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): February 16, 2011

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 Department of Interior

In connection with the acquisition of the Argonaut Hotel (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 Maritime Hotel Associates, L.P. (“Maritime Hotel Associates”), an unaffiliated third party, the noncancelable ground lease for the building property and land (as amended, the “Lease”) with the United States Department of the Interior acting by and through the Regional Director, Pacific West Region, an agency of the United States of America. Pursuant to the Lease, which expires on December 31, 2059, the Company is required to pay the greater of an annual base rent of $1.2 million (as adjusted for consumer price index (“CPI”) increases) or a percentage of Rooms Department Revenues (as defined in the Lease, and as adjusted for CPI increases) and Food and Beverage and All Other Department Revenues (as defined in the Lease). The percentage of Rooms Department Revenues ranges from 8% to 12% in the initial years to 12% to 14% in the later years of the Lease. The percentage of Food and Beverage and All Other Department Revenues is 4% for the life of the Lease. A copy of the Lease, amendments seven, ten and eleven to the Lease and the Assignment and Assumption of Lease, pursuant to which the Lease was assumed from Maritime Hotel Associates, are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.

Note Payable Obligation and Accompanying Agreements

Also in connection with the Acquisition, a subsidiary of the Company assumed from Maritime Hotel 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 $42.0 million. The Promissory Note has a fixed interest rate of 5.67% 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 Maritime Hotel Associates, are filed as Exhibits 10.6 and 10.7, 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, among other things, (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 when any event of default has occurred and is continuing under the loan documents.

In addition to, and in conjunction with, the Promissory Note, a subsidiary of the Company 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 10.8 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 February 16, 2011, a subsidiary of the Company completed its acquisition of the 252-room Argonaut Hotel for $84.0 million from Maritime Hotel Associates, L.P., an unaffiliated third party. The Hotel will continue to be managed by Kimpton Hotel & Restaurant 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 August 31, 2033 and provides for base management fees and incentive management fees within the ranges described in the Company’s final prospectus for its public equity offering filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”) on July 23, 2010. 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 $42.0 million of available cash and the assumption of the $42.0 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 February 16, 2011 announcing that it had closed on the previously announced acquisition of the Argonaut Hotel located in San Francisco, California. 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.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The Company previously reported the following historical financial statements of the Argonaut Hotel in the Company’s Current Report on Form 8-K filed on December 29, 2010:

1.	Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009 and 2008;
2.	Statements of Operations for the nine months ended September 30, 2010 and 2009 (unaudited) and years ended December 31, 2009 and 2008;
3.	Statements of Owner’s Equity in Hotel for the nine months ended September 30, 2010 (unaudited) and years ended December 31, 2009 and 2008; and
4.	Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (unaudited) and years ended December 31, 2009 and 2008.

(b) Pro Forma Financial Information.

The Company previously reported the following pro forma financial information related to the Argonaut Hotel in the Company’s Current Report on Form 8-K filed on December 29, 2010:

1.	Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2010;
2.	Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2010; and
3.	Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2009.

(d) Exhibits.

Exhibit No.	Description
10.1	Historical Lease, dated October 16, 2000, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Maritime Hotel Associates, L.P.
10.2	Seventh Amendment to Historic Lease, dated February 6, 2001, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Maritime Hotel Associates, L.P.
10.3	Tenth Amendment to Historic Lease, dated December 9, 2008, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Maritime Hotel Associates, L.P.
10.4	Eleventh Amendment to Historic Lease, dated February 16, 2011, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Wildcats Owner LLC.
10.5	Assignment and Assumption of Historical Lease, by and among the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an Agency of the United States of America, Maritime Hotel Associates, L.P., and Wildcats Owner LLC.
10.6	Promissory Note by Maritime Hotel Associates, L.P. in favor of Wachovia Bank, National Association.
10.7	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, Maritime Hotel Associates, L.P., Kimpton Development Opportunity Fund, L.P., Wildcats Owner LLC, and Pebblebrook Hotel, L.P.
10.8	Deed of Trust, Security Agreement, Assignment of Rents and Fixtures Filing dated as of February 23, 2007 by and among Maritime Hotel Associates, L.P., as borrower, to First American Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as lender.
99.1	Press release issued on February 16, 2011.
99.2	Materials about the Argonaut Hotel.

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
February 18, 2011	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	Historical Lease, dated October 16, 2000, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Maritime Hotel Associates, L.P.
10.2	Seventh Amendment to Historic Lease, dated February 6, 2001, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Maritime Hotel Associates, L.P.
10.3	Tenth Amendment to Historic Lease, dated December 9, 2008, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Maritime Hotel Associates, L.P.
10.4	Eleventh Amendment to Historic Lease, dated February 16, 2011, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, and Wildcats Owner LLC.
10.5	Assignment and Assumption of Historical Lease, by and among the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an Agency of the United States of America, Maritime Hotel Associates, L.P., and Wildcats Owner LLC.
10.6	Promissory Note by Maritime Hotel Associates, L.P. in favor of Wachovia Bank, National Association.
10.7	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, Maritime Hotel Associates, L.P., Kimpton Development Opportunity Fund, L.P., Wildcats Owner LLC, and Pebblebrook Hotel, L.P.
10.8	Deed of Trust, Security Agreement, Assignment of Rents and Fixtures Filing dated as of February 23, 2007 by and among Maritime Hotel Associates, L.P., as borrower, to First American Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as lender.
99.1	Press release issued on February 16, 2011.
99.2	Materials about the Argonaut Hotel.

EX-10.1

Exhibit 10.1

UNITED STATES

DEPARTMENT OF THE INTERIOR

NATIONAL PARK SERVICE

HISTORIC PROPERTY LEASE

—ooOoo—

HASLETT WAREHOUSE

at

SAN FRANCISCO MARITIME NATIONAL HISTORIC PARK

—ooOoo—

HISTORIC LEASE NO. HL-SAFR001-98

Dated October 16, 2000

TABLE OF CONTENTS

	Page
1. DEFINITIONS	2
2. LEASE OF THE PREMISES	17
3. ACCEPTANCE OF THE PREMISES	24
4. TERM	26
5. ANNUAL RENTAL, ONE TIME PAYMENTS, OTHER OBLIGATIONS TO LESSOR	26
6. IMPOSITIONS	33
7. AUDIT AND RECORDS	34
8. NET LEASE; NO COUNTERCLAIM OR ABATEMENT	36
9. LESSOR NOT OBLIGATED TO PAY LESSEE EXPENSES	37
10. USE OF THE PREMISES	37
11. LIMITATION ON EFFECT OF APPROVALS	39
12. CONSTRUCTION AND INSTALLATION APPROVAL	39
13. DESIGN OF LESSEE IMPROVEMENTS, ALTERATIONS AND PRESERVATION MAINTENANCE	40
14. SUBMISSION OF EVIDENCE OF FINANCING; CLOSING OF FINANCING	43
15. CONSTRUCTION OF IMPROVEMENTS AND ALTERATIONS AND PRESERVATION MAINTENANCE	46
16. PERMITS AND APPROVALS	49
17. EXCAVATION, SITE, AND GROUND DISTURBANCE	51
18. OWNERSHIP OF IMPROVEMENTS	51
19. BUILDING MAINTENANCE AND PRESERVATION MAINTENANCE	52
20. UTILITIES	54
21. COMPLIANCE WITH APPLICABLE LAWS; NEPA; NHPA	54

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TABLE OF CONTENTS
(continued)

	Page
22. HAZARDOUS MATERIALS	55
23. INSURANCE	59
24. DAMAGE OR DESTRUCTION	68
25. INDEMNITY	72
26. LIENS	73
27. TRANSFER AND SUBLETTING	74
28. LEASEHOLD MORTGAGES	77
29. TRANSFER BY LESSOR	90
30. RIGHT TO ESTOPPEL CERTIFICATES	91
31. DEFAULTS	91
32. REMEDIES	92
33. ALTERNATIVE DISPUTE RESOLUTION	95
34. SURRENDER AND VACATE THE PREMISES	97
35. HOLDING OVER	98
36. REPRESENTATIONS AND WARRANTIES OF LESSEE	98
37. REPRESENTATIONS AND WARRANTIES OF LESSOR	99
38. COMPLIANCE WITH FEDERAL EQUAL OPPORTUNITY LAWS	99
39. NOTICES	99
40. LESSOR’S RIGHT TO EXHIBIT THE PREMISES	100
41. NO PARTNERSHIP OR JOINT VENTURE	101
42. ANTI-DEFICIENCY ACT	101
43. GENERAL PROVISIONS	101

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TABLE OF CONTENTS
(continued)

EXHIBITS

EXHIBIT A — PREMISES

EXHIBIT B — RETAINED SPACE

EXHIBIT C — OFFICE SPACE

EXHIBIT D — RESTAURANT SPACE

EXHIBIT E — RETAIL SPACE

EXHIBIT F — TRADE FIXTURES

EXHIBIT G — SCHEDULE OF PERFORMANCE

EXHIBIT H — PRELIMINARY SCHEMATIC PLANS FOR, AND DESCRIPTION OF, THE INITIAL LESSEE IMPROVEMENTS

EXHIBIT I — VAULT

EXHIBIT J — RETAINED SPACE RESTROOMS AND DRINKING FOUNTAINS

EXHIBIT K — STREET ENCROACHMENT AGREEMENT

EXHIBIT L — LIST OF REPORTS AND STUDIES IDENTIFYING HISTORIC ELEMENTS

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Haslett Warehouse
HL-SAF001-99
PAGE 1

HISTORIC LEASE

THIS LEASE is made and entered into effective as of October 16, 2000, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America (“Lessor”) and Maritime Hotel Associates, L.P., a California limited partnership whose General Partner is Hyde Street Hospitality, Inc a wholly-owned subsidiary of the Kimpton Hotel & Restaurant Group, Inc, a California corporation (“Lessee”).

RECITALS

WHEREAS, the San Francisco Maritime National Historical Park is administered by the Secretary of the Department of the Interior (“Secretary”) through the National Park Service (“Lessor”) pursuant to the National Park Service Organic Act, 16 U.S.C. Sections 1 et seq., and the San Francisco Maritime National Historical Park Authorization Act, 16 U.S.C. Sections 410nn et seq.; and

WHEREAS, the Haslett Warehouse is listed on the National Register of Historic Places pursuant to the National Historic Preservation Act of 1966, as amended, 16 U.S.C. Sections 470 et seq.; and

WHEREAS, pursuant to 16 U.S.C. Section 470h-3 and 410nn-1 et seq. and 36 C.F.R. Part 18, Lessor has determined that the Haslett Warehouse is an historic property that Lessor is unable to preserve and rehabilitate during the foreseeable future, and that the historic property will be adequately preserved by this Lease; and

WHEREAS, Lessor has determined that the use and occupancy of the Haslett Warehouse for the use contemplated in this Lease is consistent with the San Francisco Maritime National Historical Park General Management Plan (defined below), and the purposes of the San Francisco Maritime National Historical Park Authorization Act, and is compatible with the public interest; and

WHEREAS, Lessee desires to lease that certain real property comprising the Haslett Warehouse (exclusive of the Retained Space (defined below)), comprised of approximately 188,435 square feet of gross building area; together with certain additional land and an existing appurtenant easement (collectively, “Premises”) as such Premises are more particularly described in Exhibit A; and to adaptively reuse the Haslett Warehouse for an approximately 268-room, first class hotel as described herein with a nautical theme, restaurant, and limited retail and office space; and

WHEREAS, Lessor desires to retain approximately 9,565 square feet of space (the “Retained Space”) for public purposes, such as a museum and visitor center, as such Retained Space is more particularly shown on Exhibit B; and

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WHEREAS, Lessor has agreed to lease the Premises to Lessee on the terms, agreements, covenants, conditions and provisions set forth in this Lease and solely for the purposes provided in this Lease.

NOW THEREFORE, in consideration of the rents to be paid under this Lease and all of the terms, agreements, covenants, conditions and provisions contained in this Lease, Lessee and Lessor (collectively, “Parties”) hereby agree as follows:

1. DEFINITIONS

As used in this Lease, the following terms shall have the following meanings applicable, as appropriate, to both the singular and plural forms of the defined terms:

1.1.	“Affected Property” is as defined in Section 22.4 of this Lease.
1.2.	“Affiliate(s)” means, all entities or persons controlled by or under common control, through one or more entities, with Lessee.
1.3.	“Agency” means any Federal, state, or local agency, department, commission, board, bureau, office or other governmental authority having jurisdiction.
1.4.	“Allowance” is as defined in Section 5.3.3 of this Lease.
1.5.	“Alterations” means any improvements, alterations, Major Alterations or Minor Alterations, of or to the Premises or Retained Space made by Lessee after the completion of Initial Lessee Improvements.
1.6.	“Annual Rental” is as defined in Section 5.4 of this Lease.
1.7.	“Annual Report” means a report that includes but is not limited to (a) audited financial statements certified by a certified public accountant that is independent of Lessee and Affiliates, prepared on an annualized basis showing Gross Receipts and Rent Roll for the preceding Lease Year; (b) a statement by Lessee that Lessee’s and any Affiliates’, Lessee’s Agents’, employees’, guests’, visitors’, invitees’, sublessees’, licensees’, and permittees’ and other persons or entities under the control of Lessee during the Term, use of the Premises is consistent with this Lease, (c) a statement describing any material change in the status of Initial Lessee Improvements and Major Alterations as of the end of such Lease Year.
1.8.	“Applicable Laws” mean all present and future applicable statutes, regulations, requirements, licenses, rules, guidelines, ordinances, codes, permits, orders, decrees, and the like, and all amendments thereto, of any Agency, relating to or affecting this Lease or the design, construction and use of Premises by Lessee, Affiliates, Lessee’s

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Agents, employees, guests, visitors, invitees, sublessees, licensees, permittees or other persons or entities under the control of Lessee during the Term, including, but not limited to:

1.8.1.	Those Applicable Laws pertaining to the Park such as 16 U.S.C. 1 et seq., 16 U.S.C. 410nn et seq.; and the General Management Plan.
1.8.2.	Those Applicable Laws pertaining to reporting, licensing, permitting, investigation, remediation or abatement of emissions, discharges, or releases (or threatened emissions, discharges or releases) of Hazardous Materials in or into the air, surface water, ground water or land, or relating to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of Hazardous Materials;
1.8.3.	Those Applicable Laws pertaining to the protection of the environment and/or the health or safety of employees or the public;
1.8.4.	Those Applicable Laws pertaining to the protection or restoration of natural or cultural resources;
1.8.5.	Those Applicable Laws pertaining to historic leasing, historic preservation tax certification, and the treatment of historic properties; and
1.8.6.	Those Applicable Laws pertaining to national and local building construction requirements.

Notwithstanding the foregoing, “Applicable Laws” shall not include (i) any amendment to the General Management Plan, nor any subsequent General Management Plan, or (ii) guideline(s) established by the Pacific West Region of the National Park Service or the San Francisco Maritime National Historical Park; solely to the extent that such amendment or subsequent General Management Plan, or guideline(s) materially increases the cost to Lessee of, the operation or use of the Premises pursuant to this Lease, or prohibits Lessee’s use of the Premises pursuant to this Lease.

1.9.

“Approved Operator” means a hotel operator of established reputation, operating five (5) or more hotels, and having at least five (5) years experience in the operation of hotels in the United States, which hotels are of equal or better quality as the Hotel Standard or a hotel chain

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	operator of established reputation, experienced in operating hotels of equal or better quality as the Hotel Standard.
1.10.	“Base Rental” is as defined in Section 5.5 of this Lease.
1.11.	“Bona Fide Institutional Lender” means any one or more of the following, whether acting in its own interest and capacity or in a fiduciary capacity for one or more persons or entities none of which need be Bona Fide Institutional Lenders: (a) 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 in the CPI after the Commencement Date) 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 State of California; (b) any insurance company, governmental agency, real estate investment trust, religious, educational or eleemosynary institution or state, municipal or similar public employees’ welfare, benefit, pension or retirement fund or system subject to the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq., investment banking, merchant banking or brokerage firm (or any special account, managed fund, department, or agency of any of the foregoing) (i) any one of which has assets of at least (A) at all times prior to Substantial Completion of the Initial Lessee Improvements, Five Hundred Million Dollars ($500,000,000) (or equivalent in foreign currency); and (B) at all time from and after Substantial Completion of the Initial Lessee Improvements, Fifty Million Dollars ($50,000,000) (or the equivalent in foreign currency), as adjusted for increases in the CPI from and after the Completion Date, and (ii) in the case of a religious, educational or eleemosynary institution or an employees’ welfare, benefit, pension or retirement fund or system, investment banking, merchant banking or brokerage firm, is regularly engaged in any aspect of the financial services business; (c) governmental and quasi-governmental agencies and government sponsored organizations; or (d) an investment banking firm that originates at least One Hundred Million Dollars ($100,000,000) annually of commercial mortgage loans for sale or transfer, in their entirety, to another entity in the mortgage loan business that is a Bona Fide Institutional Lender, or 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. For purposes hereof, (x) acting in a “fiduciary capacity” shall be deemed to include acting as a trustee, agent, or in a similar capacity under a

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	mortgage, loan agreement, indenture or other loan document, and (y) a lender, even if not a Bona Fide Institutional Lender, shall be deemed to be a Bona Fide Institutional Lender if promptly after such loan is consummated the note(s) or other evidence of indebtedness and/or the collateral securing the same are assigned to one or more persons then qualifying as a Bona Fide Institutional Lender. In no event however shall the term “Bona Fide Institutional Lender” include any Affiliate of Lessee or any Excluded Contractor. Subsequent to, and not including, the initial financing of the Initial Lessee Improvements, the term, Bona Fide 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, that includes as a matter of course hotel projects similar in size, nature, and scope to the Haslett Warehouse hotel development.
1.12.	“Building Maintenance” means maintenance of the Premises, including but not limited to, the Fixtures and the Trade Fixtures in such manner as to keep the Premises including, but not limited to, the Fixtures and the Trade Fixtures in good and sanitary order, condition, and repair (permitting reasonable wear and tear) in compliance with the Hotel Standard and Applicable Laws.
1.13.	“Certificate of Occupancy” means a document issued by Lessor that confirms that Lessor’s requirements for full occupancy and use of the Premises as provided for in this Lease have been completed.
1.14.	“Commencement Date” is as defined in Section 4 of this Lease
1.15.	“Commercially Reasonable Insurance Rates” means with respect to insurance coverage, that such coverage is commercially available from companies admitted or approved to do business in the state of California, with a financial rating of at least A-VIII, as rated by the A.M. Best Key Rating Guide, at rates and on terms such that it is/would be purchased by similarly situated owners or operators of similar hotel properties that are historic properties listed on the National Register of Historic Places in the San Francisco Bay Area of California.
1.16.	“Conditional Certificate of Occupancy” means a Certificate of Occupancy issued with conditions for final completion and allowing for partial occupation or partial use of the Premises.
1.17.	“Construction Contracts” is as defined in Section 23.13.1 of this Lease.
1.18.	“CPI” means the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index, All Urban Consumers, All Items, San

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	Francisco-Oakland-San Jose, California (1993-95 equals 100) or, if such index is no longer published, a successor or substitute index designated by Lessor, published by an Agency reflecting changes in consumer prices in the San Francisco Bay Area.
1.19.	“Design and Construction Documents” means schematic design and review documents, design development review drawings and construction documents and permit drawings or any other documents required to be prepared under this Lease for Initial Lessee Improvements or Alterations other than Minor Alterations.
1.20.	“Design and Construction Monitor” is an experienced professional firm hired by Lessor at the sole cost and expense of the Lessee and acting on behalf of Lessor to (a) review Design and Construction Documents, (b) monitor all construction of the Initial Lessee Improvements and all Alterations other than Minor Alterations, and (c) assure Lessor of compliance with the terms and conditions of this Lease. In connection with the Initial Lessee Improvements, Lessor shall provide a list of firms to Lessee no later than the tenth (10th) day of the Due Diligence Period. Lessee shall notify Lessor in writing within three (3) business days of receipt of such list of any reasonable objections Lessee may have to any of the listed contractors and provide the reasons therefor.
1.21.	“Due Diligence Period” is as defined in Section 3.2 of this Lease.
1.22.	“Environmental Damages” means all claims, demands, damages, injuries, losses, penalties, fines, costs (including reasonable consultant fees and expert fees), liabilities, causes of action, judgments, expenses and the like, of any nature whatsoever and by whomever made, incurred at any time after Lessor relinquishes and vacates the Premises to Lessee that relate to the presence or release of any Hazardous Materials in or into the air, surface water, ground water or land at, on, about, under or within the Premises and to the extent that they arise directly or indirectly from or in connection with the use of Premises by Lessee, Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term.
1.23.	“Event of Default” is as defined in Section 31 of this Lease.
1.24.	“Excluded Contractor” means any person or entity 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 (a) included on the List of Parties Excluded

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	from Federal Procurement and Nonprocurement Programs maintained by the United States General Services Administration, or successor compilation of similar information; or (b) which Lessor has advised Lessee within ten (10) days after request from Lessee would be an Excluded Contractor but for clause (a).
1.25.	Expiration Date” and “Final Expiration Date” are as defined in Section 4 of this Lease.
1.26.	“Fixtures” means all fixtures, equipment, and machinery permanently attached to and forming a part of the Premises or Retained Space, required or necessary for use and occupancy of the Premises or Retained Space and including all parts of the operating systems of the Premises or Retained Space such as heating, air conditioning, sprinkler, alarm, water, waste, and electrical, provided that the term “Fixtures” shall not include Trade Fixtures.
1.27.	“Food and Beverage and All Other Department Revenues” means all Gross Receipts less Rooms Department Revenues and including gross receipts, income, revenues, rents or economic benefit of any kind, whether in the form of cash, property or services, received by Lessee or Affiliates including those from the sale of food and beverages, or from rentals of retail or office space or other concessions on the Premises to the extent not specifically included in the Percentage Rental Exclusions. Gross receipts, as determined in accordance with generally accepted accounting principles and specifically with the most current edition of the Uniform System of Accounts for the Lodging Industry of the American Hotel and Motel Association, of any sublessee operating the Restaurant Space shall be part of Food and Beverage and All Other Department Revenues and consequently any rent received by Lessee from such sublessee shall not be included in Food and Beverage and All Other Department Revenues for the purposes of Section 5 of this Lease.
1.28.	“Force Majeure” means reasons or causes reasonably beyond Lessee’s control (excluding Lessee’s financial inability), such as acts of God or of public enemies, war, invasion, insurrection, rebellion, earthquake, riots, fires, floods, epidemics, quarantine restrictions, strikes, lockouts, freight embargoes, and unusually severe weather delays, or any similar cause.
1.29.	“General Management Plan” means that certain General Management Plan, San Francisco Maritime National Historical Park, San Francisco County, California, dated October 1997, as amended (subject to the qualification provided at the end of in Section 1.8 above).
1.30.	“Gross Receipts” means the entire amount of gross receipts received by Lessee or Affiliates, which amount is determined in accordance with

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	generally accepted accounting principles and specifically with the most current edition of the Uniform System of Accounts for the Lodging Industry of the American Hotel and Motel Association (the “Uniform System”) consistently applied, derived by Lessee from the operation of the Premises and not from any other source less Percentage Rental Exclusions. Gross Receipts shall include all cash or other revenues received by Lessee from the Premises, including but not limited to, rent, any payments in lieu of rent, non-returnable option payments, or payments under a loss of rents insurance policy or provision. There shall also be included in Gross Receipts the gross receipts from all mechanical or other vending devices placed on the Premises by Lessee, other than such devices that are installed on portions of the Premises not open to the public and that are solely for the convenience of Lessee’s employees. The gross receipts of any sublessee operating the Restaurant Space shall be part of Gross Receipts and consequently any rent received by Lessee from such Restaurant Space shall not be included in Gross Receipts.
1.31.	“Haslett Warehouse” means that certain building, comprising that portion of the Premises that is an historic structure known as the Haslett Warehouse and listed on the National Register of Historic Places. The Retained Space is located within the Haslett Warehouse.
1.32.	“Hazardous Materials” means any material or other substance (including storage tanks and Preexisting Hazardous Materials):

1.32.1.	The presence of which is governed by any Applicable Laws as being hazardous or harmful to human health or the environment;
1.32.2.	That is or becomes defined as a “hazardous waste,” “extremely hazardous waste,” “restricted hazardous waste,” “hazardous substance,” “pollutant,” “contaminant,” “toxic contaminant” under any Applicable Laws;
1.32.3.	That is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous or is or becomes regulated by any Agency under any Applicable Laws;
1.32.4.	The presence of which poses or threatens to pose a hazard to the environment or to the health or safety of persons

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1.32.5.	That contains, without limitation of the foregoing, gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic compounds;
1.32.6.	That contains, without limitation of the foregoing, polychlorinated biphenyls (PCBs), asbestos, asbestos-containing materials, or urea formaldehyde foam insulation; or
1.32.7.	That contains or consists of, without limitation of the foregoing, radon gas.

1.33.	“Historic Elements” means materials, features and any other elements of the Haslett Warehouse that are of historic significance and that existed as of the Commencement Date (including those elements identified in those reports and studies listed on Exhibit L) and remain in the Haslett Warehouse upon completion of the Initial Lessee Improvements.
1.34.	“Historic Preservation Certification Requirements” means those requirements set forth in 36 C.F.R. Part 67.
1.35.	“Historical Valuation Coverage” means the cost to repair or replace damaged components and/or materials of the Premises, using like materials and workmanship, giving consideration to duplicating the original texture, color, appearance and function, and as much as possible restoring the damaged property to the condition existing immediately prior to the loss consistent with the Historic Preservation Certification Requirements and the Secretary of Interior’s Standards.
1.36.	“Hotel Standard” means a first-class, but not deluxe, standard of operation, construction and maintenance, including the quality of construction and of the furniture, equipment and finishes. The Hotel Nikko, The Palace, The Fairmont, the St. Francis and the Ritz Carlton are examples of deluxe hotels in San Francisco as of the Commencement Date. The Tuscan Inn, the Galleria Park Hotel and the Villa Florence Hotel are examples of hotels operating at the Hotel Standard as of the Commencement Date. During the Term, hotels meeting the Hotel Standard will be those operating at a standard similar to the aforementioned properties and as first-class, but not deluxe, hotels in the City of San Francisco, California. The retail space within the Alexis Hotel building in Seattle, Washington, is an example of retail space operating at the Hotel Standard as of the Commencement Date.
1.37.	“Impositions” are all taxes, assessments, rates, charges, license fees, municipal liens, levies, excises or imposts, whether general or special, or ordinary or extraordinary, of every name, nature and kind whatsoever,

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	if any, lawfully imposed by any Agency, or other authority or entity, that may be levied, assessed, charged or imposed or may be or become a lien or charge upon the Premises or any part thereof; or upon the rent or income of Lessee; or upon the use or occupancy of the Premises; or upon this transaction or any document creating or transferring an estate or interest of Lessee in the Premises; or upon any improvements or Fixtures; or upon the leasehold estate of Lessee; or upon Lessor by reason of its ownership of the fee underlying this Lease but excluding taxes on the revenue or income of Lessor from this Lease. Impositions also include, but are not limited to, the payment of any bonds or charges imposed or required by any Agency, or other authority or entity, by reason of the proposed or actual use, treatment, storage, discharge or disposal of Hazardous Materials on or from the Premises by Lessee, or any sublessee or licensee claiming through Lessee.
1.38.	“Initial Lessee Improvements” means the Rehabilitation and other improvements performed by Lessee for initial occupancy of the Premises, including, but not limited to, (a) a first-class hotel (with a nautical theme), comprised of approximately 268 rooms (approximately 11 luxury suites, approximately 11 full suites, approximately 24 king through suites, approximately 123 large double queen rooms, approximately 96 deluxe guest rooms, and approximately 3 regular guest rooms, (b) restaurant, and (c) limited office and retail, (i) substantially as more fully described in the portion of that certain proposal from Lessee entitled, “A Proposal for the Rehabilitation of the Haslett Warehouse at San Francisco Maritime Historical Park” dated August 10, 1998 attached as Exhibit H, and (ii) as described in this Lease and (d) pursuant to Section 2.3 below, the Retained Space, all as may be modified as reflected in Lessee’s final Design and Construction Documents for the Initial Lessee Improvements approved in writing by Lessor.
1.39.	“Inventory and Condition Report” is a document that sets forth an inventory of the Premises and its Fixtures at the Commencement Date, at the completion of Initial Lessee Improvements, periodically during the Term to reflect changes, and at the Expiration Date with the latter inventory showing the condition of the Premises and Fixtures at that time for the purposes of Section 34 of this Lease.
1.40.	“Interest Rate” means the percentage of interest charged based on the current value of funds to the United States Treasury as published periodically in the Treasury Financial Manual.
1.41.	“Lease” means this Lease No. HL-SAFR001-99, including all conditions, exhibits, modifications, amendments, and extensions thereof.

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1.42.	“Lease Year” is as defined in Section 5.2 of this Lease.
1.43.	“Leasehold Mortgage” is as defined in Section 28 of this Lease.
1.44.	“Lessee’s Agents” means Lessee’s directors, officers, partners, members, employees, contractors, or agents.
1.45.	“Lessor’s Agents” means Lessor’s director, officers, employees, contractors, or agents.
1.46.	“Major Alterations” means each Alteration (or group of Alterations, if occurring substantially at the same time and as part of a single project) of or to the Premises or Retained Space by Lessee made after the completion of the Initial Lessee Improvements, the construction cost of which is greater than Five Million Dollars ($5,000,000) adjusted by CPI since the Commencement Date to the year in which the Major Alteration begins.
1.47.	“Minor Alterations” means each Alteration (or group of Alterations, if occurring substantially at the same time and as part of a single project) of or to the Premises by Lessee made after the completion of the Initial Lessee Improvements, the construction cost of which is less than One Hundred Thousand Dollars ($100,000) adjusted by CPI since the Commencement Date to the year in which the Minor Alterations begins; provided that such Alterations are limited to decorative improvements, repainting, recarpeting, and installation of Trade Fixtures and equipment, all of which are comparable to the Hotel Standard, and shall not include Preservation Maintenance.
1.48.	“Office Space” means that certain space comprised of approximately 4,200 square feet located on the ground floor of the Premises and shown on Exhibit C, as may be modified as reflected in Lessee’s final Design and Construction Documents for the Initial Lessee Improvements approved in writing by Lessor.
1.49.	“Park” means all the area, facilities, features, and property that are contained within the boundaries of or otherwise controlled by San Francisco Maritime National Historical Park.
1.50.	“Percentage Rental” is as defined in Section 5.6 of this Lease.
1.51.	“Percentage Rental Exclusions” means the following items, which, to the extent set forth herein, do not constitute a part of and which shall be excluded by Lessee from, Gross Receipts for the purpose of calculating Percentage Rental:

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1.51.1.	Federal, state and municipal excise, sales, use, or luxury or similar tax, which are collected directly from occupants or users either as a part of or added to the sales price of any goods, services, rooms or displays, such as bed taxes, gross receipts, room admission, cabaret or equivalent taxes and actually paid by Lessee;
1.51.2.	credits and refunds to customers from cancellations of room reservations;
1.51.3.	provided that the amount of such business does not exceed comparable hotel industry standards, receipts, whether direct or through license or concession by Lessee, from guest room movies, newspapers, magazines, guest room telephone, guest laundry, and guest room mini-bar revenues;
1.51.4.	the amount of any gross sales revenues received by any sublessee(s) of the Office Space and Retail Space;
1.51.5.	parking revenues;
1.51.6.	proceeds of any insurance, judgments, settlements or condemnation awards that do not compensate Lessee for loss of Gross Receipts;
1.51.7.	the actual charge not to exceed the customary and usual charge to Lessee by credit card companies imposed on a credit card transaction by a user;
1.51.8.	value that may be imputed to complimentary occupancy of hotel rooms and complimentary meals for users without charge, solely for the purpose of generating future goodwill for the hotel operation in the Premises in accordance with then prevailing customary and usual practices of other comparable hotels in San Francisco, California;
1.51.9.	value that may be imputed to complimentary employee meals;
1.51.10.	any penalty charged by Lessee for a returned check;
1.51.11.	the face value of any returned checks written off by Lessee as a bad debt to the extent Lessor received Percentage Rental on the services involved; and

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1.51.12. any charge added by Lessee to its regular cash price as a finance charge for installment sales on credit.

1.52.	“Personal Property” means all furniture, equipment, appliances, apparatus, and all other property placed on the Premises that neither are permanently attached to nor form a part of the Premises, whether leased or owned by Lessee, including without limitation, (a) all furniture, equipment and personal property located on or used in connection with the operation of the Premises, (b) all as-built plans, drawings and specifications for the Initial Lessee Improvements and any Alterations, and all architectural, structural, mechanical, electrical, and landscaping plans and specifications, surveys, engineering studies and reports and applicable flood plain maps relating to the Premises (collectively, the “Plans”), and (c) all of Lessee’s right, title and interest in any intangible personal property now or hereafter used in connection with the use and operation of the Premises, including, without limitation, the right to use any trade name now used in connection with the Initial Lessee Improvements, all warranties or guarantees received from any contractors, subcontractors, suppliers or materialmen in connection with any construction, repairs or alterations of the Premises, names, licenses, franchises, permits, Lessee lists, advertising materials and other similar property and rights relating to the use and operation of the Hotel or any of the other Personal Property. Personal Property also includes Trade Fixtures. Personal Property includes both tangible and intangible personal property including intellectual property. Notwithstanding Lessee’s rights in and to the Plans, Lessee shall provide Lessor with a copy of each of the Plans upon termination of this Lease and shall assign to Lessor all transferable warranties or guarantees received from any person or entity including but not limited to contractors, subcontractors, suppliers or materialmen in connection with the Premises.
1.53.	“Preexisting Hazardous Materials” means Hazardous Materials that existed in, on, or under the Premises prior to the Commencement Date, whether such substances were within the definition of Hazardous Materials as used in this Lease as of the Commencement Date or subsequently become included within such definition.
1.54.	“Premises” are as defined in the Recitals above and Exhibit A and includes the Vault.
1.55.	“Preservation Maintenance” means the act or process of applying preservation treatment to the Haslett Warehouse to maintain and retain the historic character of the Haslett Warehouse in accordance with the application of the Historic Preservation Certification Requirements and the Secretary of Interior’s Standards. Preservation Maintenance

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	includes housekeeping and routine and cyclic work scheduled to mitigate wear and deterioration of the Haslett Warehouse without altering the historic character, protecting the condition of the Haslett Warehouse, repairing or replacing in kind broken or worn out elements, parts, or surfaces so as to keep the existing appearance and function of the site or structure, and emergency stabilization work necessary to protect damaged historic fabric from additional damage.
1.56.	“Preservation Plan” is a document that sets forth a plan, including a time schedule, for Preservation Maintenance, including, without limitation, Lessee’s ongoing compliance with the Historic Preservation Certification Requirements and the Secretary of Interior’s Standards.
1.57.	“Reconstruction” means the act or process, in accordance with the Secretary of Interior’s Standards pertaining to “reconstruction”, of accurately depicting by means of new construction, form, features, and detailing of a non-surviving site, landscape, building, or object for the purpose of replicating its appearance at a specific period of time and it is historic location.
1.58.	“Rehabilitation” means the act or process, in accordance with the Historic Preservation Certification Requirements and the Secretary of Interior’s Standards pertaining to “rehabilitation”, of returning a property to a state of utility through repair or alteration that makes possible an efficient contemporary use while preserving those portions or features of the property that are significant to its historical, architectural and cultural values. From and after the date that is ten (10) years after the Commencement Date, “Rehabilitation” following casualty or other damage or destruction may, at Lessor’s direction, include Restoration or Reconstruction of specific Historic Elements in accordance with the Secretary of Interior’s Standards.
1.59.	“Rent Roll” means a full and complete list of all sublessees of Lessee, if any, and for each sublessee, a full and complete description of sublease terms, including but not limited to term, annual rent, base rent, percentage rent, sublessee improvements, escalation clauses, concessions, inducements, options to renew, amendments to sublease, and any other information regarding subleases as Lessor may from time to time reasonably prescribe.
1.60.	“Restaurant Space” means that certain space comprised of approximately 4,550 square feet located on the ground floor of the Premises and shown on Exhibit D, as may be modified as reflected in Lessee’s final Design and Construction Documents for the Initial Lessee Improvements approved in writing by Lessor.

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1.61.	“Restoration” means the act or process in accordance with the Secretary of Interior’s Standards pertaining to “restoration”, of accurately depicting the form, features, and character of a property as it appeared at a particular period of time by means of the removal of features from other periods in its history and reconstruction of missing features from the restoration period.
1.62.	“Retail Space” means that certain space comprised of approximately 1,200 square feet located on the ground floor of the Premises and shown on Exhibit E, as may be modified as reflected in Lessee’s final Design and Construction Documents for the Initial Lessee Improvements approved in writing by Lessor.
1.63.	“Retained Space” means space located within the Haslett Warehouse that is not leased to Lessee and is reserved for use by Lessor. The Retained Space comprises approximately 9,565 square feet of the ground floor area within the Haslett Warehouse as measured from the interior surface of the finished walls and is a contiguous area beginning approximately at the Jefferson and Hyde Street corner of the building and extending across the bays of the building’s support grid fronting on Jefferson Street as shown on Exhibit B and continuing into the interior of the building on the lowest level along the Hyde Street wall of the building so as to encompass the requisite area in a generally rectangular shape. The outside entrance to the Retained Space shall be through an existing opening onto Jefferson Street. The Retained Space extends downward from the bottom of the finished surfaces of the ceiling above and extends no further downward than the top of the concrete floor slab. The Retained Space does not include the Vault.
1.64.	“Rooms Department Revenues” means all Gross Receipts, income, revenues, rents or economic benefit of any kind, whether in the form of cash, property or services, received by Lessee or Affiliates solely from the rental of guest rooms in the Premises other than Percentage Rental Exclusions. Rooms Department Revenues does not include Food and Beverage and All Other Department Revenues.
1.65.	“Schedule of Performance” means the Schedule of Performance attached as Exhibit G to this Lease.
1.66.	“Secretary of Interior’s Standards” means (a) the Secretary of Interior’s Standards for Historic Preservation codified in 36 C.F.R. Part 68; (b) the Secretary of the Interior’s Standards for the Treatment of Historic Properties, 1995; and (c) the Secretary’s Standards for Rehabilitation and Guidelines for Rehabilitating Historic Buildings (1990 revision).

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1.67.	“Street Encroachment Agreement” means that certain Street Encroachment Agreement with the City and County of San Francisco attached as Exhibit K to this Lease.
1.68.	“Substantial Completion” means the work of constructing the Initial Lessee Improvements, Alterations, or Preservation Maintenance, as applicable, is substantially complete and the constructed facility is operable as a usable facility.
1.69.	“Term” is as defined in Section 4 of this Lease.
1.70.	“Termination Date” means the Expiration Date or Final Expiration Date or such earlier date as this Lease is terminated pursuant to any provision of this Lease.
1.71.	“Trade Fixtures” means those items, or categories of items, whether owned or leased by Lessee, listed on Exhibit F of this Lease.
1.72.	“Transfer” means the direct or indirect, voluntary or by operation of law, sale, assignment, subletting, encumbering, pledge or other transfer or hypothecation of Lessee’s or any permitted assignee’s or sublessee’s interest in or rights with respect to the Premises or Lessee’s leasehold estate therein. Any sale or other transfer, including by consolidation, merger or reorganization, of a Controlling Interest in Lessee or any permitted assignee or sublessee, if such entity is a corporation, or any sale or other transfer of a Controlling Interest in the partnership interests of such entity, if such entity is a partnership, whether in a single transfer or in a series of related transfers, and whether directly or by sales or transfers of underlying partnership or corporate ownership interests, shall be deemed a Transfer. The term “Controlling Interest” as used in this Lease means, in the case of a corporate entity, an interest, beneficial or otherwise, of sufficient outstanding voting securities or capital of the Lessee, permitted assignee, or sublessee or related entity so as to permit exercise of managerial authority over the actions and operations of the Lessee, permitted assignee, or sublessee, of a majority of the Board of Directors of Lessee, permitted assignee or sublessee, and, in the instance of a partnership, limited partnership, joint venture, limited liability company, or individual entrepreneurship, beneficial ownership of the capital assets of Lessee, permitted assignee or sublessee so as to permit exercise of managerial authority over the actions and operations of Lessee, permitted assignee or sublessee. Notwithstanding the foregoing definition of “Transfer,” a “Transfer” shall not include any transaction in connection with the granting of an Assignment for Security or Leasehold Mortgage pursuant to Section 28.2 below (but excluding a foreclosure or giving of a deed in lieu of foreclosure thereunder). A foreclosure or the giving of a deed in lieu

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	shall be deemed a “Transfer” and shall require Lessor’s prior written approval in accordance with Section 28.13.2 below.
1.73.	“Utility Areas” means the areas between the bottom of the slab over the Retained Space extending downward to the bottom of the finished surfaces of the ceiling of the Retained Space, together with such vertical areas immediately adjacent to the interior side of the exterior walls of the Retained Space and columns located therein and to and from the Vault, which locations are reasonably necessary for utilities serving the Premises. The location of any and all utilities serving the Premises within the Utility Areas shall be subject to Lessor’s prior written approval.
1.74.	“Vault” means that certain space comprised of approximately 115 square feet located on the ground floor along the interior wall of the Haslett Warehouse along Hyde Street as shown on Exhibit I. The Vault contains an electrical transformer and related electrical equipment which provides electricity to the Premises and the Retained Space.

2. LEASE OF THE PREMISES

2.1. Lease of the Premises

2.1.1. In accordance with the powers granted by Congress, Lessor, for and in consideration of the rents, covenants and agreements herein contained on the part of Lessee, its heirs, successors and assigns, to be paid, kept and performed, hereby leases and demises to Lessee, and Lessee hereby hires from Lessor, upon and subject to the terms agreements, covenants, conditions and provisions of this Lease, the Premises, excepting and reserving unto Lessor:

(a)

the Retained Space;

(b)

nonexclusive easements in the Utility Areas as appurtenances to the Retained Space to use, operate, maintain, repair, reconstruct, replace, install, construct, and inspect Lessor’s utilities, such as lighting, alarm systems, electrical, and telecommunications, and facilities, and all necessary and proper lines, ducts, measuring devices, and other related apparatus and equipment in and through the Utility Areas and to and from the Vault; together with the right, at all reasonable times to access the Utility Areas and the Vault for the same;

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(c)

the right, at all reasonable times and for purposes other than mere inspection, upon reasonable prior notice under the circumstances, given at least thirty (30) days in advance where feasible (except in case of emergency), and subject to the rights of Lessee’s invitees in the Premises, to enter and to permit any Agency, public or private utilities and other persons to enter upon the Premises as may be necessary as determined in Lessor’s reasonable judgment for the purposes of (i) using, operating, maintaining, replacing, inspecting, and relocating any existing underground wells, water, natural gas, steam, storm, storm sewer and sanitary sewer lines, telephone and electric power lines, conduits and facilities, and flood control facilities; (ii) using, installing, operating, maintaining, renewing, replacing, inspecting, and relocating underground wells, water, natural gas, steam, storm, storm sewer and sanitary sewer lines, telephone and electric power lines, conduits and facilities, and flood control facilities required by Applicable Laws or mandated by governmental entities other than the National Park Service; or (iii) using, installing, operating, maintaining, renewing, replacing, inspecting, and relocating wells and other equipment as reasonably required for environmental monitoring or remediation purposes. No such facilities shall materially interfere with the use or stability of any building or improvement on the Premises. Lessee hereby waives any claims for damages for any injury or inconvenience to or interference with Lessee’s use and occupancy of the Premises, any loss of occupancy or quiet enjoyment of the Premises or any other loss occasioned by Lessor’s exercise of its rights under this Section 2.1(c);

(d)

the right, at all reasonable times and upon twenty-four (24) hours’ prior notice to Lessee (except in the case of emergency), and subject to the rights of guests in the Premises, in its sole discretion, but not the obligation, to enter and to permit any Agency to enter upon and to permit such investigation or testing on the Premises as are reasonably necessary in the opinion of Lessor. No such inspection or testing by Lessor shall materially interfere with the use or

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		stability of any building or improvement on the Premises. Lessee shall establish procedures providing emergency access by Lessor to any secured areas within the Premises, which procedures shall comply with all Applicable Laws. Lessee hereby waives any claims for damages for any injury or inconvenience to or interference with Lessee’s use and occupancy of the Premises, any loss of occupancy or quiet enjoyment of the Premises or any other loss occasioned by Lessor’s exercise of its rights under this Section 2.1(d); and
	(e)	the right to enter upon the Premises at any reasonable time for the purpose of inspection and inventory and when otherwise deemed necessary for the protection of interests of Lessor, and Lessee shall have no claim of any character on account thereof against Lessor or any officer, agent, or employee thereof. Lessor shall have the right to make, without prior notice thereof, annual inspections for compliance with public health and safety standards. Lessor may make follow-up inspections to ensure compliance therewith. Lessor retains the right to close the Premises when immediate danger to life or property is discovered on such inspections or follow-up inspections. To the extent feasible, Lessor will provide reasonable notice of such closure. Lessee hereby waives any claims for damages for any injury or inconvenience to or interference with Lessee’s use and occupancy of the Premises, any loss of occupancy or quiet enjoyment of the Premises or any other loss occasioned by Lessor’s exercise of its rights under this Section 2.1(e).
2.1.1.1.		Premises may be initially demised to Lessee with permitted uses authorized to others on the courtyard portion of the Premises adjacent to the Haslett Warehouse on the east side (“Courtyard Permits”). Upon the Commencement Date, Lessor will invoke the cancellation clause in the Courtyard Permits and will cause the property to be vacated. Once vacated, the courtyard portion of the Premises will be demised to the Lessee without being subject to such uses.

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2.1.2.

Lessor hereby grants to Lessee for the benefit of the Premises, subject to the other terms and conditions of this Lease, a nonexclusive easement appurtenant to the Premises for reasonable access through the Retained Space, for use by the Lessee, its employees, contractors, consultants, and agents, for the purposes of (a) the use, operation, maintenance, repair, reconstruction, replacement, installation, construction, and inspection of utilities, such as heating, air conditioning, water, waste, electrical, and telecommunications, and facilities, and all necessary and proper lines, ducts, valves, fittings, pumps, measuring and protective devices, and other apparatus and equipment in and through the Utility Areas, and (b) the use, operation, maintenance, repair, reconstruction, replacement, installation, construction, and inspection of electrical utilities and facilities, and all necessary and proper lines, ducts, fittings, measuring and protective devices, and other electrical apparatus in the Vault; together with the right, to access the Utility Areas and the Vault for the same; provided that (c) Lessee’s access rights granted hereunder shall be limited to all reasonable times and for purposes other than mere inspection, upon reasonable prior notice under the circumstances, given at least thirty (30) days in advance where feasible (except in the case of emergency), (d) shall be for a reasonably minimum period of time, and (e) Lessee’s use shall not unreasonably interfere with the use of the Retained Space or reduce or unreasonably impair the usefulness or function of the Retained Space or Lessor’s utilities located within the Utility Areas.

2.1.3.

This Lease is subject to all Applicable Laws including, but not limited to, all liens, encumbrances, restrictions, rights and conditions of law or of record or otherwise actually known to Lessee or reasonably ascertainable by inspection or survey.

2.2. Reservation of Rights

2.2.1.	The privileges granted herein are further expressly subject to all existing easements, licenses, and rights-of-way.
2.2.2.	This Lease reserves to the Lessor the right to install, operate, and maintain a sign on the exterior of the Premises giving notice to the public of Lessor’s presence in the Retained Space. Such sign shall conform to

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	Applicable Laws and be in accordance with the style and appearance of signage adopted by Lessee. Any signage or other items proposed to be placed on the exterior of the Premises by Lessor must be designed and installed in consultation with Lessee and shall be installed, maintained, and operated in such a manner as to not interfere with the operations of Lessee.
2.2.3.	Mineral Rights
	Mineral rights to the land subject to this Lease are retained by the State of California, reserving all mineral deposits, as defined in Section 6407 of the Public Resources Code, together with the right to prospect for, mine, and remove such deposits.

2.2.4. Nothing contained in this Lease shall give or be deemed to give Lessee an independent right to grant easements or other rights-of-way over, under, on, or through the Premises.

2.3. Retained Space

2.3.1. Lessor’s use of the Retained Space will be for public purposes such as a museum, display area, and visitor center and for similar public purposes related to the Park and the objectives of Lessor, including, without limitation, activities conducted by any cooperating association or convention and visitor’s bureau.

2.3.2. Lessee shall (a) construct the building shell of the Retained Space as provided in Section 13 below as part of the Initial Lessee Improvements and pursuant to mechanical, electrical and plumbing (“MEP”) performance specifications submitted by Lessor to Lessee in accordance with the Schedule of Performance; and (b) use the Allowance to design and construct the interior of the Retained Space; provided that the cost of such design and construction of the interior of the Retained Space shall be limited to the extent of the Allowance. Prior to expenditure of the Allowance, Lessee shall obtain Lessor’s prior written approval for such expenditure. The allocation and expenditure of the Allowance for such design and construction shall be determined by Lessor in its sole discretion. Lessor shall complete the installation of the interior of the Retained Space as funds are available.

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Lessor hereby grants reasonable access to Lessee to the Retained Space for performance and completion of its obligations pursuant to this Section 2.3.2.

2.3.3.

Lessee, at Lessee’s sole cost and expense, shall engage an acoustical engineer as required to mitigate noise and vibration from the electrical transformer and other electrical equipment in the Vault and Lessee’s utilities in the Utility Areas so that such noise and vibration shall be reduced to levels appropriate to, and shall not materially interfere with, the use of the Retained Space pursuant to Section 2.3.1 above; provided that such mitigation shall be subject to Lessor’s prior written approval.

2.3.4. Lessor shall perform maintenance in the Retained space in accordance with Applicable Laws. The visitor center within the Retained Space shall be operated and maintained consistent with the operation and maintenance standards established for the Bear Valley Visitor Center at Point Reyes National Seashore, Loomis Museum at Lassen Volcanic National Park, and Newhalem Visitor Center at North Cascades National Park.

2.3.5. In the event Lessor ceases to require the use of the Retained Space for public purposes (described in Section 2.3.1 above) and subject to Applicable Laws, Lessee will be offered such space as an addition to Premises under the terms of the Lease and on terms compatible with the requirements of Lessor and at fair market value. Lessor shall not permit (a) the operation of a restaurant in the Retained Space; or (b) any use or operation of the Retained Space which generates excessive noxious odors or noise, such as a fast food restaurant or nightclub. Operations in the Retained Space for uses other than as a visitor center shall be commensurate with the Hotel Standard.

2.3.6. Lessor and Lessee shall cooperate to facilitate and coordinate the interactions between the Retained Space and Premises. Exhibits in the Retained Space shall meet National Park Service standards for Exhibit Planning and Design and Exhibit Fabrication. In addition, all National Park Service Conservation Guidelines that relate to the preservation and exhibit; or of historical collections will be applied. Exhibits shall be maintained as required in National Park Service Servicewide Cyclic and

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Repair/Rehab Programs. The Bear Valley Visitor Center at Point Reyes National Seashore, Loomis Museum at Lassen Volcanic National Park, and Newhalem Visitor Center at North Cascades National Park are examples of visitor centers operating under these standards.

2.3.7.

Lessee shall (or shall cause to) install the heating, HVAC, plumbing and sprinklers serving the Retained Space and shall operate, maintain, repair, reconstruct, and replace any and all such utilities serving the Premises and the Retained Space. Lessor shall operate, maintain, repair, reconstruct, and replace any and all utilities serving solely the Retained Space. All utilities installed by Lessee serving the Retained Space shall be located within the Utility Areas as approved by Lessor. Lessor will pay directly to the providing utility for Lessor’s use of all utilities serving the Retained Space to the extent feasible, otherwise, if requested by Lessor, Lessee shall contract with the applicable utility provider to provide such utility service to Lessor; the rate per unit charged the Lessor for such service shall be approximately the average cost per unit of providing such service and Lessee shall bill Lessor monthly therefor. Lessor shall pay Lessee within thirty (30) days of receipt of the invoice for such utility service.

2.3.8. Lessor shall permit Lessee and its agents, contractors and representatives to access the Vault through the Retained Space at reasonable times and for purposes other than mere inspection, upon reasonable prior notice under the circumstances, given at least thirty (30) days in advance where feasible (except in an emergency situation in which event no notice shall be required if not reasonably possible under the circumstances), for the purpose of inspecting, repairing, replacing, and maintaining the Vault and/or any equipment therein, and to perform Lessee’s obligations pursuant to Section 2.3.3 above. In connection with any such entry (except in the event of an emergency situation), Lessee shall (a) use reasonable efforts to minimize the interference with or disruption to the use and operation of the Retained Space; and (b) not exercise its rights of entry with unreasonable frequency. In any case where Lessee exercises its right to enter upon the Retained Space pursuant to this Section 2.3.8, Lessee shall, to the extent reasonably practicable, allow Lessor or its designee to

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accompany Lessee in the Retained Space while Lessee is present thereon.

3. ACCEPTANCE OF THE PREMISES

3.1. As Is Condition of the Premises

3.1.1. Lessee expressly agrees to take the Premises and all improvements thereon in their existing “as is” condition and acknowledges that in entering into this Lease, Lessee does not rely on, and Lessor does not make, any express or implied representations or warranties as to any matters including, without limitation, the suitability of the soil or subsoil; any characteristics of the Premises or improvements thereon; the suitability of the Premises for the intended use; the likelihood of deriving trade from or other characteristics of the Park; the economic or programmatic feasibility of Lessee’s use and occupancy of the Premises; title to the Premises; Hazardous Materials on or in the vicinity of the Premises; or any other matter. Lessee will satisfy itself pursuant to Section 3.2 of this Lease as to such suitability and other pertinent matters by Lessee’s own inquiries and tests into all matters relevant in determining whether to enter into this Lease. Lessee hereby accepts the Premises in their existing condition, and hereby expressly agrees that if any remedial work, Preservation Maintenance, improvements or Alterations is required to conform the Premises to the requirements of Applicable Laws, Lessee shall, at its sole cost and expense, undertake and diligently prosecute to completion any such work except as expressly set forth in this Lease, provided, however that the provisions of this Section 3 do not modify the provisions of Section 22 below with respect to Pre-existing Hazardous Materials.

3.1.2. Lessee understands and expressly agrees that Lessor’s approval of Design and Construction Documents and Lessor’s provision of the Certificate of Occupancy or Conditional Certificate of Occupancy or any Lessor approval of Lessee’s completion of Alterations, Building Maintenance, or Preservation Maintenance does not make nor imply any representation or warranty by Lessor that the Premises complies with all Applicable Laws.

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3.2.

Lessee’s Due Diligence

During the ninety (90) day period (the “Due Diligence Period”) commencing with the Commencement Date, Lessee shall conduct such investigations of the Premises and surrounding property as Lessee shall feel necessary to determine if the Premises are in a condition acceptable to Lessee, and whether Lessee can obtain adequate financing and professional and contracting services for the construction of the Initial Lessee Improvements and whether the environmental remediation of the Premises and surrounding property can be undertaken in a manner satisfactory to Lessee. During the Due Diligence Period and in accordance with the Schedule of Performance, Lessee shall submit to the State Historic Preservation Officer, and provide a copy to Lessor, of Lessee’s historic preservation certification application pursuant to 36 C.F.R. Part 67. Within ten days of receipt, Lessee shall provide to Lessor a copy of the certification of Rehabilitation determined by Historic Preservation Services, National Park Service, Washington, D.C. During the Due Diligence Period, Lessee shall be responsible for Lessee’s activities and those of Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee in conducting the necessary investigations and otherwise occupying or using the Premises and shall provide insurance coverage sufficient to fully protect, defend and indemnify Lessor from loss and damage. At any time during the Due Diligence Period, Lessee may, in its sole discretion, but only after performing the repair, replacement or restoration of any damage to Premises caused by Lessee, Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee in compliance with all Applicable Laws and in accordance with the terms and conditions of this Lease, as a result of Lessee’s investigations, elect to terminate this Lease by giving Lessor a written notice of such termination, whereupon this Lease shall terminate. Upon such termination by Lessee, Lessor shall retain the payment made pursuant to Section 5.3.1 below and Lessee and Lessor shall have no further obligation to each other except that the indemnity provided in this Section 3.2 shall survive such termination.

3.3.	Lessor Removal of Hazardous Materials from Premises
	Upon completion of the Due Diligence Period and absent Lessee’s termination of the Lease pursuant to Section 3.2 above, Lessor shall remove Lessor’s personal property from the Premises including, without limitation, stored Hazardous Materials such as cans of paint and similar items.

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4. TERM

4.1. Unless terminated sooner, the initial term of this Lease (“Term”) shall be for a period of fifty-seven (57) years, commencing on the date first above written (“Commencement Date”) and expiring on the last day of December 31, 2057 (“Expiration Date”) as extended to the Final Expiration Date or on such earlier date as this Lease may be terminated as hereinafter provided.

4.2. Upon completion of Initial Lessee Improvements and issuance of a Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first, the Term shall be considered extended by an additional period equal to the time from the Commencement Date until the issuance of the certificate and expiring after the completion of such period (“Final Expiration Date”) or on such earlier date as this Lease may be terminated as provided hereinafter but in no event shall the Final Expiration Date be later than the last day of December 31, 2059.

5. ANNUAL RENTAL, ONE TIME PAYMENTS, OTHER OBLIGATIONS TO LESSOR

5.1.	All payments due to Lessor under the terms of this Lease shall be payable at:
	Regional Director, Pacific West Region U.S. Department of the Interior National Park Service 600 Harrison Street, Suite 600 San Francisco, California 94107

or at such other place or places as Lessor may designate in writing from time to time.

5.2.	Lease Year
	The term “Lease Year,” is hereby defined as follows:

5.2.1.	The first Lease Year shall commence upon issuance of a Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first, and shall end on December 31 of that calendar year.
5.2.2.	Each subsequent Lease Year shall be a calendar year and shall commence on the January 1 following the expiration of the preceding Lease Year, and shall end on the December 31 thereafter, or on the last day of the Term, whichever occurs first.

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5.3. One-Time Payments and Allowance

5.3.1.	As partial consideration for this Lease, Lessee shall pay to Lessor on the date that this Lease is first executed by the Lessor, in lawful money of the United States of America, without deduction or offset, the amount of One Hundred Thousand Dollars ($100,000).
5.3.2.	As partial consideration for this Lease, and in accordance with the Schedule of Performance, Lessee shall pay to Lessor or its designee, in lawful money of the United States of America, without deduction or offset, the amount of One Million Nine Hundred Thousand Dollars ($1,900,000).
5.3.3.	As partial consideration for this Lease, and in accordance with the Schedule of Performance, Lessee shall establish and manage a “Capital Account” and shall deposit the amount of Five Hundred Forty Thousand Dollars ($540,000) in lawful money of the United States of America, into such Capital Account. The funds in such Capital Account, including interest earned thereon (the “Allowance”), shall be used by Lessee solely for construction of the Retained Space in accordance with the terms and conditions of this Lease.

5.4.

Annual Rental

In addition to all other amounts and charges due under this Lease, Lessee shall and hereby agrees to pay to Lessor each Lease Year, in lawful money of the United States of America, without deduction or offset except as provided for in Section 33.7 below, an absolute net annual rental (“Annual Rental”), which rental shall be the sum total amount of the following: Base Rental including the CPI adjustment applicable and Percentage Rental and other charges due hereunder.

5.5.

Base Rental

In addition to all other amounts and charges due under this Lease, Lessee shall and hereby agrees to pay to Lessor each Lease Year, beginning with the first day following issuance of the Certificate of Occupancy or of a Conditional Certificate of Occupancy, whichever occurs first, as part of the Annual Rental a Base Rental (“Base Rental”) in the initial amount of One Million Dollars ($1,000,000) payable in equal monthly installments, of Eighty-Three Thousand Three Hundred and Thirty-Three Dollars and Thirty-Three cents ($83,333.33).

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5.5.1.	Adjustments to Base Rental
	The Base Rental shall be subject to adjustment according to Sections 5.5.1.1 and 5.5.1.2 of this Lease. In no case shall the Base Rental, as a result of an adjustment be less than the Base Rental in effect immediately prior to such adjustment.

5.5.1.1.	Adjustment Schedule
	CPI adjustments to the Base Rental shall be made every five (5) years during the Term with the first such adjustment to be made effective on the first day following the fifth anniversary of the issuance of the Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first. Such CPI adjustments as may be applicable for a partial month shall be remitted with the first full monthly payment due at the adjusted amount.
5.5.1.2.	CPI Adjustments

5.5.1.2.1.

The initial base for computing the CPI adjustment is the CPI published most immediately preceding the Commencement Date (“Beginning Index”). The CPI published most immediately proceeding the Adjustment Date in question (“Adjustment Index”) is to be used in determining the amount of the adjustment. If the Adjustment Index has increased over the Beginning Index, the Base Rental shall be set by multiplying the then-current Base Rental by a fraction, the numerator of which is the Adjustment Index and the denominator of which is the Beginning Index.

5.5.1.2.2.

If the CPI is changed so that the base year differs from that in

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effect when the Term commences, the CPI shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the CPI is discontinued or revised during the Term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the CPI had not been discontinued or revised.

5.5.1.2.3.

Notwithstanding the foregoing, any increase in Base Rental shall not exceed twenty percent (20%) of the initial annual Base Rental.

5.5.2.

Upon the determination of the new Base Rental, pursuant to CPI adjustments as set forth in this Lease, Lessor shall notify Lessee of such new Base Rental and such notification shall constitute an amendment to this Lease, as if such amendment were duly executed by the Parties.

5.5.3.

Base Rental shall be payable in twelve (12) equal monthly installments during each Lease Year, monthly in advance, on the first day of each calendar month, without offset or deduction, commencing on the first day following the issuance of the Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first. Should any Lease Year contain fewer than three hundred sixty-five (365) days or more than three hundred sixty-six (366) days, then the Base Rental for said Lease Year shall be computed on a daily basis at an amount equal to one/three-hundred-sixty-fifths (1/365) of the Base Rental, and paid monthly in advance, with any fractional calendar month paid at the beginning of the succeeding full calendar month.

5.6. Percentage Rental

5.6.1. In addition to all other amounts and charges due under this Lease, Lessee shall and hereby agrees to pay to Lessor

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as part of the Annual Rental a percentage rental (“Percentage Rental”) for the Premises, the Office Space, the Retail Space and the Restaurant Space for each Lease Year as follows:

5.6.1.1.	For the purposes of calculating Percentage Rental, Gross Receipts will be allocated into two categories in a manner consistent with the Uniform System. Percentage Rental Exclusions will be allowed. Percentage Rental will be determined based on the varying percentages allocated to the two categories. The categories are (a) Rooms Department Revenues, and (b) Food and Beverage and All Other Department Revenues. All Gross Receipts from the Premises excluding Rooms Department Revenues shall be included in Food and Beverage and All Other Department Revenues.
5.6.1.2.	Percentage Rental for Lease Years 1 to 5 is calculated as follows: (a) the sum of (i) a base amount equal to six percent (6%) of Rooms Department Revenues up to $13,563,200 (in 2000 dollars), plus (ii) four percent (4%) of Food and Beverage and All Other Department Revenues, plus (iii) eight percent (8%) of Rooms Department Revenues between $13,563.200 and $17,360,875 (in 2000 dollars), plus (iv) ten percent (10%) of Rooms Department Revenues over $17,360,875 (in 2000 dollars), minus (b) the amount of Base Rental payable by Lessee in any such Lease Year.
5.6.1.3.	Percentage Rental for Lease Years 6 to 38 is calculated as follows: (a) the sum of (i) a base amount equal to eight percent (8%) of Rooms Department Revenues up to $13,563,200 (in 2000 dollars), plus (ii) four percent (4%) of Food and Beverage and All Other Department Revenues, plus (iii) ten percent (10%) of Rooms Department

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Revenues between $13,563,200 and $17,360,875 (in 2000 dollars), plus (iv) twelve percent (12%) of Rooms Department Revenues over $17,360,875 (in 2000 dollars), minus (b) the amount of Base Rental payable by Lessee in any such Lease Year.

5.6.1.4.

Percentage Rental for Lease Years 39 to 48 is calculated as follows: (a) the sum of (i) a base amount equal to ten percent (10%) of Rooms Department Revenues up to $17,360,875 (in 2000 dollars), plus (ii) four percent (4%) of Food and Beverage and All Other Department Revenues, plus (iii) twelve percent (12%) of Rooms Department Revenues over $17,360,875 (in 2000 dollars), minus (b) the amount of Base Rental payable by Lessee in any such Lease Year.

5.6.1.5. Percentage Rental for Lease Years 49 through the end of the Term is calculated as follows: (a) the sum of (i) a base amount equal to twelve percent (12%) of Rooms Department Revenues up to $17,360,875 (in 2000 dollars), plus (ii) four percent (4%) of Food and Beverage and All Other Department Revenues, plus (iii) fourteen percent (14%) of Rooms Department Revenues in excess of $17,360,875 (in 2000 dollars), minus (b) the amount of Base Rental payable by Lessee in any such Lease Year.

5.6.1.6. The Rooms Department Revenues under Sections 5.6.1.2 through 5.6.1.5 of this Lease will be indexed to the CPI each year on the anniversary of the issuance of the Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first, and in the manner described in Sections 5.5.1.1 and 5.5.1.2 of this Lease.

5.6.2. Although the Percentage Rental due shall be reconciled by calculation on a yearly basis, the Percentage Rental shall

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be payable in four (4) quarterly installments during each Lease Year, in arrears, due on the tenth (10th) day of April, July, October, and January, without offset or deduction except as provided for in Section 33.7 below, and with the first payment due on the tenth (10th) day of the first applicable quarter following the issuance of the Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first. Percentage Rental shall be calculated for quarterly payment based on the cumulative annual Gross Receipts for the applicable Lease Year. The total of such quarterly payments shall be adjusted at the end of each Lease Year as provided in Section 5.6.4 of this Lease.

5.6.3. Within thirty (30) days after the end of each calendar quarter, Lessee shall furnish to Lessor a statement of Gross Receipts for each month of that calendar quarter. Each quarterly statement shall be signed and certified to be correct by Lessee or its authorized representative.

5.6.4. At the end of each Lease Year, Lessee shall furnish to Lessor, in accordance with Section 7.2 of this Lease, the Annual Report, which report shall contain a certified report of Gross Receipts for such Lease Year. Promptly after Lessee’s submission of such Annual Report, the Parties shall make any adjustment necessitated by any deficiencies or overpayment in the monthly payments. If Lessee has not paid Lessor a sufficient Percentage Rental for the Lease Year, then Lessee shall pay any deficiency at the time of submittal of the Annual Report. If Lessee’s payments for the preceding Lease Year exceed the amount actually due to Lessor, the amount of the overpayment shall be credited to the next installment of Percentage Rental or other amounts next due under this Lease.

5.7.

Late Charges

Any unpaid Annual Rental or other amounts due from Lessee to Lessor shall bear interest from the date ten (10) days after the date due until paid at the Interest Rate. In addition, Lessee recognizes that late payment of any portion of the Annual Rental will result in administrative expense to Lessor, the extent of which expense is difficult and economically impracticable to ascertain. Lessee therefore agrees that if any payment of Annual Rental shall be overdue for ten (10) days beyond the date on which it is due and payable as provided in this Lease, an

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additional late charge of five percent (5%) of the sums so overdue shall become immediately due and payable. Lessee agrees that such amount is a reasonable estimate of the expense to be suffered by Lessor as a result of such late payment by Lessee and may be charged by Lessor to defray such expense. In the event of nonpayment of interest or late charges on overdue Annual Rental, Lessor shall have, in addition to all other rights and remedies, the rights and remedies provided in this Lease and by Applicable Laws for nonpayment of rent.

5.8.	Lease not a Concession Authorization
	This Lease encompasses all amounts due to Lessor for the rights to use the Premises and to conduct the operations authorized by this Lease. This Lease is not a concession contract and neither authorizes services for Park concession purposes nor requires concession-related payments or fees.

6. IMPOSITIONS

6.1. Lessee’s Obligation for Impositions

6.1.1. In addition to Annual Rental and all other amounts and charges due under this Lease, Lessee covenants and agrees to bear, discharge and pay to the relevant Agency, in lawful money of the United States, without offset or deduction, as the same become due, before delinquency, all Impositions that may be assessed, levied, confirmed, imposed or become a lien upon the Premises or any part thereof that become payable from and after the Commencement Date until the later of (a) last day of the Term hereof, or (b) the last day Lessee has possession of the Premises.

6.1.2. In addition, it shall be Lessee’s sole responsibility to apply for and prosecute any exemption from any Impositions that may be imposed from and after the Commencement Date, which Lessee shall pay if necessary and which shall be at no expense to Lessor. However, Lessor agrees to cooperate with Lessee’s reasonable requests to assist in any such application for exemption.

6.2.	Receipts
	Lessee shall obtain and deliver to Lessor receipts or duplicate receipts or other satisfactory evidence of payment for all Impositions required to be paid by Lessee, promptly upon payment thereof in the case of any

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Impositions for which a failure to pay may result in a lien upon the Premises, and, in all other cases, upon request of Lessor.

7. AUDIT AND RECORDS

7.1.

Books and Records

Lessee shall keep, or cause to be kept, true, accurate and complete records and double-entry books in accordance with generally accepted accounting principles, consistently applied, from which Lessor at all times can determine the nature and amounts of Gross Receipts, Rooms Department Revenues, Food and Beverage and All Other Department Revenues, Percentage Rental Exclusions by item, and Rent Roll. Without limitation of the foregoing, such records shall show all transactions relative to the conduct and production of Gross Receipts and the Rent Roll and such transactions shall be supported by documents of original entry. Lessee shall keep and make available to Lessor at all reasonable times, upon advance notice and during normal business hours, said books of account and records at a location within the limits of the City and County of San Francisco, California or at the Premises, for a period of five (5) years after the Lease Year to which they relate and thereafter in the event of litigation concerning the same until such litigation terminates in final judgment. Any such inspection shall be scheduled as soon as possible upon the request of Lessor during normal business hours at a mutually acceptable time and shall be undertaken so as to minimize, to the extent reasonably possible, any interference with the conduct of Lessee’s business. If at any time during the Term, said books, records and accounts prove inadequate to record Gross Receipts and the Rent Roll or provide other information in the detail required under this Lease, Lessee shall, upon the request of Lessor, procure and maintain such books, records and accounts as shall be of a character and form adequate for said purpose.

7.2.	Annual Financial Report
	Lessee shall, at Lessee’s sole cost and expense, prepare or cause to be prepared and furnished to Lessor an Annual Report within ninety (90) days of the end of each Lease Year.

7.3. Lessor’s Audit

7.3.1. Upon prior notice and during normal business hours, Lessee shall provide Lessor access to those records relating to the Premises and Lessee’s use and occupancy of the Premises under this Lease that are necessary for the purpose of conducting an audit of such records to

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verify the calculation and payment of Percentage Rental for any of the three (3) preceding Lease Years.

7.3.2. If it shall be determined by Lessor as a result of such audit that there has been a deficiency in the payment of any Percentage Rental for any Lease Year, then such deficiency shall become immediately due and payable and shall bear interest at the Interest Rate from the date the payment should have been made until paid. If such audit determines that there has been an overpayment of any rentals, such overpayment shall be credited against the next rents and charges due to Lessor under this Lease.

7.3.3. If Lessee disputes the findings of the audit conducted by Lessor or if the amount of deficiency is estimated by Lessor to be greater than five percent (5%) of the amount due, then, at the requirement of the Lessor, upon prior notice and during normal business hours, Lessee shall provide Lessor access to those records relating to the Premises and Lessee’s use and occupancy of the Premises under this Lease that are necessary for the purpose of conducting an audit of such records by an independent certified public accountant to verify the calculation and payment of Percentage Rental for any of the three (3) preceding Lease Years. The accountant shall consult with both parties during the audit process.

7.3.4. If it shall be determined as a result of such audit that there has been a deficiency in the payment of any Percentage Rental for any Lease Year, then such deficiency shall become immediately due and payable and shall bear interest at the Interest Rate from the date the payment should have been made until paid. If such audit determines that there has been an overpayment of any rentals, such overpayment shall be credited against the next rents and charges due to Lessor under this Lease.

7.3.5. Should Lessor conduct an audit by an independent certified public accountant for the purposes of Section 7.3.3 above then Lessee shall reimburse Lessor in full for Lessor’s reasonable out of pocket payments for the audit by the independent certified public accountant if Lessee is found to owe additional sums to Lessor.

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7.4. Access to Records

The Secretary of the Department of Interior and Comptroller General of the United States, or any of their duly authorized representatives, shall at any time up until the expiration of five (5) calendar years after the expiration of this Lease, have access to and the right to examine any of the Lessee’s pertinent books, documents, papers, and records, and such documents of any entity or person related to this Lease that are necessary to perform an audit and to verify Lessee’s compliance with the terms and conditions of this Lease.

8. NET LEASE; NO COUNTERCLAIM OR ABATEMENT

8.1. All amounts and charges due to Lessor under this Lease shall be absolutely net to Lessor and shall be paid without assertion of any counterclaim, offset, deduction or defense and without abatement, suspension, deferment or reduction except as provided for in Section 33.7 below. Under no circumstances or conditions, whether now existing or hereafter arising, and whether or not beyond the present contemplation of the Parties, shall Lessor be expected or required to make any payment of any kind whatsoever with respect to the Premises or be under any obligation or liability except as expressly set forth in this Lease.

8.2. Except as otherwise expressly provided in this Lease, this Lease shall continue in full force and effect, and the obligations of Lessee under this Lease shall not be released, discharged or otherwise affected, by reason of: (a) any damage to or destruction of the Premises or any part thereof or any improvements thereon; (b) any restriction or prevention of or interference with any use of the Premises or the improvements or any part thereof; (c) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other proceeding relating to Lessor, Lessee or any constituent partner of Lessee or any sublessee or assignee or any action taken with respect to this Lease by a trustee or receiver, or by any court, in any proceeding; (d) any claim that Lessee or any other person has or might have against Lessor; (e) any failure on the part of Lessor to perform or comply with any of the terms, agreements, covenants, conditions and provisions in this Lease or of any other agreement with Lessee or any other person; (f) any failure on the part of any sublessee, Transferee, or other person to perform or comply with any of the terms of any sublease or other agreement between Lessee and any such person; or (g) any termination of any sublease or other agreement, whether voluntary or by operation of law.

8.3. The obligations of Lessee under this Lease shall be separate and independent covenants and agreements except as otherwise expressly

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stated in this Lease. Lessee hereby waives, to the full extent permitted by Applicable Laws, all rights now or hereafter conferred by such Applicable Laws, to quit, terminate or surrender this Lease or the Premises or any part thereof, or to any abatement, suspension, deferment, diminution in or reduction of any monetary payments payable to Lessor under this Lease.

9. LESSOR NOT OBLIGATED TO PAY LESSEE EXPENSES

Lessor is not obligated by the terms of this Lease and does not agree to pay any expense or debt related to the obligations undertaken by or the operations conducted by the Lessee under the terms of this Lease. No provision of this Lease is intended to create such an obligation or agreement.

10. USE OF THE PREMISES

10.1. Use of the Premises

10.1.1. During the Due Diligence Period, Lessee may use the Premises solely in the manner permitted in Section 3.2 of this Lease. Thereafter, provided Lessee has not terminated this Lease pursuant to Section 3.2 above, Lessee may use the Premises for the construction and operation of a hotel meeting the Hotel Standard, including guest rooms, reception and lobby areas, and uses customarily related to, or in connection with, providing hotel guests and invitees services such as storage, back of the house, health club, food and beverage services, conference space, and offices.

10.1.2. Following the termination of the Due Diligence Period and provided Lessee has not terminated this Lease pursuant to Section 3.2 of this Lease, Lessee may use the Office Space for office uses and the Retail Space for retail uses. Such office uses and retail uses (including interior and exterior displays of merchandise and related signage) shall be commensurate with the operation of a hotel at the Hotel Standard.

10.1.3. Following the termination of the Due Diligence Period and provided Lessee has not terminated this Lease pursuant to Section 3.2 of this Lease, Lessee may operate a restaurant and bar in the Restaurant Space commensurate with the operation of a restaurant and bar at the Hotel Standard.

10.1.4. Lessee may amend or change the authorized uses for the Premises subject to the prior written approval of Lessor

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which approval or disapproval shall not be unreasonably withheld or delayed. Proposed changes of use of the Premises shall be approved unless Lessor determines, in the reasonable exercise of its discretion, such use to be inconsistent with Applicable Laws or with the objectives of the Lease including the potential for income to the Lessor.

10.1.5. The Parties hereby acknowledge and agree that Lessee’s covenant that the Premises shall be used as set forth in this Section 10 is material consideration for Lessor’s agreement to enter into this Lease.

10.1.6. Without limitation of the foregoing, or any other provision of this Lease, in no event shall the Premises be used for any purpose that is in violation of any Applicable Laws; that may be dangerous to life, limb, property or public health; that in any manner causes, creates, or results in a nuisance; that is of a nature that it involves substantial hazard, such as the manufacture or use of explosives, chemicals or products that may explode, or that otherwise harms the health or welfare of persons in the physical environment; or that results in any discharge of Hazardous Materials on the Premises in violation of Section 22 of this Lease, including but not limited to the disposing or discharging of such substances into, on or under the Premises.

10.2. Operation of the Premises after Completion

10.2.1. Lessee covenants that, upon completion of construction of Initial Lessee Improvements in accordance with the terms of this Lease, Lessee shall through the entire Term continuously and uninterruptedly operate the Premises as set forth in this Section 10 provided, however, that Lessee’s obligations to operate the Premises under this Section 10.2 shall be suspended during any period of Alterations, Preservation Maintenance, remediation of Hazardous Materials undertaken by Lessee pursuant to this Lease, and during periods of modification of sub-leased space for tenant use, all of the foregoing limited, however, to the portion of the Premises actually affected thereby and for such time as is reasonably required for such Alterations, Preservation Maintenance, remediation of Hazardous Materials undertaken by Lessee pursuant to this Lease, and modification of sub-leased space for tenant use and provided that Lessee complies with all other obligations under this Lease.

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10.2.2. Further, Lessee’s obligation of continuous operation under this Section 10.2 shall also be suspended to the extent reasonably necessary during a transition in connection with a Transfer that has been approved by Lessor pursuant to Section 27 of this Lease, a change in the Approved Operator, or where such continuous operation is otherwise prevented by Force Majeure. All of the foregoing are limited to such time as reasonably required to promptly complete the necessary transition or change of Approved Operator or to resolve issues reasonably beyond Lessee’s control and are conditioned upon Lessee’s compliance with all other obligations under this Lease, including without limitation, payment of Annual Rental and any other costs and expenses to Lessor.

11. LIMITATION ON EFFECT OF APPROVALS

All rights of Lessor to review, comment upon, approve, inspect or take any other action with respect to the Premises or the Retained Space, Initial Lessee Improvements, Building Maintenance, Preservation Maintenance or Alterations, or the design or construction thereof or the removal of and/or remediation of any Hazardous Materials, or any other matter, are expressly for the benefit of Lessor and no other party. No review, comment, approval, inspection, right or exercise of any right to perform Lessee’s obligations, or similar actions required or permitted by, of, or to Lessor under this Lease, or actions or omissions of Lessor’s employees or agents, or other circumstances shall give or be deemed to give Lessor any liability, responsibility or obligation for, in connection with, or with respect to, the design and construction of Initial Lessee Improvements or Alterations, Preservation Maintenance, Building Maintenance, or operation of the Premises or the removal and/or remediation of any Hazardous Materials on, in or from the Premises or other Park property by Lessee, nor shall any such approval, actions, information or circumstances relieve or be deemed to relieve Lessee of the sole obligation and responsibility for the design and construction of Initial Lessee Improvements and Alterations, Preservation Maintenance, Building Maintenance, and operation of the Premises and the removal and/or remediation of Hazardous Materials required under this Lease, if any, except as expressly provided in Section 22.7 of this Lease.

12. CONSTRUCTION AND INSTALLATION APPROVAL

12.1. Lessee shall not undertake any construction of Initial Lessee Improvements, Retained Space (exterior and interior), Alterations (other than Minor Alterations), Preservation Maintenance, or the installation of any equipment, Fixtures, Trade Fixtures or other facilities on the Premises (including temporary equipment or facilities) necessary for such Initial Lessee Improvements, Alterations (other than Minor Alterations), or Preservation Maintenance without the prior written

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approval of Lessor which approval shall not be unreasonably withheld or delayed. Construction of the Initial Lessee Improvements shall be undertaken in accordance with the Schedule of Performance and the terms and conditions of this Lease.

12.2. Lessor acknowledges that as of the Commencement Date, the City and County of San Francisco does not have jurisdiction to enforce its building codes at the Premises because the Premises are owned by the Federal government and used for a Federal function. However, Lessor desires that all Design and Construction Documents meet the locally applicable standards, whether set by national or local codes.

12.3. As part of the process of obtaining approval in accordance with Section 12.1 of this Lease, Lessee, at Lessee’s sole cost and expense, shall submit to Lessor (a) Design and Construction Documents for approval by Lessor, (b) a proposal for plan and construction review to meet the objectives of Section 13.2 below, (c) evidence of availability of financing for such construction, (d) evidence of insurance required pursuant to Section 23 of this Lease, and (e) other relevant data as may be reasonably required by Lessor. All material proposed changes or modifications to the approved plan of Initial Lessee Improvements, Preservation Maintenance or Alterations (other than Minor Alterations) must be approved by Lessor, which approval shall not be unreasonably withheld or delayed.

13. DESIGN OF LESSEE IMPROVEMENTS, ALTERATIONS AND PRESERVATION MAINTENANCE

13.1. Standards

13.1.1. The Secretary of Interior’s Standards acknowledge four distinct but interrelated treatment approaches to protecting historic resources. Those approaches include preservation, Rehabilitation, Restoration and Reconstruction. The treatment approach that has been selected for the Premises is one of Rehabilitation as to the Initial Lessee Improvements. Lessee shall design Initial Lessee Improvements and the Retained Space in accordance with Applicable Laws and sound professional design practice for Rehabilitation of an historic property listed on the National Register of Historic Places, and in accordance with the requirements of this Lease and substantially in accordance with the preliminary schematic plans and documentation attached as Exhibit H, as may be modified in accordance with Lessee’s final Design and Construction Documents for the Initial Lessee Improvements as approved in writing by

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Lessor. In addition, Lessee shall design and construct the interior of the Retained Space in accordance with the General Management Plan and in accordance with the recommendations of a designer and/or an architect specializing in visitor center and museum exhibit design approved by Lessor.

13.1.2. Lessee shall design Alterations and Preservation Maintenance in accordance with Applicable Laws and sound professional design practice for Rehabilitation of an historic property listed on the National Register of Historic Places, and in accordance with the requirements of this Lease.

13.2.

Design and Construction Monitor

The Design and Construction Monitor shall review Design and Construction Documents as they are developed and in their final form and certify in writing to Lessor that such Design and Construction Documents conform with the California Building Standards Code and local variations adopted by the City and County of San Francisco and are in compliance with all Applicable Laws, sound professional design practice for the type of project, and with the requirements of this Lease. The Design and Construction Monitor will monitor all construction of Initial Lessee Improvements, Alterations (other than Minor Alterations) and Preservation Maintenance on site as it proceeds and will certify in writing to Lessor that approved Design and Construction Documents and sound building practices are followed, that only acceptable changes in approved Design and Construction Documents in accordance with the requirements of or as otherwise permitted by this Lease are made, and that each such change is documented in “as-built” drawings required to be submitted to Lessor by the terms of this Lease.

13.3. Design and Construction Documents

13.3.1. All Design and Construction Documents shall be subject to the prior written approval of Lessor which approval shall not be unreasonably withheld or delayed.

13.3.2. All Design and Construction Documents shall be prepared in accordance with standards and submittal requirements set forth in DO-10A, Guideline for Design and Construction Drawings, as may be modified from time to time by Lessor.

13.3.3. In the preparation of Design and Construction Documents, Lessee shall review utility plans for the location of existing utilities that may be damaged by Lessee’s construction on

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the Premises and shall prevent such damage during the construction process and shall promptly repair any damage that does occur. All existing “as-built” utility plans will be furnished by Lessor showing the locations of all Lessor utilities in the relevant areas. Lessee shall obtain all other necessary utility plans from the appropriate public utility companies.

13.4. Construction of Retained Space

13.4.1.

Retained Space — Building Shell

Construction of the Retained Space shall be undertaken in accordance with the Schedule of Performance and the terms and conditions of this Lease. In addition to the requirements of Sections 12 and 13 above, as part of Initial Lessee Improvements and at no cost or expense to Lessor, Lessee shall construct the building shell of the Retained Space, for use by the Lessor without charge. Such building shell construction shall consist of lead-based paint and asbestos remediation, abatement or removal, if necessary, a new concrete floor, brick wall Preservation Maintenance, timber beams and columns Preservation Maintenance (subject to Section 13.5 below), ceiling joists Preservation Maintenance, a demising wall partially of glass and with a connecting doorway to the Premises, electrical, plumbing, mechanical HVAC base amounts installed within the Utility Easements Areas up to the Retained Space in accordance with Lessor’s requirements, as submitted to Lessee pursuant to Section 2.3.2 of this Lease, seismic strengthening and similar items all to be completed at the same time as, in the same manner as, and within the process and following the requirements for Initial Lessee Improvements for such work in the Premises. Lessee shall continuously maintain and provide such improvements (other than Lessor’s utilities located within the Utility Areas) during the Term and in accordance with the requirements for Building Maintenance and Preservation Maintenance of the Premises included in this Lease. No part of the Allowance shall be used for completion of the work required under this Section 13.4.1.

13.4.2.	Retained Space — Restrooms, Drinking Fountains
	Lessee, at its cost and expense, shall construct and install the finished restrooms and drinking fountains within and for

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the Retained Space, for use by the Lessor, its employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities in connection with the Retained Space. No part of the Allowance shall be used for completion of the work required under this Section 13.4.2. Such work shall include public men’s and women’s restrooms and drinking fountains, as well as an employee restroom and drinking fountain; the number of fixtures shall comply with applicable building codes. Lessor’s preferred number of fixtures is listed on Exhibit J. The design and location within the Retained Space of the restrooms and drinking fountains shall be as determined by Lessor and subject to Lessor’s prior written approval, which approval shall not be unreasonably withheld or delayed. Lessee shall perform such work in compliance with Applicable Laws.

13.4.3.	Retained Space — Other Interior
	Improvements to the interior of the Retained Space are separate from the building shell work described in Section 13.4.1 above and shall be paid for by application of the Allowance pursuant to Section 2.3.2 of this Lease.

13.5.

Wooden Posts

Lessee shall minimize damage to any wooden posts holding up the floor areas of the Premises and Retained Space which require removal as part of the construction pursuant to this Lease and shall provide any wooden posts or other historic elements or materials which are removed and not otherwise needed for Preservation Maintenance of the Premises or Retained Space to the Superintendent of San Francisco Maritime National Historical Park or his or her designee.

13.6.	Copy of Contracts
	Lessee shall, upon request, furnish Lessor with a true and correct copy of Lessee’s contracts with any architect, engineer, and any general contractor engaged in connection with this Lease for design and construction of any Initial Lessee Improvements, Alterations (other than Minor Alterations) or Preservation Maintenance.

14. SUBMISSION OF EVIDENCE OF FINANCING; CLOSING OF FINANCING

14.1. Prior to undertaking Initial Lessee Improvements, Preservation Maintenance or Major Alterations, Lessee shall submit to Lessor

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evidence satisfactory to Lessor that Lessee has a firm and binding commitment for any financing necessary for the construction of Initial Lessee Improvements, or Major Alterations, or any other maintenance or improvements the construction cost of which is greater than Five Million Dollars ($5,000,000) adjusted by the CPI since the Commencement Date to the year in which the construction begins, and the necessary Fixtures and Personal Property (“Financing Commitment”). Lessor shall approve the Financing Commitment upon satisfactory assurance that funds are available to complete the project to be undertaken. Lessor shall have the right to approve or disapprove the proposed lender thereunder if the proposed lender is to be other than a Bona Fide Institutional Lender. The requirement for a firm and binding commitment hereunder shall not preclude Lessee from submitting to Lessor preliminary finance documentation for Lessor’s review and comment.

14.1.1. Any material conditions to the obligations of the Leasehold Mortgagee to fund the loan including, but not limited to, approval of title exceptions, the Premises, any survey, this Lease, and all Design and Construction Documents, shall be identified at the time of submittal to Lessor, in writing, and shall be subject to the prior written approval of Lessor.

14.1.2. Lessor’s approval of such Financing Commitment shall not be unreasonably withheld or delayed. If the source of funds is a Bona Fide Institutional Lender, such source shall be considered to be a pre-approved Leasehold Mortgagee.

14.1.3. If Lessor shall disapprove the Financing Commitment or the lender thereunder, Lessor shall do so promptly by written notice to Lessee stating the specific reasons for such disapproval. Lessee shall promptly obtain and submit to Lessor a new Financing Commitment. Lessor shall approve or disapprove any new Financing Commitment and the lender thereunder in the same manner.

14.1.4. At the time of any request by Lessee to Lessor for approval of any Financing Commitment, Lessee shall also represent to Lessor in writing the amount of any equity financing to be used in the project and the source of those funds, and will provide satisfactory evidence that those equity funds are available for commitment to the purposes of this Lease.

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14.2. Prior to the commencement of construction of Initial Lessee Improvements, or Major Alterations, or any other maintenance or improvements the construction cost of which is greater than Five Million Dollars ($5,000,000) adjusted by the CPI since the Commencement Date to the year in which the construction begins, and after Lessor’s approval of such construction as required by Section 12 of this Lease, Lessee shall close its loan under the approved Financing Commitment so that the resulting construction loan funds are available for such Initial Lessee Improvements, or Major Alterations, or any other maintenance or improvements the construction cost of which is greater than Five Million Dollars ($5,000,000) adjusted by CPI since the Commencement Date to the year in which the construction begins. Lessee shall furnish Lessor with satisfactory evidence that any loan funds combined with any equity funds Lessee shall have available are available as required in this Lease and that such funds constitute all of the funds necessary to complete the proposed Initial Lessee Improvements, or Major Alterations, or any other maintenance or improvements the construction cost of which is greater than Five Million Dollars ($5,000,000) adjusted by the CPI since the Commencement Date to the year in which the construction begins.

14.3. Lessee shall deliver to Lessor true copies of all documents to evidence the Financing Commitment or other arrangements to provide for payment for work undertaken by Lessee. Such evidence shall be in a form and substance reasonably satisfactory to Lessor. Lessee shall provide Lessor with drafts of the Financing Commitment thirty (30) to sixty (60) days in advance of its approval by the lender, to the extent that such drafts are available to Lessee and the principal terms and conditions have been substantially agreed upon. Lessor shall use reasonable efforts to complete its review and notify Lessee of such approval or of the grounds for any disapproval within thirty (30) days from Lessor’s receipt of the final Financing Commitment and complete documentation in support thereof, unless Lessee shall have provided Lessor with drafts of the Financing Commitment thirty (30) to sixty (60) days in advance of the issuance of the Financing Commitment by the lender, together with complete documentation in support thereof, then Lessor shall use reasonable efforts to complete its review and notify Lessee of such approval or of the grounds for any disapproval within ten (10) business days from Lessor’s receipt of the final Financing Commitment.

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15. CONSTRUCTION OF IMPROVEMENTS AND ALTERATIONS AND PRESERVATION MAINTENANCE

15.1. Construction of Initial Lessee Improvements or Alterations

15.1.1.	If granted permission to proceed pursuant to Sections 12, 13, and 14 of this Lease, Lessee hereby agrees and covenants to commence and prosecute diligently, at Lessee’s sole cost and expense, the construction of Initial Lessee Improvements, Alterations (other than Minor Alterations) or Preservation Maintenance in accordance with Design and Construction Documents approved by Lessor, all in accordance this Section 15.
15.1.2.	It is a material part of the consideration to Lessor under this Lease that Lessee commence construction of Initial Lessee Improvements in accordance with the Schedule of Performance, that Lessee diligently pursue such construction until completion; and that Lessee complete the construction of Initial Lessee Improvements by no later than eighteen (18) months after the commencement of construction.
15.1.3.	Notwithstanding the foregoing, Lessee shall not be in default under this Section 15.1 in the event of an enforced delay in the performance of its obligations under this Section 15.1 due to Force Majeure provided that Lessee notifies Lessor in writing of the delay and of its reasonable estimate of the length of the delay. The purpose and intent of this provision is that, in the event of the occurrence of any such enforced delay, the time or times for performance of Lessee shall be extended for the period of the enforced delay, which period shall be determined by Lessor in the reasonable exercise of its discretion.

15.2.	All Initial Lessee Improvements, Alterations and/or Preservation Maintenance shall be performed by knowledgeable parties trained and experienced in the work to be done and all Initial Lessee Improvements and/or Alterations and/or Preservation Maintenance which so require shall be performed by licensed contractors who meet applicable California licensing, bonding and certification requirements.
15.3.	General Construction Requirements

15.3.1. All Initial Lessee Improvements, Alterations and Preservation Maintenance shall be done at Lessee’s sole

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	cost and expense. All construction and work shall be performed in a good and workmanlike manner. Lessee shall construct Initial Lessee Improvements, Alterations and Preservation Maintenance in accordance with all Applicable Laws, the Hotel Standard and all approved Design and Construction Documents and in accordance with this Section 15 and all other terms, agreements, covenants, conditions and provisions of this Lease. Lessee shall construct, install, and maintain equipment and any construction facilities on the Premises in a safe, thorough and reliable manner and in accordance with all Applicable Laws.
15.3.2.	Lessee shall not construct any Initial Lessee Improvements, Alterations or Preservation Maintenance outside the boundaries of the Premises and the Retained Space.
15.3.3.	Any material change in approved Design and Construction Documents or any material deviations in the actual construction of any Initial Lessee Improvements or Alterations (other than Minor Alterations) from approved design elements and all changes that affect Preservation Maintenance shall be subject to Lessor’s prior written approval which approval shall not be unreasonably withheld or delayed and which approval may be delegated in writing by Lessor to the Design and Construction Monitor or to the person or entity acting in that capacity. Lessor acknowledges that reasonable field adjustments will be necessary to the approved plans to accommodate unforeseen circumstances and that such changes may be made without specific approval of the Lessor, and Lessee agrees that such changes will be non-structural in nature, will not affect the Preservation Maintenance of the Premises or the Retained Space and will be reviewed as otherwise may be required by this Lease.
15.3.4.	Lessee shall prepare and maintain on the Premises on a current basis during construction, approved annotated Design and Construction Documents showing clearly all changes, revisions and substitutions during construction.

15.4. Construction Completion Procedures

15.4.1. Upon Substantial Completion of the construction of Initial Lessee Improvements, Alterations or Preservation

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	Maintenance on the Premises or any part thereof, Lessee shall submit to Lessor a notice of such completion.
15.4.2.	Upon completion of construction of Initial Lessee Improvements, Alterations or Preservation Maintenance, Lessee shall deliver to Lessor evidence, satisfactory to Lessor, of payment of all costs, expenses, liabilities and liens arising out of or in any way connected with such construction (except for liens that are contested in the manner provided in this Lease).
15.4.3.	On completion of the construction of Initial Lessee Improvements, Major Alterations or Preservation Maintenance, Lessee shall provide to Lessor a complete set of “as-built” drawings showing clearly all changes, revisions and substitutions during construction, including, without limitation, field changes and the final location of all mechanical equipment, utility lines, ducts, outlets, structural members, walls, partitions and other significant features of Initial Lessee Improvements, Major Alterations or Preservation Maintenance, all in a format approved by Lessor.
15.4.4.	On completion of construction of Initial Lessee Improvements, Lessee shall provide Lessor with a complete written inventory of all Fixtures which inventory shall be subject to Lessor’s approval. In addition, Lessee shall provide Lessor with a written, updated list of such Fixtures at the time of completion of any Major Alterations or Preservation Maintenance.
15.4.5.	Lessor will issue a Certificate of Occupancy after Substantial Completion of Initial Lessee Improvements or Major Alterations subject to “punch-list” items and upon final review to its reasonable satisfaction of the certifications required of the Design and Construction Monitor pursuant to Section 13.2 of this Lease and of applicable construction documents, including all tests, inspections, progress reports, and other pertinent documents customarily required by the jurisdiction in which the Premises is located for the issuance of such a document. Lessor and Lessee shall coordinate and consult on final issues in advance of the completion of construction to enable Lessor to promptly issue the Certificate of Occupancy.

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15.4.6.

Lessor may issue a Conditional Certificate of Occupancy at the request of the Lessee and when construction of Initial Lessee Improvements or Major Alterations is completed to the point that Lessee can commence pre-opening operations without threat to life or safety. Lessor’s determination to issue, and issuance of, such Conditional Certificate of Occupancy by Lessor shall not be unreasonably withheld or delayed. Lessee may operate the Premises under a Conditional Certificate of Occupancy if the Conditional Certificate of Occupancy authorizes such operations and provided that all construction necessary for the safe operation of the Premises and the protection of the life and safety of all members of the public coming on the Premises has been completed, in accordance with all Applicable Laws and the terms of this Lease.

15.4.7.

In no event shall Lessee open the Premises to the public without either (a) the issuance of a Certificate of Occupancy or (b) the issuance of a Conditional Certificate of Occupancy.

15.5. On Site Inspection

15.5.1. Lessor shall be entitled to have on the Premises at any time during the hours of construction of Initial Lessee Improvements, Alterations or Preservation Maintenance an inspector(s) or representative(s) who shall be entitled, without materially interfering with Lessee’s work, to observe all aspects of the construction in, on, over or under the Premises. No inspection performed or not performed by Lessor under this Lease shall give or be deemed to give Lessor any responsibility or liability with respect to the work or the prosecution thereof or the design or construction of Initial Lessee Improvements, Alterations or Preservation Maintenance or constitute or be deemed to constitute a waiver of any of Lessee’s obligations under this Lease or be construed as approval or acceptance of the work or the prosecution thereof or the design or construction of Initial Lessee Improvements, Alterations or Preservation Maintenance.

16. PERMITS AND APPROVALS

16.1. Except as otherwise provided in this Lease, Lessee shall be solely responsible for obtaining, at its sole cost and expense, the approval of

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	any Agency for any permit or other governmental action necessary to permit the activities under this Lease. Lessor, at no expense to itself, shall cooperate with Lessee to the extent reasonably required to obtain all such permits and approvals. Notwithstanding the foregoing, Lessee shall not submit to any person or entity, including any Agency, information regarding Lessor or Lessor’s lands without Lessor’s prior written approval, unless the communication of information is in response to a valid order by a court or Agency or to obtain a permit, approval or financing or is otherwise required to be released by law, in which case Lessee shall immediately provide Lessor with written notice of such order or requirement, identifying the specific information released. In addition, Lessee may release such information that is necessary for Lessee to obtain insurance, and upon release of such information, Lessee shall provide Lessor with written notice indicating what information was so released.
16.2.	Although Lessee’s operations will be conducted on Federal property, Lessee shall generally use and operate in the Premises as if subject to state and local ordinances in the same manner as if the Premises were not under Federal ownership. All permits normally required in the City and County of San Francisco shall be obtained by Lessee to the extent available and applicable and all Impositions otherwise payable shall be paid, solely at the expense of Lessee; it being understood that all building construction-related: (a) permits; (b) approvals (including approvals pursuant to the National Environmental Policy Act (“NEPA”) (including approvals in connection with the traffic management plan prepared by Lessee pursuant to Lessor’s requirements)); (c) inspections (made by or on behalf of Lessor); and (d) certificates; pertaining solely to the Premises will be issued by Lessor rather than by the city, county, state or other state and local officials. Notwithstanding the foregoing, to the extent that any construction activities associated with the construction of the Initial Lessee Improvements or any Alterations, Preservation Maintenance, or any repair and maintenance activities within, on or about the Premises, are located on or encroach upon non-federal property outside of the Premises or property over which Lessor does not have jurisdiction, for example, overhanging canopies, sidewalk cafes, curb cuts, temporary or permanent street or sidewalk closures, or the like, Lessee shall obtain at its sole cost and expense all necessary city, county, and/or state or other state and local permits, approvals, inspections and/or certifications pertaining to such activities.
16.3.	If Lessee is unable to obtain, for reasons beyond Lessee’s control, all Agency related approvals necessary for the operation of a hotel, restaurant, and related uses in the Premises, then Lessee shall notify the Lessor in writing of the specific approvals required and shall allow

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the Lessor thirty (30) days from the date of delivery of the notice to the Lessor for the Lessor to obtain or provide the necessary approvals. If the Lessor does not obtain or provide the necessary approvals within the thirty (30) day period, then the Lessee shall have the right to extend the time for Lessor to obtain such approvals or to terminate this Lease in accordance with Section 3.2 above.

17. EXCAVATION, SITE, AND GROUND DISTURBANCE

Lessee shall conduct no mining or drilling operations; remove no sand, gravel or similar substances from the ground (except for foundation and utilities work); commit no waste of any kind; or in any manner change the contour or condition of the Premises or other Park property. Lessee shall give Lessor not less than thirty (30) days written notice of the scheduled commencement of any site and ground disturbance on or under any portion of the Premises. Written approval for excavation including, but not limited to environmental and archaeological clearances are required prior to any digging or excavation on the Premises.

18. OWNERSHIP OF IMPROVEMENTS

18.1.	This Lease will vest in Lessee no property interest in the Premises or in the improvements or Fixtures thereon other than a leasehold interest. Title to real property and improvements and Fixtures thereon, including Initial Lessee Improvements, Alterations, Building Maintenance and Preservation Maintenance to Premises but excluding Trade Fixtures shall be and remain solely in Lessor.
18.2.	Lessor acknowledges that covenants which allow Lessor certain control and rights of approval over Personal Property items placed upon the Premises by Lessee are provided only to insure conformance with the terms of this Lease, but such covenants do not vest in, nor shall they be construed as vesting in Lessor an ownership interest in such items.
18.3.	Upon removal of Personal Property at any time during the Term or upon expiration of this Lease, Lessee shall (a) repair all damage caused by such removal at Lessee’s sole cost and expense and ensure that no safety hazard is created by such removal, (b) cause a neat appearance to remain in the area of removal, and (c) perform Preservation Maintenance of any damaged area of the Premises.
18.4.	Lessor and Lessee agree that sublessees of the Office Space, Retail Space and Restaurant Space will install personal property and/or trade fixtures related to their use of Premises and that the ownership, installation, and removal of such property by such sublessees shall be governed by the terms of the sublease between Lessee and its sublessee. At the termination of such subleases, Lessee shall, either at

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its own expense or at the expense of its sublessees, remove or cause the removal of any such personal property and trade fixtures and to the extent necessary or appropriate by reason of such removal, shall perform Preservation Maintenance or cause the Preservation Maintenance of the applicable portion of the Premises and Building Maintenance of any affected major building systems in the manner described in Section 34 of this Lease. Lessee shall repair all damage caused by such property removal in accordance with the terms of Section 18.3 above. Lessee shall cause any proposed installation, improvements or alterations of the Premises by sublessees to comply with the terms and conditions of this Lease.

19. BUILDING MAINTENANCE AND PRESERVATION MAINTENANCE

19.1.	If this Lease is not terminated by Lessee at the termination of the Due Diligence Period pursuant to Section 3.2 of this Lease, in addition to Lessee’s other obligations pursuant to this Lease, Lessee shall, with due diligence, at its own cost and expense and without any cost or expense to Lessor: (a) promptly and continuously perform all Building Maintenance; (b) subject to the approved Preservation Plan promptly and continuously perform all Preservation Maintenance; (c) allow no nuisances to exist or be maintained thereon; and (d) not commit or permit waste upon the Premises.
19.2.	Lessor shall not be obligated to perform any Building Maintenance, Preservation Maintenance, Initial Lessee Improvements or Alterations of any kind whatsoever of or to the Premises and Lessee hereby expressly waives any right under any Applicable Laws that would otherwise permit Lessee to perform Building Maintenance, Preservation Maintenance, Initial Lessee Improvements or Alterations at Lessor’s expense.
19.3.	During the Term, Lessee shall schedule and perform Building Maintenance and Preservation Maintenance, and construct the Initial Lessee Improvements and Alterations reasonably expected to be necessary to the Premises so as to avoid deterioration, keep the Premises in good order, condition and repair, and to comply with all Applicable Laws and the Hotel Standard.
19.4.	During the last five (5) Lease Years, if Lessee becomes obligated by reason of this Lease or changes in Applicable Laws, to make or install any extraordinary capital improvements to the Premises that materially affect the building structure and building mechanical systems (for example, replacement of the entire roof, structural improvements affecting load-bearing walls or foundations, or installation of new mechanical systems servicing the entire Premises), with a then-anticipated recovery period for the cost exceeding the then-remaining

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Term, then Lessee shall notify Lessor of such requirements, the itemized cost and then-anticipated recovery period for such costs. For purposes of this Section 19.4, the anticipated recovery period shall be the shortest period permitted by the Internal Revenue Code, as amended.

19.4.1.

Lessor shall determine Lessee’s Share (as defined below)) and shall elect to: (a) terminate this Lease; (b) pay Lessor’s Share (as defined below) of the reasonable cost of such capital improvements on a pro rata basis as such costs are incurred; or (c) authorize Lessee in writing to offset against subsequent payments of Base Rental and Percentage Rental Lessor’s Share of the reasonable cost of such capital improvements; provided that if Lessor elects to terminate this Lease pursuant to Section 19.4.1(a), then Lessor shall notify Lessee in writing of its election to terminate and Lessee shall have thirty (30) days to notify Lessor in writing of Lessee’s determination whether Lessee shall pay Lessor’s Share in addition to Lessee’s Share for such capital improvements. If Lessee timely notifies Lessor of its election to make or install such capital improvements and to bear all costs, that is, pay Lessor’s Share plus Lessee’s Share, then Lessor’s termination of this Lease pursuant to Section 19.4.1(a) shall be deemed withdrawn and void ab initio, provided Lessee commences to make or install such capital improvements and to bear all costs, that is, pay Lessor’s Share plus Lessee’s Share, to Lessor’s reasonable satisfaction.

19.4.2.

If Lessor does not terminate the Lease pursuant to Section 19.4.1(a) above, if applicable, then if Lessee’s Share (as defined below) of the cost of such capital improvements exceeds Five Million Dollars ($5,000,000), which amount (as adjusted for increases in the CPI since the Commencement Date) shall be reduced to Four Million Dollars ($4,000,000) as of the date that is four (4) years before the then-scheduled expiration date of the Term, to Three Million Dollars ($3,000,000) as of the date that is three (3) years before the then-scheduled expiration date of the Term, to Two Million Dollars ($2,000,000) as of the date that is two (2) years before the then-scheduled expiration date of the Term, and to One Million Dollars ($1,000,000) as of the date that is one (1) year before the then-scheduled expiration date of the Term; then Lessee

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	shall have, subject to Leasehold Mortgagee’s rights as specified in Section 28 of this Lease, the option to terminate this Lease.
19.4.3.	For purposes of this Section 19.4, “Lessee’s Share” means the portion of the reasonable cost equal to the ratio which the then remaining number of Lease Years (or fractional portion thereof) in the Term bears to the anticipated recovery period for the cost of such capital improvements as determined by Lessor, and “Lessor’s Share” means such reasonable cost less Lessee’s Share.

19.5. Within thirty (30) days of the issuance of the Certificate of Occupancy, Lessee shall submit to Lessor for approval a Preservation Plan, which Preservation Plan shall, upon request by Lessor, be periodically amended during the Term.

20. UTILITIES

Except as provided in Section 2.3.7 above, Lessee shall make all arrangements with appropriate utility providers and shall pay for all utilities furnished to or used at the Premises, including without limitation, gas, electricity, other power, water, cable, telephone and other communication services, sewage, garbage, service fees and Impositions thereon.

21. COMPLIANCE WITH APPLICABLE LAWS; NEPA; NHPA

21.1.	General Compliance
	Lessee, at Lessee’s sole cost and expense, shall promptly comply with all Applicable Laws. Lessee shall give Lessor immediate written notice of any notice of violation of Applicable Laws received by or on behalf of Lessee and, at its sole cost and expense, Lessee shall promptly rectify any such violation but shall retain the right to appeal any non-final rulings prior to taking any action.
21.2.	National Environmental Policy Act and National Historic Preservation Act
	Where activities undertaken by Lessee require the preparation of compliance documents pursuant to the National Environmental Policy Act (“NEPA”) or the National Historic Preservation Act (“NHPA”), Lessee shall supply all necessary information to Lessor and any Agency in a timely manner. No construction or installation activities shall occur until all applicable NEPA and NHPA requirements have been met.

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22. HAZARDOUS MATERIALS

22.1.	Lessor has furnished to Lessee copies of any and all reports Lessor has in its possession or has obtained in connection with the presence of Hazardous Materials on the Premises.
22.2.	Except as specifically permitted under Sections 22.8, 22.9, or 22.10 of this Lease, Lessee shall not, and Lessee shall ensure that Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term shall not bring, generate or otherwise use, handle, treat, store, sell, dispose of, discharge or release any Hazardous Material upon, about, beneath or from the Premises, except for limited quantities of standard office, personal care, and janitorial supplies containing chemicals categorized as Hazardous Materials brought, generated or otherwise used, handled, treated, stored, sold, disposed of, discharged and released in compliance with Applicable Laws and excepting those materials otherwise identified in this Lease to be part of the process of completion of Initial Lessee Improvements. All Hazardous Materials-related activities undertaken by Lessee, Affiliates, Lessee’s Agents, employees, guests, invitees, visitors, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term shall comply with all Applicable Laws. Lessee shall not, and Lessee shall ensure that Lessee’s Agents, Affiliates, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term shall not permit Hazardous Materials to be commingled with the Hazardous Materials of Lessor, if any. Lessee agrees to be responsible for timely acquisition of any permit(s) required for its Hazardous Materials-related activities, and shall provide to Lessor, upon request, inventories of all such Hazardous Materials and any supporting documentation, including but not limited to material safety data sheets, uniform waste manifest forms, and/or any other pertinent permits.
22.3.	If Lessee or Lessor become aware of, or reasonably suspect, or receive notice or other communication concerning (a) any actual, alleged or threatened violation of any Applicable Laws (i) by Lessee, Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term and in connection with the Premises or (ii) from past or present activities of any person in connection with the Premises, or (b) of any liability of Lessee, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term for Environmental Damages in connection with the Premises, then such

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party shall deliver to the other party, immediately upon receipt of such notice or communication by Lessee, a written description of such alleged violation or liability together with copies of any documents evidencing same. Receipt of such notice shall not be deemed to create any obligation on the part of Lessor to defend or otherwise respond to any such notification.

22.4.

Lessee shall, at its sole cost and expense, promptly take all actions required under Applicable Laws by any Agency to remedy damage to the Premises or neighboring property that arises directly or indirectly from or in connection with the presence, or release of any Hazardous Material introduced in or into the air, soil, surface water or ground water by Lessee’s, Affiliates’, Lessee’s Agents’, employees’, guests’, visitors’, invitees’, sublessees’, licensees’, and permittees’ and other persons’ or entities’ under the control of Lessee during the Term use of the Premises. Such actions may include but are not limited to the investigation of the environmental condition of the areas adversely affected (“Affected Property”) by Lessee’s breach of any of the provisions of this Lease, as well as the preparation and performance of any cleanup, remediation, containment, operation, maintenance, monitoring or restoration work, whether on or off of the Affected Property. Lessee shall take all actions required under Applicable Laws and shall restore (such word being used as contemplated by environmental laws rather than historic preservation laws and regulations) the Affected Property to a condition substantially equal to that existing prior to the introduction of the Hazardous Materials upon, about, in, into, or beneath the Affected Property, in accordance with the standard of remediation imposed by Applicable Laws. (To the extent of such impacted conditions, those portions of any Affected Property that cannot be restored to substantially the pre-existing condition shall be restored in accordance with the standards or requirements imposed by Applicable Law to the degree deemed necessary or appropriate by the Agency with jurisdiction to enforce Applicable Laws.) Lessee shall proceed continuously and diligently with such investigatory and remedial actions and these actions shall be performed in accordance with Applicable Laws in a good, safe and workmanlike manner by one or more licensed and reputable contractors experienced in the conduct of remedial actions in areas containing significant natural and cultural resources or comparable experience. Such contractor shall not be an Excluded Contractor. Lessee shall pay all costs and expenses in connection with such investigatory and remedial activities chargeable to Lessee, including but not limited to the charges of such contractor(s), all power and utility costs, any and all taxes or fees that may be applicable to such activities, and all reasonable costs incurred by Lessor in connection with the monitoring or reviewing of such investigatory or

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	remedial activities. Lessee shall promptly provide to Lessor copies of all unprivileged testing results and reports generated in connection with the aforementioned activities unless Lessor shall be made a party to such investigatory or remedial activities and in which case Lessee will provide Lessor with any and all such testing results and reports. Promptly upon completion of such investigation and remediation, Lessee shall remove all associated Personal Property, debris, materials and the like, to the reasonable satisfaction of Lessor.
22.5.	Lessor shall have the right, but not the obligation, at all reasonable times and, except in the case of emergency, following advance notice to Lessee, to enter upon the Premises, as may be necessary as determined by Lessor in its reasonable discretion, to conduct inspections and non-invasive tests of the Premises to determine whether Lessee is complying with all Applicable Laws, at Lessor’s sole expense. Lessor shall have the right, but not the obligation, to retain independent professional consultants to enter the Premises to conduct such inspections and to review any report prepared by or for Lessee concerning such compliance. Upon Lessee’s request, Lessor will make available to Lessee copies of all final reports and written data obtained by Lessor from such tests and investigations. Lessee expressly recognizes that it shall have no claim against Lessor for injury, loss, or other costs occasioned by any inconvenience to or interference with Lessee’s, Affiliates’, Lessee’s Agents’, employees’, guests’, visitors’, invitees’, sublessees’, licensees’, and permittees’ and other persons’ or entities’ under the control of Lessee during the Term use of the Premises as a result of Lessor’s exercise of the rights reserved to it under this Section 22.5 except to the extent such claims are covered by Federal law.
22.6.	In addition to all other indemnity requirements set forth in this Lease, and except as provided in Section 22.7 below, Lessee expressly agrees to indemnify, reimburse, defend save and hold harmless Lessor and Lessor’s Agents for and from any and all Environmental Damages as set forth in Section 25 of this Lease.
22.7.	This Lease does not create a separate obligation on the part of Lessee and in favor of Lessor to remediate Preexisting Hazardous Materials nor does it limit or expand the rights or defenses of Lessor or the Lessee with respect to such Preexisting Hazardous Materials. Consequently, the provisions of Sections 22.4 and 22.6 above shall not apply to Preexisting Hazardous Materials except to the extent that: (a) Lessee’s, Affiliates’, Lessee’s Agents’, employees’, guests’, visitors’, invitees’, sublessees’, licensees’, and permittees’ and other persons’ or entities’ under the control of Lessee during the Term negligence or willful

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	misconduct causes an exacerbation or migration of such Pre-existing Hazardous Materials, or (b) Lessee, Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term cause additional damage to the environment beyond such Preexisting Hazardous Materials due to a violation of any Applicable Laws regarding such Preexisting Hazardous Materials and, (c) except as specifically stated in Sections 22.8 and 22.9 below. This Section does not relieve Lessee of any obligation it might have with regard to third parties or any Agency by operation of Applicable Laws, including but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act.
22.8.	Lessee understands and acknowledges that the area and soils beneath the Premises are not leased to Lessee and may contain subsurface deposits of lead or lead slag resulting from prior use of the site for a lead smelting works between 1867 and 1885 and creosote associated with the preservation of the existing building substructure. Nothing in this Lease requires Lessor (or Lessee except as expressly stated herein) to remove or otherwise remediate (or otherwise incur any liability with respect to) creosote, lead or lead slag deposits, or other Hazardous Materials, that may underlie the Premises. However, whenever Lessee performs Preservation Maintenance and/or Building Maintenance, or constructs Initial Lessee Improvements and/or Alterations and/or makes an installation on the Premises or under the Premises and/or otherwise disturbs the area or soils beneath the Premises, Lessee shall comply with all Applicable Laws related to the removal or remediation of creosote, lead or lead slag deposits, or other Hazardous Materials, as applicable, and to the extent such material is removed in the course of such work, Lessee shall be designated as the generator and shall arrange for the removal of such amounts of creosote, lead or lead slag-laden soil, or soils containing other Hazardous Materials, as applicable, in compliance with Applicable Laws. Lessee shall arrange for such removal and disposal of such soil with appropriate licensed contractors, at Lessee’s sole cost and expense.
22.9.	Lessee understands and acknowledges that the Premises may contain asbestos and lead-based paint. Therefore, Lessee hereby agrees that, during the Term, any necessary costs of removal or remediation with respect to asbestos or lead-based paint in the Premises or in areas adjacent to the Premises for which access is necessary by Lessee in order to operate or maintain Premises shall be the responsibility of Lessee and Lessor shall not be responsible for such removal, remediation or costs associated therewith. Whenever Lessee performs Preservation Maintenance, Initial Lessee Improvements, Alterations,

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	Building Maintenance, and/or installation on the Premises, Lessee shall comply with all Applicable Laws related to the removal or remediation of asbestos and lead-based paint. Nothing in this Lease shall be construed to require Lessee to remove asbestos or lead-based paint unless Applicable Laws require such removal.
22.10.	Lessee shall develop and implement management and remediation plans for asbestos and lead-based paint during any construction activities and for the ongoing Preservation Maintenance of the Premises. Lessee shall furnish a copy of such management and remediation plans to Lessor before construction of Initial Lessee Improvements and/or Alterations and annually as part of the Preservation Plan.
22.11.	Should Lessee fail to perform or observe any of its obligations or agreements pertaining to Hazardous Materials or Applicable Laws for a period of thirty (30) days (or such longer period of time as is reasonably required) after notice, then Lessor shall have the right, but not the duty, without limitation of any other rights of Lessor under this Lease on its own behalf or through its agents, consultants or contractors, to enter the Premises and perform the same. Lessee agrees to reimburse Lessor for the costs thereof and to indemnify Lessor for liabilities therefrom as set in Section 22.6 of this Lease.
22.12.	The provisions of this Section 22 shall survive any termination of this Lease. Section 23 of this Lease shall not limit in any way Lessee’s or Lessor’s obligations under this Section 22.

23. INSURANCE

Lessee, at its sole cost and expense, shall procure and maintain in full force and effect the following insurance at all times during the Term, unless otherwise specified below:

23.1. Property Insurance

23.1.1. Commercial Property

Commercial property insurance insuring against perils equal to an “all risk” or ISO special causes of loss form and covering the Premises, including the finished Initial Lessee Improvements, Alterations and/or Preservation Maintenance, and Lessee’s Personal Property at full replacement cost (with like kind and quality/functional equivalent), together with, to the extent such coverage is available at Commercially Reasonable Insurance Rates, a “Difference in Conditions/Difference in Limits” endorsement or separate

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	policy providing Historical Valuation Coverage in the amount of Two Million Dollars ($2,000,000) per occurrence. Lessor, to the extent of its interest, shall be an additional insured on the policy(ies). The property insurance shall include coverage for debris removal, demolition, building ordinance upgrades and shall have an agreed amount endorsement.
23.1.2.	Boiler and Machinery
	Comprehensive boiler and machinery insurance insuring against loss caused by equipment breakdown or explosion of steam boilers, pipes and other objects, and covering consequential business interruption losses. Coinsurance shall not apply to the coverage. Lessor, to the extent of its interest, shall be an additional insured on the policy.
23.1.3.	Builder’s Risk
	During construction Lessee or Lessee’s general contractor shall obtain and maintain builder’s risk insurance for the construction of the entire work authorized as the Initial Lessee Improvements, Alterations and/or Preservation Maintenance, naming as additional insureds the Lessor, Lessee, Lessee’s contractors, subcontractors and agents performing construction on the Premises. Such insurance shall be written on a completed value form. If the estimated completed value of the project changes during construction, the policy shall be endorsed to reflect the new estimated value. Such builder’s risk insurance shall insure against perils equal to a special causes of loss (“all risk”) form, and include coverage for earthquake, flood, and collapse, including collapse resulting from design error. Such insurance shall cover the entire work, materials and equipment used in connection with the work, work in transit and stored off-site, and temporary buildings. The builder’s risk insurance shall remain in effect until the earliest of: (a) the issuance of a Certificate of Occupancy by Lessor, (b) when all insureds under the policy agree it shall be terminated, (c) when final payment under the Construction Contract has been made, or (d) the date on which the insurable interests in the Premises of all insureds other than Lessor have ceased. At all times with respect to any portion of the Premises, either the insurance required by Sections 23.1.1 or 23.1.3 of this Lease shall be in effect.

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23.1.4.	Earthquake and Flood
	Flood coverage and, to the extent such coverage is available at Commercially Reasonable Insurance Rates, earthquake coverage with limits as close to the full replacement cost of the Initial Lessee Improvements, Alterations and/or Preservation Maintenance, with like kind and quality/functional equivalent, together with, to the extent such coverage is available at Commercially Reasonable Insurance Rates, the “Difference in Conditions/Difference in Limits” endorsement or separate policy providing Historical Valuation Coverage in the amount of One Million Dollars ($1,000,000) per occurrence as required in Section 23.1.1 above. Lessor, to the extent of its interest, shall be an additional insured on the earthquake and flood policies required hereby.
23.1.5.	Business Income
	Business income and extra expense coverage insuring against perils equal to a special causes of loss (“all risk”) form, covering a period of reconstruction and/or restoration of no less than two (2) years.
23.1.6.	Blanket Policy
	The insurance required under this Section 23.1 may be part of blanket policies but only if the limits required herein will be available under such blanket policies for any event affecting the Premises.

23.2. Liability Insurance

23.2.1. Environmental Liability

23.2.1.1.	Contractor’s Pollution Legal Liability
	Lessee shall maintain, or cause those of its contractors or agents who handle Hazardous Materials to maintain, contractor’s pollution legal liability insurance during the construction of the Initial Lessee Improvements, Major Alterations and Preservation Maintenance. Such insurance shall cover liability (to parties other than Lessee, Lessee’s Affiliates, and Lessee’s

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	Agents) arising out of bodily injury and damage to and loss of use of property, clean-up costs, investigation and defense arising from acts or omissions for which Lessee is liable under Sections 22.4 and 22.7 of this Lease, and to the extent available at Commercially Reasonable Insurance Rates, shall not exclude claims arising out of lead, creosote, or asbestos. Lessor shall be an additional insured on such policy, to the extent that such coverage is available at Commercially Reasonable Insurance Rates.
23.2.1.2.	Environmental Professional Liability
	Lessee shall maintain, or cause those of its contractors, consultants or agents who provide professional environmental services to maintain environmental professional liability insurance during the construction of the Initial Lessee’s Improvements, Major Alterations and Preservation Maintenance. The policy shall cover liability arising out of testing, monitoring, measuring and laboratory analyses, and to the extent available at Commercially Reasonable Insurance Rates, shall not exclude claims arising out of lead, creosote, or asbestos for which Lessee is liable under Sections 22.4 and 22.7 of this Lease.
23.2.1.3.	Hazardous Materials Disposal
	Lessee shall ensure that any off-site disposal operator to which Lessee or Lessee’s contractors ship Hazardous Materials maintains and furnishes evidence of pollution legal liability insurance. In addition, Lessee shall maintain, or cause those of its contractors or agents who transport any Hazardous Materials to maintain on its automobile liability policy MCS-90 and CA 9948 endorsements, or the equivalent.

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23.2.2.	Commercial General Liability
	Commercial general liability insurance and if necessary commercial umbrella liability with a limit of not less than $10,000,000 each occurrence and in the aggregate. The general liability policy shall be endorsed to provide that the aggregate limit applies separately to this location. The commercial general liability policy shall cover liability arising out of bodily injury, property damage, products and completed operations, personal and advertising injuries (as defined by the policy), innkeepers legal liability, police/security guard liability, and liquor liability if alcoholic beverages are served or sold on the Premises. Said policy shall cover the Lessor and Lessor’s officers, directors, and employees as additional insureds with respect to liability arising out of Lessee’s operations on the Premises and the ownership, maintenance and use of the Premises.
23.2.3.	Commercial Automobile Liability and Garagekeepers Legal Liability
	Commercial automobile liability insurance covering owned, non-owned and hired automobiles (“any auto”) with limits of not less than $1,000,000 per accident. If applicable, Lessee shall also maintain garagekeepers legal liability coverage with a limit of not less than $1,000,000 each occurrence. Said policies shall cover the Lessor with respect to liability arising out of the Premises.

23.3. Workers’ Compensation and Employer’s Liability

23.3.1.	Workers’ compensation insurance as required by applicable law.
23.3.2.	Employer’s liability insurance with limits no less than $1,000,000 for bodily injury by accident and $1,000,000 for bodily injury by disease.

23.4. General Insurance Program Requirements

23.4.1.	Acceptable Insurance
	All of the insurance required under this Lease and all renewals thereof shall be issued by companies admitted or approved to do business in the state of California, with a

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	financial rating of at least A-VIII, as rated by the A.M. Best Key Rating Guide.
23.4.2.	Deductibles and Self-Insured Retentions
	Any deductibles and/or self-insured retentions must be on Commercially Reasonable Insurance Rates, but shall not exceed Fifty Thousand Dollars ($50,000) per occurrence without Lessor’s prior written approval. Lessor shall not be responsible for any deductible or self-insured retention amount.
23.4.3.	Lessee’s Insurance is Primary
	All of the insurance required under this Section 23 shall provide that it is primary and non-contributing with any insurance or self-insurance carried by Lessor.
23.4.4.	Severability of Interests
	To the extent available at Commercially Reasonable Insurance Rates, the policies required by Sections 23.2.2 and 23.2.3 of this Lease on which Lessor is an additional or named insured shall contain a severability of interests with respect to Lessor as additional insured (or separation of insureds) provision. All of the policies required pursuant to Section 23.1 of this Lease and to which Lessor is an additional insured shall provide on such additional insured endorsement the same protection to Lessor that is provided to a mortgagee under a standard mortgagee’s clause, in that coverage as respects Lessor’s interest will not be invalidated or suspended due to acts of the named insured, except as noted in the standard mortgagee’s clause (438 BFU or equivalent).
23.4.5.	Notice of Cancellation
	All policies required under this Section 23 of this Lease shall provide that coverage will not be cancelled or non-renewed except after a minimum of thirty (30) days prior notice to Lessor, or, in the event of nonpayment of policy premiums by Lessee, ten (10) days notice to Lessor.

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23.4.6.	Evidence of Insurance
	Prior to the Commencement of Construction of the Initial Lessee Improvements, Lessee shall furnish Lessor with insurance certificates on ACORD forms, and within sixty (60) days after Commencement of Construction, certified copies of all insurance on which Lessor is a named insured, and along with copies of required endorsements, of other insurance required under this Section 23.
23.4.7.	Claims-Made Policies
	Lessee’s or its contractors’ or agents’ liability insurance shall be on occurrence forms unless the required coverage is not available on occurrence form. If the liability policy is a claims-made policy, the retroactive date must precede the date of Commencement of Construction of the Initial Lessee Improvements, or the date of the commencement of operations insured under the policy, whichever is earlier. Continuous coverage must be maintained under the claims-made policy, or the insured must purchase an extended reporting period of no less than five (5) years, to the extent available at Commercially Reasonable Insurance Rates.
23.4.8.	Street Encroachment Agreement
	Lessee shall include the City and County of San Francisco as an additional insured on the policies required pursuant to Section 23.2.2 and 23.2.3 above with respect to liability arising out of the Street Encroachment Agreement, and such insurance shall provide that it is primary and non-contributing with any insurance or self-insurance carried by the City and County of San Francisco.

23.5. Waiver of Subrogation

Lessee hereby waives any and all rights of recovery against Lessor, and Lessor’s officers, directors and employees for any loss or damage to the extent these damages are insured by insurance carried by Lessee, and the insurance proceeds are actually received by the insured, including amounts within any insurance deductible or self-insured retention. Lessor hereby waives any and all rights against Lessee, its officers, directors, partners, members, employees, visitors, contractors, agents, and invitees for recovery for damages to the extent insured by the builder’s risk and other property insurance applicable to the construction

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	activities on the Premises and the insurance proceeds are actually received by the insured.
23.6.	Lessee’s Contractors
	Lessee shall be responsible for requiring that its contractors, all tiers of subcontractors, and vendors carry sufficient insurance, including, at a minimum workers’ compensation and commercial general liability.
23.7.	Changes in Insurance Requirements
	All insurance required by this Section 23 shall be evaluated for adequacy by Lessor and Lessee not less frequently than every five (5) years from the Commencement Date and shall be re-evaluated by Lessor as a condition to all Major Alterations or reconstruction of or major repairs to the Haslett Warehouse; provided, however, that if Lessee or Lessor cannot agree upon the amounts, limits and deductibles of any insurance required pursuant to this Section 23, such amounts, limits and deductibles shall be subject to determination by alternative dispute resolution in accordance with the provisions of Section 33 below.
23.8.	No Premium Payments by Lessor
	In no instance will Lessor be obligated to pay insurance policy premiums on the insurance required hereunder. The policies on which Lessor is a named insured shall provide that Lessor will not be obligated to pay insurance premiums.
23.9.	Availability of Policies
	Lessee shall provide to Lessor (a) certified copies of all insurance policies required in this Section 23 as soon as practicable, and (b) copies of insurance binders for all insurance required in this Section 23 within ten (10) business days of Lessor’s written request for said copies.
23.10.	Lessee’s Failure to Comply
	Lessee shall maintain and renew, as appropriate, all policies provided for in this Lease throughout the Term, and Lessee shall renew such policies before each such policy’s expiration date.
23.11.	Insurance Not Limit on Liability

23.11.1. Lessee assumes full risk and responsibility for any inadequacy of insurance coverage.

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23.11.2.

No approval by Lessor of any insurer, or the terms or conditions of any policy, or any coverage or amount of insurance, or any deductible amount shall be construed as a representation by Lessor of the solvency of the insurer or the sufficiency of any policy or any coverage or amount of insurance or deductible. By requiring insurance herein, Lessor does not represent that the stated coverage and limits will necessarily be adequate to protect Lessee, and such coverage and limits shall not be deemed as a limitation on Lessee’s liability under the indemnities granted to Lessor hereunder.

23.11.3.

Failure of Lessor to demand such certificate or other evidence of full compliance with these insurance requirements or failure of Lessor to identify a deficiency from evidence that is provided shall not be construed as a waiver of Lessee’s obligation to maintain such insurance.

23.12.	Increase In Hazards/Conflict with Coverage
	Lessee shall not do anything, or permit anything to be done that would: (a) invalidate or be in conflict with the provisions of any insurance policies covering the Premises or any property located therein, or (b) result in a refusal by insurance companies of good standing to insure the Premises or other property in amounts required under this Lease.
23.13.	Performance and Payment Bonds

23.13.1.

Scope of Requirement

Lessee shall, during construction of all Initial Lessee Improvements, Alterations and or Preservation Maintenance, be responsible for, at its sole cost and expense, payment of all obligations arising under all contracts let in connection with the construction of Initial Lessee Improvements, Alterations and/or Preservation Maintenance (“Construction Contracts”) including but not limited to amounts for cost overruns, price increases, change orders, Force Majeure delays and the like, and for guarantees of performance and payment under such Construction Contracts, and payment in full of all claims for labor performed and materials supplied under such Construction Contracts. Any performance and payment bonds, if any, used by Lessee for these purposes shall be issued by an admitted surety company licensed to do business in the State of California.

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23.13.2.	Notice of Claim
	Upon the request of any person or entity appearing to be a potential beneficiary of bonds covering payment of obligations arising under the Construction Contract, if any, the Lessee shall promptly furnish a copy of all pertinent documentation substantiating the request to Lessor.

23.14.	Lessor Review of Proposed Policies
	To the extent then available to Lessee, at least thirty (30) days before the Commencement of Construction, Lessee shall provide to Lessor for its review and comment copies of all proposed insurance policies and endorsements required by this Section 23.

24. DAMAGE OR DESTRUCTION

24.1.	No Termination; No Effect on Monetary Obligations
	No loss or damage by fire or other causes resulting in either partial or total destruction of the Park, the Premises, the improvements or, any other property on the Premises shall, except as otherwise provided herein, operate to terminate this Lease. No such loss or damage shall affect or relieve Lessee from Lessee’s obligation to pay any monetary obligations under this Lease and in no event shall Lessee be entitled to any proration or refund of same and Lessee shall not be relieved or discharged from the performance and observance of any of the agreements, covenants and conditions herein contained on the part of Lessee to be performed and observed.
24.2.	Evaluation of Extent and Effect of Damage
	Upon the occurrence of any event of damage or destruction to the Premises, the Trade Fixtures, the improvements or any portion thereof, Lessee shall promptly undertake to determine the extent of the same and the estimated cost and time to perform any necessary Building Maintenance and/or Preservation Maintenance of, or construct Initial Lessee Improvements or Alterations to, such property in accordance with the provisions of this Lease to repair, rebuild, or restore the damage or destruction. Lessee shall notify Lessor of its estimation of such cost and time as soon as is reasonably practicable but in no event later than ninety (90) days after the occurrence of the damage or destruction.

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24.3.	Damage or Destruction; Duty to Repair, Rebuild or Restore
	If the Premises, the Trade Fixtures, the improvements or any portion thereof are damaged or destroyed at any time during the Term and this Lease is not terminated pursuant to and in accordance with the terms of this Section 24, Lessee, as promptly as reasonably practicable and with all due diligence, at its sole cost and expense, and in accordance with all Applicable Laws and the requirements of this Lease, shall repair, rebuild, or restore the damaged or destroyed portions of the Premises and such damaged or destroyed Fixtures and Personal Property necessary to operate the Premises for the purposes of this Lease. Lessee’s obligations pursuant to this Section 24.3 shall be performed in accordance with the provisions of Sections 12 through 16 and other applicable provisions of this Lease.
24.4.	Proceeds of Insurance
	All insurance proceeds received by or payable to any Party with respect to such damage (except proceeds of insurance covering loss or damage of Lessee’s Personal Property and business interruption insurance), less actual costs and expenses incurred in connection with the collection thereof, shall be held by Lessee, or the Leasehold Mortgagee, if applicable, in an interest-bearing account, with all interest accrued thereon deemed proceeds in insurance for purposes of this Lease, and such proceeds shall be applied to the costs to perform any Building Maintenance and/or Preservation Maintenance, or construct Initial Lessee Improvements or Alterations of the Premises or the Fixtures, as the case may be and in accordance with all Applicable Laws and the requirements of this Lease to repair, rebuild, or restore the damage or destruction. Lessee, or the Leasehold Mortgagee, if applicable, shall pay any amount by which insurance proceeds received as a result of such damage or destruction, less the costs and expenses incurred in connection with the collection thereof, are insufficient to pay the entire cost to repair such damage or to carry out the obligations under Section 24.6 below. Notwithstanding the foregoing, if required by Lessor or the Leasehold Mortgagee, an insurance trustee mutually acceptable to Lessor and Lessee will hold and apply such proceeds in accordance with this Lease.
24.5.	Option to Terminate upon Damage or Destruction
	In the event of any damage to or destruction of the Premises or the improvements or any portion thereof at any time during the Term, if (a) the time to repair, rebuild, or restore the Premises to substantially the same condition as existing immediately prior to such occurrence is reasonably estimated to exceed nine (9) months, or (b) the cost of such

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	repair, rebuilding, or restoration exceeds the available proceeds of insurance (or, if greater, the proceeds that would have been available had insurance been maintained in accordance with the requirements of this Lease) by more than Five Million Dollars ($5,000,000), which amount (as adjusted for increases in the CPI since the Commencement Date) shall be reduced to Four Million Dollars ($4,000,000) as of the date that is four (4) years before the then-scheduled expiration date of the Term, to Three Million Dollars ($3,000,000) as of the date that is three (3) years before the then-scheduled expiration date of the Term, to Two Million Dollars ($2,000,000) as of the date that is two (2) years before the then-scheduled expiration date of the Term, and to One Million Dollars ($1,000,000) as of the date that is one (1) year before the then-scheduled expiration date of the Term; then Lessee shall have, subject to Leasehold Mortgagee’s rights as specified in Section 28 of this Lease, the option to terminate this Lease. Lessee shall not have the option to terminate this Lease in whole or in part or to surrender the Premises or any portion thereof pursuant to this Section 24 unless Lessee surrenders the Premises or portion thereof to Lessor free and clear of all occupancies, tenancies, subleases and liens, and otherwise in accordance with this Section 24.
24.6.	Election to Terminate; Lessee’s Obligation to Repair, Rebuild, or Restore Premises Upon Termination
	Lessee shall exercise its right of termination pursuant to this Section 24 by giving written notice to Lessor within ninety (90) days after determination of the extent of damage and estimated cost to repair or replacement pursuant to Section 24.2 above. If Lessee elects to terminate this Lease pursuant to this Section 24, Lessee, at Lessee’s sole cost and expense (which may include, but shall not be limited to, insurance proceeds applied as set forth in this Section 24.6), and in accordance with all Applicable Laws, shall promptly demolish and remove all damaged property, except any property Lessor elects to retain on the Premises, and shall cause the Premises to be in a clean, safe and sightly condition free from rubble and shall remediate any Hazardous Materials to the extent required under Section 22 above and shall surrender the Premises to Lessor in accordance with the provisions of Section 34 below and free and clear of any and all occupancies, tenancies, subleases and liens. If this Lease is terminated pursuant to this Section 24.6, all proceeds of insurance payable with respect to such damage to, or destruction of the improvements and other property located on the Premises, after payment of actual costs and expenses of collection thereof, shall be applied to either the costs of such demolition and removal, and/or then to remediation required by Section 22 above, as directed by Lessor. Lessee shall, to the extent of any remaining

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insurance proceeds, repair or replace any improvements Lessor elects to retain on the Premises, in an amount not to exceed Five Hundred Thousand Dollars ($500,000 indexed for increases in the CPI since the Commencement Date); provided, however, that if there are no insurance proceeds available solely because such insurance coverage was not available at Commercially Reasonable Insurance Rates, Lessee’s obligations shall be limited to such demolition, removal and remediation and to the extent of any applicable insurance proceeds available. The balance, if any, of insurance proceeds shall be distributed as provided in Section 24.7 below. Lessee’s obligations under this Section 24 shall survive the termination of this Lease.

24.7.

Excess Insurance Proceeds

24.7.1.

If there are proceeds of insurance in excess of that required to perform the obligations required under this Section 24, upon receipt by Lessor of satisfactory evidence that the work of Building Maintenance, Preservation Maintenance, Initial Lessee Improvements or Alterations and construction required under this Section 24 has been fully completed and paid for in accordance with the terms and conditions of this Lease and that the last day for filing any mechanic’s or materialmen’s liens has passed without the filing of any, or if filed, any such lien has been released, any remaining amount of such proceeds of insurance shall be paid first to Lessee to discharge the outstanding balance of any Leasehold Mortgage, then to Lessee.

24.7.2.

In the event Lessee elects the option to terminate this Lease pursuant to Section 24.6 above, if there are proceeds of insurance in excess of that required to perform the obligations required under this Section 24, upon receipt by Lessor of satisfactory evidence that the work required under this Section 24 has been fully completed and paid for in accordance with the terms and conditions of this Lease and that the last day for filing any mechanic’s or materialmen’s liens has passed without the filing of any, or if filed, any such lien has been released, any remaining amount of such proceeds of insurance shall be paid first to Lessee to discharge the outstanding balance of any Leasehold Mortgage, then to Lessor and Lessee in accordance with their interest in the property immediately prior to the time of termination.

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24.8.	Emergency Repairs
	If, after damage to or destruction of the Premises, or any part thereof, there is a substantial possibility that immediate emergency repairs (“Emergency Repairs”) are required to eliminate defective or dangerous conditions and to comply with all Applicable Laws, Lessee shall promptly undertake such Emergency Repairs after such damage or destruction as are necessary or appropriate under the circumstances to eliminate defective or dangerous conditions and to comply with all such Applicable Laws.
24.9.	CPI Adjustment
	If Lessor at any time, but no more often than every three (3) years, believes that the dollar amounts stated in this Section 24 are insufficient for a prudent owner of property of the nature of the Premises, the dollar amounts shall be adjusted by an amount equal to the percentage of change in the CPI from the Commencement Date or from the last Lease Year in which such adjustment was made to the date of the adjustment.

25. INDEMNITY

25.1.

Lessor assumes no liability for any damage to or destruction of the Premises, including improvements therein, or the Park, or Lessee’s Personal Property, or for personal injuries or death sustained in connection with or as a result of the use of the Premises by Lessee, Affiliates, Lessee’s Agents, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term.

25.2.

Lessee shall indemnify, reimburse, defend, save and hold harmless Lessor and Lessor’s Agents from and against any and all liability, claims, demands, damages, injuries, losses, penalties, fines, costs (including reasonable consulting fees and expert fees), causes of action, judgments, expenses and the like for any loss of third party’s business revenue or income, any loss or destruction of, or damage to, any real property or personal property to the extent owned by Lessor or a third party (excluding Lessor’s interest in the Premises, Trade Fixtures or Lessee’s Personal Property), or for the death of or injury to persons, of any nature whatsoever and by whomever made, that may arise out of or be incident to the use of the Premises by Lessee, Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term or to the activities of Lessee, Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee

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	during the Term on the Premises, whether or not the same shall be occasioned by the negligence or lack of diligence of Lessee, Affiliates, Lessee’s Agents, employees, guests, visitors, invitees, sublessees, licensees, and permittees and other persons or entities under the control of Lessee during the Term, provided, however, that Lessee shall not be liable to the extent that the damages, expenses, claims or suits result from the willful acts or negligence of Lessor, provided further that Lessor shall be liable only to the extent such claims are specifically covered by Federal law. Lessee expressly acknowledges and agrees that it has an immediate and independent obligation to defend Lessor from any claim that actually or potentially falls within this Section 25, regardless of whether such allegation is, or may be, groundless, fraudulent or false. Such obligation to defend and indemnify shall arise at the time such claim is tendered to the Lessee by Lessor and shall continue until discharged through performance or judicial determination. To the extent of any conflict with this Section 25.2 and the indemnity provisions of Section 22 of this Lease, the indemnity provisions of Section 22 of this Lease shall control.
25.3.	Lessor and Lessor’s Agents shall be liable for acts and omissions related to this Lease only to the extent specifically covered by Federal law, including the Federal Tort Claims Act.
25.4.	This Section 25 shall survive any termination of this Lease. The provisions of Section 23 of this Lease shall not limit in any way Lessee’s obligations under this Section 25.

26. LIENS

26.1.	No Power in Lessee to Create Lien on Lessor’s Interest
	Lessee shall have no power to do any act or to make any contract that may create or be the foundation for any lien, mortgage or other encumbrance upon the reversion, fee interest or other estate of Lessor or of any interest of Lessor in the Premises, except for such actions or contracts contemplated and taken in accordance with this Lease.
26.2.	Discharge of Liens by Lessee
	Lessee shall not suffer or permit any liens known to Lessee to stand against the Premises, the improvements thereon, or any part thereof by reason of any work, labor, or services performed for or materials supplied to, or claimed to have been supplied to Lessee. If any such lien shall at any time be filed against the Premises, the improvements thereon, or any part thereof, Lessee shall cause the same to be discharged of record within sixty (60) days after notice to Lessee of filing

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	the same, by either payment, deposit or bond, unless such lien shall be contested. If Lessee fails to discharge or contest such lien within such period and such failure shall continue for a period of fifteen (15) days after notice by Lessor, then, in addition to any other right or remedy of Lessor, Lessor may, but shall not be obligated to, procure the discharge of the same either by paying the amount claimed to be due, by deposit in court, or by bonding. All amounts paid or deposited by Lessor for any of the aforesaid purposes, and all other expenses of Lessor and all necessary disbursements in connection therewith in defending any such action or in procuring the discharge of such lien, shall become due and payable forthwith by Lessee to Lessor upon written demand therefor.
26.3.	No Consent or Waiver by Lessor
	Nothing in this Lease shall be deemed to be, or be construed in any way as constituting, the consent or request of Lessor, expressed or implied, by inference or otherwise, to any person, firm or corporation, for the performance of any labor or the furnishing of any materials for any Building Maintenance, Preservation Maintenance, Initial Lessee Improvements or Alterations of or to the Premises or any part thereof, or as giving Lessee any right, power or authority to contract for or permit the rendering of any services or the furnishing of any materials that might in any way give rise to the right to file any lien against Lessor’s interest in the Premises.

27. TRANSFER AND SUBLETTING

27.1.	Transfer
	Lessor is entering into this Lease in reliance on the particular and unique skills and reputation of Lessee, and Lessor would not enter into this Lease except for such particular and unique skills and reputation. Except as set forth in this Section 27, Lessee shall not make Transfers without the express prior written permission of Lessor.
27.2.	Lessee may make Transfers (other than the subleases pursuant to Section 27.7 below) without the prior written approval of the Lessor only if Kimpton Hotel and Restaurant Group, Inc. maintains a Controlling Interest in the operations conducted by Lessee on the Premises. Upon any such Transfer which does not change the Controlling Interest, Lessee shall notify Lessor in writing of any such Transfer to be made at least thirty (30) days prior to doing so and shall explain in writing the purpose of the Transfer.
27.3.	(a) After the fourth (4th) Lease Year, a Transfer (other than the subleases pursuant to Section 27.7 below) of the Controlling Interest of

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	Kimpton Hotel and Restaurant Group, Inc. in Lessee may be made to an Approved Operator or to an entity with a management contract with an Approved Operator, which change in Controlling Interest shall require Lessor’s prior written approval.
	(b) Lessor agrees to approve such Transfer upon demonstration to the reasonable satisfaction of Lessor that, (i) transferee shall have not less than a twenty percent (20%), equity investment in the project, as estimated by the appraiser for the first priority Leasehold Mortgagee financing the acquisition of the Project by the transferee; regardless if (A) the acquisition is being financed by a purchase money Leasehold Mortgage held by the transferor or an Affiliate thereof, securing an amount not exceeding the largest total amount of all Leasehold Mortgages in effect at any one time as previously approved by Lessor pursuant to Sections 28.5 and 28.7 of this Lease, or (B) the transferee acquires the project by taking subject to or assuming an existing Leasehold Mortgage(s); (ii) transferee is of good reputation; and (iii) either (A) transferee has had substantial and successful experience in the hotel business sufficient to qualify as an Approved Operator or (B) transferee has an Approved Operator with a firm commitment to be retained to operate the Premises and which Approved Operator is acceptable to Lessor and of good reputation.
27.4.	Transferee shall promptly reimburse Lessor for all reasonable costs incurred in connection with Lessor’s review of a Transfer.
27.5.	Provided that Lessor has consented to a Transfer in writing, upon such approved Transfer Lessee shall be released from its obligations hereunder which arise subsequent to the effective date of the Transfer to the extent of the interest of Lessee transferred and to the extent the transferee of the Transfer assumes, in writing, Lessee’s obligations under this Lease.
27.6.	With respect to proposed Transfers, as part of the written request for approval for a Transfer, Lessee shall furnish to Lessor the following information: (a) all instruments proposed to implement the transaction; (b) a statement as to the existence of any litigation questioning the validity of the proposed transaction; (c) a description of the hotel property management qualifications and financial background of the proposed assignee; (d) a description of the ownership structure and general business standing of the proposed assignee; (e) if the transaction may result in an encumbrance on the Premises, full particulars of the terms and conditions of the encumbrance; and; (f) such other information as Lessor may reasonably require. Lessor shall have the right to approve the form of any Transfer.

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27.7. Office Space, Retail Space and Restaurant Spaces Subleasing

27.7.1.

Lessee may sublease the Office Space, Retail Space, and Restaurant Space provided Lessee shall give Lessor thirty (30) days prior written notice during which time Lessor shall approve or disapprove the proposed sublease.

27.7.2.

With respect to proposed subleases, as part of a written request for approval from Lessor as set forth in Section 27.7.1 above and without otherwise limiting the criteria upon which Lessor may withhold its consent to any proposed sublease, Lessee shall furnish to Lessor the following information: (a) evidence satisfactory to Lessor that the proposed sublessee’s use of the subleased Premises shall be in compliance with the terms and conditions of this Lease; (b) a copy of the proposed sublease with the proposed sublessee, which sublease shall be subject to, and the sublessee of such sublease shall be required to comply with, all of the terms, agreements, covenants, conditions and provisions of this Lease; (c) evidence satisfactory to Lessor of the proposed sublessee’s financial capacity to meet its commitments under the proposed sublease; and (d) demonstrates that any proposed sublease for Office Space and Retail Space are at market rental rate. Subleases so approved shall not serve to relieve Lessee from any liability or diminish any supervisory authority of Lessor as provided under this Lease.

27.8.	Approval Time, Etc.
	Except as provided in Section 27 above, Lessor shall approve or disapprove any written request for approval of a Transfer or sublease which written request shall include all the evidence required under this Section 27 within forty-five (45) days from the date of receipt by Lessor of complete documentation supporting such written request. Lessor shall not unreasonably withhold or condition its approval of any Transfer or sublease. Any disapproval by Lessor shall set forth a written explanation of the grounds for such disapproval.
27.9.	This Lease shall be binding upon, inure to the benefit of, and be enforceable by transferees of a Transfer approved by Lessor. No rights shall inure to the benefit of any transferee of Lessee unless such transferee has been approved by Lessor in accordance with this Section 27.

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28. LEASEHOLD MORTGAGES

28.1. Additional Definitions. For purposes of this Section 28, the following terms shall have the meanings hereinafter set forth:

28.1.1. “Assignment for Security” shall mean a transaction or transactions in which Lessee:

(i)	assigns all or any portion of its interest hereunder for the purpose of security (“Assignment”); and/or
(ii)	executes a deed of trust (“Deed of Trust”) with respect to all or any portion of its interest hereunder; and/or
(iii)	executes a mortgage (“Mortgage”) with respect to all or any portion of its interest hereunder; and/or
(iv)	sells and assigns and leases or subleases back all or any portion of its interest under this Lease, in connection with a refinancing transaction in which Lessee obtains debt, repayment of which is secured in whole or in part, or becomes an obligation in whole or in part incurred by Lessee in the transaction in which such sale, assignment and lease or sublease back is delivered or consummated. In the event that the Lessee enters into such a sale-leaseback or lease-leaseback transaction, the Lessee shall nonetheless remain fully responsible for all of its obligations under this Lease, even after completing the sale-leaseback or lease-leaseback transaction, until and unless it is otherwise released from liability in accordance with the provisions of this Lease. The use of such a transaction is permitted for refinancing purposes only, and not for the initial financing of the Initial Lessee Improvements. The other party in such a transaction will be treated as a Leasehold Mortgagee as defined in this Lease.

28.1.2. “Leasehold Mortgage” shall mean the encumbrance created by and all of the instruments of encumbrance in connection with an Assignment for Security, including, without limitation, a Mortgage, Deed of Trust, Assignment, reassignment or other instrument regardless of the form of the transaction.

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28.1.3.	“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.
28.1.4.	“Mortgaged Premises” shall mean Lessee’s interest under this Lease encumbered by a Leasehold Mortgage.

28.2.	Lessee may, subject to the requirements of this Lease, mortgage its interest in the leasehold estate created by this Lease and may grant a security interest in the Personal Property situated thereon by a Leasehold Mortgage. Lessee shall have the right, subject to the terms and conditions of this Section 28, to enter into Assignments for Security so long as Lessee (or a successor taking by assignment) remains liable, to the extent provided for in this Lease, for performance of all Lessee obligations hereunder. A Leasehold Mortgage shall cover no interest in any real property other than (a) Lessee’s interest in the Premises and the Trade Fixtures or some portion thereof, (b) any subleases thereon, and (c) any Personal Property of Lessee. With the exception of the rights expressly granted to Leasehold Mortgagees in this Lease, the execution and delivery of a Leasehold Mortgage shall not give a Leasehold Mortgagee any greater rights than those granted Lessee hereunder.
28.3.	Notwithstanding anything to the contrary set forth herein, any rights given hereunder to Leasehold Mortgagees shall not apply to more than two (2) Leasehold Mortgagees at any one time. Once a Leasehold Mortgagee is designated by Lessee, Lessee shall not designate different or additional Leasehold Mortgagees without the written consent of the Leasehold Mortgagee first designated, or the earlier termination of such Leasehold Mortgage. In the event that at any time there are more than two (2) Leasehold Mortgagees, Lessee shall notify Lessor in writing of the two (2) Leasehold Mortgagees to which such rights should apply.
28.4.	Amount and Purpose of Loan

28.4.1. Except for Leasehold Mortgages permitted without Lessor’s permission pursuant to Section 28.6, at no time may the total of all Leasehold Mortgages on the Premises, as of the date that the latest Leasehold Mortgage is granted, exceed eighty percent (80%) of the total value of the Premises as estimated by the appraiser for the latest Leasehold Mortgagee at or about such time. The appraiser shall be a current member in good standing of either the American Society of Appraisers (“ASA”) or the Appraisal Institute (“MAI”), and shall also be a member of

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either the Counselors of Real Estate (“CRE”) or the International Society of Hospitality Consultants (“ISHC”), or their successor organizations. Promptly upon demand, Lessee shall cause a complete copy of such appraisal, together with all supporting documentation, to Lessor for determination of compliance with the terms and conditions of this Lease. Lessee shall bear all costs of any such appraisal.

28.4.2.	No Leasehold Mortgage will be approved by Lessor or will be entered into by Lessee that has a maturity date beyond the Term.
28.4.3.	From the date which is the termination of the Due Diligence Period until issuance of a Certificate of Occupancy or Conditional Certificate of Occupancy, a Leasehold Mortgage shall be made only for the purposes of:

(a)	short-term, interim or construction financing incurred to finance demolition and construction costs relating to the Premises and Fixtures, or to acquire and install the Personal Property and supplies;
(b)	interim, long-term or take-out financing of the completed development referred to in Section 28.4.3(a) above; or
(c)	long-term or permanent financing of the take-out loans referred to in Section 28.4.3(b) above.

28.4.4. From the date of issuance of a Certificate of Occupancy a Leasehold Mortgage can be made for any purpose.

28.5.

Lessor to Approve Initial Leasehold Mortgage

The Lessor shall be provided with copies of the draft initial Leasehold Mortgage instruments prior to their execution and shall approve such draft Leasehold Mortgage instruments or shall make any objections within thirty (30) days from the date of the receipt of the complete documentation of the Leasehold Mortgage. Lessor shall review the drafts for the purpose of evaluating their conformity with this Lease, acceptability of the encumbrance instruments, and consistency with the Financing Commitment. Lessor shall have an additional five (5) business days to review and approve or disapprove any revisions to the final Leasehold Mortgage documentation made after the Lessee and

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Leasehold Mortgagee have negotiated the financing of the Initial Lessee Improvements, but prior to the scheduled closing of escrow of the initial Leasehold Mortgage.

28.6.	Lessor’s prior written approval shall not be required for refinancing, whether pursuant to foreclosure or otherwise, an amount not to exceed the largest amount of total Leasehold Mortgages in effect at any one time as previously approved by Lessor pursuant to Sections 28.5 and 28.7 of this Lease provided that the source of funds is a Bona Fide Institutional Lender. Lessee shall promptly provide Lessor notice of any such refinancing in accordance with Section 28.7 and Section 39 of this Lease.
28.7.	Lessor’s prior written approval shall be required for any refinancing that exceeds the total amount of all mortgage financing previously approved by Lessor to be in effect at any one time, or any financing from other than a Bona Fide Institutional Lender. Lessor shall be provided with copies of any such draft Leasehold Mortgage instruments prior to their execution and shall approve or shall make any objections to such draft instruments within thirty (30) days from the date of the receipt of the complete documentation of the Leasehold Mortgage. Lessor shall review the drafts for the purpose of evaluating their conformity with this Lease, acceptability of the encumbrance instruments, and consistency with the refinance commitment. Lessor shall have an additional five (5) business days to review and approve or disapprove any revisions to the final Leasehold Mortgage documentation made after the Lessee and Leasehold Mortgagee have negotiated the refinancing of the Leasehold Mortgage, but prior to the scheduled closing of escrow of the refinance of the Leasehold Mortgage.
28.8.	Lessee shall deliver to Lessor, promptly after execution by Lessee, a copy, certified by Lessee as a true copy, of any Leasehold Mortgage and any subsequent amendment, modification or extension thereof, together with the name and address of the owner(s) and holder(s) thereof.
28.9.	Lessee shall use good faith, commercially reasonable efforts to cause its Leasehold Mortgage documents to contain provisions permitting the disposition and application of the insurance proceeds and condemnation awards with respect to the Premises in the manner provided in this Lease. To the extent that Lessee is unsuccessful in so doing despite such efforts, insurance proceeds and condemnation awards shall be applied in accordance with the Leasehold Mortgage documents and the laws of the State of California (to the extent not otherwise addressed under federal laws).

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28.10. Rights Subject to Lease.

28.10.1.

All rights acquired by a Leasehold Mortgagee under any Leasehold Mortgage shall be subject to each and all of the covenants, conditions and restrictions set forth in this Lease, and to all rights of Lessor hereunder, none of which covenants, conditions and restrictions is or shall be waived by Lessor by reason of the giving of such Leasehold Mortgage, except as expressly provided in this Lease or otherwise specifically waived by Lessor in writing.

28.10.2.

Notwithstanding any provision of this Lease to the contrary, including, but not limited to, those representing covenants running with the land, no Leasehold Mortgagee, including any such Leasehold Mortgagee who obtains title to the leasehold or any part thereof as a result of foreclosure proceedings or action in lieu thereof but excluding (a) any other party who thereafter obtains title to the leasehold or any part thereof from or through such Leasehold Mortgagee, or (b) any other purchaser at foreclosure sale (other than the Leasehold Mortgagee itself), shall be obligated by the provisions of this Lease to construct or complete the Initial Lessee Improvements or to guarantee such construction or completion; however, any Leasehold Mortgagee that acquires possession of the Premises, either directly or through a receiver, may construct and complete the Initial Lessee Improvements or such portion thereof that the Leasehold Mortgagee determines is necessary to protect the value of its security, provided, however, that nothing in this Section or any other Section or provisions of this Lease shall be deemed or construed to permit or authorize any such holder to devote the Premises or any part thereof to any uses, or to construct any improvements thereon, other than those uses or improvements provided or authorized in the Lease, as hereafter amended or extended from time to time.

28.11. Required Provisions of any Leasehold Mortgage.

28.11.1. Lessee agrees to have any Leasehold Mortgage provide:

(a) that the Leasehold Mortgagee shall by registered or certified mail give written notice to Lessor of the occurrence of any event of default under the Leasehold Mortgage;

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(b) that Lessor shall be given notice at the time any Leasehold Mortgagee initiates any foreclosure action.

28.12. Notices to Mortgagee

28.12.1.

If Lessee shall have granted any Leasehold Mortgage and if the Leasehold Mortgagee thereunder shall have given to Lessor written notice substantially in the form provided in Section 28.12.2 below, Lessor shall give to Leasehold Mortgagee a copy of any and all notices of default or of the occurrence of an Event of Default from time to time given to Lessee by Lessor at the same time as and whenever any such notice shall thereafter be given by Lessor to Lessee, addressed to such Leasehold Mortgagee at the address last furnished to Lessor. No such notice by Lessor shall be deemed to have been given to Lessee unless and until a copy thereof shall have been so given to Leasehold Mortgagee. Any such notices to Leasehold Mortgagee shall be given in the same manner as provided in Section 39 of this Lease.

28.12.2.

The Leasehold Mortgagee under any Leasehold Mortgage shall be entitled to receive notices from time to time given to Lessee by Lessor under this Lease in accordance with Section 28.12.1 above provided such Leasehold Mortgagee shall have delivered a notice to Lessor in substantially the following form:

“The undersigned does hereby certify that it is a Leasehold Mortgagee, as such term is defined in that certain Lease entered into by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America, as Lessor, and ______________________, as Lessee (the “Lease”), of Lessee’s interest in the Lease demising the parcels, a legal description of which is attached hereto as Exhibit A and made a part hereof by this reference. The undersigned hereby requests that copies of any and all notices from time to time given under the Lease to Lessee by Lessor be sent to the undersigned at the following address: _________________________.”

28.12.3. The Leasehold Mortgagee shall be entitled to written notice by Lessor and Lessee of, and shall have the right to intervene in, any arbitration or other legal proceeding between Lessor and Lessee pertaining to this Lease or the rights, duties or obligations of the parties under this Lease.

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28.12.4. Lessee shall not claim any offset against any amount owing to Lessor under this Lease without prior written notice and consent of each Leasehold Mortgagee whose consent is required pursuant to the terms of its Leasehold Mortgage.

28.13.	Leasehold Mortgagee’s Right to Cure.
	If Lessee, or Lessee’s successors or assigns, shall mortgage this Lease in compliance with the provisions of this Section, then, so long as any such Leasehold Mortgage shall remain unsatisfied of record, the following provisions shall apply:

28.13.1.

In the case of any notice of default given by Lessor to Lessee and Leasehold Mortgagee in accordance with Section 28.12 above, the Leasehold Mortgagee shall have the same concurrent cure periods as are given Lessee under this Lease for remedying a default or causing it to be remedied, plus, in each case, an additional period of thirty (30) days after the later to occur of (i) the expiration of such cure period, or (ii) the date that Lessor has served a notice of default upon Leasehold Mortgagee, and Lessor shall accept such performance by or at the instance of the Leasehold Mortgagee as if the same had been made by Lessee; provided, however, if such default cannot reasonably be cured or remedied by the Leasehold Mortgagee within such additional thirty (30) day period, such cure period shall be extended (and no Event of Default shall be deemed to have occurred under this Lease) so long as the Leasehold Mortgagee commences the cure or remedy within such period, and prosecutes the completion thereof with diligence and dispatch, subject to Force Majeure and delays caused by foreclosure, bankruptcy or insolvency proceedings.

28.13.2.

Anything herein contained to the contrary notwithstanding, upon the occurrence of an Event of Default, other than an Event of Default due to a default in the payment of money or other default reasonably susceptible of being cured prior to Leasehold Mortgagee obtaining possession, Lessor shall take no action to effect a termination of this Lease if, within thirty (30) days after notice of such Event of Default is given to each Leasehold Mortgagee, a Leasehold Mortgagee shall have (a) obtained possession of the Premises (including possession by a receiver), or (b) notified Lessor of its intention to institute foreclosure

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proceedings or otherwise acquire Lessee’s interest under the Lease, and thereafter promptly commences and prosecutes such proceedings with diligence and dispatch (subject to Force Majeure and delays caused by bankruptcy or insolvency proceedings). Upon such a foreclosure or other acquisition of Lessee’s interest under the Lease, Lessor shall recognize such Leasehold Mortgagee, or any other foreclosure or trustee sale purchaser or recipient of any deed in lieu as Lessee hereunder (provided that such acquirer is not an Excluded Contractor) for a period of sixty (60) days following such foreclosure or other acquisition of Lessee’s interest under the Lease to obtain approval by the Director of the National Park Service as required under 36 C.F.R. Section 18.10(d) and Section 27 above for approval of a successor lessee and upon such approval, such successor lessee shall take Lessee’s interest in the Premises subject to all of the terms, agreements, covenants, conditions and provisions in this Lease and shall accept and agree in writing to be bound by all the terms and conditions of this Lease and assume Lessee’s obligations hereunder. A Leasehold Mortgagee anticipating acquisition of Lessee’s interest under the Lease may request prior approval by the Director of a proposed Transferee (including a Transfer to such Leasehold Mortgagee). A Leasehold Mortgagee, upon acquiring Lessee’s interest under this Lease, shall be required promptly to cure all other defaults then reasonably susceptible of being cured by such Leasehold Mortgagee. The foregoing provisions of this Section 28.13.2 are subject to the following: (i) no Leasehold Mortgagee shall be obligated to continue possession or to continue foreclosure proceedings, provided that it complies with the last sentence of this Section 28.13.2; (ii) nothing herein contained shall preclude Lessor, subject to the provisions of this Section, from exercising any rights or remedies under this Lease (other than a termination of this Lease to the extent otherwise permitted hereunder) with respect to any other Event of Default by Lessee during the pendency of such foreclosure proceedings; and (iii) such Leasehold Mortgagee shall agree with Lessor in writing to comply during the period Lessor forebears from terminating this Lease with such of the terms, conditions and covenants of this Lease as are reasonably susceptible of being complied with by such Leasehold Mortgagee. Notwithstanding anything to the contrary, including an

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agreement by Leasehold Mortgagee given under clause (iii) of the preceding sentence, Leasehold Mortgagee shall have the right at any time to notify Lessor that it has relinquished possession of the Premises or that it will not institute foreclosure proceedings or, if such foreclosure proceedings have commenced, that it has discontinued them, and, in such event, the Leasehold Mortgagee shall have no further liability under such agreement from and after the date it delivers such notice to Lessor, and, thereupon, Lessor shall be entitled to seek the termination of this Lease as otherwise herein provided. Upon any such termination, the provisions of this Section 28.13.2 shall apply.

28.13.2.1.

If the default of Lessee is with respect to construction of the Initial Lessee Improvements, nothing contained in this Section 28.13 or in any other Section or provision of this Lease shall be deemed to require, permit or authorize Leasehold Mortgagee, either before or after foreclosure or action in lieu thereof, to undertake or continue the construction or completion of the Initial Lessee Improvements beyond the extent necessary to conserve or protect the Initial Lessee Improvements or construction already made, without first (in its sole discretion) having expressly assumed Lessee’s obligation to Lessor by written agreement reasonably satisfactory to Lessor, to complete, in the manner provided in this Lease, the Initial Lessee Improvements on the Premises or the part thereof to which the lien or title of such Leasehold Mortgagee relates, and submitted evidence satisfactory to Lessor that it has the qualifications and financial responsibility necessary to perform such obligation.

28.13.2.2.

Upon assuming Lessee’s obligations to complete the Initial Lessee Improvements in accordance with Section 28.13.2.1 above, the Leasehold Mortgagee shall be required only to exercise due diligence in completion of the construction of the Initial Lessee

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Improvements but shall not be required to complete construction of the Initial Lessee Improvements within the dates set forth in Section 15 of this Lease.

28.13.2.3.	Any transferee of a Leasehold Mortgagee or any purchaser at a foreclosure sale other than a Leasehold Mortgagee shall be obligated to complete the Initial Lessee Improvements and exercise due diligence in the completion of the construction thereof, but shall not be required to complete construction of the Initial Lessee Improvements within the dates set forth in Section 15 of this Lease.
28.13.2.4.	Any assuming Leasehold Mortgagee or transferee properly completing such Initial Lessee Improvements shall be entitled, upon written request made to Lessor, to a Certificate of Occupancy from Lessor with respect to such Initial Lessee Improvements to the same extent and in the same manner as Lessee would have been entitled had Lessee not defaulted.

28.13.3. In the event of the termination of this Lease prior to the expiration of the Term, except (i) by eminent domain, or (ii) as the result of damage or destruction as provided in Section 24 of this Lease, Lessor shall serve upon the Leasehold Mortgagee written notice that this Lease has been terminated, together with a statement of any and all sums which would at that time be due under this Lease but for such termination, and of all other defaults, if any, under this Lease then known to Lessor. The Leasehold Mortgagee shall thereupon have the option to obtain a new Lease in accordance with and upon the following terms and conditions:

28.13.3.1. Upon the written request of the Leasehold Mortgagee, within thirty (30) days after service of such notice that this Lease has been terminated, Lessor shall enter into a new lease of the Premises with the most senior Leasehold Mortgagee giving notice within such period; and

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28.13.3.2. Such new Lease shall be entered into at the reasonable cost of the Leasehold Mortgagee thereunder, shall be effective as of the date of termination of this Lease, and shall be for the remainder of the Term and at the rent and upon all the agreements, terms, covenants and conditions hereof, including any applicable rights of renewal. Such new Lease shall require the Leasehold Mortgagee to perform any unfulfilled obligation of Lessee under this Lease which is reasonably susceptible of being performed by such Leasehold Mortgagee other than obligations of Lessee with respect to construction of the Initial Lessee Improvements, which obligations shall be performed by Leasehold Mortgagee in accordance with this Section 28.13.3. Upon the execution of such new Lease, the Leasehold Mortgagee shall pay any and all sums which would at the time of the execution thereof be due under this Lease but for such termination, and shall pay all expenses, including reasonable counsel fees, court costs and disbursements incurred by Lessor in connection with such defaults and termination, the recovery of possession of the Premises, and the preparation, execution and delivery of such new Lease.

28.13.4. Effective upon the commencement of the term of any new Lease executed pursuant to this Section 28.13.4, all subleases then in effect shall be assigned and transferred without recourse by Lessor to Leasehold Mortgagee and all monies on deposit with Lessor which Lessee would have been entitled to use but for the termination or expiration of this Lease may be used by Leasehold Mortgagee for the purposes of and in accordance with the provisions of such new lease. Between the date of termination of this Lease and commencement of the term of the new lease, Lessor shall not (a) enter into any new subleases, management agreements or agreements for the maintenance of the Premises or the supplies therefor which would be binding upon Leasehold Mortgagee if

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Leasehold Mortgagee enters into a new lease, (b) cancel or materially modify any of the existing subleases, management agreements or agreements for the maintenance of the Premises or the supplies therefor, or (c) accept any cancellation, termination or surrender thereof without the written consent of Leasehold Mortgagee, which consent shall not be unreasonably withheld or delayed.

28.13.5.	Anything herein contained to the contrary notwithstanding, the provisions of this Section 28.13 shall inure only to the benefit of the holders of the Leasehold Mortgages which are permitted hereunder.
28.13.6.	No agreement between Lessor and Lessee amending, terminating or surrendering this Lease, or election by Lessee not to continue this Lease as provided for herein, shall be valid or effective without Leasehold Mortgagee’s written consent.
28.13.7.	No union of the interests of Lessor and Lessee herein shall result in a merger of this Lease in the fee interest, so long as any Leasehold Mortgage shall be unsatisfied.
28.13.8.	Anything herein contained to the contrary notwithstanding, no Leasehold Mortgagee, or its designee or nominee, shall become liable under the provisions of this Lease unless and until such time as it becomes, and then only for so long as it remains, the owner of the leasehold estate created hereby.

28.14.

Assignment by Leasehold Mortgagee

If a Leasehold Mortgagee shall acquire Lessee’s interest in this Lease as a result of a sale under said Leasehold Mortgage pursuant to a power of sale contained therein, pursuant to a judgment of foreclosure, through any transfer in lieu of foreclosure, or through settlement of or arising out of any pending or contemplated foreclosure, bankruptcy or insolvency action, or in the event a Leasehold Mortgagee becomes Lessee under this Lease or any new Lease obtained pursuant to this Section 28.13.4, such Mortgagee’s right thereafter to assign or transfer this Lease or such new Lease shall be subject to the restrictions of Section 27 of this Lease. In the event Leasehold Mortgagee subsequently assigns or transfers its interest under this Lease after acquiring the same by foreclosure or deed in lieu of foreclosure or subsequently assigns or transfers its interest under any new lease obtained pursuant to Section 28.13.4 above, and in

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connection with any such assignment or transfer, Leasehold Mortgagee takes back a mortgage or deed of trust encumbering such leasehold interest to secure a portion of the purchase price given to Leasehold Mortgagee for such assignment of transfer, then such mortgage or deed of trust shall be considered a Leasehold Mortgage, and Leasehold Mortgagee shall be entitled to receive the benefit and enforce the provisions of this Section 28 and any other provisions of this Lease intended for the benefit of the holder of a Leasehold Mortgage.

28.15.	Condemnation Proceeds
	If more than one Leasehold Mortgagee should assert a right to condemnation or private sale proceeds payable to, or for the account of, Lessee, then subject to the terms of the applicable Leasehold Mortgage, Lessee’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.
28.16.	Execution of Documents

28.16.1.	Lessor shall, upon request from Lessee, execute and deliver from time to time any agreement or document which may reasonably be deemed necessary to implement the provisions of this Section 28, provided that subordination of Lessor’s fee interest shall not be required.
28.16.2.	Subject to the conditions set forth below, Lessor and Lessee shall cooperate to include in this Lease by suitable amendment from time to time any provision which may reasonably be requested by any proposed Leasehold Mortgagee for the purpose of implementing the mortgagee protection provisions contained in this Lease and allowing such Leasehold Mortgagee reasonable means to protect or preserve the lien of the Leasehold Mortgage or to avoid the impairment of its security on the occurrence of a default under the terms of this Lease.
	Lessor and Lessee each agree to execute and deliver (and to acknowledge, if necessary, for recording purposes) any agreement reasonably necessary to effect any such amendment; provided, however, that any such amendment shall not, except as specifically provided in this Lease, in any way:

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(a)	affect the Term, require the subordination of Lessor’s fee simple title or reversionary interest, or affect the Annual Rental and other monetary obligations under this Lease, nor
(b)	otherwise in any material respect adversely affect any rights or obligations of Lessor or its mortgagee under this Lease.

28.16.3. Lessee shall reimburse Lessor for all reasonable fees, including non-affiliate attorneys’ fees, up to One Thousand Dollars ($1,000) incurred by Lessor in connection with any agreement or document which Lessor is requested to execute pursuant to this Section 28.16.

29. TRANSFER BY LESSOR

29.1.	Lessor shall have the right to transfer any or all of its rights and obligations under this Lease. This Lease shall not be affected by any such transfer, and Lessee agrees to attorn to the purchaser or transferee.
29.2.	If this Lease is transferred by Lessor, Lessor will, as a condition of such transfer, cause the transferee to recognize Lessee’s and any Leasehold Mortgagee’s rights hereunder.
29.3.	In the event of any transfer of Lessor’s interest in and to the Premises, Lessor, subject to the provisions hereof, (and in case of any subsequent transfers, the then transferor) will automatically be relieved from and after the date of such transfer of all liability with regard to the performance of any covenants or obligations on the part of Lessor (or such transferor, as the case may be) contained in this Lease thereafter to be performed, but not from liability incurred by Lessor (or such transferor, as the case may be) on account of covenants or obligations to be performed by Lessor (or such transferor, as the case may be) hereunder prior to the date of such transfer.
29.4.	If this Lease is assigned to any person or entity other than another department or agency of the United Stated Government, Lessor, to the extent feasible, shall notify Lessee at least sixty (60) days prior to such assignment. Upon such notification, Lessee may make recommendations as to amendments to this Lease that would delete those portions of the Lease that have been included in the Lease because of Lessor’s status as an instrumentality of the United States Government and replace those provisions with provisions that are reasonably and customarily used with hotel ground leases for urban

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properties similar to the Premises and appropriate given the circumstances of the proposed assignment. Such amendments may be made as part of the assignment to the extent they are, in the opinion of Lessor, appropriate and reasonable and customary and do not otherwise alter the relationships between the parties.

30. RIGHT TO ESTOPPEL CERTIFICATES

Each party, within twenty (20) days written request from the other party, shall execute and deliver to the other party, in reasonable form, a certificate stating that this Lease is unmodified and in full force and effect, or in full force and effect as modified, and stating the modifications. The certificate also shall state the amount of Annual Rental, the Base Rental, and Percentage Rental, the dates to which the Annual Rental has been paid in advance, and the amount of any security deposits or prepaid rent and such other matters as may be reasonably or customarily requested.

31. DEFAULTS

31.1. The occurrence of any one or more of the following events shall constitute an “Event of Default” under the terms of this Lease (regardless of the pendency of any bankruptcy, reorganization, receivership, insolvency or other proceedings, in law, in equity or before any administrative tribunal which has or might have the effect of preventing Lessee from complying with the terms of this Lease):

31.1.1.	Lessee shall fail to pay any Annual Rental when due to Lessor subject to Lessee’s right to cure within fifteen (15) days after notice by Lessor of such failure to pay;
31.1.2.	Lessee shall fail to perform or comply with any other term hereof, and such failure shall continue beyond the applicable cure period, if any, or, if none, for more than thirty (30) days after notice thereof from Lessor, or if such default cannot reasonably be cured within such thirty (30) day period, Lessee shall not within such period commence with due diligence and dispatch the curing of such default, or having so commenced, shall thereafter cease, fail or neglect to prosecute or complete with diligence and dispatch the curing of such default;
31.1.3.	the filing by or against Lessee of any proceedings under any state or Federal insolvency or bankruptcy law, or any comparable law that is now or hereafter may be in effect, whether for liquidation or reorganization, which proceedings if filed against Lessee are not dismissed or stayed within sixty (60) days;

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31.1.4.	the entry of an order for relief against Lessee under any bankruptcy or reorganization case;
31.1.5.	the appointment of a receiver, trustee or custodian of all or any part of the property of Lessee which appointment with respect to Lessee is not dismissed within sixty (60) days; provided, however, that the appointment of a receiver pursuant to the exercise by a Leasehold Mortgagee of its rights under a Leasehold Mortgage shall not be an Event of Default hereunder;
31.1.6.	the assignment of all or any part of the property, if any, of Lessee for the benefit of creditors;
31.1.7.	the failure of Lessee to give written notice to Lessor of Lessee’s intention to commence proceedings under any state or Federal insolvency, bankruptcy or any comparable law that is now or hereafter may be in effect, whether for liquidation or reorganization, at least thirty (30) days prior to the commencement of such proceedings;
31.1.8.	a writ of attachment or execution is levied on this Lease which is not released within thirty (30) days;
31.1.9.	the Premises are abandoned or cease to be used for the uses permitted hereunder, which abandonment or cessation is not cured within thirty (30) days after notice thereof from Lessor (provided, however, that no such thirty (30) day cure period shall be applicable to any such abandonment or cessation from and after the first occurrence of any such abandonment or cessation);
31.1.10.	Lessee suffers or permits a Transfer of this Lease or any interest therein to occur in violation of this Lease, or sublets all or any portion of the Premises in violation of this Lease, which violation is not remedied within thirty (30) days after notice thereof from Lessor.

32. REMEDIES

32.1. Upon an Event of Default, Lessor shall have the following rights and remedies in addition to any rights or remedies available to Lessor at law or inequity, or under this Lease.

32.1.1. The rights and remedies provided by California Civil Code, Section 1951.2;

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32.1.2.	The rights and remedies provided by California Civil Code, Section 1951.4, that allows Lessor to continue this Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover Annual Rental as it becomes due, for so long as Lessor does not terminate Lessee’s right to possession; provided, however, if Lessor elects to exercise its remedies described in this Section 32.1.2 and Lessor does not terminate this Lease, and if Lessee requests Lessor’s consent to an assignment of this Lease or a sublease of the Premises at such time as Lessee is in default, Lessor shall not unreasonably withhold its consent to such assignment or sublease. Acts of Building Maintenance or Preservation Maintenance, efforts to relet the Premises or the appointment of a receiver upon Lessor’s initiative to protect its interest under this Lease shall not constitute a termination of Lessee’s rights to possession;
32.1.3.	The right to terminate this Lease by giving notice to Lessee in accordance with Applicable Law;
32.1.4.	If Lessor elects to terminate this Lease, the right and power to enter the Premises and remove therefrom all persons and property and, to store such property in a public warehouse or elsewhere at the cost of and for the account of Lessee, and to sell such property and apply such proceeds therefrom pursuant to Applicable Law.

32.2.	No act by Lessor allowed by this Section 32 shall terminate this Lease unless Lessor notifies Lessee that Lessor elects to terminate this Lease.
32.3.	In the event Lessor terminates Lessee’s right to possession of the Premises pursuant to this Section 32, Lessee hereby expressly waives any and all rights to recover or regain possession of the Premises under any rights of redemption to which it may be entitled by or under any present or future law, including, without limitation, California Code of Civil Procedure Sections 1174 and 1179.
32.4.	Upon the occurrence of an Event of Default, Lessor shall have the right, but not the obligation, to take such action as reasonably necessary to cure such default.
32.5.	The remedies given to Lessor in this Section shall be in addition and supplemental to all other rights or remedies which Lessor may have at law or in equity.

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32.6. Liability Between the Parties

32.6.1. Lessee’s liability pursuant to this Lease is limited to the Lessee’s interest in the Premises; provided that, Lessee expressly agrees that Lessor may recover directly from Lessee and/or, subject to Section 28 of this Lease, any Leasehold Mortgagee that has acquired Lessee’s interest in this Lease and/or the Premises at a foreclosure sale or by deed in lieu of foreclosure or assignment of the Leasehold Mortgage held by such Leasehold Mortgagee (but not from any officer, director, employee, representative or attorney, past, present or future of Lessee or any such Leasehold Mortgagee), only those damages that arise out of or in connection with (and with respect to any Leasehold Mortgagee acquiring the Lessee’s interest in this Lease at a foreclosure sale or by deed in lieu of foreclosure or assignment of the Leasehold Mortgage held by such Leasehold Mortgagee, such shall have occurred on or after the date of acquisition by such Leasehold Mortgagee ) (a) any Impositions not paid by Lessee; (b) uninsured losses to the extent that such insurance covering such losses was required to be maintained by Lessee pursuant to Section 23 of this Lease, but such insurance was in fact not so maintained; (c) the application of any insurance or condemnation proceeds in a manner inconsistent with or contrary to the provisions of this Lease; (d) the cost of razing any improvements Lessee fails to raze in accordance with the terms of Section 24 of this Lease; (e) any damages suffered by Lessor as the result of the breach by Lessee of the covenants contained in Section 22 of this Lease, whether or not any action or proceeding is commenced, including, without limitation, reasonable attorney fees and all costs, disbursements and expenses of Lessor’s outside counsel, expert witness fees, transcript preparation fees and costs and document copying, exhibit preparation, courier, postage, facsimile and long distance expenses; (f) any expenses in enforcing the limited recourse provisions of this Section 32.6, whether or not any action or proceeding is commenced, including, without limitation, reasonable attorney fees and all costs, disbursements and expenses of Lessor’s outside counsel, expert witness fees, transcript preparation fees and costs and document copying, exhibit preparation, courier, postage, facsimile

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and long distance expenses; and (g) waste committed or permitted by Lessee.

32.6.2. Lessee agrees that it will have no recourse with respect to any obligation of Lessor under this Lease, or for any claim based upon this Lease or otherwise, against any officer, director, employee, representative or attorney, past, present or future, of Lessor, or against any person other than Lessor, or against Lessor except to the extent of the value of Lessor’s interest in the Premises, whether by virtue of any constitution, statute, rule of law, rule of equity, enforcement of any assessment as penalty, or by reason of any matter prior to the execution and delivery of this Lease, or otherwise. By Lessee’s execution and delivery hereof and as part of the consideration for Lessor’s obligations hereunder all such liability is expressly waived.

32.7.

No failure by Lessor to insist upon the strict performance of any term, covenant, agreement, provision, condition or limitation of this Lease or to exercise any right or remedy upon an Event of Default, and no acceptance by Lessor of full or partial monetary obligation during the continuance of any such Event of Default, shall constitute a waiver of any such Event of Default or of such term, covenant, agreement, provision, condition or limitation. No term, covenant, agreement, provision, condition or limitation of this Lease and no Event of Default under this Lease may be waived, altered or modified except by a written instrument executed by Lessor. No waiver of any Event of Default shall affect or alter this Lease, but each and every term, covenant, agreement, provision, condition and limitation of this Lease shall continue in full force and effect with respect to any other then existing or subsequent Event of Default.

32.8.

No expiration or termination of this Lease pursuant to the terms hereof or by operation of law or otherwise and no repossession of the Premises or any part thereof pursuant to the terms hereof or by operation of law or otherwise, shall relieve Lessee of its liabilities and obligations hereunder arising prior to termination of this Lease, all of which shall survive such expiration, termination or repossession, including, without limitation, the rights of Lessor for indemnification for liability, personal injuries or property damage, nor shall anything in this Lease be deemed to affect the right of Lessor to equitable relief.

33. ALTERNATIVE DISPUTE RESOLUTION

33.1. In the event of any dispute between the Parties arising out of the specific provisions of this Lease listed below, or any other provision of

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this Lease that expressly provides for alternative dispute resolution pursuant to this Section 33, or a breach of any such provisions solely between Lessor and Lessee, but not including a default with respect to the timely payment of Annual Rental, or if the parties otherwise agree to do so, Lessee and Lessor shall meet promptly in an effort to resolve the dispute extrajudicially. The following provisions of this Lease shall be subject to alternative dispute resolution pursuant to this Section 33:

33.1.1.	Section 2.3.7 [Retained Space], only with respect to the rate per unit charged Lessor;
33.1.2.	Section 7.3 [Lessor’s Audit], with respect to an audit conducted by either Party;
33.1.3.	Section 10.1.1 [Use of the Premises], only with respect to whether Lessee’s use complies with the use specified in Section 10.1.1;
33.1.4.	Sections 19.4.1 and 19.4.2 [Building Maintenance and Preservation Maintenance], only with respect to termination by Lessor or Lessee;
33.1.5.	Section 21.1 [General Compliance with Applicable Law];
33.1.6.	Section 23.7 [Changes in Insurance Requirements];
33.1.7.	Section 24 [Damage or Destruction], only with respect to termination by Lessee;
33.1.8.	Section 32 [Remedies]; with respect to any provision pursuant to which Lessor desires to exercise its right of termination; and
33.1.9.	Section 34 [Surrender and Vacate the Premises].

33.2.	If the dispute is not resolved as a result of such meeting, the dispute shall be referred to the senior management of each party within fifteen (15) days after the meeting prescribed in Section 33.1 of this Lease.
33.3.	The members of the senior management of each party shall meet to attempt to resolve the dispute within thirty (30) days after the dispute has been referred to them as prescribed in Section 33.2 of this Lease.
33.4.	Prior to the meeting of the members of the senior management of each party, the Parties shall exchange a written summary of the issue(s) and the underlying evidence relating to the dispute. The disputing party shall submit its written summary to the other party twenty (20) days before the

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meeting of the senior management. This submission shall set for the basis of its dispute and identify the member of its senior management authorized to resolve the dispute on its behalf. Then, ten (10) days thereafter, the other party shall submit its written summary to the disputing party. This submission shall respond to the matters raised in the written summary provided by the disputing party and identify the member of its senior management authorized to resolve the dispute on its behalf.

33.5.	If the dispute is not resolved by the senior management of each party within thirty (30) days of the last submission provided pursuant to Section 33.4 above, the Parties will attempt in good faith to resolve the dispute by mediation conducted in accordance with the Commercial Mediation Rules of the American Arbitration Association.
33.6.	Insofar as the Federal Government adopts and maintains binding arbitration as a method of dispute resolution and to the extent of the development by the United States of applicable procedures for such binding arbitration, then Lessor and Lessee shall meet to confer as to whether to adopt such procedures for binding arbitration that may be promulgated for use by the United States.
33.7.	Should the resolution of a dispute under this Section 33 result in a written agreement by the Lessor that (a) an amount of money is owed by the Lessor to the Lessee and if Lessor has not paid such amount within thirty (30) days thereafter, then Lessee may, in its sole discretion, elect to receive payment of such amount by reducing subsequent monetary payments due by Lessee to Lessor in a total amount equaling the amount due; or (b) that performance is required by Lessee, then Lessee shall have the right to cure within thirty (30) days of receipt of the written agreement by the Lessor pursuant to this Section 33.7, or if such performance cannot reasonably be completed within such thirty (30) day period, Lessee shall commence within such thirty (30) day period with due diligence and dispatch the curing and shall, having so commenced, thereafter not cease, fail or neglect to prosecute or complete with diligence and dispatch such cure.

34. SURRENDER AND VACATE THE PREMISES

34.1. On the Termination Date or other termination of the Term, Lessee shall surrender and vacate the Premises and the Fixtures, remove the Personal Property therefrom, and return the Premises and improvements thereon, including the Initial Lessee Improvements, Alterations, Preservation Maintenance, Fixtures and all of Lessor’s personal property, if any, on the Premises to as good an order and condition as would be reasonably expected given maintenance and care

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in accordance with the terms of this Lease and given normal use and wear and tear on the property. All Fixtures shall be in good working order and shall remain attached to the Premises. Notwithstanding the removal of any Trade Fixtures, all major building systems including heating, air conditioning, electrical, security lighting, fire detection, smoke detection, building fire suppression, alarm, drainage, water supply, elevator, escalator, and sewer shall be complete and in good working order and shall function as designed. Lessee shall execute all documents as Lessor may deem necessary to evidence any such other termination.

34.2.

If Lessee shall fail or neglect to remove the Personal Property and shall fail to leave the Premises in good order as described in this Section 34, then, at Lessor’s option, the Personal Property shall either become the property of Lessor without compensation therefor, or Lessor may cause it to be removed and the Premises to be repaired at the expense of Lessee, and no claim for damages against Lessor or Lessor’s Agents, shall be created by or made on account of such removal and repair work and all major building systems shall be returned to working order at the expense of Lessee.

34.3.

Ninety (90) days prior to the Termination Date, Lessee and Lessor shall jointly, or Lessor shall in the absence of Lessee, prepare an Inventory and Condition Report of the Premises to constitute the basis for materials and work that may be necessary to meet the conditions of this Section 34.

35. HOLDING OVER

This Lease shall terminate upon the Termination Date and any holding over by Lessee after the Termination Date shall not constitute a renewal of this Lease or give Lessee any rights under this Lease or in or to the Premises.

36. REPRESENTATIONS AND WARRANTIES OF LESSEE

Lessee hereby represents and warrants to Lessor as follows:

36.1.

Lessee is a limited partnership duly formed and validly existing under the laws of the State of California.

36.2.

Lessee has the right, power, legal capacity and authority to enter into and perform its obligations under this Lease, and to develop, construct, and operate the Premises as contemplated by this Lease; all approvals or consents of any person(s) required in connection with the execution and performance of this Lease have been obtained. The execution and performance of this Lease will not result in or constitute an Event of

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Default under this Lease or event that would, with notice or lapse of time or both, be a default, breach or violation of the organizational instruments governing Lessee or any agreement or any order or decree of any court or Agency to which Lessee is a party or to which it is subject.

36.3. Lessee has taken all necessary action to authorize the execution, delivery and performance of this Lease and this Lease constitutes the legal, valid and binding obligation of Lessee.

37. REPRESENTATIONS AND WARRANTIES OF LESSOR

Lessor hereby represents and warrants to Lessee as follows:

37.1.	Lessor is an Agency of the United States of America.
37.2.	Lessor has taken all necessary action to authorize the execution, delivery and performance of this Lease, and this Lease constitutes the legal, valid and binding obligation of Lessor.
37.3.	Lessor has made no representations or warranties, direct or implied, written or verbal, with respect to the Premises or any other property owned by Lessor.

38. COMPLIANCE WITH FEDERAL EQUAL OPPORTUNITY LAWS

To the extent that the following Orders, Acts, Laws, and regulations apply to this Lease then Lessee shall comply with the requirements of (a) Title VII of the Civil Rights Act of 1964 (as amended), as well as Executive Order No. 11246 of September 24, 1965, as amended by Executive Order 11375 of October 13, 1967; (b) Title V, Sections 503 and 504 of the Rehabilitation Act of September 26, 1973, P.L. 93-112 (as amended), which prohibits discrimination on the basis of disability and requires Government contractors and subcontractors to take affirmative action to employ and advance in employment qualified handicapped individuals; (c) 41 C.F.R. Chapter 60, which prescribes affirmative action requirements for government contractors and subcontractors; (d) the Age Discrimination in Employment Act of December 15, 1967, (as amended); (e) the Americans with Disabilities Act, 42 U.S.C. Sections 12111 et seq.; (f) and all other Applicable Laws relating to nondiscrimination in employment and in providing facilities and services to the public, and Lessee shall do nothing in advertising for employees that will prevent those covered by these laws from qualifying for such employment.

39. NOTICES

Any notice, consent or other communication required or permitted under this Lease shall be in writing and shall be delivered by hand, sent by courier, sent by prepaid registered or certified mail with return receipt requested, and shall be deemed to have

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been given on the earliest of (a) receipt, (b) one (1) business day after delivery to a courier for overnight expedited delivery service, or (c) five (5) business days after the date deposited in the United States mail, registered or certified, with postage prepaid and return receipt requested (provided that such return receipt must indicate receipt at the address specified), and addressed as appropriate to the following addresses (or to such other or further addresses as the Parties may designate by notice given in accordance with this Section 39):

If to Lessor:

Regional Director, Pacific West Region
U.S. Department of the Interior
National Park Service
600 Harrison Street, Suite 600
San Francisco, California 94107

with copy to: Superintendent
San Francisco Maritime National Historical Park
Fort Mason, Building. E, Room 265
San Francisco, California 94123

If to Lessee:

Maritime Hotel Associates, L.P.
c/o Kimpton Hotel and Restaurant Group, Inc.
222 Kearny Street, Suite 200
San Francisco, California 94108
Attention: Chief Financial Officer

And to:

Lessee’s Leasehold Mortgagee pursuant to Section 28 of this Lease.

40. LESSOR’S RIGHT TO EXHIBIT THE PREMISES

During the final two (2) years of the Term, Lessor shall have the right to enter the Premises at all reasonable times during normal business hours and after giving twenty-four (24) hours prior notice for the purposes of exhibiting the same to prospective lessees or developing plans for conversion of the same to full Park use after expiration of the Term. Lessor shall not take any action under this Section 40 that causes or is likely to cause material interference with Lessee’s use and/or occupancy of the Premises under the terms of this Lease.

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41. NO PARTNERSHIP OR JOINT VENTURE

Lessor is not for any purpose a partner or joint venturer of Lessee in the development or operation of the Premises or in any business conducted on the Premises. Lessor shall not under any circumstances be responsible or obligated for any losses or liabilities of Lessee.

42. ANTI-DEFICIENCY ACT

Lessee and Lessor agree that nothing contained in this Lease shall be construed as binding Lessor to expend, in any fiscal year, any sum in excess of the appropriation made by Congress for that fiscal year in furtherance of the subject matter of this Lease, or to involve Lessor in any contract or other obligation for the future expenditure of money in excess of such appropriations.

43. GENERAL PROVISIONS

43.1.	No Congressional Conflict of Interest
	No member or delegate to Congress or Resident Commissioner shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom, but this provision shall not be construed to extend to this Lease if made with a corporation for its general benefit.
43.2.	No Third Party Beneficiaries
	This Lease shall not, nor be deemed nor construed to, confer upon any person or entity, other than the Parties hereto, any right or interest, including, without limiting the generality of the foregoing, any third party beneficiary status or any right to enforce any provision of this Lease.
43.3.	No Preferential Renewal and Relocation Assistance
	This Lease provides no right of renewal, and Lessee hereby waives any preferential right of renewal of this Lease under 16 U.S.C. Section 20 or otherwise. No rights shall be acquired by virtue of this Lease entitling Lessee to claim benefits under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, Public Law 91-646.
43.4.	Memorandum of Lease
	Lessor will record a Memorandum of Lease at no charge to Lessee other than normal per page recording costs, except that Lessee shall pay any costs which may be associated with such act of recordation that exceed $100. For the purpose of recordation by Lessor, Lessee shall at Lessee’s sole expense prepare the document(s) necessary for recordation and provide such documents to Lessor.

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43.5.	Broker’s Commissions
	Lessee warrants that no person or selling agency has been employed or retained to solicit or secure this Lease upon an agreement or understanding for a commission, percentage, brokerage or contingent fee. For breach or violation of this warranty, Lessor shall have the right to annul this Lease without liability.
43.6.	Severability
	In case any one or more of the provisions of this Lease shall for any reason be held to be invalid, illegal or unenforceable in any respect, or inapplicable due to assignment of this Lease by Lessor to any person or entity other than another governmental entity of the United States Government, such invalidity, illegality or unenforceability, or inapplicability of provisions solely applicable to a governmental entity of the United States Government, shall not affect any other provision of this Lease, and this Lease shall be construed as if such invalid, illegal, unenforceable, or inapplicable provisions had not been contained in this Lease.
43.7.	Exhibits
	Each of the exhibits referenced in this Lease is attached hereto and incorporated herein.
43.8.	Time of the Essence
	Time is hereby expressly declared to be of the essence of this Lease and of each and every term, covenant, agreement, condition and provision of this Lease.
43.9.	Headings
	Section and Subsection headings in this Lease are for convenience only and are not to be construed as a part of this Lease or in any way limiting or amplifying the provisions of this Lease.
43.10.	Lease Construed as a Whole
	The language in all parts of this Lease shall in all cases be construed as a whole according to its fair meaning and not strictly for or against either Lessor or Lessee. The Parties acknowledge that each party and its counsel have reviewed this Lease and participated in its drafting and therefore that the rule of construction that any ambiguities are to be resolved against the drafting party shall not be employed or applied in the interpretation of this Lease.

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43.11.	Meaning of Terms
	Whenever the context so requires, the neuter gender shall include the masculine and the feminine, and the singular shall include the plural and vice versa.
43.12.	Federal Law
	The laws of the United States shall govern the validity, construction and effect of this Lease.
43.13.	Entire Lease
	This instrument, together with the exhibits hereto, constitutes the entire agreement between Lessor and Lessee with respect to the subject matter of this Lease and supersedes all prior offers, negotiations, oral and written. This Lease may not be amended or modified in any respect whatsoever except by an instrument in writing signed by Lessor and Lessee.
43.14.	Termination Not Merger
	The voluntary sale or other surrender of this Lease by Lessee to Lessor, or a mutual cancellation thereof, or the termination thereof by Lessor pursuant to any provision contained in this Lease, shall not work a merger, but, at the option of Lessor, shall either terminate any or all existing subleases or subtenancies on the Premises, or operate as an assignment to Lessor of any or all of such subleases or subtenancies.
43.15.	Time Periods
	Any time period to be computed pursuant to this Lease shall be computed by excluding the first day and including the last day. If the last day falls on a Saturday, Sunday or holiday, the last day shall be extended until the next business day that the Lessor is open for business, but in no event shall the extension be for more than three (3) calendar days. All references to days shall mean calendar days unless otherwise specifically stated.

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     IN WITNESS WHEREOF, the Regional Director of the Pacific West Region of the National Park Service, acting on behalf of the United States, in the exercise of the delegated authority from the Secretary, as Lessor, and Lessee have executed this Lease by proper persons thereunto duly authorized as of the date first above written.

MARITIME HOTEL ASSOCIATES, L.P.			NATIONAL PARK SERVICE
By:	/s/ Tom LaTour		By:	/s/ John J Reynolds
	Name:	Tom LaTour		John J. Reynolds
	Title:	President		Regional Director Pacific West Region

Attest:

Name:	/s/ William G. Thomas
Title:	Superintendent

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EXHIBIT A

PREMISES

     The Premises is the Haslett Warehouse, including the Vault but exclusive of the Retained Space, and the real property located within the San Francisco Maritime National Historical Park, San Francisco, California, and more particularly described as:

All of that real property situate in the City and County of San Francisco, State of California, described as follows:

Beginning at the point of intersection of the southerly line of Jefferson Street with the easterly line of Hyde Street; running thence easterly along said line of Jefferson Street 202.834 feet to a point distant thereon 209.666 feet westerly from the westerly line of Leavenworth Street; thence deflecting 89° 55’ 30” to the right and running southerly 141.370 feet; thence southerly and southeasterly along a curve to the left tangent to the preceding course, which curve has a radius of 301.90 feet, a central angle of 26° 16’ 49.43”, an arc distance of 138.475 feet to a point on the northerly line of Beach Street; thence deflecting 116° 21’ 19.43” to the right from the tangent of the preceding curve at last said point and running westerly along said line of Beach Street 234.400 feet to the easterly line of Hyde Street; thence northerly along said line of Hyde Street 275.00 feet to the point of beginning.

Being a portion of 50 Vara Block No. 259.

Together with a perpetual easement appurtenant to the above described property over a strip of land 3.50 feet in width lying contiguous to and easterly of the easterly boundary line of the above described premises and extending from the northerly line of Beach Street to a point 27 feet and 1-1/8 inches southerly from the said southerly line of Jefferson Street, this easement being the purposes of perpetually maintaining suitable clearance for spur tract purposes; and no structure shall be constructed in, over or upon said 3.50 foot strip of land except such structures as may be required to drain, maintain, support or construct a spur track at any elevation required by good railroad practice.

As created and reserved in the deed from California Packing Corporation, a New York Corporation, to Security Lithograph Company, a California Corporation, dated February 12, 1948, and recorded February 16, 1948, in Book 4815, Page 487 of Official Records of the City and County of San Francisco, State of California.

The Premises includes Fixtures and any utility facilities, such as conduits, lines, valves, fittings and related equipment and apparatus located within the Premises owned by Lessor and existing as of the Commencement Date. The Premises does not extend below (a) the bottom surface of the concrete slab on the lowest level of the Haslett Warehouse except for the specific building foundation structures, or (b) the bottom surface of the hardscape or any improvements installed by Lessee supporting such hardscape on the above-described real property that is not situated under the Haslett Warehouse.

EXHIBIT B

RETAINED SPACE

[Attach Shaded Drawing]

EXHIBIT C

Office Space

[Attach Shaded Drawing]

EXHIBIT D

Restaurant Space

[Attach Shaded Drawing]

EXHIBIT E

Retail Space

[Attach Shaded Drawing]

EXHIBIT F

TRADE FIXTURES

All of the following items installed by Lessee, to the extent that they are affixed to the Premises and constitute fixtures (or would constitute fixtures but for Lessee’s rights to remove them pursuant to this Lease) and are readily removable:

• Chandeliers, wall sconces, custom or artistic decorative lighting fixtures in the lobby areas, Restaurant Space, meeting rooms, and suites;

• Furniture, except to the extent the furniture is fully integrated into the Premises;

• Curtain rods;

• Mirrors;

• Artwork;

• Shelving, except to the extent the shelving is fully integrated into the walls of the Premises;

• Restaurant, bar, catering, room service and other food service equipment and furnishings;

• Computer and telephone equipment (excluding wiring);

• Audio/visual equipment;

• Ice machines;

• Safes (other than wall safes);

• Exercise equipment;

• Security equipment (other than wiring);

• Key card system (excluding wiring and the locks on the doors);

• Hair dryers and other personal care items;

and all other equipment reasonably agreed to in writing by Lessor and Lessee at the time of its installation; but in any event excluding mechanical (including heating, ventilating and air conditioning), elevator, fire detection, alarm and sprinkler, illumination (other than as listed above), electrical, and plumbing fixtures and systems in the Premises, and components thereof.

EXHIBIT G

SCHEDULE OF PERFORMANCE
(Due Diligence and Initial Lessee Improvements)
Haslett Warehouse

#	Action	Timeframe	Anticipated Date
1	Lessee pays Lessor $100,000 one-time payment (§ 5.3.1)	On Commencement Date	10/16/00
2	Lessor provides to Lessee all available site information in Landlord’s possession to Lessee, to include “as built” utility plans (§ 13.3.3), and hazardous material reports (§ 22.1) Lessor prepares an Inventory and Condition Report (§ 1.39)
3	Lessor delivers to Lessee list of potential Design and Construction Monitors (§ 1.20)	10th day after the Commencement Date	10/26/00
4	Lessee notifies Lessor in writing of receipt of list of Design and Construction Monitors and any reasonable objections to any of the listed contractors (Sec. 1.20)	3rd business day after receipt of list from Lessor	10/29/00
5	Lessor to submit MEP requirements for Retained Space (§ 2.3.2)	20th day after Commencement Date	11/06/00
6	Lessee submits to Lessor a traffic management plan (§ 16.2)	25th day after the Commencement Date	11/13/00
7	Lessee submits to Lessor complete schematic design package	32nd day after the Commencement Date	11/17/00
8	Lessee submits to State Historic Preservation Officer (SHPO), and provides copy to Lessor, of historic preservation certification application (Tax-Act certification)
9	Lessee makes first of 3 payments in amount of $110,000 for services of Design and Construction Monitor hired by Lessor (§ 1.20)
10	Lessor completes review of traffic management plan

#	Action	Timeframe	Anticipated Date
11	Lessor completes review process of schematic design package	21st day after receipt of complete schematic design package	12/08/00
12	End of Due Diligence Period	90th day after the Commencement Date	01/16/01
13	Lessor to remove Lessor’s personal property from warehouse (§ 3.3)	30th day after end of Due Diligence period	02/14/01
14	Lessee submits to Lessor complete design development package	91st day after Lessor approval of schematic design package	03/09/01
15	Lessee makes second of 3 payments in amount of $110,000 for services of Design and Construction Monitor hired by Lessor (§ 1.20)
16	Lessor completes review process of design development package	28th day after receipt of complete design development package	04/06/01
17	Lessee submits to Lessor a completed construction documents package	63rd day after Lessor approval of design development package	06/08/01
18	Lessee provides Lessor with HazMat Management/Remediation Plan (§ 22.10)
19	Lessee submits to Lessor evidence of insurance (§ 23.4.6)	7th day after submission of construction documents package	06/15/01
20	Lessee submits to Lessor complete financial package showing evidence of financing availability (§ 14.1)
21	Lessor completes review process of evidence of insurance and financial package	14th day after receipt of complete insurance and financial package	06/29/01
22	Lessor completes review process of construction documents	35th day after receipt of complete construction documents package	07/13/01

#	Action	Timeframe	Anticipated Date
23	Lessor delivers building permit to escrow for the loan under the approved Financing Commitment	1 day prior to closing of loan (pending Lessor approval of construction documents package)	07/30/01
24	Lessee closes loan under the approved Financing Commitment (§ 14.2)	16th day after Lessor approval of construction documents package	07/31/01
25	Building permit is delivered to Lessee	Concurrent with closing of loan under the approved Financing Commitment and issuance of the building permit for the project
26	Lessee establishes and deposits $1.9M payment into “Capital Account” for projects (§ 5.3.2)
27	Lessee makes third and last of 3 payments in amount of $110,000 for services of Design and Construction Monitor hired by Lessor (§ 1.20)
28	Lessee establishes and deposits $540K into “Capital Account” for retained space (§ 5.3.3)
29	Lessee begins construction	3rd day after closing of the loan under the approved Financing Commitment	08/03/01
30	Lessee gives Lessor Notice of Substantial Completion (§ 15.4.1)	13 months after commencement of construction	09/03/02 (No later than 12/31/02 (§ 15.1.2))
31	Lessor issues Conditional Certificate of Occupancy	Upon Substantial Completion of construction	09/11/02
32	Lessor issues Certificate of Occupancy	Upon final completion of construction	10/11/02

#	Action	Timeframe	Anticipated Date
33	Lessee submits to Lessor Preservation Plan for approval (§ 19.5)	30th day after issuance of Certificate of Occupancy	11/11/02
34	Lessee submits to Lessor Trade Fixture Inventory (revised Exhibit F), as applicable, and inventory and condition report (§ 15.4.4)
35	Lessee submits to Lessor As-Built drawings (§ 15.4.3)

EXHIBIT H

PRELIMINARY SCHEMATIC PLANS FOR, AND DESCRIPTION OF,

THE INITIAL LESSEE IMPROVEMENTS

[Attached Preliminary Schematic drawings and text from Kimpton’s Proposal]

EXHIBIT I

VAULT

[Attach Shaded Drawing]

EXHIBIT J

Retained Space Restrooms and Drinking Fountains

Plumbing Fixtures in the Retained Space

Men’s Restroom:

2 Toilets

2 Urinals

2 Wash basins

1 Diaper changing station

Women’s Restroom:

4 Toilets

2 Wash basins

1 Diaper changing station

Employee Unisex Restroom:

1 Toilet

1 Wash basin

1 Drinking fountain

Other Fixtures:

1 Service sink

2 Drinking fountains

EXHIBIT K

Street Encroachment Agreement

[Attached Recorded Street Encroachment Agreement]

EXHIBIT L

List of reports and studies identifying Historic Elements of the Haslett Warehouse:

1.	“Haslett Warehouse: Historic Structures Report”; February 1986; prepared for National Park Service by Page, Anderson & Turnbull, Inc.
2.	“Haslett Warehouse: Evaluation of Adaptive Use Alternatives”; April 1994; prepared for National Park Service by Architectural Resources Group.

EX-10.2

Exhibit 10.2

Seventh Amendment
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SEVENTH AMENDMENT
TO
HISTORIC LEASE
(HL-SAFR001-98)

     THIS SEVENTH AMENDMENT TO HISTORIC LEASE (HL-SAFR001-98) (“Seventh Amendment”) is made and entered into effective as of 12:00 (noon) Pacific Standard Time February 6, 2001, by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America (“Lessor”) and Maritime Hotel Associates, L.P., a California limited partnership whose General Partner is Hyde Street Hospitality, Inc a wholly-owned subsidiary of the Kimpton Hotel & Restaurant Group, Inc, a California corporation (“Lessee”).

RECITALS

     This Seventh Amendment is entered upon the basis of the following facts, understandings and intentions of the parties.

     WHEREAS, Lessor and Lessee entered into that certain Historic Lease (HL-SAFR001-98), effective as of October 16, 2000 (the “Original Lease”), as amended by that certain First Amendment to Historic Lease (HL-SAFR001-98) effective as of January 16, 2001 (the “First Amendment”), that certain Second Amendment to Historic Lease (HL-SAFR001-98) effective as of January 18, 2001 (the “Second Amendment”), that certain Third Amendment to Historic Lease (HL-SAFR001-98) effective as of January 22, 2001 (the “Third Amendment”), that certain Fourth Amendment to Historic Lease (HL-SAFR001-98) effective as of January 24, 2001 (the “Fourth Amendment”), that certain Fifth Amendment to Historic Lease (HL-SAFR001-98) effective as of January 29, 2001 (the “Fifth Amendment”), and that certain Sixth Amendment to Historic Lease (HL-SAFR001-98) effective as of February 1, 2001 (the “Sixth Amendment”), which shall be amended by this Seventh Amendment. This Seventh Amendment, together with the Original Lease, as amended by the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, and the Sixth Amendment, hereinafter shall be referred to collectively as the “Lease;”

     WHEREAS, Lessor, in response to Lessee’s request for an extension of the Due Diligence Period for certain matters, Lessor has agreed to certain extensions as set

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forth below.

     WHEREAS, the consistency determination process with the San Francisco Bay Conservation and Development Commission (“BCDC”) has not yet been completed;

     WHEREAS, Lessor and Lessee desire to amend the Lease in the manner set forth herein.

AGREEMENT

     NOW, THEREFORE, in consideration of the terms, conditions and covenants set forth below and other good and valuable consideration, the parties hereto agree as follows:

     1. The capitalized terms not otherwise defined herein shall have the meanings given in the Original Lease, First Amendment, Second Amendment, Third Amendment, Fourth Amendment, Fifth Amendment, and Sixth Amendment.

     2. Section 3.2 is hereby amended to: insert “(a)” at the beginning of the first paragraph; and provide for an extension of the Due Diligence Period to February 28, 2001.

     3. Section 3.2 is hereby further amended to add the following:

(b) The Due Diligence Period shall be further extended beyond February 28, 2001 solely for the limited purpose of addressing the final decision by San Francisco Bay Conservation and Development Commission (“BCDC”) on Lessor’s consistency determination and request for letter of agreement (“Determination Request”). Such period of extension beyond February 28, 2001 (“Extended Due Diligence Period”) shall be as set forth below. Lessor and Lessee acknowledge that BCDC does not have the authority under 15 C.F.R. Part 930 (2000) to conditionally approve a Determination Request, and instead must either approve or disapprove it.

(c) On January 25, 2001, Lessor submitted the Determination Request to BCDC. Lessee and Lessor shall cooperate to expedite and facilitate processing of the Determination Request. Pursuant to 15 C.F.R. Section 930.41 (2000), inaction by BCDC at the end of forty-five (45) days (or sixty

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(60) days if extended) from the date of Lessor’s submission of its Determination Request is deemed approval. Therefore, the Determination Request is deemed approved if BCDC has not acted on it by March 11, 2001, or by March 26, 2001, if an extension is requested by BCDC pursuant to 15 C.F.R. Section 930.41 (2000), (the “Required Response Date”). In the event that Lessor grants any extensions to the Required Response Date to BCDC beyond March 26, 2001, the Extended Due Diligence Period shall be extended for a commensurate period, the Required Response Date shall refer to such extended date, and the Determination Request shall be deemed approved as provided in 15 C.F.R. Section 930.41 (2000) if BCDC has not acted by such extended date. If BCDC has approved the Determination Request on or before the Required Response Date, the Extended Due Diligence Period shall terminate the day after the date of approval by BCDC.

(d) Lessee’s right to terminate this Lease under the procedures and requirements set forth in this Section 3.2 during the Extended Due Diligence Period is limited to: (i) the issuance by BCDC of its written disapproval of the Determination Request (A) without alternative measures, or (B) with a request for additional information from Lessor; or (ii) the issuance by BCDC of its written disapproval of the Determination Request which includes alternative measures which, if implemented, would (A) materially increase the costs to Lessee of performing its obligations under this Lease, (B) result in an imposition that is not commercially reasonable, or (C) materially adversely affect Lessee’s use of any portion of the Premises (individually and collectively, “Unacceptable Measures”).

(e) If BCDC disapproves the Determination Request without suggesting alternative measures or without requesting additional information from Lessor, Lessee shall have five (5) business days from the date of the BCDC disapproval to terminate this Lease pursuant to this Section 3.2. Alternatively, within five (5) business days from the date of the BCDC disapproval, Lessee may request in writing an extension of the Due Diligence Period from Lessor, and the Due Diligence Period shall be extended pursuant to the terms set forth in Section 3.2(g) for an additional thirty (30) days after the date of the BCDC action (the “Final Extended Due Diligence Period”) so that Lessor and BCDC may confer and attempt to resolve any disagreement.

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(f) If BCDC disapproves the Determination Request and suggests alternative measures on or before the Required Response Date, then Lessee shall be permitted a five (5) business day period after the date of the disapproval to determine whether the disapproval includes Unacceptable Measures. If Lessee determines that it does not include Unacceptable Measures, then it shall so notify Lessor in writing within the five (5) business day period that it consents to the alternative measures, and the Extended Due Diligence Period shall be terminated at the end of the five (5) business day period. If Lessee determines that the BCDC disapproval includes Unacceptable Measures it may elect to: (i) terminate immediately and shall do so by providing written notice to the Lessor no later than the end of the five (5) business day period; or (ii) notify Lessor in writing during the five (5) business day period that it has reasonably determined that the BCDC measures include Unacceptable Measures (the “Unacceptable Measure Notice”).

(g) If Lessee elects to: (i) request an extension from Lessor pursuant to Section 3.2(e) above; (ii) deliver the Unacceptable Measure Notice to Lessor pursuant to Section 3.2(f)(ii) above; or (iii) if BCDC disapproves the Determination Request without alternative measures but requests additional information from Lessor prior to the Required Response Date, then the Extended Due Diligence Period shall be extended for up to an additional thirty (30) days after the date of the BCDC action as the Final Extended Due Diligence Period so that Lessor and BCDC may confer and attempt to resolve any disagreement between them or submit the supplemental information requested by BCDC. In consideration of the Final Extended Due Diligence Period, Lessee shall advance incrementally to Lessor funds sufficient to cover Lessor’s out-of-pocket costs for the design of the museum space as are reasonably required to keep pace with Lessee’s design and construction schedule, which total amount shall not exceed Two Hundred Sixty Thousand Dollars ($260,000.00). This amount shall be offset against the one-time payment payable to Lessor pursuant to Section 5.3.2 of the Lease. The Final Extended Due Diligence Period shall terminate: (w) upon written approval by BCDC; (x) at the end of the Final Extended Due Diligence Period; (y) upon receipt by Lessee of written notice from Lessor that negotiations have been terminated without resolution; or (z) in the event that resolution has been reached, five (5)

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days after Lessee has received notice of the proposed resolution, whichever date is earliest.

(h) If BCDC disapproves the Determination Request, or disapproves the Determination Request with alternative measures that Lessee has found to be Unacceptable Measures or has requested additional information and the Extended Due Diligence Period has been extended through the Final Extended Due Diligence Period, then Lessor, during the Final Extended Due Diligence Period, may elect to: (i) continue discussions with BCDC; (ii) resubmit the Determination Request with the additional information requested by BCDC (“Resubmission”); or (iii) pursue mediation under 15 C.F.R. Part 930 (2000). If Lessor so elects, it shall notify Lessee in writing prior to the end of the Final Extended Due Diligence Period, and Lessee shall be entitled to extend the Final Extended Due Diligence Period to: (w) five (5) business days after written approval or disapproval by BCDC on the Resubmission; (x) five (5) business days after receipt by Lessee of written notice from Lessor that the negotiations and/or mediation have been terminated without resolution; (y) in the event that a resolution has been reached, five (5) days after Lessee has received notice of the proposed resolution; or (z) by no later than June 1, 2001, whichever is the earliest date.

     4. Exhibit G, Schedule of Performance, is hereby deleted in its entirety and replaced with Exhibit G-1, Schedule of Performance attached hereto. All references to Exhibit G in the Lease shall mean Exhibit G-1.

     5. Upon execution of this Seventh Amendment, Lessee shall pay to Lessor Two Hundred and Twenty Thousand Dollars ($220,000) as follows:

          a. A nonrefundable advance payment of a portion of the one-time payment payable to Lessor pursuant to Section 5.3.2 of the Lease in the amount of One Hundred Seventy Thousand Dollars ($170,000); and

          b. A nonrefundable advance payment of a portion of the second payment for the Design and Construction Monitor in the amount of Fifty Thousand Dollars ($50,000).

     6. The third nonrefundable payment for the Design and Construction Monitor shall be increased to One Hundred Thirty Thousand Dollars ($130,000) and shall be

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paid in accordance with Exhibit G-1, Schedule of Performance, Line Item #27.

     7. Section 12.1 of the Lease is hereby amended to add the following sentence:

Lessee’s obligation to pay the costs and fees of the Design and Construction Monitor shall not exceed an aggregate of Three Hundred and Fifty Thousand dollars ($350,000), which shall be paid in accordance with Exhibit G-1, Schedule of Performance.

     8. Lessor shall permit Lessee to perform Soft Demolition (as defined below) prior to closing on any financing necessary for the construction of Initial Lessee Improvements provided Lessee obtains Lessor’s prior written approval of such Soft Demolition, which approval Lessor shall not unreasonably withhold or delay provided Lessee submits complete plans for such Soft Demolition to permit Lessor’s timely review. Soft Demolition shall mean interior demolition which does not affect the integrity of the building, including, without limitation, structural and weatherproofing elements and Historic Elements, such as removal of non-structural wall partitions or ceiling panels, or carpeting. Lessee, at its sole cost and expense, shall comply with all Applicable Laws in the performance of such Soft Demolition, and shall remove all materials demolished as part of such Soft Demolition and shall dispose of such materials in compliance with all Applicable Laws. Except as expressly provided herein, all provisions of the Lease applicable to Lessee’s construction of Initial Lessee Improvements, including insurance and liability provisions, shall also apply to Soft Demolition.

     9. Section 28.4.1 of the Lease is hereby deleted in its entirety and replaced with the following:

28.4.1 Except for Leasehold Mortgages permitted without Lessor’s permission pursuant to Section 28.6, at no time may the total of all Leasehold Mortgages on the Premises, as of the date that the latest Leasehold Mortgage is granted, exceed eighty percent (80%) of the total value of the Premises as estimated by the appraiser for the latest Leasehold Mortgagee at or about such time. Conversely, subject to the other provisions of this Article 28, Lessee shall have the right to enter into Leasehold Mortgages that at any one time in the aggregate do not exceed eighty percent (80%) of the total value of the Premises as estimated by the appraiser for the latest Leasehold Mortgagee at or about such time.

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For purposes herein, the appraiser shall be a current member in good standing of either the American Society of Appraisers (“ASA”) or the Appraisal Institute (“MAI”), and shall also be a member of either the Counselors of Real Estate (“CRE”) or the International Society of Hospitality Consultants (“ISHC”), or their successor organizations. Promptly upon demand, Lessee shall cause a complete copy of such appraisal, together with all supporting documentation, to Lessor for determination of compliance with the terms and conditions of this Lease. Lessee shall bear all costs of any such appraisal.

     10. Section 28.13.2 of the Lease is hereby deleted in its entirety and replaced with the following:

28.13.2	(a) Anything herein contained to the contrary notwithstanding, upon the occurrence of an Event of Default, other than an Event of Default due to a default in the payment of money or other default reasonably susceptible of being cured prior to Leasehold Mortgagee obtaining possession, Lessor shall take no action to effect a termination of this Lease if, within thirty (30) days after notice of such Event of Default is given to each Leasehold Mortgagee, a Leasehold Mortgagee shall have (i) obtained possession of the Premises (including possession by a receiver), or (ii) notified Lessor of its intention to institute foreclosure proceedings or otherwise acquire Lessee’s interest under this Lease, and thereafter promptly commences and prosecutes such proceedings with diligence and dispatch (subject to Force Majeure and delays caused by bankruptcy or insolvency proceedings).
	(b) Upon such a foreclosure or other acquisition of Lessee’s interest under this Lease, Lessor agrees to approve as Lessee hereunder pursuant to 36 C.F.R. Section 18.10(d) (2000), the (i) Leasehold Mortgagee, or (ii) any other foreclosure or trustee sale purchaser or grantee of any deed in lieu; provided such acquirer of Lessee’s interest under this Lease is a Qualified Transferee (as defined below).
	(c) A “Qualified Transferee” shall mean a person or entity that (i) satisfies the criteria provided in Section 27.3(b) above, (ii) is not an Excluded Contractor, nor has entered into an Operating Agreement (as defined in Section 28.13.2(k) below) with an Approved Operator that is an Excluded Contractor; (iii) agrees in a written agreement to be bound by all

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the terms and conditions of this Lease and assume Lessee’s obligations hereunder arising or accruing from and after the date of its acquisition of Lessee’s interest under this Lease (collectively the foregoing contained in this Section 28.13.2(c)(iii), the “Assumption Agreement”); and (iv) receives a written determination by Lessor approving such potential acquirer of Lessee’s interest under this Lease as having satisfied the requirements of Section 28.13.2(c)(i), (ii) and (iii) prior to such acquisition of Lessee’s interest.

(d) A Leasehold Mortgagee anticipating acquisition of Lessee’s interest under this Lease by foreclosure or otherwise, and any potential foreclosure or trustee sale purchaser or potential grantee of any deed in lieu may request Lessor’s approval of such party as a Qualified Transferee prior to such acquisition, purchase or receipt, which determination shall be made within fifteen (15) business days of Lessor’s receipt of complete documentation supporting such written request.

(e) Notwithstanding anything to the contrary in the foregoing, Lessor shall recognize as Lessee a Leasehold Mortgagee, its designee or nominee (other than Lessee) that acquires Lessee’s interest under this Lease through foreclosure, deed in lieu, or otherwise for a period of sixty (60) days following such acquisition of Lessee’s interest under this Lease during which time, Leasehold Mortgagee, its designee or nominee (other than Lessee) shall (i) assign Lessee’s interest under this Lease pursuant to Section 28.14, (ii) (A) enter into an Operating Agreement (as defined in Section 28.13.2(k) below) with a person or entity that has all of the qualifications of an Approved Operator set forth in Sections 27.3 and 28.13.2 of this Lease, as reasonably determined by Lessor, and which is not an Excluded Contractor, and (B) deliver to Lessor an executed counterpart of an Assumption Agreement; or (iii) deliver to Lessor an executed counterpart of an Assumption Agreement. Notwithstanding any requirement for an Assumption Agreement and anything to the contrary in Section 28.13.2(g) below, the provisions of Section 32.6.1 pertaining to a Leasehold Mortgagee shall apply to a Leasehold Mortgagee, its nominee or designee (other than Lessee) for the period of its possession of Lessee’s interest under the Lease pursuant to this Section 28.13.2(e) until its assignment of Lessee’s interest pursuant to Section 28.13.2(e)(i) above, or its assumption of Lessee’s obligations pursuant to Sections 28.13.2(e)(ii) or (iii) above, upon either of which events the provisions of

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Section 32.6.1 pertaining to Lessee shall apply to such Leasehold Mortgagee or its assignee, as applicable. A Leasehold Mortgagee, its nominee or designee (other than Lessee) assuming Lessee’s obligations pursuant to Sections 28.13.2(e)(ii) or (iii) may subsequently assign its interest in the Lease in accordance with Section 28.14.

(f) A Leasehold Mortgagee may exercise its rights under this Section 28.13.2 through a nominee or designee (other than Lessee) which shall be treated for all purposes under this Section 28.13.2 as though it were a Leasehold Mortgagee, provided that such nominee or designee is a wholly owned subsidiary of Leasehold Mortgagee (directly or indirectly) and is not Lessee; and provided, further, that no Leasehold Mortgagee shall acquire title to this Lease through a nominee or designee which is an Excluded Contractor.

(g) Subject to Section 28.13.2(e) above, any successor lessee, including, without limitation, a Qualified Transferee, shall enter into an Assumption Agreement. If an Assumption Agreement has an effective date during the period of construction of the Initial Lessee Improvements, then such Assumption Agreement shall be further subject to potential time extensions provided under Section 28.13.2(j)(ii) or (iii) to the extent applicable. Additionally, a successor lessee approved pursuant to (i) Section 28.13.2(c) as a Qualified Transferee with an Operating Agreement (as defined in Section 28.13.2(k) below) with a person or entity that has all of the qualifications of an Approved Operator set forth in Sections 27.3 and 28.13.2 of this Lease, as reasonably determined by Lessor, and which is not an Excluded Contractor; or (ii) Section 28.13(e)(ii) shall maintain an Operating Agreement (as defined in Section 28.13.2(k) below) with an Approved Operator for the Term of this Lease. Any approval by Lessor as required by Section 28.13.2 shall apply only to the specific transaction thereby authorized and shall not relieve Lessee from any requirement of obtaining the prior written consent of Lessor, if required under this Lease, to any further sale, assignment, transfer described in this Section, including any change in an Approved Operator or Qualified Transferee.

(h) A Leasehold Mortgagee, upon acquiring Lessee’s interest under this Lease, shall be required promptly to cure all other defaults then reasonably susceptible of being cured by such Leasehold Mortgagee.

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(i) Notwithstanding anything to the contrary in the foregoing, the following provisions of this Section 28.13.2(i) are intended to apply to a Leasehold Mortgagee that obtains possession of the Premises and intends to institute foreclosure proceedings or otherwise acquire Lessee’s interest under this Lease pursuant to Section 28.13.2(a) above and shall not apply to a Leasehold Mortgagee that has acquired Lessee’s interest under this Lease through foreclosure, deed in lieu or otherwise: (i) no Leasehold Mortgagee shall be obligated to continue possession or to continue foreclosure proceedings; (ii) nothing herein contained shall preclude Lessor, subject to the provisions of this Section, from exercising any rights or remedies under this Lease (other than a termination of this Lease to the extent otherwise permitted hereunder) with respect to any other Event of Default by Lessee during the pendency of such foreclosure proceedings; and (iii) such Leasehold Mortgagee shall agree with Lessor in writing to comply during the period Lessor forebears from terminating this Lease with such of the terms, conditions and covenants of this Lease as are reasonably susceptible of being complied with by such Leasehold Mortgagee. Notwithstanding anything to the contrary, including an agreement by Leasehold Mortgagee given under clause (iii) of the preceding sentence, Leasehold Mortgagee shall have the right at any time to notify Lessor that it has relinquished possession of the Premises, or that it will not institute foreclosure proceedings or, if such foreclosure proceedings have commenced, that it has discontinued them, and, in such event, the Leasehold Mortgagee shall have no further liability under such agreement from and after the date it delivers such notice to Lessor, and, thereupon, Lessor shall be entitled to seek the termination of this Lease as otherwise herein provided. Upon any such termination, the provisions of this Section 28.13.3 shall apply.

(j) The following provisions shall apply during the period of construction of the Initial Lessee Improvements:

(i) Subject to Section 28.13.2(e)(ii) and (iii), if the default of Lessee is with respect to construction of the Initial Lessee Improvements, nothing contained in this Section 28.13.2 or in any other Section or provision of this Lease shall be deemed to require, permit or authorize the Leasehold Mortgagee, either before or after foreclosure or action in lieu thereof, to undertake or continue the construction or

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	completion of the Initial Lessee Improvements beyond the extent necessary to conserve or protect the Initial Lessee Improvements or construction already made, without first (in its sole discretion) having expressly assumed Lessee’s obligation to Lessor by written agreement reasonably satisfactory to Lessor, to complete, in the manner provided in this Lease, the Initial Lessee Improvements on the Premises or the part thereof to which the lien or title of such Leasehold Mortgagee relates, and submitted evidence satisfactory to Lessor that it has the qualifications and financial responsibility necessary to perform such obligation.
(ii)	Upon assuming Lessee’s obligations under this Lease pursuant to Sections 28.13.2(e)(ii) or (iii) or Section 28.13.2(j)(i) above, the Leasehold Mortgagee shall be required only to exercise due diligence in completion of the construction of the Initial Lessee Improvements but shall not be required to complete construction of the Initial Lessee Improvements within the dates set forth in Section 15 of this Lease.
(iii)	Any transferee of a Leasehold Mortgagee or any purchaser at a foreclosure sale or other acquirer of Lessee’s interest under this Lease pursuant to this Section 28.13.2 or Section 28.14 other than a Leasehold Mortgagee shall be obligated to complete the Initial Lessee Improvements and exercise due diligence in the completion of the construction thereof, but shall not be required to complete construction of the Initial Lessee Improvements within the dates set forth in Section 15 of this Lease.
(iv)	Any assuming Leasehold Mortgagee or transferee properly completing such Initial Lessee Improvements shall be entitled, upon written request made to Lessor, to a Certificate of Occupancy from Lessor with respect to such Initial Lessee Improvements to the same extent and in the same manner as Lessee would have been entitled had Lessee not defaulted.

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(k) For purposes under this Lease “Operating Agreement” shall mean a written contract for development and/or operation and management of the Premises in accordance with the terms and provisions of this Lease. Lessee (or any successor Lessee) shall ensure that any Operating Agreement entered into pursuant to this Lease requires the Premises to be developed and/or operated and managed in accordance with the terms of this Lease.

     11. The following are technical corrections to the Lease:

          a. The designations HL-SAFR001-98 and HL-SAF001-99 in the Lease are hereby corrected and replaced by “HL-SAFR001-00”.

          b. Section 1.29 is hereby revised to delete the word “in” between “end of” and “Section 1.8”.

          c. Section 5.5.1.2.1 is hereby revised to change the phrase “Adjustment Date” to “adjustment date”.

     12. This Seventh Amendment may be executed in counterparts, each of which shall constitute an original, and all of which together shall constitute one and the same instrument.

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     13. Except as otherwise expressly modified by the terms of this Seventh Amendment, the Lease remains unchanged and in full force and effect.

     IN WITNESS WHEREOF, the Regional Director of the Pacific West Region of the National Park Service, acting on behalf of the United States, in the exercise of the delegated authority from the Secretary, as Lessor, and Lessee have executed this Seventh Amendment by proper persons thereunto duly authorized as of the date first above written.

MARITIME HOTEL ASSOCIATES, L.P.,			NATIONAL PARK SERVICE
a California limited partnership
By:	Hyde Street Hospitality, Inc.
	a California corporation
Its:	General Partner
	By:	/s/ J. Kirke Wrench	By:	/s/ John J. Reynolds
	Name:	J. Kirke Wrench	Name:	John J. Reynolds
	Title:	CFO	Title:	Regional Director,
				Pacific West Region

***SAN FRANCISCO MARITIME NATIONAL HISTORICAL PARK***
****PACIFIC WEST REGION — NATIONAL PARK SERVICE ****

EX-10.3

Exhibit 10.3

Tenth Amendment
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Page 1

TENTH AMENDMENT
TO
HISTORIC LEASE
(HL-SAFR001-00)

     THIS TENTH AMENDMENT TO HISTORIC LEASE (HL-SAFR001-00) (“Tenth Amendment”), dated for reference purposes December 9, 2008 and retroactively effective as of September 18, 2008, is made and entered into by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America (“Lessor”) and Maritime Hotel Associates, L.P., a California limited partnership whose General Partner is Hyde Street Hospitality, LLC, a wholly-owned subsidiary of Kimpton Group Holding LLC, a Delaware limited liability company (“Lessee”).

RECITALS

     This Tenth Amendment is entered upon the basis of the following facts, understandings and intentions of the parties.

     WHEREAS, Lessor and Lessee entered into that certain Historic Lease (HL-SAFR001-98), effective as of October 16, 2000 (the “Original Lease”), as amended by that certain First Amendment to Historic Lease effective as of January 16, 2001 (the “First Amendment”), that certain Second Amendment to Historic Lease effective as of January 18, 2001 (the “Second Amendment”), that certain Third Amendment to Historic Lease effective as of January 22, 2001 (the “Third Amendment”), that certain Fourth Amendment to Historic Lease effective as of January 24, 2001 (the “Fourth Amendment”), that certain Fifth Amendment to Historic Lease effective as of January 29, 2001 (the “Fifth Amendment”), that certain Sixth Amendment to Historic Lease effective as of February 1, 2001 (the “Sixth Amendment”), that certain Seventh Amendment to Historic Lease (which corrected the designation to HL-SAFR001-00) effective as of February 6, 2001 (the “Seventh Amendment”), that certain Eighth Amendment to Historic Lease effective as of August 10, 2001 (the “Eighth Amendment”), and that certain Ninth Amendment to Historic Lease effective as of May 14, 2004 (the “Ninth Amendment”), which shall be amended by this Tenth Amendment. This Tenth Amendment, together with the Original Lease, as amended by the First Amendment, the Second Amendment, the Third Amendment, Fourth Amendment, Fifth Amendment, Sixth Amendment, Seventh Amendment, Eighth Amendment, and Ninth Amendment hereinafter shall be referred to collectively as the

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“Lease”; and

     WHEREAS, pursuant to Section 5.5.1.1 of the Lease, CPI adjustments to the Base Rental shall be made every five (5) years during the Term with the first such adjustment to be made on the first day following the fifth anniversary of the issuance of the Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first; and

     WHEREAS, Lessor and Lessee desire to amend the Lease to reflect the first CPI adjustment to Base Rental in the manner set forth herein.

AGREEMENT

     NOW, THEREFORE, in consideration of the terms, conditions and covenants set forth below and other good and valuable consideration, the parties hereto agree as follows:

     1. The capitalized terms not otherwise defined herein shall have the meanings given in the Lease.

     2. Pursuant to Section 5.5, Lessee is obligated to pay Base Rental, as part of the Annual Rental, commencing with the first day following issuance of the Certificate of Occupancy or Conditional Certificate of Occupancy, whichever occurs first.

     3. The Certificate of Occupancy was issued on September 17, 2003, therefore pursuant to Section 5.5.1.1 of the Lease, the first adjustment to the Base Rental shall occur on September 18, 2008. In addition, pursuant to Section 5.2 of the Lease, Lease Year 1 commenced on September 17, 2003 and each subsequent Lease Year shall commence on January 1 thereafter. A copy of the Certificate of Occupancy is attached hereto as Exhibit A.

     4. Pursuant to Section 5.5 of the Lease, the initial amount of the Base Rental was One Million Dollars ($1,000,000) payable in equal monthly installments of Eighty-Three Thousand Three Hundred and Thirty-Three Dollars and Thirty-Three cents ($83,333.33).

     5. Pursuant to Section 5.5.2 of the Lease, Lessor notified Lessee that commencing as of September 18, 2008, the Base Rental, as adjusted by CPI, shall be in the amount of One Million Two Hundred Thousand Dollars ($1,200,000), payable in

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equal monthly installments of One Hundred Thousand Dollars ($100,000). A worksheet showing the CPI calculations, together with a chart of the annual CPI, are attached hereto as Exhibits B-1 and B-2.

     6. Pursuant to Section 5.5.1.1 of the Lease, CPI adjustments applicable to a partial month shall be remitted with the first full monthly payment due at the adjustment amount, however, since the amount of the CPI adjustment was not known until release of the October, 2008 CPI for the Bay Area, which occurred in December, 2008, Lessee received notification of the increase after the October, November and December 2008 payments of Base Rental were paid by Lessee to Lessor. Therefore, payment in the amount of Fifty-seven Thousand One Hundred Twenty-Three Dollars and Thirty Cents ($57,123.30) shall be due on December 30, 2008; which payment is comprised of the following amounts owed:

September 2008	$	7,123.29
October 2008	$	16,666.67
November 2008	$	16,666.67
December 2008	$	16,666.67
	$	57,123.30

     7. Commencing as of January 1, 2008 (Lease Year 6) through Lease Year 38, Percentage Rental shall be calculated pursuant to Section 5.6.1.3 of the Lease.

     8. Pursuant to Section 5.5.2 of the Lease, Lessor’s notice to Lessee of the CPI adjustment constitutes an amendment to the Lease as if duly executed by the Parties. This Tenth Amendment memorializes that amendment for the parties’ record-keeping purposes.

     9. This Tenth Amendment may be executed in counterparts, each of which shall constitute an original, and all of which together shall constitute one and the same instrument.

     10. Except as otherwise expressly modified by the terms of this Tenth Amendment, the Lease remains unchanged and in full force and effect.

***SAN FRANCISCO MARITIME NATIONAL HISTORICAL PARK***
****PACIFIC WEST REGION — NATIONAL PARK SERVICE ****

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     IN WITNESS WHEREOF, the Regional Director of the Pacific West Region of the National Park Service, acting on behalf of the United States, in the exercise of the delegated authority from the Secretary, as Lessor, and Lessee have executed this Tenth Amendment by proper persons thereunto duly authorized as of the date first above written.

MARITIME HOTEL ASSOCIATES, L.P.,			NATIONAL PARK SERVICE
a California limited partnership
By:	Hyde Street Hospitality, LLC,
	a Delaware limited liability company
Its:	General Partner
	By: Name:	/s/ Ben Rowe Ben Rowe	By: Name:	/s/ George J. Turnbull George Turnbull
	Title:	Chief Financial Officer	Title:	Deputy Regional Director, PWRO

***SAN FRANCISCO MARITIME NATIONAL HISTORICAL PARK***
****PACIFIC WEST REGION — NATIONAL PARK SERVICE ****

Tenth Amendment
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Exhibit A

Certificate of Occupancy

[Attached]

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****PACIFIC WEST REGION — NATIONAL PARK SERVICE ****

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Exhibit B-1

Worksheet for CPI Calculations

[Attached]

***SAN FRANCISCO MARITIME NATIONAL HISTORICAL PARK***
****PACIFIC WEST REGION — NATIONAL PARK SERVICE ****

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Exhibit B-2

Annual CPI

[Attached]

***SAN FRANCISCO MARITIME NATIONAL HISTORICAL PARK***
****PACIFIC WEST REGION — NATIONAL PARK SERVICE ****

EX-10.4

Exhibit 10.4

Eleventh Amendment
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ELEVENTH AMENDMENT
TO
HISTORIC LEASE

(HL-SAFR001-00)

     THIS ELEVENTH AMENDMENT TO HISTORIC LEASE (HL-SAFR001-00) (“Eleventh Amendment”), effective as of February 16, 2011 (the “Eleventh Amendment Effective Date”), is made and entered into by and between the United States Department of the Interior, National Park Service acting through the Regional Director, Pacific West Region, an agency of the United States of America (“Lessor”) and Wildcats Owner LLC, a Delaware limited liability company (“Lessee”).

RECITALS

     This Eleventh Amendment is entered upon the basis of the following facts, understandings and intentions of the parties.

     WHEREAS, Lessor and Maritime Hotel Associates, L.P., a California limited partnership (the “Original Lessee”) entered into that certain Historic Lease (HL-SAFR001-98), effective as of October 16, 2000 (the “Original Lease”), as amended by that certain First Amendment to Historic Lease effective as of January 16, 2001 (the “First Amendment”), that certain Second Amendment to Historic Lease effective as of January 18, 2001 (the “Second Amendment”), that certain Third Amendment to Historic Lease effective as of January 22, 2001 (the “Third Amendment”), that certain Fourth Amendment to Historic Lease effective as of January 24, 2001 (the “Fourth Amendment”), that certain Fifth Amendment to Historic Lease effective as of January 29, 2001 (the “Fifth Amendment”), that certain Sixth Amendment to Historic Lease effective as of February 1, 2001 (the “Sixth Amendment”), that certain Seventh Amendment to Historic Lease (which corrected the designation to HL-SAFR001-00) effective as of February 6, 2001 (the “Seventh Amendment”), that certain Eighth Amendment to Historic Lease effective as of August 10, 2001 (the “Eighth Amendment”), that certain Ninth Amendment to Historic Lease effective as of May 14, 2004 (the “Ninth Amendment”) and that certain Tenth Amendment to Historic Lease effective as of September 18, 2008 (the “Tenth Amendment”), which shall be amended by this Eleventh Amendment. This Eleventh Amendment, together with the Original Lease, as amended by the First Amendment, the Second Amendment, the Third Amendment, Fourth Amendment, Fifth Amendment, Sixth Amendment, Seventh Amendment, Eighth Amendment, Ninth Amendment and Tenth Amendment hereinafter shall be referred to collectively as the “Lease”; and

     WHEREAS, the rights and obligations of Original Lessee have been assigned and delegated to, and assumed by, Lessee pursuant to that certain Assignment and Assumption of Historic Lease (HL-SAFR001-00) of even date herewith; and

     WHEREAS, Lessor and Lessee desire to amend the Lease as set forth herein.

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AGREEMENT

     NOW, THEREFORE, in consideration of the terms, conditions and covenants set forth below and other good and valuable consideration, the parties hereto agree as follows:

     1. Definitions. The capitalized terms not otherwise defined herein shall have the meanings given in the Lease.

     2. Amended Section 1.72. Section 1.72 is hereby deleted in its entirety and replaced with the following:

     (a) “Transfer” means the direct or indirect, voluntary or by operation of law, sale, assignment, subletting, encumbering, pledge or other transfer or hypothecation of Lessee’s or any permitted assignee’s or sublessee’s interest in or rights with respect to the Premises or Lessee’s leasehold estate therein. Any sale or other transfer, including by consolidation, merger or reorganization, of a Controlling Interest in Lessee, or any permitted assignee or sublessee, if such entity is a corporation, or any sale or other transfer of a Controlling Interest in the partnership interests of such entity, if such entity is a partnership, or any sale or other transfer of a Controlling Interest in the membership interests of such entity, if such entity is a limited liability company, whether in a single transfer or in a series of related transfers, and whether directly or by sales or transfers of underlying membership or partnership or corporate ownership interests, shall be deemed a Transfer. In the event the Lessee is directly or indirectly owned by a real estate investment trust (“REIT”) or other entity which operates the Premises through a different wholly-owned entity owned directly or indirectly by such REIT (the “Operating Affiliate”), then, a “Transfer” shall include a change in the Controlling Interest of the Operating Affiliate whether in a single transfer or in a series of related transfers, whether directly or by sales or transfers of the underlying ownership interests. For illustrative examples, please see Attachments 1A and 1B attached to this Eleventh Amendment and incorporated herein by this reference.

     (b) The term “Controlling Interest” as used in this Lease means: (i) in the case of a corporate entity, an interest, beneficial or otherwise, (A) of sufficient outstanding voting securities or capital of the Lessee, Operating Affiliate, permitted assignee, sublessee or related entity so as to permit exercise of managerial authority over the actions and operations of the Lessee, Operating Affiliate, permitted assignee, sublessee or related entity, and/or (B) of a majority of the Board of Directors of Lessee, Operating Affiliate, permitted assignee, sublessee or

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related entity; or (ii) in the instance of a partnership, limited partnership, joint venture, limited liability company, or individual entrepreneurship, beneficial ownership of the capital assets of Lessee, Operating Affiliate, permitted assignee, sublessee or related entity so as to permit exercise of managerial authority over the actions and operations of Lessee, Operating Affiliate, permitted assignee, sublessee or related entity.

     (c) Notwithstanding the foregoing definition of “Transfer,” a “Transfer” shall not include any transaction in connection with the granting of an Assignment for Security or Leasehold Mortgage pursuant to Section 28.2 below (but excluding a foreclosure or giving of a deed in lieu of foreclosure thereunder). A foreclosure or the giving of a deed in lieu shall be deemed a “Transfer” and shall require Lessor’s prior written approval in accordance with Section 28.13.2 below. For the avoidance of doubt a “Transfer” shall not include the sale, assignment, encumbrance or pledge, direct or indirect, of any (i) shares in any REIT, or (ii) partnership interests (sometimes referred to as “units”) in the operating partnership of any REIT.

     3. Amended Section 10.1.1. Section 10.1.1 is hereby amended to add the following:

If Lessee is not an Approved Operator, then it shall operate the Premises through an Approved Operator pursuant to an Operating Agreement (as defined in Section 28.13.2(k)), which shall require that such Approved Operator shall operate and manage the Premises in accordance with the terms of this Lease. Lessor acknowledges that Kimpton Hotel & Restaurant Group, LLC, a Delaware limited liability company, is the Approved Operator as of the Eleventh Amendment Effective Date. From and after the Eleventh Amendment Effective Date, any change of the Approved Operator to a new operator shall require Lessor’s prior written consent. Lessor shall approve or disapprove any written request for approval of an operator which written request shall include all the evidence reasonably necessary to make such determination within forty-five (45) days from the date of receipt by Lessor of such complete documentation supporting such written request. Lessor shall not unreasonably withhold, condition or delay its approval of any operator. Any disapproval by Lessor shall set forth a written explanation of the grounds for such disapproval.

     4. Amended Section 21.1. The phrase “and shall ensure any Approved Operator complies with all Applicable Laws” is hereby inserted at the end of the first sentence in Section 21.1.

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     5. Amended Sections 22. The phrase “Approved Operator (if applicable),” is hereby inserted immediately before the word “Affiliates” or “Affiliates’”, as applicable, in each instance the word “Affiliates” or “Affiliates’”, as applicable, appears in Section 22.

     6. Amended Sections 25. The phrase “Approved Operator (if applicable),” is hereby inserted immediately before the word “Affiliates” in each instance the word “Affiliates” appears in Section 25.

     7. Amended Section 27.2. The first sentence of Section 27.2 is deleted in its entirety and hereby replaced with the following: “Lessee may make Transfers (other than the subleases pursuant to Sections 27.7 and 27.10 below) without the prior written approval of Lessor only if Pebblebrook Hotel L.P., a Delaware limited partnership maintains a Controlling Interest in the Lessee and the Operating Affiliate.”

     8. New Section 27.10. Section 27 is hereby amended to add the following new Section 27.10:

 27.10 Lessor’s prior written consent shall be required if a Transfer is a sublease of the entire Premises or a sublease of the hotel portion of the Premises.

     9. New Section 27.11. Section 27 is hereby amended to add the following new Section 27.11:

27.11

Each sublease entered into concurrently with and after the Eleventh Amendment Effective Date shall contain provisions in form and substance substantially as set forth below in this Section 27.11. By executing its sublease, each subtenant shall be deemed to have agreed to these provisions, which reflect the definitions in this Lease. All such defined terms shall be modified in the sublease as appropriate to reflect the applicable definitions in the sublease:

“All terms, covenants, and provisions of this sublease and all rights, remedies and remedies of subtenant under this sublease are and shall at all times remain fully subject and subordinate in all respects to the Lease. If the Lease and the leasehold estate created thereby terminate, then this sublease shall terminate. In that event, subtenant, only at the election and request of Lessor (except as Lessor has agreed otherwise in writing) and to the extent lawful under Applicable Laws, shall attorn to Lessor, and recognize Lessor as subtenant’s direct landlord under this sublease, except that subtenant acknowledges that Lessor shall not be liable to the subtenant for any security deposit or prepaid rent or funds previously paid by such subtenant to Lessee unless such deposits are transferred to Lessor. Subtenant shall execute and deliver, at any time and from time to time,

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upon the request of Lessee, Lessor, or any Mortgagee, any instrument necessary or appropriate to evidence such attornment.”

     10. Counterparts. This Eleventh Amendment may be executed in counterparts, each of which shall constitute an original, and all of which together shall constitute one and the same instrument.

     11. Full Force and Effect. Except as otherwise expressly modified by the terms of this Eleventh Amendment, the Lease remains unchanged and in full force and effect.

     IN WITNESS WHEREOF, the Regional Director of the Pacific West Region of the National Park Service, acting on behalf of the United States, in the exercise of the delegated authority from the Secretary, as Lessor, and Lessee have executed this Eleventh Amendment by proper persons thereunto duly authorized as of the date first above written.

LESSEE:
Wildcats Owner LLC,
a Delaware limited liability company
By: Name:	/s/ Raymond D. Martz Raymond D. Martz
Title:	President
LESSOR:
National Park Service
By: Name:	/s/ Christine Lehnertz Christine Lehnertz
Title:	Regional Director

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****PACIFIC WEST REGION — NATIONAL PARK SERVICE****

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ATTACHMENT 1A

Ownership Diagram

[Attached behind this page]

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ATTACHMENT 1B

Illustrative Examples of Transfers

The following are hypothetical examples are meant to be illustrative of certain Transfers resulting from change in Controlling Interest described in Section 1.72, with reference to the organizational structure shown in Attachment 1A. The examples below are by no means all inclusive and are not intended to illustrate all possible types of Transfers. Other forms of Transfers described in Section 1.72, such as, for example, an assignment by Lessee to a third party unrelated entity, and similar transfers are not among the illustrative examples below. All defined terms are as defined in the Eleventh Amendment to which this is attached.

As shown on Attachment 1A, Pebblebrook Hotel Trust, Pebblebrook Hotel, L.P., Wildcats Owner LLC, Wildcats Lessee LLC, and Pebblebrook Hotel Lessee, Inc., are each Pebblebrook entities.

Pebblebrook Hotel Trust is a publicly traded REIT
Pebblebrook Hotel, L.P. is a wholly-owned operating partnership subsidiary
Pebblebrook Hotel Lessee, Inc. is a wholly-owned taxable REIT subsidary
Lessee: Wildcats Owner LLC
Operating Affiliate: Wildcats Lessee LLC

Example A: A change in Controlling Interest of Wildcats Owner LLC.

Since Wildcats LLC is the Lessee under the Lease, a change in the Controlling Interest of Lessee is a Transfer which requires Lessor’s approval.

Example B: A change in Controlling Interest of Wildcats Lessee LLC

Wildcats Owner LLC is the Lessee under the Lease, which is directly or indirectly controlled by a REIT. Wildcats Owner LLC, as Lessee will not manage and operate the hotel, but instead will enter into a sublease with Wildcats Lessee LLC, which will enter into a hotel operating agreement with a third party Approved Operator. The third party Approved Operator will manage and operate the Premises. Wildcats Lessee LLC is a wholly-owned affiliate controlled directly or indirectly by the REIT (an Operating Affiliate), therefore a change in the Controlling Interest of Wildcats Lessee LLC shall require Lessor’s approval.

***SAN FRANCISCO MARITIME NATIONAL HISTORICAL PARK***
****PACIFIC WEST REGION — NATIONAL PARK SERVICE****

EX-10.5

Exhibit 10.5

Record and Return to:

Hunton & Williams LLP
1900 K Street NW
Washington DC 20006
Attn: Celeste White

ASSIGNMENT AND ASSUMPTION OF HISTORIC LEASE
(HL-SAFR001-00)

     This Assignment and Assumption of Historic Lease (HL-SAFR001-00) (this “Agreement”) is made and entered into as of February 16, 2011 (the “Effective Date”) by and among UNITED STATES DEPARTMENT OF THE INTERIOR, NATIONAL PARK SERVICE, ACTING THROUGH THE REGIONAL DIRECTOR, PACIFIC WEST REGION, AN AGENCY OF THE UNITED STATES OF AMERICA (“Lessor”), MARITIME HOTEL ASSOCIATES, L.P., a California limited partnership (“Assignor”), and WILDCATS OWNER LLC, a Delaware limited liability company (“Assignee”).

RECITALS

     A. Assignor is the lessee, and Landlord the lessor, under that certain Historic Lease (HL-SAFR001-98) dated as of October 16, 2000, as amended by that certain First Amendment to Historic Lease (HL-SAFR001-98) effective as of January 16, 2001, that certain Second Amendment to Historic Lease (HL-SAFR001-98) dated effective as of January 18, 2001, that certain Third Amendment to Historic Lease (HL-SAFR001-98), effective as of January 22, 2001, that certain Fourth Amendment to Historic Lease (HL-SAFR001-98), effective as of January 24, 2001, that certain Fifth Amendment to Historic Lease (HL-SAFR001-98), effective as of January 29, 2001, that certain Sixth Amendment to Historic Lease (HL-SAFR001-98), effective as of February 1, 2001, that certain Seventh Amendment to Historic Lease (HL-SAFR001-98), effective as of February 6, 2001, that certain Eighth Amendment to Historic Lease (HL-SAFR001-98), effective as of August 10, 2001, that certain Ninth Amendment to Historic Lease (HL-SAFR001-98), effective as of May 14, 2004, that certain Tenth Amendment to Historic Lease (which corrected designation to HL-SAFR001-00), effective as of September 18, 2008 and that certain Eleventh Amendment to Historic Lease (HL-SAFR001-00), dated as of the date hereof (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 recorded by the San Francisco Assessor-Recorder on July 25, 2001, as Instrument Number 2001-G986437-00. Capitalized terms used herein and not defined shall have the meanings assigned to them in the Lease.

     B. Assignor has agreed, to sell, and Assignee has agreed to purchase, that certain hotel located at 495 Jefferson Street, San Francisco, California, and commonly known as the Argonaut Hotel, which is subject to the Lease.

     C. In connection with the purchase and sale of the hotel, Assignor desires to assign, and Assignee desires to assume, all of the rights and obligations of Assignor as Lessee 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 Lessor 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 assign and delegate all of its right, title, interest and obligations in, to and under the Lease to Assignee.
1.2	Assignee does hereby accept the foregoing assignment and delegation of the Lease and hereby assumes and agrees to observe and perform all of the obligations, terms, covenants and conditions of the Lessee 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 “Lessee” in the Lease shall refer to Assignee.
1.4	Each of Assignor and Assignee hereby represents and warrants that it has full power and legal right and authority to execute this Agreement.

2. Lessor’s Consent and Release.

2.1	Lessor acknowledges and consents to the foregoing assignment and delegation to and assumption by Assignee of the Lease.
2.2	Lessor hereby releases Assignor from all obligations and liabilities of “Lessee” 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 and sale 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 and sale.

2

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]

3

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

“ASSIGNOR” MARITIME HOTEL ASSOCIATES, L.P., a California limited partnership
By:	Hyde Street Hospitality, LLC, a Delaware limited liability company
Its:	General Partner

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

“ASSIGNEE” WILDCATS OWNER LLC, a Delaware limited liability company
By:	/s/ Raymond D. Martz
	Name:	Raymond D. Martz
	Title:	President

“LESSOR” NATIONAL PARK SERVICE
By:	/s/ Christine S. Lehnertz
	Name:	Christine S. Lehnertz
	Title:	Regional Director

Signature Page to Assignment and Assumption of Historic Lease

ACKNOWLEDGEMENT

STATE OF California	)
	)  ss.
COUNTY OF San Francisco	)

On February 28, 2011, before me, Grace Y Nishkalva, Notary Public,

personally appeared Judith C. Miles ,

who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that she/he executed the same in her/his authorized capacity, and that by her/his signature on the instrument the person, or the entity upon behalf of which the person 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.

/s/ Grace Y Nishkalva
Signature of Notary Public	Place Notary Seal

Signature Page to Assignment and Assumption of Historic Lease

ACKNOWLEDGEMENT

STATE OF Maryland	)
	)  ss.
COUNTY OF Montgomery	)

On January 28 , 2011, before me, Elizabeth A Wyche, Notary Public,

personally appeared Raymond D. Martz,

who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that she/he executed the same in her/his authorized capacity, and that by her/his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

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

WITNESS my hand and official seal.

/s/ Elizabeth A. Wyche
Signature of Notary Public	Place Notary Seal

Signature Page to Assignment and Assumption of Historic Lease

ACKNOWLEDGEMENT

STATE OF California	)
	)  ss.
COUNTY OF Alameda	)

On Feb 14, 2011, before me, Natascha H Fraser, Notary Public,

personally appeared Christine S Lehnertz,

who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that she/he executed the same in her/his authorized capacity, and that by her/his signature on the instrument the person, or the entity upon behalf of which the person 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.

/s/ Natasha H Fraser
Signature of Notary Public	Place Notary Seal

Signature Page to Assignment and Assumption of Historic Lease

EXHIBIT A
LEGAL DESCRIPTION

Real property in the City of San Francisco, County of San Francisco, State of California, described as follows:

PARCEL ONE:

BEGINNING AT THE POINT OF INTERSECTION OF THE SOUTHERLY LINE OF JEFFERSON STREET WITH THE EASTERLY LINE OF HYDE STREET; RUNNING THENCE EASTERLY ALONG SAID LINE OF JEFFERSON STREET 202.834 FEET TO A POINT DISTANT THEREON 209.666 FEET WESTERLY FROM THE WESTERLY LINE OF LEAVENWORTH STREET; THENCE DEFLECTING 89° 55’ 30” TO THE RIGHT AND RUNNING SOUTHERLY 141.370 FEET; THENCE SOUTHERLY AND SOUTHEASTERLY ALONG A CURVE TO THE LEFT TANGENT TO THE PRECEDING COURSE, WHICH CURVE HAS A RADIUS OF 301.90 FEET, A CENTRAL ANGLE OF 26° 16’ 49.43”, AN ARC DISTANCE OF 138.475 FEET TO A POINT ON THE NORTHERLY LINE OF BEACH STREET; THENCE DEFLECTING 116° 21’ 19.43” TO THE RIGHT FROM THE TANGENT OF THE PRECEDING CURVE AT LAST SAID POINT AND RUNNING WESTERLY ALONG SAID LINE OF BEACH STREET 234.400 FEET TO THE EASTERLY LINE OF HYDE STREET; THENCE NORTHERLY ALONG SAID LINE OF HYDE STREET 275.00 FEET TO THE POINT OF BEGINNING.

BEING A PORTION OF 50 VARA BLOCK NO. 259.

EXCEPTING THEREFROM: THE RETAINED SPACE AS DEFINED AND SET FORTH IN THAT CERTAIN MEMORANDUM OF LEASE RECORDED JULY 25, 2001 AS DOCUMENT NO. 2001-G986437-00 OF OFFICIAL RECORDS OF THE CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA.

FURTHER EXCEPTING THEREFROM: THE PREMISES EXTENDING BELOW (A) THE BOTTOM SURFACE OF THE CONCRETE SLAB ON THE LOWEST LEVEL OF THE HASLETT WAREHOUSE, EXCEPT FOR THE SPECIFIC BUILDING FOUNDATION STRUCTURES, (B) OR THE BOTTOM SURFACE OF THE HARDSCAPE OR ANY IMPROVEMENTS INSTALLED BY THE LESSEE SUPPORTING SUCH HARDSCAPE ON THE ABOVE-DESCRIBED LAND THAT IS NOT SITUATED UNDER THE HASLETT WAREHOUSE.

FURTHER EXCEPTING THEREFROM: ALL MINERAL DEPOSITS AS DEFINED IN SECTION 6407 OF THE PUBLIC RESOURCES CODE, TOGETHER WITH THE RIGHT TO PROSPECT FOR, MINE AND REMOVE SUCH DEPOSITS, AS RESERVED IN THE “QUITCLAIM DEED” RECORDED APRIL 9, 1998 BOOK H108 PAGE 319, OFFICIAL RECORDS.

PARCEL TWO:

A PERPETUAL EASEMENT APPURTENANT TO THE ABOVE DESCRIBED PROPERTY OVER A STRIP OF LAND 3.50 FEET IN WIDTH LYING CONTIGUOUS TO AND EASTERLY OF THE EASTERLY BOUNDARY LINE OF THE ABOVE DESCRIBED PREMISES AND EXTENDING FROM THE NORTHERLY LINE OF BEACH STREET TO A POINT 27 FEET AND 1-1/8 INCHES SOUTHERLY FROM THE SAID SOUTHERLY LINE OF JEFFERSON STREET, THIS EASEMENT BEING THE PURPOSES OF PERPETUALLY MAINTAINING SUITABLE CLEARANCE FOR SPUR TRACT PURPOSES; AND NO STRUCTURE SHALL BE CONSTRUCTED IN, OVER OR UPON SAID 3.50 FOOT STRIP OF LAND EXCEPT SUCH STRUCTURES AS MAY BE REQUIRED TO DRAIN, MAINTAIN, SUPPORT OR CONSTRUCT A SPUR TRACK AT ANY ELEVATION REQUIRED BY GOOD RAILROAD PRACTICE, AS CREATED AND RESERVED IN THE DEED FROM CALIFORNIA PACKING CORPORATION, A NEW YORK CORPORATION, TO SECURITY LITHOGRAPH COMPANY, A CALIFORNIA CORPORATION, DATED FEBRUARY 12, 1948, AND RECORDED FEBRUARY 16, 1948 IN BOOK/REEL 4815 AT PAGE/IMAGE 487 OF OFFICIAL RECORDS OF THE CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA.

PARCEL THREE:

A NON-EXCLUSIVE EASEMENT AS AN APPURTENANCE TO PARCEL ONE ABOVE, FOR REASONABLE ACCESS THROUGH THE RETAINED SPACE AS DEFINED AND SET FORTH IN THAT CERTAIN MEMORANDUM OF LEASE RECORDED JULY 25, 2001 AS DOCUMENT NO. 2001-G986437-00 OF OFFICIAL RECORDS OF THE CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA AND DESCRIBED IN SECTION 2.1.2 OF THE LEASE DATED OCTOBER 16, 2000.

     Assessor’s Lot 002; Block 0010

EX-10.6

Exhibit 10.6

Argonaut Hotel

PROMISSORY NOTE

Note Amount: $42,000,000.00

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 FORTY-TWO MILLION AND NO/1OO DOLLARS ($42,000,000.00) (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 5.67% 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 anyone 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 intended to be satisfied shall be revived and continue as if such Payment or proceeds had not been received by Lender.

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     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 anyone 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 anyone or more of the Loan Documents to be encumbered by the Loan

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Documents, or (iv) to otherwise carry out the purposes of the Loan 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 anyone 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 C01>ts 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

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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 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 State of California applicable to contracts made and performed in such State and any applicable law of tie 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.

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     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 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.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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

BORROWER;
MARITIME HOTEL ASSOCIATES, L.P., a
California limited partnership
	By:	Hyde Street Hospitality, 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 J. Wolkom
	Name: Gregory J. Wolkom
	Title: CFO

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EX-10.7

Exhibit 10.7

EXECUTION COPY

ASSUMPTION AGREEMENT

     This Assumption Agreement (“Assumption Agreement”) is made this 16th day of February ____, 2011, 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”), MARITIME HOTEL ASSOCIATES, L.P., a California limited partnership (“Borrower”), KIMPTON DEVELOPMENT OPPORTUNITY FUND, L.P., a California limited partnership (“Original Guarantor”), WILDCATS 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 Forty Two Million and no/100 Dollars ($42,000,000.00) (“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 27, 2007 as instrument number 2007-I344231-00 in the land records of the City and Count of San Francisco, California (“Official Records”), the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on June 25, 2008, as instrument number 2008-I604025-00, 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 27, 2007 as instrument number 2007-I344232-00 with said Official Records, the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on June 25, 2008, as instrument number 2008-I604025-00, 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 07-7104477188 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 $42,000,000.00;

     2. Accrued interest on the Note has been paid through February 10, 2011;

     3. The balance in the Basic Carrying Costs Escrow Account (as defined in Section 5.06 of the Security Instrument) was $9,585.02; and

     4. The balance in the Recurring Replacement Reserve Escrow Account (as defined in Section 5.08 of the Security Instrument) was $1,759,004.84.

     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 executed in connection with the closing of this assumption) an assumption fee of $210,000.00 (0.5% of the loan balance), due on execution of this Assumption Agreement by Noteholder.

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     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. 276377CA1, dated February 27, 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 Agreement of Sublease (the “Operating Lease”) between Assumptor and Wildcats Lessee LLC (“Operating Lessee”) in form and substance reasonably acceptable to Noteholder;

     h. Execution and delivery to Noteholder by Operating Lessee and Assumptor, as applicable, of an acceptable Operating Lease Subordination and

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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;

     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

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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) the written consent of the United States Department of the Interior, National Park Service, acting by and through the Regional Director, Pacific West Division, an agency of the United States of America (the “Ground Lessor”) of the assignment of the Ground Lease; and (ii) an acceptable estoppel certificate 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 a liquor license is not required under California law at the Property (since the hotel is on federal land) 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(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 State of California) based on Noteholder’s standard form; (B) standard Delaware single member LLC opinions 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.

     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

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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 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;

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     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 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

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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. Increase in Basic Carrying Costs Monthly Installment. Assumptor acknowledges and agrees that the Basic Carrying Costs Monthly Installment (as defined in the Security Instrument) shall be increased from $1,818.49 per month to $1,857.85 per monthly due to an increase in the estimated amount of Real Estate Taxes (as defined in the Security Instrument) for the Property.

     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.

     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

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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 Sublease dated as of February ___, 2011 between Borrower, as landlord, and Operating Lessee, as tenant.

     “Operating Lessee” shall mean Wildcats Lessee LLC.

     c. The definition of “Borrower’s Knowledge” on page 7 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.”

     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.

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     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 subtenant 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 Pebblebrook Hotel Lessee, Inc. (the “TRS”); (E) Guarantor 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).

     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

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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 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.

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     (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 eighth and ninth 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 76 of the Security Instrument is hereby modified to include that certain Assignment of and Second 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.

     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

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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 Covenant of New Guarantor. As of the end of each fiscal quarter of New Guarantor commencing with the fiscal quarter ending March 31, 2011, New Guarantor’s Tangible Net Worth shall not be less than $250,000,000 (the “Net Worth Threshhold”). 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. If the Tangible Net Worth of New Guarantor falls below the Net Worth Threshhold, Assumptor and New Guarantor shall have a period of thirty (30) days to provide one or more additional/replacement guarantors (individually or collectively, the “Replacement Guarantor”) who meet the Net Worth Threshhold and are otherwise satisfactory to Lender, in its reasonable discretion. Each Replacement Guarantor shall execute a guaranty in the same form as the New Guaranty. Assumptor’s and New Guarantor’s failure to provide a Replacement Guarantor (if required by this Section 11) within such time-frame shall constitute an Event of Default under the Loan Documents.

     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

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Metro Center, Suite 1530, Bethesda, Maryland 20814, Attn: Raymond Martz, President; with a copy to Hunton & Williams LLP, 951 East Byrd Street, Richmond, VA 23219, Attn: Kimberly Magee, Esq. 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, 550 S. Tryon Street, 14th Floor, Charlotte, NC 28202, MAC D1086-120, Attn. Asset Manager; with a copy to Alston & Bird LLP, 101 South Tryon Street, Suite 4000, Charlotte, NC 28280, Attn. James A. L. Daniel, Jr., Esq.

     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 is 15 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. 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 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

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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.

     21. 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/ Wayne Ventus, Jr.
		Name:	Wayne Ventus, Jr.
		Title:	Asst. Vice President

ASSUMPTOR:	WILDCATS OWNER LLC, a Delaware limited liability company
	By:	/s/Raymond D. Martz
		Name:	Raymond D. Martz
		Title:	President
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:	EVP, CFO, Treasurer & Secretary

BORROWER:	MARITIME HOTEL ASSOCIATES, L.P., a California limited partnership
	By:	Hyde Street Hospitality, LLC, a Delaware limited liability company, its general partner
	By:	Kimpton Group Holding LLC, a Delaware limited liability company, its sole member
	By:	/s/ Ben Rowe
		Name:	Ben Rowe
		Title:	CFO
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

     MARITIME HOTEL 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”), WILDCATS 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 $42,000,000.00, 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, secures the Note and other obligations of Borrower (“Security Instrument”), and which Security Instrument was recorded on February 27, 2007 as instrument number 2007-I344231-00 in the land records of the City and Count of San Francisco, California (“Official Records”), the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on June 25, 2008, as instrument number 2008-I604025-00, in said Official Records; (ii) that certain Assignment of Leases and Rents (the “Assignment of Leases”) executed by Borrower, which was recorded on February 27, 2007 as instrument number 2007-I344232-00 with said Official Records, the Original Lender’s interest under which was assigned to Noteholder by instrument recorded on June 25, 2008, as instrument number 2008-I604025-00, 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 February, 2011.

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 ___________, 2011, 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:	WILDCATS 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:

[ABC TO ATTACH APPROPRIATE NOTARY FORMS]

BORROWER:	MARITIME HOTEL ASSOCIATES, L.P., a California limited partnership
	By:	Hyde Street Hospitality, 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:

[OBC TO ATTACH APPROPRIATE NOTARY FORMS]

Exhibit A
Legal Description

EX-10.8

Exhibit 10.8

Argonaut Hotel

MARITIME HOTEL 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 23rd day of February, 2007, by MARITIME HOTEL 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 1 First American Way, Santa Ana, California 92707 (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 FORTY-TWO MILLION AND NO/100 DOLLARS ($42,000,000.00) (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 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 or hereafter located upon, or in, and used in connection with the Premises or the Improvements

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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 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

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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 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;

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     (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. “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.

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     “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.

     “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.

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     “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 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.

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     “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.

     “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.

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     “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 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

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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

     (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.

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     “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 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

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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 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 of the Premises, together with nine (9) amendments thereto more particularly described on Exhibit G hereto, together with all exhibits and renewals, modifications and extensions thereto.

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     “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.

     “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

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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, 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,

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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.

     “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.

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     “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, 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.

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     “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 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

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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 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

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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.

     “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.

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     “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, 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.

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     “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 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.

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     “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 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

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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 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 entitled to approve such Person, which approval shall not be unreasonably withheld and shall be granted or withheld in accordance with Lender’s 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.

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     “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.

     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

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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 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

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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).

     (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.

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     (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 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,

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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, 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.

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     (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.

     (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.

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     (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 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.

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     (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 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.

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     (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 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

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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;

     (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

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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.

     (iv) 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 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.

     (vi) 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

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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 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

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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 the Trade Fixtures described on Exhibit F to the Ground Lease (“Trade Fixtures”) and good, insurable and marketable fee simple title to the Trade Fixtures (the Improvements and Fixtures, including the Trade Fixtures, together with the Premises 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

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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. Other than as previously disclosed to Lender in writing, 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 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

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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 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.

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     (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 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.

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     (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 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.

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     (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 Lease.

     (i) Subject to Section 28.15 of the Ground Lease, Borrower is authorized to assign its interest in any condemnation award which Borrower is entitled to receive pursuant to the Ground Lease.

     (ii) Provided Lender provides to Ground Lessor the certification required pursuant to Section 28.12.2 of the Ground Lease, if any default by Borrower shall occur under the Ground Lease, Lender is entitled under the Ground Lease to receive notice of such default contemporaneously with any notice of default which is given to Borrower 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 Lessor’s approval pursuant to Section 28.13.2(b) 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.

     (iii) The Ground Lease is in full force and effect and has not been modified or supplemented. The Ground Lease cannot be amended or modified in any respect whatsoever except by an instrument in writing signed by Ground Lessor and Borrower.

     (iv) All rents (including Annual Rental, Base Rental and Percentage Rental (each as defined in the Ground Lease) and other charges) reserved for in the Ground Lease and payable prior to the date hereof have been paid.

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     (v) 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.

     (vi) Other than as set forth in any ground lessor estoppel addressed to Lender which was delivered to Lender in connection with the origination of the Loan, 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.

     (vii) If there shall be a Taking of the fee title to the Premises, subject to amounts which are applied to restoration, Borrower is entitled 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. If there shall be a casualty under a Ground Lease, there is an obligation to use insurance proceeds for a full restoration.

     (viii) Provided that no monetary default 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.

     (ix) Pursuant and subject to Section 28.13.3 of the Ground Lease, if the Ground Lease is terminated, upon Lender’s request pursuant to Section 28.13.3.1 of the Ground Lease and if Lender is then the most senior Leasehold Mortgagee (as defined in the Ground Lease) giving such notice, Ground Lessor shall enter into a new lease (the “New Lease”) with Lender 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 in accordance with Section 28.13.3.2 of the Ground Lease.

     (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.

     (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

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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, 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

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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 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

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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 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.

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     (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.

     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

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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 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

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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, 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.

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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, 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,

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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 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

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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.

     (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

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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.

     (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

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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 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

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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.

     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

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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.

     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

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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.

     (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

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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 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,

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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, 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

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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 $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

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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.

     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,

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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 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

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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 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

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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.

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

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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.

     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

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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;

     (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

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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 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

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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.

     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

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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) 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

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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 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.

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     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 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

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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 excess Loss Proceeds shall be disbursed to Borrower provided any such 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 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

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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 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

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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.

     (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.

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     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) 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.

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     (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.

     (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 June 14, 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

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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.

     (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.

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     (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.

     (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

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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.

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.

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     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;

     (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;

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     (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 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.

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     (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 Loan Number: 502858677 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.
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 by repayment of the Debt, foreclosure or delivery of a deed in lieu thereof, assignment or

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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;

     (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;

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     (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;

     (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

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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, 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

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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 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

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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;

     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

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     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 the Debt the net sales price after deducting therefrom the expenses of the sale and the costs of the action.

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     (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 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

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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 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

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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, 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

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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 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

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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 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.

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     (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 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

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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, 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

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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 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

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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 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

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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, 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

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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 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

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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.

     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.

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     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 STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE 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 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

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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 State of California 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.

     (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

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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 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.

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     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.

     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;

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(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. 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

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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.

     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

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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) — (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,

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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 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

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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 (u) 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 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

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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 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

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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.

     Section 18.37. Certain Matters Relating to Property Located in the State of California. With respect to the Property which is located in the State of California, notwithstanding anything contained herein:

     (a) Power of Sale. Lender may deliver to Trustee a written declaration of an Event of Default and demand for sale which requests that Trustee record and serve a written notice of default and of election to cause the Property to be sold, and cause any or all of the Property to be sold under the power of sale granted by this Security Instrument in the manner hereinbelow specified in this Section 18.37.

     (i) Declaration of Default; Acceptance. Lender shall (1) deliver to Trustee a written declaration of an Event of Default which recites facts which demonstrate Borrower’s default, and a demand that Trustee sell the Property, and (2) deposit the Note and this Security Instrument, if required by law, with Trustee. Trustee shall accept Lender’s declaration of an Event of Default as true and as demonstrative of Borrower’s default, and shall record and serve a written notice of default and of election to cause the Property to be sold in the manner required by applicable law.

     (ii) Rescission of Notice of Default. Lender may rescind any notice of default at any time before Trustee’s sale by executing a notice of rescission and recording it. The

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recordation of the notice will constitute a cancellation of any prior declaration of an Event of Default and demand for sale and of any acceleration of maturity of the Debt affected by any prior declaration or notice of an Event of Default. The exercise by Lender of the right of rescission will not constitute a waiver of any default then existing or subsequently occurring, or impair the right of Lender to execute other declarations of default and demand for sale, or notices of default and of election to cause the Property to be sold, nor otherwise affect the Note or this Security Instrument, or any of the rights, obligations or remedies of Lender or Trustee hereunder or under applicable law.

     (iii) Date of Trustee’s Sale. If, after the expiration of any period of time provided by applicable law, Borrower’s Event of Default has not been cured and Borrower’s Debt has not been reinstated in the manner required by applicable law, Trustee shall establish a date for the sale of the Property and record and serve a notice of sale in the manner required by applicable law.

     (iv) Trustee’s Sale. If, on or before the date scheduled for the sale of the Property, Borrower’s Event of Default has not been cured and the Debt has not been reinstated, Trustee, without demand on Borrower, shall sell the Property at the time and place fixed by Trustee in the notice of sale, either as a whole or in separate parcels, and in such order as Trustee may determine, at public auction, and to any Person, including Borrower, Lender or Trustee. The Property shall be sold to the highest bidder for cash payable at the time of sale. Notwithstanding the foregoing, instead of paying cash for the Property, Lender may credit the amount of its auction sale bid by the amount of the Debt, or any fraction thereof, including, without limitation, Trustee’s cost and expenses from the sale of the Property. Lender will be entitled to bid, at any trustee’s or foreclosure sale of the Property, the amount of the Environmental Damages (as hereinafter defined), any costs incurred by Lender with respect to any Environmental Problem and interest in addition to the amount of other Debt as a credit bid, the equivalent of cash. Furthermore, if a bid has been made by Lender in the amount of the Debt, other than Debt for Environmental Damages and any costs incurred by Lender with respect to any Environmental Problem incurred by Lender, any Debt comprised of the Environmental Damages and any costs incurred by Lender with respect to any Environmental Problem shall not be discharged by virtue of the full credit bid and shall remain an obligation of Borrower to be satisfied under this Security Instrument.

     (v) Delivery of Deed. Trustee shall deliver to the purchaser of the Property a deed which conveys title to the Property without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of their truthfulness.

     (vi) Postponement of Trustee’s Sale. Trustee may postpone the sale of all or any portion of the Property in accordance with California Civil Code §2924g, by public announcement at the time and place of sale, and from time to time thereafter Trustee may postpone such sale by public announcement at the time fixed by the preceding postponement or as otherwise allowed by said statute.

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     (vii) Application of Sale Proceeds. The proceeds of Trustee’s public auction of the Property shall be applied in the following manner: (1) payment of the portion of the Debt attributable to the costs and expenses of the sale; (2) repayment of the portion of the Debt attributable to any sums expended or advanced by Lender (other than the Environmental Damages and costs incurred by Lender with respect to any Environmental Problem) under the terms of this Security Instrument, plus interest at the Default Rate; (3) payment of all other Debt and all other obligations of Borrower secured by this Security Instrument, in any order that Lender chooses; (4) repayment of the portion of the Debt attributable to the Environmental Damages and costs incurred by Lender with respect to any Environmental Problem under the terms of this Security Instrument, plus interest at the Default Rate; and (5) the remainder, if any, to satisfy the outstanding balance of obligations secured by any junior encumbrances in the order of their priority, then to Borrower or Borrower’s successor in interest.

     (viii) Proof of Compliance with the Law. If there is a sale of the Property, or any part of it, and the execution of a deed for it, the recital of default and of recording notice of breach and election of sale, and of the elapsing of the required time between the recording and the following notice, and of the sale should be made, will be conclusive proof of the default, recording, election, elapsing of time, and the due giving of notice, and that the sale was regularly and validly made on proper demand by Lender. Any deed with these recitals will be effectual and conclusive against Borrower, its successors, and assigns, and all other Persons. The receipt for the purchase money recited or in any deed executed to the purchaser will be sufficient discharge to the purchaser from all obligations to see to the proper application of the purchase money.

     (b) Acceptance by Trustee. Trustee accepts this trust when this Security Instrument, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender or Trustee shall be a party unless brought by Trustee.

     (c) Rights and Duties. It shall be no part of the duty of Trustee to see to any recording, filing or registration of this Security Instrument or any other instrument in addition or supplemental hereto, or to give any notice thereof, or to see to the payment of or be under any duty in respect of any tax or assessment or other governmental charge which may be levied or assessed on the Property, or any part thereof, or against Trustee, or to see to the performance or observance by Borrower of any of the covenants and agreements contained herein. Trustee shall not be responsible for the execution, acknowledgement or validity of this Security Instrument or of any instrument in addition or supplemental hereto or for the sufficiency of the security purported to be created hereby, and makes no representation in respect thereof or in respect of the rights of Lender. Trustee shall have the right to advice of counsel upon any matters arising hereunder and shall be fully protected in relying as to legal matters on the advice of counsel. Trustee shall not incur any personal liability hereunder except for its own gross negligence or willful misconduct and Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by Trustee hereunder and believed by Trustee in good faith to be genuine.

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     (d) Subrogation to Existing Liens; Vendor’s Lien. To the extent that proceeds of the Note are used to pay Debt secured by any outstanding lien, security interest, charge or prior encumbrance against the Property, such proceeds have been advanced by Lender at Trustee’s request, and Lender shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such outstanding liens, security interests, charges or encumbrances, however remote, irrespective of whether said liens, security interests, charges or encumbrances are released, and all of the same are recognized as valid and subsisting and are renewed and continued and merged herein to secure the Debt, but the terms and provisions of this Security Instrument shall govern and control the manner and terms of enforcement of the liens, security interests, charges and encumbrances to which Lender is subrogated hereunder. It is expressly understood that, in consideration of the payment of such indebtedness by Lender, Borrower hereby waives and releases all demands and causes of action for offsets and payments in connection with the said indebtedness. If all or any portion of the proceeds of the loan evidenced by the Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase price for all or a part of the Property, no vendor’s lien is waived; and Lender shall have, and is hereby granted, a vendor’s lien on the Property as cumulative additional security for the secured indebtedness. Lender may foreclose under this Security Instrument or under the vendor’s lien without waiving the other or may foreclose under both.

     (e) Substitute Trustee. Trustee may resign by an instrument in writing addressed to Lender, or Trustee may be removed at any time with or without cause by an instrument in writing executed by Lender. In case of the death, resignation, removal or disqualification of Trustee, or if for any reason Lender shall deem it desirable to appoint a substitute or successor trustee to act instead of the herein named trustee or any substitute or successor trustee, then Lender shall have the right and is hereby authorized and empowered to appoint a successor trustee, or a substitute trustee, without other formality than appointment and designation in writing executed by Lender, and the authority hereby conferred shall extend to the appointment of other successor and substitute trustees successively until the Debt secured hereby has been paid in full, or until the Property is fully and finally sold hereunder. In the event that the Debt is owned by more than one person or entity, the holder or holders of not less than a majority in amount of such indebtedness shall have the right and authority to make the appointment of a successor or substitute trustee as provided for in the preceding sentence or to remove Trustee as provided in the first sentence of this Section 18.37(e). Such appointment and designation by Lender, or by the holder or holders of not less than a majority of the Debt secured hereby, shall be full evidence of the right and authority to make the same and of all facts therein recited. If Lender is a corporation or association or trust and such appointment is executed in its behalf by an officer or trustee of such corporation or association or trust, such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of the corporation or association or trust. Upon the making of any such appointment and designation, all of the estate and title of Trustee in the Property shall vest in the named successor or substitute trustee, and it shall thereupon succeed to and shall hold, possess and execute, all of the rights, powers, privileges, immunities and duties herein conferred upon Trustee; but, nevertheless, upon the written request of Lender or of the successor or substitute trustee, the trustee ceasing to act shall execute and deliver an instrument transferring to such successor or substitute trustee all of the estate and title in the Property of the trustee so ceasing to act, together with all the rights, powers, privileges, immunities and duties herein conferred upon the Trustee, and shall duly assign,

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transfer and deliver any of the properties and moneys held by said trustee hereunder to said successor or substitute trustee. All references herein to “Trustee” shall be deemed to refer to Trustee (including any successor or substitute appointed and designated as herein provided) from time to time acting hereunder.

     (f) No Liability of Trustee. TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING TRUSTEE’S NEGLIGENCE), EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE OR MISCONDUCT. Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by it hereunder, believed by it in good faith to be genuine. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by law), and Trustee shall be under no liability for interest on any moneys received by it hereunder. Trustee hereby ratifies and confirms any and all acts which the herein-named Trustee or its successor or successors, substitute or substitutes, in this trust, shall do lawfully by virtue hereof.

     (g) Judgment on Environmental Provision.

     (i) Judgment Sought. Pursuant to California Code of Civil Procedure §736, Lender may bring an action (as such term is defined in California Code of Civil Procedure §22) for breach of contract against Borrower for breach of any provision contained in Article XVI hereof (the “Environmental Provision”), for the recovery of the Environmental Damages listed in Section (ii) hereof, and for the enforcement of the Environmental Provision, whether the Environmental Provision is or was contained in or secured by this Security Instrument and whether or not this Security Instrument has been discharged, reconveyed or foreclosed upon. Notwithstanding the foregoing, no injunction for the enforcement of an Environmental Provision may be issued after (x) satisfaction of the Debt or (y) transfer of Borrower’s right, title and interest in and to the “Real Property Security” (as such term is defined in California Code of Civil Procedure §736(f)(4) in a bona fide transaction to an unaffiliated third party for fair value.

     (ii) Damages. The damages that Lender may recover pursuant to Section (i) above shall be limited to reimbursement or indemnification of the following (collectively, the “Environmental Damages”): (w) if not pursuant to an order of any Governmental Authority relating to the cleanup, remediation, or other response action required by any applicable rule promulgated by a Governmental Authority, those costs relating to a reasonable and good faith cleanup, remediation, or other response action concerning a Release (such term shall have the meaning ascribed to it under California Civil Code §2929.5 and under California Civil Code of Procedure §726.5 and §736) or threatened release of Hazardous Materials which is anticipated by the Environmental Provision; (x) if pursuant to an order of any Governmental Authority which is anticipated by the Environmental Provision, all amounts reasonably advanced in good faith by Lender in connection therewith, provided that Lender negotiated, or attempted to negotiate, in good faith to minimize the amounts it was required to advance under the order; (y)

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indemnification against all liabilities of Lender to any third party relating to the breach and not arising from acts, omissions or other conduct which occur after Borrower is no longer an owner or operator of the “Real Property Security” in accordance with the standards set forth in California Code of Civil Procedure §726.5(d) (for the purposes of this Section (ii), the term “owner or operator” means those persons described in §101(20)(A) of CERCLA); and (z) attorneys’ fees and costs incurred by Lender relating to the breach. Notwithstanding the foregoing, the Environmental Damages recoverable by Lender shall not include (w) any part of the principal amount or accrued interest of the Debt, except for any amounts advanced by Lender to cure or mitigate the breach of any Environmental Provision that is added to the principal amount, and contractual interest thereon, or (x) amounts which relate to a Release which was knowingly permitted, caused or contributed to by Lender or any affiliate or agent of Lender.

     (h) Waiver of Lien. Pursuant to the terms of California Code of Civil Procedure §726.5, Lender may (i) waive its lien against (A) any parcel of “Real Property Security” that is “environmentally impaired” (as such term is defined in California Code of Civil Procedure §726.5(e)(3)), or is an “affected parcel” (as such term is defined in California Code Civil Procedure §726.5(e)(1)), and (B) all or any portion of the personal property attached to such parcels and (ii) exercise (A) the rights and remedies of an unsecured creditor including reduction of its claim against Borrower to judgment and (B) any other rights and remedies permitted by law. As between Lender and Borrower, for purposes of California Code of Civil Procedure §726.5, Borrower shall have the burden of proving that (1) the Release or threatened Release was not (x) knowingly or negligently caused or contributed to, or (y) knowingly or willfully permitted or acquiesced to, by Borrower or any related party (as such term is defined in California Code of Civil Procedure §726.5(e)(6)), or any affiliate or agent of Borrower or any related party, and (2) in conjunction with the making, renewal or modification of the Debt, (x) neither Borrower, any related party nor any affiliate or agent of Borrower or any related party had actual knowledge or notice of the Release or threatened Release of any Hazardous Materials, or (y) if such a person had knowledge or notice of the Release or threatened Release, Borrower made written disclosure thereof to Lender after Lender’s written request for information concerning the environmental condition of the Real Property Security (provided that Lender shall be deemed to have knowledge of any matter disclosed in the Environmental Reports), or (z) Lender otherwise obtained actual knowledge thereof prior to the making, renewal or modification of the Debt.

     (i) Reconveyance Upon Payment of Debt. In the event that Borrower shall cause to be paid the entire Debt and perform in full all of its obligations under the Loan Documents, Lender shall release and shall cause Trustee to release the Property from the lien of this Security Instrument and to reconvey (without warranty by or recourse against Trustee or Lender) the Property to Borrower. Upon Trustee’s receipt of Lender’s request for reconveyance, Trustee shall reconvey, without warranty, the Property or that portion held. When the Property has been fully reconveyed, the last reconveyance will operate as a reassignment of all future Rents to the Person legally entitled.

     (j) Environmental Addendum.

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     (i) Lender shall have the right, but not the obligation, to enter upon the Property, from time to time upon prior reasonable notice, and in its sole and absolute discretion, to conduct inspections of the Property and the activities conducted thereon to determine the compliance with all Environmental Statutes, the presence of Hazardous Materials and the existence of any potential damages as a result of the condition of the Property in the event that Lender reasonably believes that there are Hazardous Materials on the Property that are not in compliance with applicable Environmental Requirements. In furtherance thereof, Borrower hereby grants to Lender and its agents, employees and qualified consultants and contractors, the right to enter upon the Property and to perform such tests on the Property (including invasive tests) as are reasonably necessary. Lender shall conduct such inspections and tests at reasonable times, shall use its best efforts to minimize interference with the operation of the Property and agrees to restore the condition of the Property, but Lender shall not be liable for any interference caused thereby unless due to the gross negligence or willful misconduct or omission of Lender. In furtherance of the purposes above, without limitation of any of Lender’s other rights, Lender may: (x) obtain a court order to enforce Lender’s right to enter and inspect the Property under California Civil Code §2929.5, to which the reasonable, good faith decision of Lender as to whether there exists any Hazardous Materials on or about the Property in violation of any Environmental Statutes, or a breach by Borrower of any environmental provision of this Security Instrument or any of the other Loan Documents, will be deemed reasonable and conclusive as between the parties; and (y) have a receiver be appointed under California Code of Civil Procedure §564 to enforce Lender’s right to enter and inspect the Property for the purpose set forth above.

     (ii) Borrower and Lender agree that: (x) this paragraph is intended as Lender’s written request for information and Borrower’s written response concerning the environmental condition of the Property as provided in California Code of Civil Procedure §726.5; and (y) each representation, warranty or covenant, or indemnity made by Borrower in this Security Instrument or in the other Loan Documents that relates to the environmental condition of the Property is intended by Borrower and Lender to be an “environmental provision” for the purposes of California Code of Civil Procedure §736 and will survive the payment of the Debt and the termination or expiration of this Security Instrument and will not be affected by Lender’s acquisition of any interest in the Property, whether by full credit bid at foreclosure, deed in lieu of that, or otherwise. If there is any transfer of any portion of Borrower’s interest in the Property, any successor-in-interest to Borrower agrees by its succession to that interest that the written request made pursuant to this paragraph will be deemed remade to the successor-in-interest without any further or additional action on the part of Lender and that by assuming the Debt secured by this Security Instrument or by accepting the interest of Borrower subject to the lien of this Security Instrument, the successor remakes each of the representations and warranties in this Security Instrument and agrees to be bound by each covenant in this Security Instrument, including but not limited to any indemnity provision.

     (k) Financing Statement. This Security Instrument shall also constitute a financing statement pursuant to UCC §9502, and shall be filed as a fixture filing in the Official Records of the County Recorder of the County in which the Property is located and covers goods which are or are to become fixtures on the Property.

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     (l) Border Zone Property. Borrower represents and warrants that the Property has not been designated as Border Zone Property under the provisions of California Health and Safety Code §25220 et seq. or any regulation adopted in accordance therewith and there has been no occurrence or condition on any real property adjoining or in the vicinity of the Property that is reasonably likely to cause the Property or any part thereof to be designated as Border Zone Property.

     (m) Waiver of Statutory Regulation. By initialing below, Borrower waives any right under California Civil Code §2954.10 or otherwise to prepay the Note, in whole or in part, without a Prepayment Charge (as described in Section 13.03 and Article XV hereof). Borrower acknowledges that prepayment of the Note may result in Lender’s incurring additional losses, costs, expenses, and liabilities, including, but not limited to, lost revenue and lost profits. Borrower therefore agrees to pay any prepayment charges on the terms and conditions provided herein, including, without limitation, upon any Event of Default attributable to the transfer or conveyance of any right, title, or interest in the Property to the extent the same would be due pursuant to Section 13.03 or Article XV hereof.

     BORROWER AGREES THAT LENDER’S WILLINGNESS TO MAKE THE LOAN AT THE INTEREST RATE FOR THE TERM SET FORTH HEREIN CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER, FOR THIS WAIVER AND AGREEMENT.

[Borrower’s Initials]

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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: 199822200005	MARITIME HOTEL ASSOCIATES, L.P., a California limited partnership
	By:	Hyde Street Hospitality, 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 J. Wolkom Name: Gregory J. Wolkom Title: CFO

Acknowledgment

State Of California	)
	) ss:
County Of San Francisco	)

     On February, 9, 2007, before me, Jessie Holland personally appeared Gregory Wolkom, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.

     WITNESS my hand and official seal.

Signature /s/ Jessie Holland         (seal)

EXHIBIT A

Legal Description of Premises

EXHIBIT B

SUMMARY OF RESERVES

		Monthly Installment
Reserve Items	Initial Deposit Amount	Amount
Basic Carrying Costs
•    Taxes	$0	$48,500
•    Insurance Premiums	$0	$TBD
•    Ground Rents	$0	$TBD
Initial Engineering Deposits		Not Applicable
•    Immediate Repairs	$0
•    Environmental Remediation	$0
Recurring Replacement Reserve Monthly Installment	Not Applicable	$70,983.36

EXHIBIT C

EXHIBIT D

Required Engineering Work

None.

EXHIBIT E

Form of Direction Letter

[Letterhead of Landlord]

[Name and Address of tenant]

Re: [Address of Premises]

Dear tenant:

     You are hereby directed to make all future payments of rent and other sums due to Landlord under the Lease payable as follows:

Payable To:	Borrower and Wachovia Bank, National Association, as secured party
	ABA #
	Account #
	Address:

     Please take particular care in making the check payable only to the above-mentioned names because only checks made payable to the referenced names will be credited against sums due by you to landlord. Until otherwise advised in writing by Landlord and the above-mentioned bank (or its successor), you should continue to make your payments for rent and other sums as directed by the terms of this letter.

     Thank you in advance for your cooperation with this change in payment procedures.

By:

EXHIBIT F

CREDIT CARD PAYMENT DIRECTION LETTER

[Date]

Re:                                                                                   (the “Company”)

Gentlemen:

     _____________________________ (the “Processor”) has entered into arrangements pursuant to which Processor acts as credit card processing service provider with respect to certain credit card and debit card sales by Company and makes payments to Company in respect of such sales as set forth in the [Merchant Services Bankcard Agreement], dated _______________ between Processor and Company (and together with any replacement agreement thereto, referred to herein as the “Card Processing Agreement”).

     Please be advised that Company has entered or is about to enter into financing arrangements with _____________________________ (the “Lender”) pursuant to which Lender may from time to time make loans and advances and provide other financial accommodations to Company, secured by, among other things, all of Company’s right, title and interest in and to all deposit and other bank accounts and proceeds of the foregoing, including all amounts at any time payable by Processor to Company pursuant to the Card Processing Agreement or otherwise.

     Notwithstanding anything to the contrary contained in the Card Processing Agreement or any prior instructions to Processor, unless and until Processor receives written instructions from Lender to the contrary, effective as of the day after the date of Processor’s written acknowledgement below all amounts payable by Processor to Company pursuant to the Card Processing Agreement or otherwise shall be sent by federal funds wire transfer or electronic depository transfer to the following bank account of Lender:

________________ (the “Bank”)
ABA Number: _____________________
For the Account of: _____________________________
its successors and assigns
Account Number: ___________________
Attn: __________________, Fax: __________________

___________________________

     In the event Processor at any time receives any other instructions from Lender with respect to the disposition of amounts payable by or through Processor to Company pursuant to the Card Processing Agreement or otherwise, Processor is hereby irrevocably authorized and directed to follow such instructions, without inquiry as to Lender’s right or authority to give such instructions. Company and Lender acknowledge that (a) any instructions from Lender to Processor to change the account to which funds must be sent by a vice president or other officer of Lender to _____________________________; (b) such instructions shall only provide for funds to be sent to a single deposit account of Lender, in a manner with respect to the nature of the funds transfer and at times consistent with the payment practices of Processor as then in effect, unless otherwise agreed by Processor. The Company agrees to hold harmless Processor for any action taken by Processor in accordance with the terms of this letter and the Card Processing Agreement; and Lender shall complete such account change forms as Processor may require. The Company hereby acknowledges that the account set forth above is owned by Company but is under the control of Lender.

     Lender and Company hereby confirm and agree as follows: (i) the Card Processing Agreement is in full force and effect and (ii) this Payment Direction Letter does not prohibit or limit any rights Processor possesses under the Card Processing Agreement, including but not limited to Processor’s right to debit, offset or charge back any amount owing to Processor under the Card Processing Agreement or any replacement or renewal thereof, against funds sent to or to be sent to the above referenced bank account.

     This Payment Direction Letter cannot be changed, modified, or terminated, except by written agreement signed by Lender, Company and Processor. Processor agrees to use reasonable efforts to ensure payment instructions are followed, but Lender and Company herein acknowledge that Processor shall incur no liability for changes or modifications wherein Processor has received instructions from Company or Lender to change deposit instructions. The terms of this Payment Direction Letter shall be governed by the laws of the State of New York.

     Please acknowledge your receipt of, and agreement to, the foregoing by signing in the space provided below.

Very truly yours,
_________________________ (the “Company”)
By:
	Name:
	Title:
Date:

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EXHIBIT G

GROUND LEASE

1. Historic Lease (HL-SAFR001-98), effective as of October 16, 2000, by and between Ground Lessor and Borrower.

2. First Amendment to Historic Lease (HL-SAFR001-98), effective as of January 16, 2001, by and between Ground Lessor and Borrower.

3. Second Amendment to Historic Lease (HL-SAFR001-98), effective as of January 18, 2001, by and between Ground Lessor and Borrower.

4. Third Amendment to Historic Lease (HL-SAFR001-98), effective as of January 22, 2001, by and between Ground Lessor and Borrower.

5. Fourth Amendment to Historic Lease (HL-SAFR001-98), effective as of January 24, 2001, by and between Ground Lessor and Borrower.

6. Fifth Amendment to Historic Lease (HL-SAFR001-98), effective as of January 29, 2001, by and between Ground Lessor and Borrower.

7. Sixth Amendment to Historic Lease (HL-SAFR001-98), effective as of February 1, 2001, by and between Ground Lessor and Borrower.

8. Seventh Amendment to Historic Lease (HL-SAFR001-98) effective as of 12:00 (noon) Pacific Standard Time February 6, 2001, by and between Ground Lessor and Borrower.

9. Eighth Amendment to Historic Lease (HL-SAFR001-98), effective as of August 10, 2001, by and between Ground Lessor and Borrower.

10 Ninth Amendment to Historic Lease (HL-SAFR001-98) effective as of May 14, 2004, by and between Ground Lessor and Borrower.

INDEX

	PAGE
ARTICLE I: DEFINITIONS	5
Section 1.01. Certain Definitions.	5
ARTICLE II: REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER	24
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.	24
Section 2.02. Representations, Warranties and Covenants of Borrower. Borrower represents and warrants to and covenants with Lender:	24
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 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

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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.	35
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.	35
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:	36
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.	42
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

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such sum, together with interest thereon at the Default Rate from and after such demand until fully paid, shall constitute a part of the Debt.	43
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.	43
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.	44
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.	46
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

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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.	46
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.	47
ARTICLE III: INSURANCE AND CASUALTY RESTORATION	50
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:	50
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

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omissions of Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an endorsement indicating that neither Lender nor Borrower shall be or be deemed to be a co-insurer with respect to any casualty risk insured by such policies and shall provide for a deductible per loss of an amount not more than $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.	53
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.	54
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

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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”.	55
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

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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.	59
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.	60
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.	61
ARTICLE IV: IMPOSITIONS	61
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,

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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.	61
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.	62
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.	62
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 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

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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.	62
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.	63
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.	63
ARTICLE V: CENTRAL CASH MANAGEMENT	63
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

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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

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and instruments as are reasonably required to restore Borrower’s right to daily withdrawals from the Rent Account.	63
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.	64
Section 5.03. Intentionally Omitted.	65
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.	65
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

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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:	65
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.	66
Section 5.07. Intentionally Omitted.	67
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

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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.	67
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) 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.	68
Section 5.10. Intentionally Omitted.	68
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

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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.	68
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 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.	69
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,

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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 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

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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 excess Loss Proceeds shall be disbursed to Borrower provided any such Loss Proceeds still remain in the Central Account.	70
ARTICLE VI: CONDEMNATION	71
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 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

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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.	71
ARTICLE VII: LEASES AND RENTS	73
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.	73
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.	74
ARTICLE VIII: MAINTENANCE AND REPAIR	76
Section 8.01. Maintenance and Repair of the Property; Alterations; Replacement of Equipment. Borrower hereby covenants and agrees:	76
ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE PROPERTY	78
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

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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.	78
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.	78
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.	78
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:	79
ARTICLE X: CERTIFICATES	80
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

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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.	80
ARTICLE XI: NOTICES	81
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:	81
ARTICLE XII: INDEMNIFICATION	82
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

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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 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.		82
ARTICLE XIII: DEFAULTS		83
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”):		83
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

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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, 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

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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 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

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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.		85
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 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

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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.		89
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.		90
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 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.		90
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

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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.		91
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.		91
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.		91
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.		92
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

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other action, for a default or defaults by Borrower existing at the time such earlier action was commenced.		92
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.		92
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.		92
Section 13.13. General Provisions Regarding Remedies.		92
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS		93
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.		93
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.		94
ARTICLE XV: PREPAYMENT		94

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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.		94
ARTICLE XVI: ENVIRONMENTAL COMPLIANCE		95
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, 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.		95
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:		98
ARTICLE XVII: ASSIGNMENTS		99
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

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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.		99
ARTICLE XVIII: MISCELLANEOUS		99
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.		99
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.		99
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.		99
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.		99
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 invalid, illegal or unenforceable in any respect, such Loan Document shall be construed without such provision.		99
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.		99
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.		99

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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.		100
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.		100
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.		100
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.		100
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.		100

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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 STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.		101
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 disposition thereof. Lender shall have no obligation to clean-up or otherwise prepare the Collateral for disposition.		101
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

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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.		102
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.		102
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.		103
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.		103
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 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

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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.		103
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.		103
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.		104
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.		104
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.		104
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.		104
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

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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.		104
Section 18.26. Time of the Essence. Time shall be of the essence in the performance of all obligations of Borrower hereunder.		104
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.		104
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.		105

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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. Notwithstanding the foregoing, Borrower shall not be required to deliver a “10b-5” or “REMIC” Opinion in connection with any Securitization.		105
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

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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.		105
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

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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.		106
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) — (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

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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 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

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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 (u) 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 would not have had recourse thereto other than in accordance with the provisions of this Section 18.32).		107
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

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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.		109
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.		110
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.		110
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

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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.		111
Section 18.37. Certain Matters Relating to Property Located in the State of California. With respect to the Property which is located in the State of California, notwithstanding anything contained herein:		111

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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

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 the Argonaut Hotel

     Bethesda, MD, February 16, 2011 — Pebblebrook Hotel Trust (NYSE: PEB) (the “Company”) today announced that it has acquired the Argonaut Hotel for $84.0 million. The 252-room, upper-upscale, full-service, boutique-style hotel is located in San Francisco, California, in the heart of Fisherman’s Wharf. The property will continue to be managed by Kimpton Hotels & Restaurants (“Kimpton”). The transaction includes the assumption of a $42.0 million secured loan, with the balance of the purchase price funded by the Company with available cash.

     “We are pleased to acquire such a distinctive hotel in one of the most dynamic areas of San Francisco,” said Jon Bortz, Chairman, President and Chief Executive Officer of Pebblebrook Hotel Trust. “The hotel is situated in an excellent location in Fisherman’s Wharf and is in close proximity to the area’s major attractions. The hotel is a spectacular historic landmark that is surrounded by a wealth of entertainment and leisure activities. Moreover, the Argonaut is the market leader in the internationally known Fisherman’s Wharf market. The strong leisure and group demand in this market, combined with extremely high barriers to entry, makes the Argonaut a very compelling addition to our growing portfolio.”

     The Argonaut Hotel is located in the popular Fisherman’s Wharf area of San Francisco, California, within the San Francisco Maritime National Historical Park and just blocks from numerous fine dining, entertainment and shopping establishments. Fisherman’s Wharf is an historic part of San Francisco that has long been known for its vibrant, marine-oriented atmosphere and is home to the Aquarium by the Bay, Anchorage Square, Ghirardelli Square and PIER 39, a 110-shop, two-story, festival marketplace. The area is also the main departure point for Alcatraz Island, a prime tourist attraction. San Francisco has consistently been featured as a top tourist destination in North America for both domestic and international travelers and boasts an exceptional array of natural attractions. In addition to the abundant and diverse collection of leisure activities, the city’s location on the west coast makes it a natural gateway to travelers from Asia.

     The hotel was originally constructed in 1907 as the Haslett Warehouse, before its conversion to a hotel in 2003. The Argonaut Hotel is a boutique-style property located directly across from San Francisco Bay with stunning views of Alcatraz Island, the Golden Gate Bridge and the Transamerica Pyramid. The property consists of 252 well-appointed guestrooms, with decor that celebrates the nautical history of the city’s waterfront. The property highlights the historic features of the property, including exposed red brick walls, high ceilings and original redwood columns and beams. The hotel features over 8,000 square feet of meeting space, including the 4,200 square-foot Golden Gate Ballroom and the 1,800 square-foot Maritime Room. The property also features the Blue Mermaid Chowder House, a 170-seat, three-meal-a-day restaurant that serves fresh seafood fare and is locally known for its excellent chowder. Additionally, the hotel is home to the San Francisco Maritime National Historical Park Visitors Center, along with several retail outlets including Starbucks, Ben & Jerry’s Homemade Ice Cream, Blazing Saddles Bike Rentals and Tours, and the Winery Collective Tasting Room.

     In 2010, the Argonaut Hotel operated at 87% occupancy, with an average daily rate of $185. During the next 12 months, the Company currently forecasts that the hotel will generate earnings before interest, taxes, depreciation and amortization (“EBITDA”) of approximately $5.1 to $5.6 million and net operating income after capital reserves of approximately $4.2 to $4.7 million.

     The Company will own a leasehold interest in the property through a long-term ground lease with the Department of the Interior National Park Service by way of the United States of America. There are currently 49 years remaining on the long-term ground lease, which expires in 2059. The $42.0 million secured loan that is being assumed in connection with the acquisition is a non-recourse, interest-only loan, subject to a fixed annual interest rate of 5.67%. The loan matures in March 2012.

     The hotel will continue to be managed by Kimpton, which has managed the property since 2003. In addition to the Argonaut Hotel, Kimpton also manages Pebblebrook’s 416-room Sir Francis Drake in downtown San Francisco, California, 183-room Monaco Washington DC in downtown Washington, DC and 140-room The Grand Hotel Minneapolis in downtown Minneapolis, Minnesota.

     “We are excited to expand our very successful relationship with Kimpton Hotels & Restaurants,” continued Mr. Bortz. “They are extremely experienced with the San Francisco market and we believe they will continue to drive market-leading performance at the Argonaut Hotel.”

     The Company expects to incur approximately $1.4 million of costs related to the acquisition of this hotel that will be expensed as incurred.

     The Argonaut Hotel marks the ninth acquisition for the Company since completing its initial public offering in December 2009.

About Pebblebrook Hotel Trust

     Pebblebrook Hotel Trust is a publicly traded 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 nine hotels with a total of 2,552 guest rooms in six states and the District of Columbia including, San Francisco, California; Washington, DC; Santa Monica, California; Minneapolis, Minnesota; Bethesda, Maryland; Buckhead, Georgia; Stevenson, Washington; and Philadelphia, Pennsylvania.

Click here to visit the Pebblebrook Hotel Trust website

Click here to visit the Argonaut Hotel 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. Celebrating its 30th anniversary in 2011, Bill Kimpton founded the company in 1981 and today it 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. Adjacent to the hotels are locally-loved, top-rated, destination Kimpton 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 51 hotels and 54 restaurants in 24 cities. For more information visit www.KimptonHotels.com or call 1-800-KIMPTON.

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

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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; forecasts of the Company’s future economic performance and 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) 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 at www.sec.gov ..

     All information in this release is as of February 16, 2011. 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.

Contact:

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
Argonaut Hotel
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	$	2.5	to	$	3.0
Adjustment:
Depreciation and amortization (1)		2.6			2.6
Hotel EBITDA	$	5.1		$	5.6
Adjustment:
Capital reserve		(0.9	)		(0.9	)
Hotel Net Operating Income	$	4.2		$	4.7

(1)  Depreciation and amortization has been estimated based on a preliminary purchase price allocation. A change, if any, in the allocation will affect the amount of Depreciation and Amortization and the resulting change 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 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 are they 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 after capital reserves calculations to net income in accordance with GAAP.

Pebblebrook Hotel Trust
Historical Hotel Pro Forma Operating Data
(In thousands)
(Unaudited)

Historical Operating Data

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
	2009			2009			2009			2009			2009
Pro forma Occupancy		65.6	%		75.4	%		78.9	%		69.4	%		72.4	%
Pro forma ADR	$	179.36		$	168.66		$	165.48		$	170.32		$	170.58
Pro forma RevPAR	$	117.72		$	127.14		$	130.57		$	118.25		$	123.44
Pro forma Hotel Revenues	$	41,839		$	46,039		$	46,511		$	44,239		$	178,628
Pro forma Hotel EBITDA	$	6,670		$	12,192		$	11,751		$	10,340		$	40,953

	First Quarter			Second Quarter			Third Quarter
	2010			2010			2010
Pro forma Occupancy		68.8	%		81.0	%		79.9	%
Pro forma ADR	$	160.43		$	169.28		$	174.56
Pro forma RevPAR	$	110.40		$	137.12		$	139.48
Pro forma Hotel Revenues	$	39,869		$	49,291		$	49,200
Pro forma Hotel EBITDA	$	6,331		$	12,548		$	12,331

Notes:

These historical hotel operating results include results from the hotels the Company owned as of February 16, 2011 including: DoubleTree by Hilton Bethesda-Washington DC, Sir Francis Drake, InterContinental Buckhead, Monaco Washington DC, Skamania Lodge, Sheraton Delfina, Sofitel Philadelphia and the Argonaut Hotel. This schedule excludes The Grand Hotel Minneapolis. These historical operating results include results for periods prior to the Company’s ownership of the hotels. The Company expects to include historical operating results for The Grand Hotel Minneapolis after the Company has owned the hotel for one year.

The data above is not audited and has been presented only for comparison purposes.

EX-99.2

Exhibit 99.2