GUARANTY OF RECOURSE OBLIGATIONS

 

This GUARANTY OF RECOURSE OBLIGATIONS (this “Guaranty”) is executed as of April
8, 2014 by DANIEL A. HOFFLER, an individual, having an office at 222 Central
Park Avenue, Suite 2100, Virginia Beach, Virginia 23462 (“Hoffler”), LOUIS S.
HADDAD, an individual, having an office at 222 Central Park Avenue, Suite 2100,
Virginia Beach, Virginia 23462 (“Haddad”) and AMERICAN REALTY CAPITAL
HOSPITALITY TRUST, INC., a Maryland corporation, having an office at 405 Park
Avenue, 15th Floor, New York, NY 10022, Attn: Jon Mehlman (“ARC REIT”; each of
the foregoing, a “Guarantor”, and collectively, “Guarantors”), for the benefit
of GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation, having an
address at 60 Wall Street, 10th Floor, New York, New York 10005 (together with
its successors and/or assigns, “Lender”).

 

W I T N E S S E T H:

 

A.           Pursuant to that certain Promissory Note, dated of even date
herewith, executed by TCA BLOCK 7 HOTEL, L.L.C., a Virginia limited liability
company (“Borrower”) and payable to the order of Lender in the original
principal amount of TWENTY MILLION SEVEN HUNDRED THOUSAND AND NO/100 DOLLARS
($20,700,000.00) (together with all renewals, modifications, increases and
extensions thereof, the “Note”), Borrower has become indebted, and may from time
to time be further indebted, to Lender with respect to a loan (the “Loan”) which
is made pursuant to that certain Loan Agreement, dated of even date herewith,
between Borrower and Lender (as the same may be amended, modified, supplemented,
replaced or otherwise modified from time to time, the “Loan Agreement”).
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Loan Agreement.

 

B.            Lender is not willing to make the Loan, or otherwise extend
credit, to Borrower unless Guarantors unconditionally guarantee the payment and
performance to Lender of the Guaranteed Obligations (as herein defined).

 

C.            Guarantors are the owners of direct or indirect interests in
Borrower, and each Guarantor will directly benefit from Lender’s making the Loan
to Borrower.

 

NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrower and to
extend such additional credit as Lender may from time to time agree to extend
under the Loan Documents, and for other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, the parties do
hereby agree as follows:

 

ARTICLE 1
NATURE AND SCOPE OF GUARANTY

 

Section 1.1            Guaranty of Obligation.

 

(a)           Each Guarantor hereby irrevocably and unconditionally guarantees
to Lender and its successors and assigns the payment and performance of the
Guaranteed Obligations (as defined below) as and when the same shall be due and
payable, whether by lapse of time, by acceleration of maturity or otherwise.
Each Guarantor hereby irrevocably and unconditionally covenants and agrees that
it is liable for the Guaranteed Obligations as a primary obligor.

 

 

 

 

(b)          As used herein, the term “Guaranteed Obligations” means
(i) Borrower's Recourse Liabilities and (ii) from and after the date that any
Springing Recourse Event occurs, payment and performance of all of the
Obligations. Notwithstanding the foregoing, Guarantors shall not be liable to
Lender under this Guaranty with respect to subclause (ii)(A) set forth in
Section 10.1 of the Loan Agreement, and Lender shall not assert any claim
against the Guarantors under this Guaranty, with respect to any obligation set
forth in the Environmental Indemnity, unless and until the Environmental
Insurance Policy (as defined in the Loan Agreement) lapses, expires, terminates,
is cancelled or otherwise ceases to be in full force and effect for any reason
whatsoever (including, without limitation, coverage of Lender as mortgagee, loss
payee and additional insured) (a “Contingency Event”). Upon the occurrence of a
Contingency Event, Guarantors shall automatically and without notice become
liable to Lender under this Guaranty, and Lender shall have the right to assert
any claim against Guarantors under this Guaranty, with respect to any obligation
under the Environmental Indemnity created as a result of such Contingency Event.
If Borrower or Guarantors subsequently deliver a replacement Environmental
Insurance Policy in accordance with the requirements of the Loan Agreement, and
provided that there are no gaps between the policy periods and coverages
provided by the prior Environmental Insurance Policy and such replacement
Environmental Insurance Policy, Guarantors shall, subject to the terms set forth
in this Section 1.1(b) and subclause (ii)(A) set forth in Section 10.1 of the
Loan Agreement, have no further liability for environmental matters.

 

(c)           Notwithstanding anything to the contrary in this Guaranty or in
any of the other Loan Documents, Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Obligations or to require that all collateral shall continue to secure all of
the Obligations owing to Lender in accordance with the Loan Documents.

 

(d)          Notwithstanding anything to the contrary contained herein, this
Guaranty shall be deemed discharged with respect to the Guarantors solely with
respect to any Guaranteed Obligations first arising from and after the
occurrence of any of the following events: (i) the indefeasible satisfaction in
full of the Debt (other than obligations for which no claim has arisen but which
survive satisfaction), (ii) Lender (or any designee, nominee or Affiliate of
Lender) accepts title to the Property upon foreclosure or deed in lieu of
foreclosure pursuant to the terms of the Loan Documents, (iii) the consummation
of a Transfer and Assumption pursuant to, and in accordance with, Section 7.1 or
Section 7.2 of the Loan Agreement or (iv) the occurrence of a Defeasance
pursuant to Section 2.4.2 of the Loan Agreement (each a “Satisfaction Event”).

 

Section 1.2           Nature of Guaranty. This Guaranty is an irrevocable,
absolute, continuing guaranty of payment and performance and not a guaranty of
collection. This Guaranty may not be revoked by any Guarantor and shall continue
to be effective with respect to any Guaranteed Obligations arising or created
after any attempted revocation by any Guarantor and after (if such Guarantor is
a natural person) such Guarantor’s death (in which event this Guaranty shall be
binding upon such Guarantor’s estate and such Guarantor’s legal representatives
and heirs). The fact that at any time or from time to time the Guaranteed
Obligations may be increased or reduced shall not release or discharge the
obligation of any Guarantor to Lender with respect to the Guaranteed
Obligations. This Guaranty may be enforced by Lender and any subsequent holder
of the Note and shall not be discharged by the assignment or negotiation of all
or part of the Note.

 

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Section 1.3           Guaranteed Obligations Not Reduced by Offset. The
Guaranteed Obligations and the liabilities and obligations of Guarantors to
Lender hereunder shall not be reduced, discharged or released because or by
reason of any existing or future offset, claim or defense of Borrower or any
other party against Lender or against payment of the Guaranteed Obligations,
whether such offset, claim or defense arises in connection with the Guaranteed
Obligations (or the transactions creating the Guaranteed Obligations) or
otherwise.

 

Section 1.4           Payment By Guarantors. If all or any part of the
Guaranteed Obligations is or shall give rise to a monetary obligation, and such
monetary obligation shall not be punctually paid when due, whether at demand,
maturity, acceleration or otherwise, Guarantors shall, immediately upon demand
by Lender and without presentment, protest, notice of protest, notice of
non-payment, notice of intention to accelerate the maturity, notice of
acceleration of the maturity or any other notice whatsoever, all such notices
being hereby waived by Guarantors, pay in lawful money of the United States of
America, the amount due on the Guaranteed Obligations to Lender at Lender’s
address as set forth herein. Such demand(s) may be made at any time coincident
with or after the time for payment of all or part of the Guaranteed Obligations
and may be made from time to time with respect to the same or different items of
Guaranteed Obligations. Such demand shall be deemed made, given and received in
accordance with the notice provisions hereof.

 

Section 1.5           No Duty To Pursue Others. It shall not be necessary for
Lender (and each Guarantor hereby waives any rights which such Guarantor may
have to require Lender), in order to enforce the obligations of Guarantors
hereunder, first to (i) institute suit or exhaust its remedies against Borrower
or others liable on the Loan or the Guaranteed Obligations or any other Person,
(ii) enforce Lender’s rights against any collateral which shall ever have been
given to secure the Loan, (iii) enforce Lender’s rights against any other
guarantors of the Guaranteed Obligations, (iv) join Borrower or any others
liable on the Guaranteed Obligations in any action seeking to enforce this
Guaranty, (v) exhaust any remedies available to Lender against any collateral
which shall ever have been given to secure the Loan, or (vi) resort to any other
means of obtaining payment of the Guaranteed Obligations. Lender shall not be
required to mitigate damages or take any other action to reduce, collect or
enforce the Guaranteed Obligations.

 

Section 1.6           Waivers. Each Guarantor agrees to the provisions of the
Loan Documents and hereby waives notice of (i) any loans or advances made by
Lender to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or
extension of the Note, the Mortgage, the Loan Agreement or any other Loan
Document, (iv) the execution and delivery by Borrower and Lender of any other
loan or credit agreement or of Borrower’s execution and delivery of any
promissory note or other document arising under the Loan Documents or in
connection with the Property, (v) the occurrence of (A) any breach by Borrower
of any of the terms or conditions of the Loan Agreement or any of the other Loan
Documents, or (B) an Event of Default, (vi) Lender’s transfer or disposition of
the Guaranteed Obligations, or any part thereof, (vii) the sale or foreclosure
(or the posting or advertising for the sale or foreclosure) of any collateral
for the Guaranteed Obligations, (viii) protest, proof of non-payment or default
by Borrower, or (ix) any other action at any time taken or omitted by Lender
and, generally, all demands and notices of every kind in connection with this
Guaranty, the Loan Documents, any documents or agreements evidencing, securing
or relating to any of the Guaranteed Obligations and/or the obligations hereby
guaranteed.

 

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Section 1.7           Payment of Expenses. In the event that any Guarantor shall
breach or fail to timely perform any provisions of this Guaranty, Guarantors
shall, immediately upon demand by Lender, pay Lender all costs and expenses
(including court costs and reasonable attorneys’ fees) incurred by Lender in the
enforcement hereof or the preservation of Lender’s rights hereunder, together
with interest thereon at the Default Rate from the date requested by Lender
until the date of payment to Lender. The covenant contained in this Section
shall survive the payment and performance of the Guaranteed Obligations.

 

Section 1.8           Effect of Bankruptcy. In the event that pursuant to any
insolvency, bankruptcy, reorganization, receivership or other debtor relief law
or any judgment, order or decision thereunder, Lender must rescind or restore
any payment or any part thereof received by Lender in satisfaction of the
Guaranteed Obligations, as set forth herein, any prior release or discharge from
the terms of this Guaranty given to Guarantors by Lender shall be without effect
and this Guaranty shall remain (or shall be reinstated to be) in full force and
effect. It is the intention of Borrower and Guarantors that Guarantors’
obligations hereunder shall not be discharged except by Guarantors’ performance
of such obligations and then only to the extent of such performance.

 

Section 1.9           Waiver of Subrogation, Reimbursement and Contribution.
Notwithstanding anything to the contrary contained in this Guaranty, each
Guarantor hereby unconditionally and irrevocably waives, releases and abrogates
any and all rights it may now or hereafter have under any agreement, at law or
in equity (including, without limitation, any law subrogating Guarantors to the
rights of Lender), to assert any claim against or seek contribution,
indemnification or any other form of reimbursement from Borrower or any other
party liable for the payment of any or all of the Guaranteed Obligations for any
payment made by Guarantors under or in connection with this Guaranty or
otherwise.

 

ARTICLE 2
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTORS’ OBLIGATIONS

 

Each Guarantor hereby consents and agrees to each of the following and agrees
that such Guarantor’s obligations under this Guaranty shall not be released,
diminished, impaired, reduced or adversely affected by any of the following and
waives any common law, equitable, statutory or other rights (including, without
limitation, rights to notice) which such Guarantor might otherwise have as a
result of or in connection with any of the following:

 

Section 2.1          Modifications. Any renewal, extension, increase,
modification, alteration or rearrangement of all or any part of the Guaranteed
Obligations, the Note, the Mortgage, the Loan Agreement, the other Loan
Documents or any other document, instrument, contract or understanding between
Borrower and Lender or any other parties pertaining to the Guaranteed
Obligations or any failure of Lender to notify Guarantors of any such action.

 

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Section 2.2           Adjustment. Any adjustment, indulgence, forbearance or
compromise that might be granted or given by Lender to Borrower or any
Guarantor.

 

Section 2.3          Condition of Borrower or Guarantors. The insolvency,
bankruptcy, arrangement, adjustment, composition, liquidation, disability,
dissolution or lack of power of Borrower, any Guarantor or any other Person at
any time liable for the payment of all or part of the Guaranteed Obligations; or
any dissolution of Borrower or any Guarantor or any sale, lease or transfer of
any or all of the assets of Borrower or any Guarantor or any changes in the
direct or indirect shareholders, partners or members, as applicable, of Borrower
or any Guarantor; or any reorganization of Borrower or any Guarantor.

 

Section 2.4            Invalidity of Guaranteed Obligations. The invalidity,
illegality or unenforceability of all or any part of the Guaranteed Obligations
or any document or agreement executed in connection with the Guaranteed
Obligations for any reason whatsoever, including, without limitation, the fact
that (i) the Guaranteed Obligations or any part thereof exceeds the amount
permitted by law, (ii) the act of creating the Guaranteed Obligations or any
part thereof is ultra vires, (iii) the officers or representatives executing the
Note, the Mortgage, the Loan Agreement or the other Loan Documents or otherwise
creating the Guaranteed Obligations acted in excess of their authority, (iv) the
Guaranteed Obligations violate applicable usury laws, (v) the Borrower has valid
defenses, claims or offsets (whether at law, in equity or by agreement) which
render the Guaranteed Obligations wholly or partially uncollectible from
Borrower, (vi) the creation, performance or repayment of the Guaranteed
Obligations (or the execution, delivery and performance of any document or
instrument representing part of the Guaranteed Obligations or executed in
connection with the Guaranteed Obligations or given to secure the repayment of
the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or
(vii) the Note, the Mortgage, the Loan Agreement or any of the other Loan
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that Guarantors shall remain liable hereon regardless
of whether Borrower or any other Person be found not liable on the Guaranteed
Obligations or any part thereof for any reason.

 

Section 2.5            Release of Obligors. Any full or partial release of the
liability of Borrower for the Guaranteed Obligations or any part thereof, or of
any co-guarantors, or of any other Person now or hereafter liable, whether
directly or indirectly, jointly, severally, or jointly and severally, to pay,
perform, guarantee or assure the payment of the Guaranteed Obligations, or any
part thereof, it being recognized, acknowledged and agreed by each Guarantor
that such Guarantor may be required to pay the Guaranteed Obligations in full
without assistance or support from any other Person, and no Guarantor has been
induced to enter into this Guaranty on the basis of a contemplation, belief,
understanding or agreement that other Persons (including Borrower) will be
liable to pay or perform the Guaranteed Obligations or that Lender will look to
other Persons (including Borrower) to pay or perform the Guaranteed Obligations.

 

Section 2.6            Other Collateral. The taking or accepting of any other
security, collateral or guaranty, or other assurance of payment, for all or any
part of the Guaranteed Obligations.

 

Section 2.7           Release of Collateral. Any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment (including, without
limitation, negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations.

 

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Section 2.8           Care and Diligence. The failure of Lender or any other
party to exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of any
collateral, property or security, including, but not limited to, any neglect,
delay, omission, failure or refusal of Lender (i) to take or prosecute any
action for the collection of any of the Guaranteed Obligations, or (ii) to
foreclose, or initiate any action to foreclose, or, once commenced, prosecute to
completion any action to foreclose upon any security therefor, or (iii) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Guaranteed Obligations.

 

Section 2.9           Unenforceability. The fact that any collateral, security,
security interest or lien contemplated or intended to be given, created or
granted as security for the repayment of the Guaranteed Obligations, or any part
thereof, shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other security interest or lien, it being
recognized and agreed by each Guarantor that such Guarantor is not entering into
this Guaranty in reliance on, or in contemplation of the benefits of, the
validity, enforceability, collectibility or value of any of the collateral for
the Guaranteed Obligations.

 

Section 2.10        Offset. Any existing or future right of offset, claim or
defense of Borrower against Lender, or any other party, or against payment of
the Guaranteed Obligations, whether such right of offset, claim or defense
arises in connection with the Guaranteed Obligations (or the transactions
creating the Guaranteed Obligations) or otherwise.

 

Section 2.11        Merger. The reorganization, merger or consolidation of
Borrower or any Guarantor into or with any other Person.

 

Section 2.12        Preference. Any payment by Borrower to Lender is held to
constitute a preference under the Bankruptcy Code or for any reason Lender is
required to refund such payment or pay such amount to Borrower or to any other
Person.

 

Section 2.13        Other Actions Taken or Omitted. Any other action taken or
omitted to be taken with respect to the Loan Documents, the Guaranteed
Obligations or the security and collateral therefor, whether or not such action
or omission prejudices Guarantors or increases the likelihood that Guarantors
will be required to pay the Guaranteed Obligations pursuant to the terms hereof,
it being the unambiguous and unequivocal intention of Guarantors that such
Guarantors shall be obligated to pay the Guaranteed Obligations when due,
notwithstanding any occurrence, circumstance, event, action or omission
whatsoever, whether contemplated or uncontemplated, and whether or not otherwise
or particularly described herein, which obligation shall be deemed satisfied
only upon the full and final payment and satisfaction of the Guaranteed
Obligations.

 

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ARTICLE 3
REPRESENTATIONS AND WARRANTIES

 

To induce Lender to enter into the Loan Documents and to extend credit to
Borrower, each Guarantor represents and warrants to Lender as follows:

 

Section 3.1           Benefit. Each Guarantor is an Affiliate of Borrower, is
the owner of a direct or indirect interest in Borrower and has received, or will
receive, direct or indirect benefit from the making of this Guaranty with
respect to the Guaranteed Obligations.

 

Section 3.2           Familiarity and Reliance. Each Guarantor is familiar with,
and has independently reviewed books and records regarding, the financial
condition of Borrower and is familiar with the value of any and all collateral
intended to be created as security for the payment of the Note or Guaranteed
Obligations; however, such Guarantor is not relying on such financial condition
or the collateral as an inducement to enter into this Guaranty.

 

Section 3.3           No Representation By Lender. Neither Lender nor any other
party has made any representation, warranty or statement to any Guarantor in
order to induce such Guarantor to execute this Guaranty.

 

Section 3.4           Each Guarantor’s Financial Condition. As of the date
hereof, and after giving effect to this Guaranty and the contingent obligation
evidenced hereby, each Guarantor (a) is and will be solvent, (b) has and will
have assets which, fairly valued, exceed its obligations, liabilities (including
contingent liabilities) and debts, and (c) has and will have property and assets
sufficient to satisfy and repay its obligations and liabilities, including the
Guaranteed Obligations.

 

Section 3.5           Legality. The execution, delivery and performance by each
Guarantor of this Guaranty and the consummation of the transactions contemplated
hereunder do not and will not contravene or conflict with any law, statute or
regulation whatsoever to which such Guarantor is subject, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the breach of, any indenture,
mortgage, charge, lien, contract, agreement or other instrument to which such
Guarantor is a party or which may be applicable to such Guarantor. This Guaranty
is a legal and binding obligation of each Guarantor and is enforceable against
such Guarantor in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to the enforcement of
creditors’ rights.

 

Section 3.6           Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of any Guarantor’s knowledge, threatened
in writing against any Guarantor in any court or by or before any other
Governmental Authority which, if adversely determined, would reasonably be
expected to materially and adversely affect the condition (financial or
otherwise) or business of such Guarantor (including the ability of such
Guarantor to carry out the obligations contemplated by this Guaranty).

 

Section 3.7            Survival. All representations and warranties made by each
Guarantor herein shall survive the execution hereof.

 

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ARTICLE 4
SUBORDINATION OF CERTAIN INDEBTEDNESS

 

Section 4.1            Subordination of All Guarantor Claims. As used herein,
the term “Guarantor Claims” shall mean all debts and liabilities of Borrower to
Guarantors, whether such debts and liabilities now exist or are hereafter
incurred or arise, and whether the obligations of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the Person or Persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be, created, or the manner in which they have been, or may
hereafter be, acquired by Guarantors. The Guarantor Claims shall include,
without limitation, all rights and claims of Guarantors against Borrower
(arising as a result of subrogation or otherwise) as a result of Guarantors’
payment of all or a portion of the Guaranteed Obligations. So long as any
portion of the Obligations or the Guaranteed Obligations remain outstanding, no
Guarantor shall receive or collect, directly or indirectly, from Borrower or any
other Person any amount upon the Guarantor Claims.

 

Section 4.2            Claims in Bankruptcy. In the event of any receivership,
bankruptcy, reorganization, arrangement, debtor’s relief or other insolvency
proceeding involving any Guarantor as a debtor, Lender shall have the right to
prove its claim in any such proceeding so as to establish its rights hereunder
and receive directly from the receiver, trustee or other court custodian
dividends and payments which would otherwise be payable upon Guarantor Claims.
Each Guarantor hereby assigns such dividends and payments to Lender. Should
Lender receive, for application against the Guaranteed Obligations, any dividend
or payment which is otherwise payable to any Guarantor and which, as between
Borrower and Guarantors, shall constitute a credit against the Guarantor Claims,
then, upon payment to Lender in full of the Obligations and the Guaranteed
Obligations, such Guarantor shall become subrogated to the rights of Lender to
the extent that such payments to Lender on the Guarantor Claims have contributed
toward the liquidation of the Guaranteed Obligations, and such subrogation shall
be with respect to that proportion of the Guaranteed Obligations which would
have been unpaid if Lender had not received dividends or payments upon the
Guarantor Claims.

 

Section 4.3            Payments Held in Trust. Notwithstanding anything to the
contrary contained in this Guaranty, in the event that any Guarantor should
receive any funds, payments, claims and/or distributions which are prohibited by
this Guaranty, such Guarantor agrees to hold in trust for Lender an amount equal
to the amount of all funds, payments, claims and/or distributions so received,
and agrees that it shall have absolutely no dominion over the amount of such
funds, payments, claims and/or distributions so received except to pay such
funds, payments, claims and/or distributions promptly to Lender, and such
Guarantor covenants promptly to pay the same to Lender.

 

Section 4.4            Liens Subordinate. Each Guarantor agrees that any liens,
security interests, judgment liens, charges or other encumbrances upon
Borrower’s assets securing payment of the Guarantor Claims shall be and remain
inferior and subordinate to any liens, security interests, judgment liens,
charges or other encumbrances upon Borrower’s assets securing payment of the
Guaranteed Obligations, regardless of whether such encumbrances in favor of
Guarantors or Lender presently exist or are hereafter created or attach. Without
the prior written consent of Lender, no Guarantor shall (i) exercise or enforce
any creditor’s rights it may have against Borrower, or (ii) foreclose,
repossess, sequester or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including, without limitation, the
commencement of, or the joinder in, any liquidation, bankruptcy, rearrangement,
debtor’s relief or insolvency proceeding) to enforce any liens, mortgages, deeds
of trust, security interests, collateral rights, judgments or other encumbrances
on the assets of Borrower held by any Guarantor. The foregoing shall in no
manner vitiate or amend, nor be deemed to vitiate or amend, any prohibition in
the Loan Documents against Borrower granting liens or security interests in any
of its assets to any Person other than Lender.

 

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ARTICLE 5
COVENANTS

 

Section 5.1            Definitions. As used in this Article 5, the following
terms shall have the respective meanings set forth below:

 

(a)           “GAAP” shall mean generally accepted accounting principles,
consistently applied.

 

(b)          “Liquid Asset” shall mean any of the following, but only to the
extent owned individually, free of all security interests, liens, pledges,
charges or any other encumbrance: (a) cash, (b) certificates of deposit (with a
maturity of two years or less) issued by, or savings account with, any bank or
other financial institution reasonably acceptable to Lender, (c) money market
accounts or (d) marketable securities listed on a national or international
exchange reasonably acceptable to Lender, marked to market; provided that Liquid
Assets shall not include any asset that is a part of any of the Properties or
that is otherwise part of the collateral for the Loan.

 

(c)           “Net Worth” shall mean, as of a given date, (i) a Guarantor’s
total assets as of such date (exclusive of any interest in the Property or in
any other asset that is part of the collateral for the Loan) less (ii) such
Guarantor’s total liabilities (taking into consideration contingent liabilities
but exclusive of any liability under the Loan Documents) as of such date,
determined in accordance with GAAP (or such other accounting method reasonably
acceptable to Lender; it being acknowledged that a cash basis of accounting
consistently applied shall be reasonably acceptable to Lender for purposes
hereof).

 

Section 5.2            Covenants and Representations. As of the Closing Date,
Guarantors represent and warrant to Lender that Guarantors have (x) a collective
Net Worth of not less than $20,700,000.00 (the “Net Worth Threshold”) and (y)
collective Liquid Assets of not less than $2,070,000.00 (the “Liquid Assets
Threshold”). Until all of the Obligations and the Guaranteed Obligations have
been paid in full no Guarantor shall sell, pledge, mortgage or otherwise
transfer any of its assets, or any interest therein, on terms materially less
favorable than would be obtained in an arms-length transaction or if such
transaction would cause the Net Worth of Guarantors to fall below the Net Worth
Threshold or the Liquid Assets of Guarantors to fall below the Liquid Assets
Threshold.

 

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Section 5.3            Prohibited Transactions.

 

(a)           No Guarantor shall, at any time while a default in the payment of
the Guaranteed Obligations has occurred and is continuing, either (i) enter into
or effectuate any transaction with any Affiliate that would reduce the Net Worth
of such Guarantor (including the payment of any dividend or distribution to a
shareholder, or the redemption, retirement, purchase or other acquisition for
consideration of any stock or other ownership interest in such Guarantor) or
(ii) sell, pledge, mortgage or otherwise transfer to any Person any of such
Guarantor’s assets, or any interest therein except in exchange for consideration
of equivalent value and in accordance with the terms and conditions set forth in
the Loan Documents.

 

Section 5.4            Financial Statements. Each Guarantor shall deliver to
Lender:

 

(a)           With respect to any ARC REIT, within 90 days after the end of each
fiscal year of such Guarantor, a complete copy of such Guarantor’s unaudited
annual financial statements internally prepared in accordance with GAAP (or such
other accounting method reasonably acceptable to Lender, it being acknowledged
by Lender that a cash basis of accounting shall be deemed reasonably acceptable
for purposes hereof) and the requirements of Regulation AB (if applicable),
including statements of income and expense and cash flow, together with a
certificate of the chief financial officer of such Guarantor (A) setting forth
in reasonable detail such Guarantor’s Net Worth and Liquid Assets as of the end
of such prior calendar year and based on such annual financial statements, and
(B) certifying that such annual financial statements are true, correct, accurate
and complete and fairly present the financial condition and results of the
operations of such Guarantor; and

 

(b)          With respect to Hoffler and Haddad:

 

(i)            within 30 days after the date filed, a complete copy of such
Guarantor’s tax return certified by such Guarantor; and

 

(ii)          20 days after request by Lender, such other reasonable financial
information with respect to such Guarantor as Lender may reasonably request.

 

ARTICLE 6
MISCELLANEOUS

 

Section 6.1           Waiver. No failure to exercise, and no delay in
exercising, on the part of Lender, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The rights of
Lender hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty, nor any consent to any
departure therefrom, shall be effective unless in writing and no such consent or
waiver shall extend beyond the particular case and purpose involved. No notice
or demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.

 

Section 6.2           Notices. All notices, demands, requests, consents,
approvals or other communications (any of the foregoing, a “Notice”) required,
permitted or desired to be given hereunder shall be in writing and shall be sent
by telefax (with answer back acknowledged) or by registered or certified mail,
postage prepaid, return receipt requested, or delivered by hand or by reputable
overnight courier, addressed to the party to be so notified at its address
hereinafter set forth, or to such other address as such party may hereafter
specify in accordance with the provisions of this Section 6.2. Any Notice shall
be deemed to have been received: (a) three (3) days after the date such Notice
is mailed, (b) on the date of sending by telefax if sent during business hours
on a Business Day (otherwise on the next Business Day), (c) on the date of
delivery by hand if delivered during business hours on a Business Day (otherwise
on the next Business Day), and (d) on the next Business Day if sent by an
overnight commercial courier, in each case addressed to the parties as follows:

 

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If to Lender: German American Capital Corporation   60 Wall Street, 10th Floor  
New York, NY  10005   Attention:  Robert W. Pettinato, Jr.   Facsimile
No.  (212) 797-4489     and to: German American Capital Corporation   60 Wall
Street, 10th Floor   New York, NY  10005   Attention:  General Counsel  
Facsimile No.  (646)736-5721     with a copy to: Cassin & Cassin LLP   711 Third
Avenue, 20th Floor   New York, New York 10017   Attention:  Michael J. Hurley,
Jr., Esq.   Facsimile No. (212) 557-2952     with a copy to: Wells Fargo
Commercial Mortgage Servicing   550 S Tryon St., 12th Floor   Charlotte NC,
28202   Attention: Alex Groot   Facsimile No. (704) 715-0473     If to
Guarantors: American Realty Capital Hospitality Trust, Inc.   405 Park Avenue,
15th Floor   New York, NY  10022   Attention:  Jon Mehlman     and to: Daniel A.
Hoffler   222 Central Park Avenue, Suite 2100   Virginia Beach, Virginia 23462  
Facsimile No. (757) 523-0370

 

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and to: Louis S. Haddad   222 Central Park Avenue, Suite 2100   Virginia Beach,
Virginia 23462   Facsimile No. (757) 523-0370     with a copy to: Faggert &
Frieden, P.C.   222 Central Park Avenue, Suite 1300   Virginia Beach, Virginia
23462   Attention:  David Y. Faggert   Facsimile No. (757) 424-0102

 

Any party may change the address to which any such Notice is to be delivered by
furnishing ten (10) days’ written notice of such change to the other parties in
accordance with the provisions of this Section 6.2. Notices shall be deemed to
have been given on the date set forth above, even if there is an inability to
actually deliver any Notice because of a changed address of which no Notice was
given or there is a rejection or refusal to accept any Notice offered for
delivery. Notice for any party may be given by its respective counsel.
Additionally, Notice from Lender may also be given by Servicer.

 

Section 6.3            Governing Law; Jurisdiction; Service of Process.
(a)  THIS GUARANTY WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY EACH
GUARANTOR AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF
THE NOTE WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES
AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING
TRANSACTION RELATED HERETO, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE
FULLEST EXTENT PERMITTED BY LAW, EACH GUARANTOR HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS GUARANTY AND/OR THE OTHER LOAN DOCUMENTS, AND THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW.

 

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(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR ANY GUARANTOR ARISING
OUT OF OR RELATING TO THIS GUARANTY MAY, AT LENDER’S OPTION, BE INSTITUTED IN
ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT
TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND EACH GUARANTOR
WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR
FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY SUCH COURT IN
ANY SUIT, ACTION OR PROCEEDING. EACH GUARANTOR DOES HEREBY DESIGNATE AND
APPOINT:

 

O’HALLORAN RYAN LLP

275 MADISON AVENUE, SUITE 2005

NEW YORK, NEW YORK 10016

ATTN: NEIL J. O’HALLORAN

 

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND EACH GUARANTOR AGREES THAT
SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID
SERVICE MAILED OR DELIVERED TO SUCH GUARNATOR IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH
GUARANTOR IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. EACH
GUARANTOR (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE
A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH
SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR
SERVICE OF PROCESS AND WHICH SUBSITUTE AGENT SHALL BE THE SAME AGENT DESIGNATED
BY BORROWER UNDER THE LOAN AGREEMENT), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW
YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR. NOTHING CONTAINED HEREIN SHALL
AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY GUARANTOR IN
ANY OTHER JURISDICTION.

 

Section 6.4           Invalid Provisions. If any provision of this Guaranty is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Guaranty, such provision shall be fully
severable and this Guaranty shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Guaranty,
and the remaining provisions of this Guaranty shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Guaranty, unless such continued
effectiveness of this Guaranty, as modified, would be contrary to the basic
understandings and intentions of the parties as expressed herein.

 

Section 6.5           Amendments. This Guaranty may be amended only by an
instrument in writing executed by the party(ies) against whom such amendment is
sought to be enforced.

 

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Section 6.6           Parties Bound; Assignment. This Guaranty shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, permitted assigns, heirs and legal representatives. Lender shall
have the right to assign or transfer its rights under this Guaranty in
connection with any assignment of the Loan and the Loan Documents. Any assignee
or transferee of Lender shall be entitled to all the benefits afforded to Lender
under this Guaranty. No Guarantor shall have the right to assign or transfer its
rights or obligations under this Guaranty without the prior written consent of
Lender, and any attempted assignment without such consent shall be null and
void.

 

Section 6.7           Headings. Section headings are for convenience of
reference only and shall in no way affect the interpretation of this Guaranty.

 

Section 6.8           Recitals. The recitals and introductory paragraphs hereof
are a part hereof, form a basis for this Guaranty and shall be considered prima
facie evidence of the facts and documents referred to therein.

 

Section 6.9           Counterparts. To facilitate execution, this Guaranty may
be executed in as many counterparts as may be convenient or required. It shall
not be necessary that the signature of, or on behalf of, each party, or that the
signature of all persons required to bind any party, appear on each counterpart.
All counterparts shall collectively constitute a single instrument. It shall not
be necessary in making proof of this Guaranty to produce or account for more
than a single counterpart containing the respective signatures of, or on behalf
of, each of the parties hereto. Any signature page to any counterpart may be
detached from such counterpart without impairing the legal effect of the
signatures thereon and thereafter attached to another counterpart identical
thereto except having attached to it additional signature pages.

 

Section 6.10        Rights and Remedies. If any Guarantor becomes liable for any
indebtedness owing by Borrower to Lender, by endorsement or otherwise, other
than under this Guaranty, such liability shall not be in any manner impaired or
affected hereby and the rights of Lender hereunder shall be cumulative of any
and all other rights that Lender may ever have against Guarantor. The exercise
by Lender of any right or remedy hereunder or under any other instrument, or at
law or in equity, shall not preclude the concurrent or subsequent exercise of
any other right or remedy.

 

Section 6.11        Entirety. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT
OF GUARANTORS AND LENDER WITH RESPECT TO GUARANTORS’ GUARANTY OF THE GUARANTEED
OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTORS AND LENDER AS A
FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF
DEALING BETWEEN GUARANTORS AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY. THERE
ARE NO ORAL AGREEMENTS BETWEEN GUARANTORS AND LENDER.

 

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Section 6.12       Waiver of Right To Trial By Jury. EACH GUARANTOR HEREBY
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE MORTGAGE, THE
LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY EACH GUARANTOR AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTORS.

 

Section 6.13        Cooperation. Each Guarantor acknowledges that Lender and its
successors and assigns may (i) sell this Guaranty, the Note and the other Loan
Documents to one or more investors as a whole loan, (ii) participate the Loan
secured by this Guaranty to one or more investors, (iii) deposit this Guaranty,
the Note and the other Loan Documents with a trust, which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
or (iv) otherwise sell the Loan or one or more interests therein to investors
(the transactions referred to in clauses (i) through (iv) are hereinafter each
referred to as “Secondary Market Transaction”). Subject to the terms, conditions
and limitations set forth in the Loan Agreement, each Guarantor shall at no
material cost to any Guarantor, cooperate with Lender in effecting any such
Secondary Market Transaction, shall cooperate to implement all requirements
imposed by any of the Rating Agencies involved in any Secondary Market
Transaction and shall provide (or cause Borrower to provide) such information,
indemnities and materials as may be required or necessary pursuant to Article 9
of the Loan Agreement.

 

Section 6.14        Reinstatement in Certain Circumstances. If at any time any
payment of the principal of or interest under the Note or any other amount
payable by Borrower under the Loan Documents is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of the
Borrower or otherwise, Guarantors’ obligations hereunder with respect to such
payment shall be reinstated as though such payment had been due but not made at
such time.

 

Section 6.15        Gender; Number; General Definitions. Unless the context
clearly indicates a contrary intent or unless otherwise specifically provided
herein, (a) words used in this Guaranty may be used interchangeably in the
singular or plural form, (b) any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, (c) the word “Borrower” shall
mean “each Borrower and any subsequent owner or owners of the Property or any
part thereof or interest therein”, (d) the word “Lender” shall mean “Lender and
any subsequent holder of the Note”, (e) the word “Note” shall mean “the Note and
any other evidence of indebtedness secured by the Loan Agreement”, (f) the word
“Property” shall include any portion of the Property and any interest therein,
and (g) the phrases “attorneys’ fees”, “legal fees” and “counsel fees” shall
include any and all attorneys’, paralegal and law clerk fees and disbursements,
including, but not limited to, fees and disbursements at the pre-trial, trial
and appellate levels, incurred or paid by Lender in protecting its interest in
the Property, the Leases and/or the Rents and/or in enforcing its rights
hereunder.

 

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Section 6.16        Joint and Several. The obligations of each Guarantor
hereunder are joint and several.

 

Section 6.1          Special State Provision. Guarantor waives the benefit of
the provisions of Sections 49-25 and 49-26 of the Code of Virginia (1950), as
amended.

 

[NO FURTHER TEXT ON THIS PAGE]

 

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IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the day and
year first above written.

 

 

 

GUARANTORS:

 

AMERICAN REALTY CAPITAL HOSPITALITY
TRUST, INC., a Maryland corporation

 

 

By: /s/ Jesse C. Galloway                     

Name: Jesse C. Galloway

Title: Authorized Signatory

 

 

 

 

/s/ Daniel A. Hoffler                             

DANIEL A. HOFFLER, an individual

 

 

/s/ Louis S. Haddad                              

LOUIS S. HADDAD, an individual