions of the Company’s plans or objectives for future operations, acquisitions or services; projected completions of acquisitions; forecasts of the Company’s future economic performance, potential increases in average daily rate, occupancy and room demand; and descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of their occurrence. These forward-looking statements are subject to various risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the state of the U.S. economy, supply and demand in the hotel industry and other factors as are described in greater detail in the Company’s filings with the Securities and Exchange Commission (“SEC”), including, without limitation, the Company’s Prospectus filed pursuant to Rule 424(b)(1) filed on July 23, 2010. Unless legally required, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

     For further information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s SEC filings, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company’s website at www.pebblebrookhotels.com and www.sec.gov .

     All information in this release is as of September 9, 2010. The Company undertakes no duty to update the statements in this release to conform the statements to actual results or changes in the Company’s expectations. The Company assumes no responsibility for the contents or accuracy of the information on any of the non-Company websites mentioned herein, which are included solely for ease of reference.

Additional Contacts:

     Raymond D. Martz, Chief Financial Officer, Pebblebrook Hotel Trust — (240) 507-1330

For additional information or to receive press releases via email, please visit our website at
www.pebblebrookhotels.com

###

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Pebblebrook Hotel Trust
Hotel Monaco Washington DC
Reconciliation of Hotel Net Income to Hotel EBITDA and Hotel Net Operating Income
12-Month Forecast
(Unaudited, in millions)

	Range
	Low				High
Hotel net income	$	3.1		to	$	3.6
Adjustment:
Depreciation and amortization (1)		2.2				2.2
Hotel EBITDA	$	5.3		to	$	5.8
Adjustment:
Capital reserve		(0.8	)			(0.8	)
Hotel net operating income	$	4.5		to	$	5.0

(1) Depreciation and amortization has been estimated based on a preliminary purchase price allocation. The Company is currently evaluating the final purchase price allocation, which is based on many factors including the particular ground-lease-based ownership structure. A change, if any, in the allocation will affect the amount of Depreciation and Amortization and the amount may be material.

This press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission (SEC) Rules. These measures are not in accordance with, or an alternative to, measures prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the hotel’s results of operations determined in accordance with GAAP.

The Company has presented forecasted hotel earnings before interest, taxes, depreciation and amortization (EBITDA) and forecasted hotel net operating income after capital reserves, because it believes these measures provide investors and analysts with an understanding of the hotel-level operating performance. These non-GAAP measures do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments and uncertainties, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make distributions.

The Company’s presentation of the hotel’s forecasted EBITDA and forecasted net operating income after capital reserves should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of the hotel’s financial performance. The table above is a reconciliation of the hotel’s forecasted EBITDA and net operating income net operating income after capital reserves calculations to net income in accordance with GAAP.

EX-99.2

Exhibit 99.2

monacowashington dc washington, dcProertyInformation: p yAcquisition Price: $74.0M ($404K per room)Location: East End of DowntownHistoric Performance and Washington, DC Acquired: September 9, 2010 Rooms: 183 Estimated Discount to Replacement 25% Type: Luxury, Full-Service 2009 Occupancy: 80% Built: 18392009 ADR: $257 Last Renovated: Converted to a hotel in 2002, Soft goods in 2008 Forward 12-Month Cap Rate (Projected) (1) : 6.1% -6. Property Amenities: (1) Based on previously disclosedfter capital reserves forecasted net 183luxuriously appointedguestrooms appointedguestrooms (7 th Street, Washington, DC) (Poste Restaurant) (Guest Room) (Poste Entrance)-Classic original vaulted ceilings or segmented arch ceilings 7,000 square feet of elegant meeting space across three rooms Poste Moderne Brasserie -174-seat restaurant and bar -Historic carriage-way access and separate entrance off 8 thStreet Off-site valet parking Business center Fitness center Room Service Competitive Set:Market Highlights: Map YearHotelsMarket Overview: Marker RoomsOpened Washington, D.C. is the ninth-largest country with Monaco metropolitan area in the Washington, DC over 5.3 million people InterContinental rd Washington Willa 1 333 Highly educated array of top-tier population institutions with educational The Jefferson 2 99 including GeorgetownUniversity,GeorgeWashingtonUniversity,Howard GeorgetownUniversity GeorgeWashingtonUniversity Loews Madison Hotel Howard 3 University and American University Marriott Washington at Metro Center Excellent transportation infrastructure, nal airports and Kimpton with three internatio The Hotel George 5 efficient public that includes transportation raveled the second-most t Sofitel Washington DC 6 subway system in the United States Total (excluding the Hotel Monaco) The Washington metropolitan area ate has the lowest unemployment r in the top *49 MSAs Demand Generators: The Federal Government -The Federal gingper diem helps gp lod p drive demand while creating a floor on the region’s average daily rate Travel and Tourism 2 3-National Mall -White House -U.S. Capitol -Supreme Court -Museums -National Zoo -National Archives -Rock Creek Park 6 The Verizon Center 4 Six professional sports teams Threeinternational airports airports 1(E ntrance) t ) 5-All easily accessible from downtown Washington, D.C. Gateway city with a transient population Walter E. Washington Convention Center More than 40 performing arts venues with over 31,000 seats(Exterior)Operating Performance Market Data: Washington, DC CBDADR (( $$ )) RevPAR ($) ($) Occupancy (%) (%) $2102000-2009 ADR CAGR: 3.2% 2009 RevPAR 2000- R: CAG 3.2% 75% Investment Highlights: $190 73%Strengths Opportunities) $170 Market Leader Limited $ 71%($ 150 (%) Superior Downtown Location in 69% Irreplaceable Asset and Registered $130 67% National Landmark Asset $110 High-Quality Physical Condition$90 65% Attractive Cash Yield Off — Mar ketTransaction tT ti Assumable Existing DebtSource: Smith Travel Research Significant Discount to ReplacementThis summary information sheet contains g” statements relating to, among certain “forward-lookin hotel net operating income after other things, hotel EBITDA looking statements made are based and capital reserves. The forward assumptions and expectations of account all information currently future performance, taking ts could differ materially from into available to us. Actual resul made on this summary information sheet the forward-looking statements words “projected,” “expected,” expressions, we are identifying and “estimated” or other similar forward-looking statements on forward-looking statements. e subject to the safe harbor of the this The summary information sheet ar Litigation Reform Act of 1995.All as of September 9, 2010. information on this We undertake no duty sheet ormation to conform to actual is to update the tions. For additional information, results inf o r changes in our expecta www.pebblebrookhotels.com. * As of July; Top 49 MSA’s are opulation largest of 1 millionMSA