INDEPENDENT DIRECTOR DESIGNATION AGREEMENT
HUDSON YARDS WEST MEZZANINE LLC
Dated as of June 15, 2025
by and between
HUDSON YARDS WEST MEZZANINE LLC
a Delaware limited liability company
and
COMMONWEALTH TRUST COMPANY
a Pennsylvania trust company
This INDEPENDENT DIRECTOR DESIGNATION AGREEMENT (this "Agreement") is entered into as of June 15, 2025 (the "Effective Date"), by and between Hudson Yards West Mezzanine LLC, a Delaware limited liability company (the "Company"), and Commonwealth Trust Company, a Pennsylvania trust company (the "Service Provider").
The Company is the direct borrower under a Mezzanine Loan Agreement dated as of June 15, 2025, between the Company and Granite Peak Capital Partners, LP, a Delaware limited partnership (the "Mezzanine Lender"), evidencing a mezzanine loan in the original principal amount of Two Hundred Million Dollars ($200,000,000) (the "Mezzanine Loan"). The Company is also the sole member of Hudson Yards West Mortgage LLC, a Delaware limited liability company (the "Mortgage Borrower"), which is the borrower under a Senior Mortgage Loan Agreement dated as of June 15, 2025 (the "Senior Loan Agreement"), among the Mortgage Borrower and Ironclad National Bank, N.A., a national banking association, as administrative agent (in such capacity, the "Senior Lender" or the "Agent"), evidencing a senior mortgage loan in the original principal amount of Four Hundred Seventy-Five Million Dollars ($475,000,000) (the "Senior Loan"). The Senior Loan and the Mezzanine Loan are each secured, directly or indirectly, by the mixed-use development project located at 450 West 34th Street, New York, New York 10001 (the "Project"). The Company has been formed as a special purpose entity and, pursuant to the terms of the Mezzanine Loan Agreement and the Company's Limited Liability Company Agreement, is required to have at least one (1) Independent Director designated at all times in order to satisfy the separateness covenants contained therein. The Company desires to engage Service Provider to designate a natural person to serve as Independent Director of the Company, and Service Provider is willing to make such designation, each on the terms and subject to the conditions set forth in this Agreement.
RECITALS
A. The Company is a Delaware limited liability company formed as a bankruptcy-remote special purpose entity and is the direct borrower under that certain Mezzanine Loan Agreement dated as of June 15, 2025 (as amended, restated, supplemented, or otherwise modified from time to time, the "Mezzanine Loan Agreement"), by and between the Company and Granite Peak Capital Partners, LP, a Delaware limited partnership (the "Mezzanine Lender"), evidencing a mezzanine loan in the original principal amount of Two Hundred Million Dollars ($200,000,000) (the "Mezzanine Loan"), the repayment of which is secured by a pledge of the Company's membership interests in the Mortgage Borrower.
B. The Company is the sole member of Hudson Yards West Mortgage LLC, a Delaware limited liability company (the "Mortgage Borrower"), which is the borrower under the Senior Mortgage Loan Agreement dated as of June 15, 2025 (as amended, restated, supplemented, or otherwise modified from time to time, the "Senior Loan Agreement"), among the Mortgage Borrower, the lenders party thereto from time to time, and Ironclad National Bank, N.A., a national banking association, as administrative agent (in such capacity, the "Senior Lender" or the "Agent"), evidencing a senior mortgage loan in the original principal amount of Four Hundred Seventy-Five Million Dollars ($475,000,000) (the "Senior Loan"), which Senior Loan is secured by, among other things, a first-priority mortgage lien on the Project located at 450 West 34th Street, New York, New York 10001 (Block 729, Lots 1, 5, 12, and 15), in the Borough of Manhattan, City and State of New York.
C. Pursuant to Section 5.4 of the Limited Liability Company Agreement of the Company dated as of June 12, 2025 (as amended, restated, supplemented, or otherwise modified from time to time, the "LLC Agreement"), and the requirements of Section 7.15 of the Mezzanine Loan Agreement, the Company is required to have at least one (1) Independent Director (as hereinafter defined) at all times for so long as any obligations under the Mezzanine Loan Agreement or the Senior Loan Agreement remain outstanding.
D. The Company desires to engage Service Provider to designate a natural person to serve as an Independent Director of the Company, and Service Provider is in the business of providing such persons to special purpose entities in connection with structured finance transactions and has agreed to designate such a person on the terms and conditions set forth herein.
E. This Agreement is entered into concurrently with that certain Independent Director Designation Agreement of even date herewith by and between the Mortgage Borrower and Service Provider (as amended, restated, supplemented, or otherwise modified from time to time, the "Mortgage Borrower Independent Director Agreement"), and the provisions of this Agreement are intended to be parallel to, and consistent with, the provisions of the Mortgage Borrower Independent Director Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 — Definitions.
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Mezzanine Loan Agreement or, if not defined therein, the Senior Loan Agreement, or, if not defined in either, the LLC Agreement.
"Acceptance and Consent" means the Acceptance and Consent of the Designated Independent Director substantially in the form attached hereto as Exhibit A.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under Common Control with such Person. For purposes of this definition, "Control" (including the correlative meanings of the terms "Controlled by" and "under Common Control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. This definition is consistent with the definition of "Affiliate" set forth in the Mezzanine Loan Agreement.
"Agreement" means this Independent Director Designation Agreement, as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Bankruptcy Code" means Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq., as amended from time to time, and any successor statute thereto.
"Cause" means, with respect to the Designated Independent Director, (a) fraud committed by or with the knowing participation of the Designated Independent Director in connection with the Designated Independent Director's service hereunder, (b) willful misconduct by the Designated Independent Director in the performance of the Designated Independent Director's duties hereunder, (c) gross negligence by the Designated Independent Director in the performance of the Designated Independent Director's duties hereunder, or (d) a material breach of any Independence Requirement set forth in Section 1.2 hereof.
"Company" means Hudson Yards West Mezzanine LLC, a Delaware limited liability company.
"Designated Independent Director" means the natural person designated by Service Provider pursuant to Article II of this Agreement to serve as an Independent Director of the Company, together with any successor so designated in accordance with Section 4.4 hereof.
"Effective Date" has the meaning set forth in the preamble to this Agreement.
"Indemnitee" has the meaning set forth in Section 7.1 hereof.
"Independence Requirements" means the requirements set forth in Section 1.2 hereof.
"Independent Director" means a natural person who, at all times during such person's service as an Independent Director of the Company, satisfies all of the Independence Requirements set forth in Section 1.2 hereof.
"LLC Agreement" means the Limited Liability Company Agreement of the Company dated as of June 12, 2025, as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms and the terms of the Mezzanine Loan Agreement.
"Material Action" has the meaning set forth in Section 3.1 hereof.
"Mezzanine Lender" means Granite Peak Capital Partners, LP, a Delaware limited partnership, together with its successors and assigns as lender under the Mezzanine Loan Agreement.
"Mezzanine Loan" has the meaning set forth in Recital A.
"Mezzanine Loan Agreement" has the meaning set forth in Recital A.
"Mortgage Borrower" means Hudson Yards West Mortgage LLC, a Delaware limited liability company.
"Mortgage Borrower Independent Director Agreement" has the meaning set forth in Recital E.
"MTDC" means Metropolitan Transit Development Corp., a Delaware corporation, in its capacity as the Sole Member of the Company.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, governmental authority, or other entity of any kind.
"Project" means the mixed-use development located at 450 West 34th Street, New York, New York 10001 (Block 729, Lots 1, 5, 12, and 15), in the Borough of Manhattan, City, County, and State of New York, as more particularly described in the Senior Loan Agreement.
"Senior Lender" or "Agent" means Ironclad National Bank, N.A., a national banking association, in its capacity as administrative agent under the Senior Loan Agreement, together with its successors and assigns in such capacity.
"Senior Loan" has the meaning set forth in Recital B.
"Senior Loan Agreement" has the meaning set forth in Recital B.
"Service Provider" means Commonwealth Trust Company, a Pennsylvania trust company.
"Sole Member" means Metropolitan Transit Development Corp., a Delaware corporation (or its permitted designee under the LLC Agreement and the Mezzanine Loan Agreement), in its capacity as the sole member of the Company.
"Springing Member" has the meaning set forth in Section 4.5 hereof.
Section 1.2 — Independence Requirements.
The Designated Independent Director must, at all times during such person's service as an Independent Director of the Company, satisfy each of the following criteria (collectively, the "Independence Requirements"):
(a) The Designated Independent Director shall not be, and shall not have been at any time during the five (5) years immediately preceding the date of such person's initial designation or, if later, the date of determination, a stockholder, member, partner, director (other than in the capacity as an Independent Director of the Company, the Mortgage Borrower, or any other special purpose entity that is an Affiliate of the Company or the Mortgage Borrower), officer, employee, or Affiliate of (i) the Company, (ii) the Mortgage Borrower, (iii) Metropolitan Transit Development Corp. ("MTDC"), (iv) any Affiliate of any of the foregoing, (v) the Mezzanine Lender, or (vi) the Senior Lender.
(b) The Designated Independent Director shall not be, and shall not have been at any time during the five (5) years immediately preceding the date of such person's initial designation or, if later, the date of determination, a customer, supplier, creditor, or contractor of the Company, the Mortgage Borrower, MTDC, or any Affiliate of any of the foregoing (other than in the capacity as an Independent Director or independent manager of any such entity pursuant to an agreement with Service Provider or a similar nationally recognized provider of independent directors).
(c) The Designated Independent Director shall not have any direct or indirect financial interest in the Company, the Mortgage Borrower, MTDC, the Mezzanine Lender, the Senior Lender, or any Affiliate of any of the foregoing, other than (i) the right to receive compensation for services as an Independent Director pursuant to this Agreement or any parallel agreement and (ii) indemnification and other rights arising under this Agreement or any parallel agreement.
(d) The Designated Independent Director shall not be a family member (whether by blood, marriage, or adoption, and including any spouse, parent, child, sibling, grandparent, grandchild, uncle, aunt, nephew, niece, or first cousin, or the spouse of any of the foregoing) of any officer, director, manager, member, partner, or shareholder of the Company, the Mortgage Borrower, MTDC, or any Affiliate of any of the foregoing.
(e) The Designated Independent Director shall be employed by the Service Provider or by a nationally recognized company that is regularly engaged in the business of providing independent directors or independent managers to special purpose entities in connection with structured finance transactions.
(f) The Designated Independent Director shall have prior experience serving as an independent director or independent manager of special purpose entities in structured real estate finance transactions, including transactions involving commercial mortgage-backed securities, mezzanine lending, or other securitized or structured real estate indebtedness.
Section 1.3 — Rules of Construction.
Unless the context otherwise requires: (a) words importing the singular shall include the plural, and vice versa; (b) references to "herein," "hereof," "hereunder," and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; (c) references to any Article, Section, Exhibit, or Schedule refer to the applicable Article, Section, Exhibit, or Schedule of or to this Agreement; (d) references to any agreement or instrument mean such agreement or instrument as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms; (e) the headings of Articles, Sections, and other subdivisions of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement; (f) references to any law, statute, regulation, or rule include any amendments thereto and any successor provisions; (g) the words "include," "includes," and "including" are not limiting and shall be deemed to be followed by the words "without limitation"; and (h) this Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, as set forth more fully in Section 10.2 hereof.
ARTICLE II
DESIGNATION AND ACCEPTANCE
Section 2.1 — Initial Designation.
Service Provider hereby designates Margaret A. Ellison as the initial Designated Independent Director of the Company, effective as of the date hereof. Ms. Ellison's business address is c/o Commonwealth Trust Company, 29 North Church Street, West Chester, Pennsylvania 19380. Service Provider confirms that Ms. Ellison has served as an independent director or independent manager for special purpose entities in structured real estate finance transactions for over twelve (12) years, has previously served in such capacity for over forty (40) special purpose entities in commercial real estate loan transactions, and satisfies all of the Independence Requirements set forth in Section 1.2 hereof as of the date hereof.
Section 2.2 — Acceptance.
The Designated Independent Director shall execute the Acceptance and Consent attached hereto as Exhibit A concurrently with or promptly following the execution of this Agreement. By executing the Acceptance and Consent, the Designated Independent Director shall confirm (a) acceptance of the designation as Independent Director of the Company, (b) acknowledgment of the fiduciary duties owed to the Company and its creditors with respect to Material Actions, (c) satisfaction of all Independence Requirements as of the date of the Acceptance and Consent, and (d) agreement to be bound by all terms and conditions of this Agreement applicable to the Designated Independent Director. This Agreement shall not become effective with respect to the Designated Independent Director's service until the Acceptance and Consent has been duly executed and delivered.
Section 2.3 — Appointment Under LLC Agreement.
The Sole Member and the Company shall, concurrently with the execution of this Agreement, take all actions necessary or appropriate under the LLC Agreement to appoint the Designated Independent Director as an Independent Director of the Company, including without limitation executing and delivering any required amendments, supplements, or consent resolutions under the LLC Agreement and providing all required notices to the Mezzanine Lender and the Senior Lender. The Company shall deliver to Service Provider and the Mezzanine Lender evidence of such appointment promptly upon completion.
Section 2.4 — One Independent Director Minimum.
The Company shall at all times have at least one (1) Independent Director serving in such capacity, as required by the LLC Agreement and the Mezzanine Loan Agreement. In the event that, at any time, the Company has no Designated Independent Director (whether as a result of resignation, removal, incapacity, death, or failure to satisfy Independence Requirements), Service Provider shall use commercially reasonable efforts to designate a replacement Designated Independent Director who satisfies all Independence Requirements within five (5) business days of Service Provider's receipt of notice of such vacancy (or, if earlier, five (5) business days after Service Provider becomes aware of such vacancy). During any period in which no Designated Independent Director is serving, no Material Action shall be taken by the Company. The failure of the Company to have a Designated Independent Director serving at any time shall constitute an event of default under the Mezzanine Loan Agreement and may constitute an event of default under the Senior Loan Agreement, and the Company acknowledges and agrees to the severity of such consequence.
ARTICLE III
DUTIES AND MATERIAL ACTIONS
Section 3.1 — Definition of Material Action.
As used in this Agreement, "Material Action" means any of the following actions with respect to the Company, whether taken directly or indirectly, voluntarily or involuntarily:
(a) Filing or consenting to the filing of any petition for relief under the Bankruptcy Code, or any similar federal, state, or foreign insolvency, reorganization, moratorium, receivership, or similar debtor-relief law, with respect to the Company;
(b) Seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official for the Company or for a substantial part of its property or assets;
(c) Making a general assignment for the benefit of creditors of the Company;
(d) Admitting in writing the inability of the Company to pay its debts generally as they become due within the meaning of the Bankruptcy Code or any applicable insolvency law;
(e) Taking any action to authorize, effect, or facilitate any of the foregoing actions described in clauses (a) through (d);
(f) Dissolving, liquidating, winding up, consolidating, or merging the Company, or selling all or substantially all of the Company's assets (other than in connection with a transaction expressly permitted by the Mezzanine Loan Agreement and the LLC Agreement);
(g) Engaging in any business or activity other than the business and activities set forth in the LLC Agreement, which business and activities are limited to (i) holding the membership interests in the Mortgage Borrower, (ii) performing the Company's obligations under the Mezzanine Loan Agreement and the other loan documents executed in connection therewith, and (iii) activities that are incidental, necessary, or appropriate to the foregoing;
(h) Amending, modifying, restating, supplementing, or waiving any separateness, single-purpose entity, or special purpose entity provisions of the LLC Agreement, this Agreement, the Mezzanine Loan Agreement, or any other document or agreement to which the Company is a party that contains such provisions, in each case without the prior written consent of the Mezzanine Lender and, to the extent required by the applicable intercreditor agreement, the Senior Lender;
(i) Incurring any indebtedness, whether for borrowed money or otherwise, or assuming, guaranteeing, endorsing, or otherwise becoming liable for or in respect of the obligations of any other Person, other than as expressly permitted under the Mezzanine Loan Agreement and the Senior Loan Agreement;
(j) Any other action that is designated as a "Material Action," "Major Decision," "Unanimous Member Action," or "Springing Member Triggering Event" (or words of similar import) in the LLC Agreement, the Mezzanine Loan Agreement, or any other agreement to which the Company is a party and which requires the consent of an Independent Director.
Section 3.2 — Consent Required.
No Material Action shall be taken by the Company unless the Designated Independent Director shall have given prior unanimous written consent thereto. If more than one (1) Independent Director is serving at any given time, no Material Action shall be taken unless the prior unanimous written consent of all Independent Directors then serving shall have been obtained. Without limiting the generality of the foregoing, any consent to the filing of a voluntary petition for relief under the Bankruptcy Code or any similar law shall require the Designated Independent Director to give due consideration, in accordance with his or her fiduciary duties, to the interests of the Company's creditors, including the Mezzanine Lender and the Senior Lender, as well as the interests of the Company itself, and the Designated Independent Director shall not consent to any such filing unless, after such due consideration, the Designated Independent Director determines in good faith that such filing is in the best interests of the Company and all of its stakeholders, taking into account the totality of the circumstances. The consent of the Designated Independent Director with respect to Material Actions shall be documented in writing and copies thereof shall be maintained by the Company.
Section 3.3 — Fiduciary Duties.
The Designated Independent Director shall, in exercising consent rights with respect to Material Actions, owe fiduciary duties to the Company, including fiduciary duties of care and loyalty. In fulfilling such fiduciary duties, the Designated Independent Director shall consider the interests of the Company and all of its creditors (including without limitation the Mezzanine Lender and the Senior Lender) and shall not act solely in the interests of the Sole Member or any Affiliate of the Sole Member. The parties acknowledge that, pursuant to Section 18-1101(c) of the Delaware Limited Liability Company Act (6 Del. C. § 18-1101(c)), a limited liability company agreement may expand, restrict, or eliminate the fiduciary duties of a member or manager; provided, however, that the LLC Agreement shall not eliminate or restrict the fiduciary duties of the Independent Director with respect to Material Actions. The parties further acknowledge that, pursuant to Section 18-1101(e) of the Delaware Limited Liability Company Act (6 Del. C. § 18-1101(e)), a limited liability company agreement may provide for the limitation or elimination of liability for breach of contract and breach of duties (including fiduciary duties) of a member, manager, or other person; provided, however, that the LLC Agreement shall not limit or eliminate the liability of the Independent Director with respect to any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing. Nothing in this Section 3.3 shall be construed to impose upon the Designated Independent Director any duty to creditors of the Company other than those duties arising under applicable law and the LLC Agreement.
Section 3.4 — No Duty to Manage.
Except with respect to Material Actions as set forth in this Article III, the Designated Independent Director shall have no management authority over the Company, no obligation to attend meetings of members or managers of the Company, no obligation to monitor the business, operations, financial condition, or affairs of the Company, and no obligation to review the books and records of the Company. The Designated Independent Director shall not be deemed a "manager" of the Company for any purpose under the Delaware Limited Liability Company Act or otherwise, except solely to the extent required by the LLC Agreement and this Agreement in connection with the Designated Independent Director's consent rights with respect to Material Actions. The Designated Independent Director shall not be required to devote any specific amount of time to the affairs of the Company.
Section 3.5 — No Vote or Consent on Ordinary Matters.
The Designated Independent Director's consent is required only with respect to Material Actions as defined in Section 3.1 hereof. The Designated Independent Director shall have no right to vote on, consent to, or otherwise participate in any decision-making with respect to ordinary business decisions, management matters, or day-to-day operations of the Company, all of which shall be within the sole authority of the Sole Member (or any manager appointed by the Sole Member) as provided in the LLC Agreement.
ARTICLE IV
TERM, REMOVAL, AND REPLACEMENT
Section 4.1 — Term.
The designation of the Designated Independent Director under this Agreement shall continue until the earliest to occur of:
(a) the date on which all obligations of the Company under the Mezzanine Loan Agreement and all obligations of the Mortgage Borrower under the Senior Loan Agreement have been indefeasibly paid and performed in full and all commitments of the Mezzanine Lender and the Senior Lender thereunder have been terminated, as confirmed in writing by the Mezzanine Lender and the Senior Lender, respectively;
(b) the date of termination of this Agreement by the Company with the prior written consent of the Mezzanine Lender, such consent not to be unreasonably withheld, conditioned, or delayed; provided that such termination shall not be effective unless and until the Company has made alternative arrangements satisfactory to the Mezzanine Lender for the designation of a replacement Independent Director in compliance with the Mezzanine Loan Agreement and the LLC Agreement; or
(c) the date specified in Section 4.4 hereof on which a successor Designated Independent Director has been designated and accepted appointment in accordance with the provisions of Section 4.4.
Upon termination of this Agreement in accordance with clause (a) above, all rights and obligations of the parties hereunder shall terminate, except for those provisions that expressly survive termination, including without limitation Article VII (Indemnification), Section 5.3 (Payment Terms, with respect to accrued amounts), and Article VIII (Limitation of Liability).
Section 4.2 — Removal.
The Designated Independent Director may be removed as Independent Director of the Company only in the following circumstances:
(a) For Cause. The Designated Independent Director may be removed for Cause by the Sole Member or the Company, upon written notice to the Designated Independent Director, Service Provider, and the Mezzanine Lender, specifying the grounds for removal. As used herein, "Cause" means fraud, willful misconduct, gross negligence, or a material breach of any Independence Requirement set forth in Section 1.2 hereof by the Designated Independent Director.
(b) At the Request of the Mezzanine Lender. The Designated Independent Director may be removed upon the written request of the Mezzanine Lender delivered to the Company and Service Provider, with a copy to the Senior Lender. The Mezzanine Lender shall not be required to specify any reason for such request.
(c) With Mezzanine Lender Consent. The Designated Independent Director may be removed by the Company with the prior written consent of the Mezzanine Lender.
Notwithstanding the foregoing, no removal of the Designated Independent Director shall be effective until a successor Independent Director has been designated by Service Provider in accordance with Section 4.4 hereof and such successor has accepted appointment by executing an Acceptance and Consent in the form of Exhibit A. During any interim period between notice of removal and the effective designation of a successor, the Designated Independent Director shall continue to serve in such capacity and shall continue to owe all duties set forth in Article III hereof.
Section 4.3 — Resignation.
The Designated Independent Director may resign from service as Independent Director of the Company upon not less than thirty (30) days' prior written notice to the Company, Service Provider, the Mezzanine Lender, and the Senior Lender. Such notice shall specify the proposed effective date of resignation. The resignation shall not be effective until a successor Designated Independent Director has been designated by Service Provider in accordance with Section 4.4 hereof and such successor has accepted appointment by executing an Acceptance and Consent in the form of Exhibit A. Service Provider shall use commercially reasonable efforts to designate a successor within the thirty (30)-day notice period. If a successor has not been designated and accepted appointment by the date specified in the resignation notice, the resignation shall not take effect until such time as a successor has been duly designated and accepted.
Section 4.4 — Replacement.
In the event that the Designated Independent Director resigns, is removed, becomes incapacitated (whether by reason of physical or mental disability), dies, or otherwise ceases to satisfy any of the Independence Requirements:
(a) Service Provider shall designate a replacement Designated Independent Director within five (5) business days of Service Provider's receipt of notice of such event (or, if earlier, five (5) business days after Service Provider becomes aware of such event);
(b) any such replacement must satisfy all of the Independence Requirements set forth in Section 1.2 hereof as of the date of designation and at all times during such replacement's service;
(c) the replacement Designated Independent Director must execute an Acceptance and Consent substantially in the form of Exhibit A attached hereto, which shall be delivered to the Company, the Mezzanine Lender, and the Senior Lender;
(d) Service Provider shall give prompt written notice of any such replacement to the Company, the Mezzanine Lender, and the Senior Lender, substantially in the form of Exhibit B attached hereto (a "Replacement Designation Notice"), which notice shall include the name and business address of the replacement, confirmation that the replacement satisfies all Independence Requirements, and shall be accompanied by the replacement's executed Acceptance and Consent; and
(e) the replacement Designated Independent Director shall assume all rights and obligations of the predecessor Designated Independent Director under this Agreement effective upon the execution and delivery of the Acceptance and Consent by such replacement.
Section 4.5 — Springing Member.
Upon the occurrence of any event that causes the Sole Member to cease to be a member of the Company (including without limitation the dissolution, liquidation, winding up, bankruptcy, insolvency, or cessation of existence of the Sole Member, or the transfer by the Sole Member of all of its membership interests in the Company in violation of the LLC Agreement), the Designated Independent Director then serving (or, if no Designated Independent Director is then serving, Service Provider) shall, without any action of any Person and without any further consent, vote, approval, or other action by the Sole Member, any other member, or any other Person, be automatically admitted as a "Springing Member" of the Company, solely for the limited purpose of continuing the existence of the Company in accordance with the terms of the LLC Agreement and to prevent the dissolution of the Company that would otherwise result from the Sole Member ceasing to be a member. The Springing Member shall have no economic interest in the Company (including no right to receive any distributions, allocations of profits or losses, or return of capital), shall have no management authority over the Company (other than any authority necessary to prevent dissolution of the Company), and shall serve solely to ensure the continued existence of the Company as a legal entity. The Springing Member shall not be required to make any capital contribution to the Company. The provisions of this Section 4.5 shall not be amended, modified, or waived without the prior written consent of the Mezzanine Lender.
ARTICLE V
COMPENSATION AND EXPENSES
Section 5.1 — Annual Fee.
The Company shall pay to Service Provider an annual fee of Seven Thousand Five Hundred Dollars ($7,500) (the "Annual Fee") for the designation of the Designated Independent Director, payable in advance on each anniversary of the Effective Date (or, in the case of the first year, upon execution of this Agreement). The Annual Fee covers the designation of one (1) Designated Independent Director to the Company and shall not include any additional fees for designation of independent directors to the Mortgage Borrower, which are governed by the Mortgage Borrower Independent Director Agreement. If this Agreement terminates on a date other than an anniversary of the Effective Date, no pro rata refund of the Annual Fee shall be due or payable.
Section 5.2 — Reimbursement of Expenses.
The Company shall reimburse Service Provider and the Designated Independent Director for all reasonable, documented out-of-pocket expenses actually incurred in connection with the performance of their respective duties and obligations under this Agreement, including without limitation (a) reasonable travel expenses, if any, incurred in connection with attendance at meetings or proceedings related to Material Actions or the Designated Independent Director's service hereunder, (b) reasonable legal fees and expenses incurred in connection with the enforcement of the indemnification rights set forth in Article VII hereof, and (c) costs of supplemental independence certifications or due diligence reasonably requested by the Company, the Mezzanine Lender, or the Senior Lender. Service Provider shall submit reasonably detailed invoices for all such expenses, and payment shall be made in accordance with Section 5.3.
Section 5.3 — Payment Terms.
All fees and expenses payable under this Article V shall be due and payable within thirty (30) days following the date of the applicable invoice delivered by Service Provider to the Company. Late payments shall bear interest at the lesser of (a) one and one-half percent (1.5%) per month and (b) the maximum rate permitted by applicable law. The payment obligations of the Company under this Article V shall survive termination of this Agreement with respect to any amounts accrued but unpaid as of the date of such termination.
Section 5.4 — Mezzanine Lender as Third-Party Beneficiary.
All compensation arrangements under this Article V are subject to the prior approval of the Mezzanine Lender to the extent required by the Mezzanine Loan Agreement or any other loan document. The Mezzanine Lender is an express third-party beneficiary of this Section 5.4 and shall have the right to enforce the provisions hereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.1 — Representations and Warranties of Service Provider.
Service Provider hereby represents and warrants to the Company, as of the Effective Date, as follows:
(a) Organization and Good Standing. Service Provider is duly organized and validly existing as a trust company in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite power and authority to conduct its business as currently conducted and to own, lease, and operate its properties.
(b) Power and Authority. Service Provider has full corporate power and authority to enter into this Agreement and to perform all of its obligations hereunder. The execution, delivery, and performance of this Agreement by Service Provider have been duly authorized by all necessary corporate action on the part of Service Provider, and no further corporate proceedings on the part of Service Provider are necessary to authorize the execution, delivery, and performance of this Agreement.
(c) Due Authorization. The execution and delivery of this Agreement by Service Provider have been duly authorized by all necessary corporate action, and no other corporate proceedings are necessary to authorize the execution or performance hereof.
(d) Binding Obligation. This Agreement constitutes a legal, valid, and binding obligation of Service Provider, enforceable against Service Provider in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, and other similar laws affecting creditors' rights generally and to general principles of equity (whether considered at law or in equity).
(e) Independence of Designated Independent Director. The Designated Independent Director satisfies all of the Independence Requirements set forth in Section 1.2 hereof as of the Effective Date, and Service Provider has conducted reasonable due diligence to confirm such compliance.
(f) Business of Service Provider. Service Provider is regularly and continuously engaged in the business of providing independent directors and independent managers to special purpose entities in connection with structured finance transactions, including real estate-related structured finance transactions, and has been so engaged for at least ten (10) years.
(g) No Conflicts. No conflict of interest exists with respect to Service Provider or the Designated Independent Director and the Company, MTDC, the Mezzanine Lender, the Senior Lender, or any Affiliate of any of the foregoing, in each case with respect to the services to be performed under this Agreement. Neither the execution, delivery, nor performance of this Agreement by Service Provider will (i) violate any provision of the organizational documents of Service Provider, (ii) violate any law, regulation, order, judgment, or decree applicable to Service Provider, or (iii) result in a breach of, or default under, any material agreement or instrument to which Service Provider is a party or by which Service Provider is bound.
Section 6.2 — Representations and Warranties of the Company.
The Company hereby represents and warrants to Service Provider, as of the Effective Date, as follows:
(a) Organization and Good Standing. The Company is duly formed and validly existing as a limited liability company in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to conduct its business as currently conducted and to own, lease, and operate its properties.
(b) Power and Authority. The Company has full limited liability company power and authority to enter into this Agreement and to perform all of its obligations hereunder. The execution, delivery, and performance of this Agreement by the Company have been duly authorized by all necessary limited liability company action on the part of the Company, including any required approval of the Sole Member under the LLC Agreement.
(c) No Conflict. The execution, delivery, and performance of this Agreement by the Company do not and will not (i) conflict with or violate any provision of the LLC Agreement or any organizational document of the Company, (ii) conflict with or result in a breach of, or default under, the Mezzanine Loan Agreement, the Senior Loan Agreement, or any other material agreement or instrument to which the Company is a party or by which the Company or any of its assets is bound, or (iii) violate any applicable law, regulation, order, judgment, or decree.
(d) Required Consents. No consent, approval, authorization, or order of any court, governmental authority, or third party is required for the execution, delivery, and performance of this Agreement by the Company, other than the consent of the Mezzanine Lender, which has been obtained as of the Effective Date, and the consent of the Senior Lender, to the extent required under the applicable intercreditor agreement, which has been obtained as of the Effective Date.
Section 6.3 — Ongoing Covenants of Service Provider.
Service Provider hereby covenants and agrees that, for so long as this Agreement remains in effect:
(a) Notification of Non-Compliance. Service Provider shall promptly, and in any event within two (2) business days, notify the Company and the Mezzanine Lender in writing if Service Provider becomes aware that the Designated Independent Director has ceased to satisfy any Independence Requirement set forth in Section 1.2 hereof.
(b) Maintenance of Records. Service Provider shall maintain adequate records of the independence qualifications of all persons designated as Designated Independent Directors under this Agreement, including documentation supporting the satisfaction of each Independence Requirement at the time of designation and at all times during service.
(c) Supplemental Certifications. Service Provider shall cause the Designated Independent Director to execute and deliver supplemental certifications of independence in form and substance reasonably satisfactory to the Company and the Mezzanine Lender, upon the reasonable request of the Company or the Mezzanine Lender, from time to time during the term of this Agreement. Such certifications shall be delivered within ten (10) business days following such request.
ARTICLE VII
INDEMNIFICATION
Section 7.1 — Indemnification by the Company.
The Company shall indemnify, defend, and hold harmless Service Provider and the Designated Independent Director and their respective successors, heirs, executors, administrators, and assigns (each, an "Indemnitee") from and against any and all claims, demands, actions, suits, proceedings, judgments, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees, expert witness fees, court costs, and other costs of investigation and litigation) arising out of or relating to the Designated Independent Director's service as an Independent Director of the Company or Service Provider's designation of the Designated Independent Director pursuant to this Agreement; provided, however, that the Company shall have no obligation to indemnify any Indemnitee to the extent that such claims, damages, losses, liabilities, costs, or expenses are finally determined by a court of competent jurisdiction (from which no further appeal may be taken or the time for appeal has expired) to have arisen from the fraud, willful misconduct, or gross negligence of such Indemnitee.
Section 7.2 — Survival.
The indemnification obligations of the Company set forth in this Article VII shall survive (a) the termination of this Agreement, (b) the resignation or removal of the Designated Independent Director, and (c) the dissolution, liquidation, or winding up of the Company, and shall remain in full force and effect until the expiration of all applicable statutes of limitations with respect to the claims, actions, or proceedings to which such indemnification obligations relate.
Section 7.3 — Advancement of Expenses.
The Company shall advance to an Indemnitee, promptly upon request and prior to the final disposition of any claim, action, suit, or proceeding, all reasonable expenses (including reasonable attorneys' fees) incurred by such Indemnitee in connection with the defense of any claim, action, suit, or proceeding for which indemnification may be sought under Section 7.1 hereof; provided, however, that such advancement shall be subject to the receipt by the Company of a written undertaking by or on behalf of the Indemnitee to repay all amounts so advanced if it is ultimately determined by a court of competent jurisdiction (from which no further appeal may be taken or the time for appeal has expired) that the Indemnitee is not entitled to indemnification under Section 7.1 hereof with respect to such claim, action, suit, or proceeding.
Section 7.4 — Insurance.
The Company shall, to the extent commercially available on reasonable terms and to the extent required by the Mezzanine Loan Agreement or the Senior Loan Agreement, obtain and maintain directors' and officers' liability insurance covering the Designated Independent Director, with coverage limits and deductibles reasonably satisfactory to the Mezzanine Lender. The Company shall provide Service Provider with evidence of such insurance upon request. In the event that such insurance is not commercially available on reasonable terms, the Company shall promptly notify the Mezzanine Lender and Service Provider in writing and shall cooperate with Service Provider and the Mezzanine Lender to identify alternative risk-mitigation arrangements.
ARTICLE VIII
LIMITATION OF LIABILITY
Section 8.1 — No Personal Liability.
Neither Service Provider nor the Designated Independent Director shall be personally liable to the Company, the Sole Member, the Mezzanine Lender, the Senior Lender, or any other creditor of the Company for any act or omission in connection with the services provided under this Agreement, except in the case of fraud, willful misconduct, or gross negligence of such party. Without limiting the foregoing, neither Service Provider nor the Designated Independent Director shall be liable for any error of judgment made in good faith in connection with the exercise (or the decision not to exercise) of the Designated Independent Director's consent rights with respect to Material Actions, unless such error of judgment constitutes fraud, willful misconduct, or gross negligence.
Section 8.2 — Cap on Liability.
In no event shall the aggregate liability of Service Provider and the Designated Independent Director (or any successor Designated Independent Director) under this Agreement, whether in contract, tort, strict liability, or otherwise, exceed the total fees actually paid to Service Provider pursuant to Article V hereof during the twelve (12) months immediately preceding the date on which the applicable claim first arose, exclusive of any amounts payable under Article VII (Indemnification) and any amounts recovered under directors' and officers' liability insurance maintained pursuant to Section 7.4 hereof.
Section 8.3 — Consequential Damages Waiver.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SERVICES PROVIDED HEREUNDER, WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY, OR ANY OTHER THEORY, REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW.
ARTICLE IX
SPE COVENANTS AND ACKNOWLEDGMENTS
Section 9.1 — SPE Covenants.
The Company acknowledges and agrees that, for so long as this Agreement remains in effect and any obligations under the Mezzanine Loan Agreement or the Senior Loan Agreement remain outstanding, the Company shall comply with all separateness covenants and special purpose entity requirements set forth in the LLC Agreement and the Mezzanine Loan Agreement, including without limitation:
(a) maintaining separate books, records, and financial statements from those of the Sole Member, MTDC, and any Affiliate thereof;
(b) holding itself out to the public and to all third parties as a legal entity separate and distinct from the Sole Member, MTDC, any Affiliate thereof, and any other Person;
(c) not commingling its assets, funds, or accounts with those of the Sole Member, MTDC, any Affiliate thereof, or any other Person;
(d) maintaining adequate capitalization in light of its contemplated business operations and obligations;
(e) paying its own liabilities and expenses solely from its own funds and assets;
(f) observing all limited liability company formalities required by the Delaware Limited Liability Company Act and the LLC Agreement;
(g) not guaranteeing, pledging its assets for, or otherwise becoming obligated with respect to the debts or obligations of the Sole Member, MTDC, any Affiliate thereof, or any other Person (other than as expressly permitted by the Mezzanine Loan Agreement);
(h) conducting its business in its own name through its own duly authorized officers, agents, and employees (or those of the Sole Member acting in their capacity as officers, agents, or employees of the Company);
(i) maintaining separate stationery, invoices, and checks in its own name;
(j) not acquiring obligations or securities of, or making loans or advances to, the Sole Member, MTDC, any Affiliate thereof, or any other Person (other than as expressly permitted by the Mezzanine Loan Agreement);
(k) filing its own tax returns separate from those of the Sole Member, MTDC, and any Affiliate thereof (except to the extent required to file a consolidated, combined, or unitary return under applicable tax law); and
(l) correcting any known misunderstanding regarding its separate identity.
Section 9.2 — Reliance by Mezzanine Lender and Senior Lender.
The parties acknowledge and agree that the Mezzanine Lender and the Senior Lender are entering into the Mezzanine Loan Agreement and the Senior Loan Agreement, respectively, in material reliance upon the inclusion of the Independent Director requirement in the LLC Agreement and the provisions of this Agreement, and that the failure of the Company to maintain a Designated Independent Director or to comply with the provisions of this Agreement could result in material harm to the Mezzanine Lender and the Senior Lender. Accordingly, the Mezzanine Lender and the Senior Lender are express intended third-party beneficiaries of this Agreement and shall have the right to enforce the provisions hereof directly against the Company and Service Provider, including without limitation the right to (a) require the designation of a replacement Designated Independent Director in accordance with Section 4.4, (b) require the removal of a Designated Independent Director in accordance with Section 4.2, and (c) enforce the SPE covenants set forth in Section 9.1 and the amendment restrictions set forth in Section 9.3.
Section 9.3 — No Amendment Without Mezzanine Lender Consent.
This Agreement may not be amended, restated, supplemented, modified, or terminated, and no provision hereof may be waived, without the prior written consent of the Mezzanine Lender and the Senior Lender (to the extent required under the applicable intercreditor agreement among the Mezzanine Lender and the Senior Lender). Any amendment, modification, supplement, termination, or waiver made without such required consent shall be void and of no force or effect.
ARTICLE X
MISCELLANEOUS
Section 10.1 — Notices.
All notices, requests, demands, consents, approvals, and other communications required or permitted to be given under this Agreement (each, a "Notice") shall be in writing and shall be deemed duly given and received (a) when delivered by hand (with written confirmation of receipt), (b) one (1) business day after deposit with a nationally recognized overnight courier service (with written confirmation of receipt), or (c) three (3) business days after being sent by certified or registered mail, return receipt requested, postage prepaid. Notices shall be delivered to the parties at the following addresses (or at such other address as a party may designate by Notice given in accordance with this Section 10.1):
If to the Company:
Hudson Yards West Mezzanine LLC c/o Metropolitan Transit Development Corp. 200 South Michigan Avenue, Suite 3100 Chicago, Illinois 60604
Attention: Lydia Okafor, General Counsel
Telephone: (312) 555-9400
Email: lokafor@mtdc-group.com
With a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP One Liberty Plaza, 55th Floor New York, New York 10006
Attention: Douglas Fairchild
Telephone: (212) 555-7200
Email: dfairchild@calderwoodharkness.com