Exhibit 10.19

LOAN AGREEMENT

Dated as of September 19, 2006

between

KPA TYSONS CORNER RI LLC,

a Delaware limited liability company,

as Borrower

and

MERRILL LYNCH MORTGAGE LENDING, INC.,

a Delaware corporation,

as Lender

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TABLE OF CONTENTS

 

     Page I.    DEFINITIONS; PRINCIPLES OF CONSTRUCTION    1    Section 1.1.   
Definitions    1    Section 1.2.    Principles of Construction    19 II.   
GENERAL TERMS    19    Section 2.1.    Loan Commitment; Disbursement to Borrower
   19    Section 2.2.    Interest Rate    20    Section 2.3.    Loan Payment   
21    Section 2.4.    Prepayments    21    Section 2.5.    Release    22   
Section 2.6.    Lockbox Account/Cash Management    22    Section 2.7.   
Defeasance    23 III.    INTENTIONALLY DELETED    25 IV.    REPRESENTATIONS AND
WARRANTIES    25    Section 4.1.    Borrower Representations    25    Section
4.2.    Survival of Representations    33    Section 4.3.    Knowledge and Other
Matters    33 V.    BORROWER COVENANTS    33    Section 5.1.    Affirmative
Covenants    33    Section 5.2.    Negative Covenants    43 VI.    INSURANCE;
CASUALTY; CONDEMNATION; REQUIRED REPAIRS    48    Section 6.1.    Insurance   
48    Section 6.2.    Casualty    51    Section 6.3.    Condemnation    52   
Section 6.4.    Restoration    52 VII.    RESERVE FUNDS    56    Section 7.1.   
Required Repairs    56    Section 7.2.    Tax and Insurance Escrow Fund    56   
Section 7.3.    Replacements and Replacement Reserve    57    Section 7.4.   
Reserve Funds, Generally    60 VIII.    DEFAULTS    61    Section 8.1.    Event
of Default    61    Section 8.2.    Remedies    63    Section 8.3.    Remedies
Cumulative; Waivers    64 IX.    SPECIAL PROVISIONS    64    Section 9.1.   
Secondary Market Transactions    64    Section 9.2.    Securitization
Indemnification    66

 

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TABLE OF CONTENTS

(continued)

 

     Page    Section 9.3.    Exculpation    68    Section 9.4.    Matters
Concerning Manager    71    Section 9.5.    Servicer    71 X.    MISCELLANEOUS
   71    Section 10.1.    Survival    71    Section 10.2.    Intentionally
Omitted    71    Section 10.3.    Governing Law    71    Section 10.4.   
Modification, Waiver in Writing    73    Section 10.5.    Delay Not a Waiver   
73    Section 10.6.    Notices    73    Section 10.7.    Trial by Jury    74   
Section 10.8.    Headings    74    Section 10.9.    Severability    74   
Section 10.10.    Preferences    75    Section 10.11.    Waiver of Notice    75
   Section 10.12.    Remedies of Borrower    75    Section 10.13.    Expenses;
Indemnity    75    Section 10.14.    Schedules Incorporated    77    Section
10.15.    Offsets, Counterclaims and Defenses    77    Section 10.16.    No
Joint Venture or Partnership; No Third Party Beneficiaries    77    Section
10.17.    Publicity    77    Section 10.18.    Waiver of Marshalling of Assets
   78    Section 10.19.    Waiver of Counterclaim    78    Section 10.20.   
Conflict; Construction of Documents; Reliance    78    Section 10.21.    Brokers
and Financial Advisors    78    Section 10.22.    Prior Agreements    79   
Section 10.23.    Execution in Counterparts    79    Section 10.24.    Entire
Agreement    79    Section 10.25.    Time is of the Essence    79

 

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SCHEDULES

 

Schedule I    -      Organizational Chart of Borrower Schedule II    -     
Leases Schedule III    -      Required Repair Schedule IV    -      Reserved
Schedule V    -      Exceptions to Representations Schedule VI    -     
Reserved Schedule VII    -      Description of Management Agreement
Schedule VIII    -      Identification of Certain Qualified Managers

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LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of September 19, 2006 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
“Agreement”), MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation,
having an address at Four World Financial Center, 16th Floor, New York, New York
10080 (“Lender”), and KPA TYSONS CORNER RI LLC, a Delaware limited liability
company, having its principal place of business at c/o Innkeepers USA Trust, 340
Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480 (“Borrower”).

W I T N E S S E T H:

WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from
Lender;

WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents (as
hereinafter defined).

NOW THEREFORE, in consideration of the making of the Loan by Lender and the
covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:

I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1. Definitions. For all purposes of this Agreement, except as
otherwise expressly required or unless the context clearly indicates a contrary
intent:

“ACH” shall mean the automated clearinghouse system.

“Additional Insolvency Opinion” shall have the meaning set forth in
Section 4.1.30(b) hereof.

“Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person or of an Affiliate of
such Person.

“Agent” shall mean PNC Bank National Association or any successor Eligible
Institution acting as Agent under the Cash Management Agreement.

“Agreement” shall mean this Loan Agreement, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Agreement of Manager” shall mean, with respect to the Property, that certain
Assignment of Management Agreement and Subordination of Management Fees, dated
as of the date hereof, among Lender, Borrower, Operating Lessee and Manager, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.

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“Alteration” shall mean any demolition, alteration, installation, improvement or
expansion of or to the Property or any portion thereof.

“Alteration Threshold Amount” shall mean, with respect to an Alteration at the
Property, an amount equal to 4% of the original principal balance of the Loan.

“Annual Budget” shall mean a budget setting for the Property prepared by
Borrower in accordance with Section 5.1.11.(d) hereof for the applicable Fiscal
Year.

“Approved Annual Budget” shall have the meaning set forth in Section 5.1.11(d)
hereof.

“Assignment of Leases” shall mean that certain first priority Assignment of
Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to
Lender, as assignee, assigning to Lender all of Borrower’s interest in and to
the Leases, the Room License Agreements and Rents of the Property as security
for the Loan, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

“Award” shall mean any compensation paid by any Governmental Authority to or for
the benefit of Borrower in connection with a Condemnation in respect of all or
any part of the Property.

“Bankruptcy Action” shall mean with respect to any Person (a) such Person filing
a voluntary petition under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (b) the filing of an involuntary petition against
such Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law, (c) such Person filing an answer consenting to or otherwise
acquiescing in or joining in any involuntary petition filed against it, by any
other Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law; (d) such Person consenting to or joining in an application
for the appointment of a custodian, receiver, trustee, or examiner for such
Person or any portion of the Property; or (e) such Person making an assignment
for the benefit of creditors, or admitting, in writing or in any legal
proceeding, its insolvency or inability to pay its debts as they become due.

“Bankruptcy Code” shall mean Title 11 of the United States Code, 11 U.S.C. §
101, et seq., as the same may be amended from time to time, and any successor
statute or statutes and all rules and regulations from time to time promulgated
thereunder, and any comparable foreign laws relating to bankruptcy, insolvency
or creditors’ rights or any other Federal or state bankruptcy or insolvency law.

“Basic Carrying Costs” shall mean, with respect to the Property, the sum of the
following costs associated with the Property for the relevant Fiscal Year or
payment period: (a) Taxes, (b) Other Charges and (c) Insurance Premiums.

“Borrower” shall have the meaning set forth in the introductory paragraph
hereto, together with its successors and permitted assigns.

 

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“Business Day” shall mean any day other than a Saturday, Sunday or any other day
on which national banks in New York, New York; or the place of business of any
then current Servicer are not open for business.

“Capital Expenditures” shall mean, for any period, the amount expended for items
capitalized under GAAP and the Uniform System of Accounts (including
expenditures for building improvements or major repairs).

“Cash Management Account” shall have the meaning set forth in the Cash
Management Agreement.

“Cash Management Agreement” shall mean that certain Cash Management Agreement,
dated as of the date hereof, by and among Borrower, Manager, Operating Lessee,
Agent and Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.

“Casualty” shall have the meaning set forth in Section 6.2 hereof.

“Casualty Consultant” shall have the meaning set forth in Section 6.4(b)(iii)
hereof.

“Casualty Retainage” shall have the meaning set forth in Section 6.4(b)(iv)
hereof.

“Closing Date” shall mean the date of the funding of the Loan.

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

“Company Agreement” shall mean the Limited Liability Company Agreement of
Borrower dated as of the date hereof, entered into by Innkeepers USA Limited
Partnership.

“Condemnation” shall mean a temporary or permanent taking by any Governmental
Authority as the result or in lieu or in anticipation of the exercise of the
right of condemnation or eminent domain, of all or any part of the Property, or
any interest therein or right accruing thereto, including any right of access
thereto or any change of grade affecting the Property or any part thereof.

“Condemnation Proceeds” shall have the meaning set forth in Section 6.4(b).

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of management, policies or activities of a Person,
whether through ownership of voting securities, by contract or otherwise.

“Debt” shall mean the outstanding principal amount set forth in, and evidenced
by, this Agreement and the Note together with all interest accrued and unpaid
thereon and all other sums (including, but not limited to, any Yield Maintenance
Premium) due to Lender in respect of the Loan under the Note, this Agreement,
the Mortgage or any other Loan Document.

 

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“Debt Service” shall mean, with respect to any particular period of time,
scheduled payments of interest and, if required hereunder, principal, due under
this Agreement and the Note.

“Debt Service Payment Amount” shall mean, with respect to each Payment Date
(i) prior to the Payment Date occurring in October, 2009, a monthly payment of
interest only for the applicable Interest Period, which for the purposes hereof
and assuming the Loan is equal to $25,200,000, shall equal to (a) $118,168.40 in
any Interest Period consisting of 28 days, (b) $122,388.70 in any Interest
Period consisting of 29 days, (c) $126,609.00 in any Interest Period consisting
of 30 days and (d) $130,829.30 in any Interest Period consisting of 31 days and
(ii) from and including the Payment Date occurring in November, 2009, a monthly
payment in the amount of $151,556.90 (the principal component of which amount is
based on a 30 year amortization schedule).

“Default” shall mean the occurrence of any event hereunder or under any other
Loan Document which, but for the giving of notice or passage of time, or both,
would be an Event of Default.

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to
the lesser of (a) the Maximum Legal Rate or (b) five percent (5%) above the
Interest Rate.

“Defeasance Date” shall have the meaning set forth in Section 2.7.1(i) hereof.

“Defeasance Collateral” shall mean U.S. Obligations, which provide payments
(i) on or prior to, but as close as possible to, the Business Day immediately
preceding all monthly Payment Dates and other scheduled payment dates, if any,
under the Note after the Defeasance Date and up to and including the Prepayment
Release Date, and (ii) in amounts equal to or greater than the Scheduled
Defeasance Payments relating to such monthly Payment Dates and other scheduled
payment dates.

“Defeasance Collateral Account” shall have the meaning set forth in
Section 2.7.3.

“Defeasance Event” shall have the meaning set forth in Section 2.7.1 hereof.

“Eligible Account” shall mean a separate and identifiable account from all other
funds held by the holding institution that is either (a) an account or accounts
maintained with a federal or state-chartered depository institution or trust
company which complies with the definition of Eligible Institution or (b) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. § 9.10(b),
having in either case a combined capital and surplus of at least Fifty Million
and 00/100 Dollars ($50,000,000.00) and subject to supervision or examination by
federal and state authority. An Eligible Account will not be evidenced by a
certificate of deposit, passbook or other instrument.

 

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“Eligible Institution” shall mean a depository institution or trust company, the
short term unsecured debt obligations or commercial paper of which are rated at
least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of
accounts in which funds are held for thirty (30) days or less (or, in the case
of accounts in which funds are held for more than thirty (30) days, the
long-term unsecured debt obligations of which are rated at least “AA” by Fitch
and S&P and “Aa2” by Moody’s).

“Embargoed Person” shall have the meaning set forth in Section 4.1.35 hereof.

“Environmental Indemnity” shall mean that certain Environmental Indemnity
Agreement dated the date hereof executed by Borrower in connection with the Loan
for the benefit of Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.

“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.

“Fiscal Year” shall mean each twelve (12) month period commencing on January 1
and ending on December 31 during each year of the term of the Loan.

“Fitch” shall mean Fitch, Inc., or its successors and assigns as a Rating
Agency.

“Force Majeure” shall mean a delay due to acts of God, governmental
restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion,
fire, casualty, strikes, work stoppages, shortages of labor or materials or
other causes beyond the reasonable control of Borrower, but lack of funds in and
of itself shall not be deemed a cause beyond the control of Borrower.

“Franchise Agreement” shall mean that certain agreement dated October 20, 2000
between Marriott International, Inc., as franchisor, and KPA Leaseco, Inc., as
franchisee, with respect to the Property.

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

“Governmental Authority” shall mean any court, board, agency, commission, office
or other authority of any nature whatsoever for any governmental unit (foreign,
federal, state, county, district, municipal, city or otherwise) whether now or
here-after in existence.

“Gross Income from Operations” shall mean all revenues, receipts and income of
any kind derived directly or indirectly by or on behalf of Borrower or Operating
Lessee from or in connection with the operation of the Property, determined on
an accrual basis in accordance with GAAP, whether on a cash basis or credit,
paid or collected, including, without limitation, net rent (i.e., gross rent
less pass-throughs of utilities and other operating expenses) received from
commercial tenants of the Property, and excluding, however: (i) funds furnished
by Borrower or Operating Lessee to Manager; (ii) investment income including
interest accrued on

 

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amounts in the accounts of the Manager; (iii) federal, state and municipal
hotel, excise, sales, occupancy and use taxes collected directly from patrons
and guests of the Property or as part of the sales price of any goods, services
or displays, such as gross receipts, admissions, cabaret or similar or
equivalent taxes and paid over to federal, state or municipal governments;
(iv) gratuities; (v) proceeds of insurance and condemnation, except for the
proceeds from business interruption insurance; (vi) proceeds from the sale or
other disposition of capital assets; and rebates, discounts or credits of a
similar nature; and (vii) “pass-throughs” of food or other expenses incurred by
guests arising for the purchase of goods or services from third-party vendors.

“Guarantor” shall mean Innkeepers USA Trust, a Maryland real estate investment
trust and its permitted successors and/or assigns in accordance with
Section 5.2.10 hereof.

“Guaranty” shall mean that certain Guaranty Agreement, dated as of the date
hereof, executed and delivered by Guarantor in connection with the Loan to and
for the benefit of Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

“Improvements” shall have the meaning set forth in the granting clause of the
related Mortgage with respect to the Property.

“Indebtedness” of a Person, at a particular date, means the sum (without
duplication) at such date of (a) all indebtedness or liability of such Person
(including, without limitation, amounts for borrowed money and indebtedness in
the form of mezzanine debt or preferred equity); (b) obligations evidenced by
bonds, debentures, notes, or other similar instruments; (c) obligations for the
deferred purchase price of property or services (including trade obligations);
(d) obligations under letters of credit; (e) obligations under acceptance
facilities; (f) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds, to invest in any Person
or entity, or otherwise to assure a creditor against loss; and (g) obligations
secured by any Liens, whether or not the obligations have been assumed (other
than the Permitted Encumbrances).

“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(b)
hereof.

“Indemnifying Person” shall mean Borrower.

“Independent Manager” shall mean a manager of Borrower who is not at the time of
initial appointment, or at any time while serving as a manager of Borrower, and
has not been at any time during the preceding five (5) years: (a) a stockholder,
director (with the exception of serving as the Independent Manager of Borrower),
officer, employee, partner, member, attorney or counsel of Borrower or any of
its Affiliates; (b) a creditor, customer, supplier or other Person who derives
any of its purchases or revenues from its activities with Borrower or any of its
Affiliates; (c) a Person controlling or under common control with any such
stockholder, director, officer, employee, partner, member, creditor, customer,
supplier or

 

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other Person; or (d) a member of the immediate family of any such stockholder,
director, officer, employee, partner, member, creditor, customer, supplier or
other person. A natural person who satisfies the foregoing definition other than
subparagraph (b) shall not be disqualified from serving as an Independent
Manager of Borrower if such individual is an independent director provided by a
nationally-recognized company that provides professional independent directors
and other corporate services in the ordinary course of its business. A natural
person who otherwise satisfies the foregoing definition shall not be
disqualified from serving as an Independent Manager of Borrower because such
person is the independent director or independent manager of a “special purpose
entity” affiliated with Borrower that does not own a direct or indirect equity
interest in Borrower if such individual is an independent director provided by a
nationally-recognized company that provides professional independent directors.
For purposes of this paragraph, a “special purpose entity” is an entity, whose
organizational documents contain restrictions on its activities and impose
requirements intended to preserve its separateness that are substantially
similar to those of the Borrower, and provide, inter alia, that it: (a) is
organized for the limited purpose of owning, leasing and/or operating one or
more properties or of being the general partner or member of a special purpose
entity organized for the limited purpose of owning, leasing and/or operating one
or more properties (i.e., of an “SPE Borrower”); (b) has restrictions on its
ability to incur indebtedness, dissolve, liquidate, consolidate, merge and/or
sell assets; (c) may not file voluntarily a bankruptcy petition either on its
own behalf or, if it is a general partner or member of an SPE Borrower, on
behalf of such SPE Borrower without the consent of an independent director and
(d) shall conduct itself in accordance with certain “separateness covenants,”
including, but not limited to, the maintenance of its books, records, bank
accounts and assets separate from those of any other person or entity.

“Insolvency Opinion” shall mean that certain non-consolidation opinion letter
dated the date hereof delivered by Hunton & Williams LLP in connection with the
Loan.

“Insurance Premiums” shall have the meaning set forth in Section 6.1(b) hereof.

“Insurance Proceeds” shall have the meaning set forth in Section 6.4(b) hereof.

“Interest Period” shall mean, in connection with the calculation of interest
accrued with respect to any specified Payment Date including the Maturity Date,
the period commencing on (and including) the first (1st) day of the prior
calendar month and ending on (and including) the last calendar day of the prior
calendar month.

“Interest Rate” shall mean a fixed rate per annum equal to 6.029%.

“Lease” shall mean any lease, sublease or subsublease, letting, license,
concession or other agreement, other than a Room License Agreement, whether
written or oral and whether now or hereafter in effect, pursuant to which any
Person is granted a possessory interest in, or right to use or occupy all or any
portion of any space in the Property (excluding hotel guests at the Property),
and every modification, amendment or other agreement relating to such lease,
sublease, subsublease, or other agreement entered into in connection with such
lease, sublease, subsublease, or other agreement and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.

 

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“Legal Requirements” shall mean, with respect to the Property, all federal,
state, county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting Borrower, Operating Lessee, the Property or any part
thereof, or the construction, use, Alteration or operation thereof, or any part
thereof; whether now or hereafter enacted and in force, and all permits,
licenses and authorizations and regulations of Governmental Authorities relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Borrower, at any time in force
affecting Borrower, Operating Lessee, the Property or any part thereof,
including, without limitation, any which may (a) require repairs, modifications
or Alterations in or to the Property or any part thereof, or (b) in any way
limit the use and enjoyment thereof.

“Lender” shall have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.

“Licenses” shall have the meaning set forth in Section 4.1.22 hereof.

“Lien” shall mean any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance or charge on the
Property, or any portion thereof or any interest therein, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement (unless otherwise permitted
under the Loan Documents), and mechanic’s, materialmen’s and other similar liens
and encumbrances.

“Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement
in the amount of Twenty Five Million Two Hundred Thousand and No/100 Dollars
($25,200,000.00).

“Loan Documents” shall mean, collectively, this Agreement, the Note, the
Mortgage, the Assignment of Leases, the Environmental Indemnity, the Agreement
of Manager, the Guaranty, the Cash Management Agreement, the Lockbox Agreement
and all other documents executed and/or delivered in connection with the Loan.

“Lockbox Account” shall have the meaning set forth in the Cash Management
Agreement hereof.

“Lockbox Agreement” shall have the meaning set forth in the Cash Management
Agreement.

“Lockbox Bank” shall have the meaning set forth in the Cash Management
Agreement.

“Management Agreement” shall mean with respect to the Property, (i) the
management agreement described on Schedule VII attached hereto, or (ii) if the
context requires, the Replacement Management Agreement.

 

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“Manager” shall mean Innkeepers Hospitality Management, Inc., a Florida
corporation, or, if the context requires, any Qualified Manager who is managing
the Property in accordance with the terms and provisions of the Management
Agreement.

“Material Adverse Effect” shall mean any event or condition that has a material
adverse effect on (i) the use, value or possession of the Property, (ii) the
business, prospects, profits, operations or condition (financial or otherwise)
of Borrower, or (iii) the ability of Borrower to repay the principal and
interest of the Loan as it becomes due.

“Maturity Date” shall mean the Payment Date occurring in October, 2016, or such
other date on which the final payment of principal of the Note becomes due and
payable as therein or herein provided, whether at such stated maturity date, by
declaration of acceleration, or otherwise.

“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by the Note and as provided
for herein or the other Loan Documents, under the laws of such state or states
whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.

“Mezzanine Borrower” shall have the meaning set forth in Section 9.1.4(c)
hereof.

“Mezzanine Loan” shall have the meaning set forth in Section 9.1.2(b) hereof.

“Moody’s” shall mean Moody’s Investors Service, Inc., and its successors and
assigns as a Rating Agency.

“Mortgage” shall mean, with respect to the Property, that certain first priority
Deed of Trust and Security Agreement, dated the date hereof, executed and
delivered by Borrower to Lender as security for the Loan and encumbering the
Property, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

“Net Operating Income” shall mean the amount obtained by subtracting Operating
Expenses from Gross Income from Operations.

“Net Proceeds” shall have the meaning set forth in Section 6.4(b) hereof.

“Net Proceeds Deficiency” shall have the meaning set forth in Section 6.4(b)(vi)
hereof.

“Note” shall mean that certain Promissory Note, dated the date hereof, in the
principal amount of Twenty Five Million Two Hundred Thousand and No/100 Dollars
($25,200,000.00), made by Borrower in favor of Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower
which is signed by an authorized officer of the general partner or managing
member of Borrower.

 

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“Operating Expenses” shall mean the total of all expenditures by Borrower,
computed in accordance with GAAP, of whatever kind relating to the operation,
maintenance and management of the Property for the applicable period, including
without limitation, utilities, repairs and maintenance (other than repairs or
maintenance which are Capital Expenditures), Insurance Premiums, Other Charges,
license fees, Taxes, advertising expenses, management fees equal to three
percent (3%) of Gross Income from Operations, payroll and related taxes,
computer processing charges, operational equipment or other lease payments
permitted by this Agreement, and other similar costs, but excluding
depreciation, Debt Service Payment Amounts, Capital Expenditures and
contributions to the Reserve Funds applicable to the Property.

“Operating Lease” shall mean that certain Operating Lease, dated as of
January 8, 2001, between Borrower, as lessor, and Operating Lessee, as lessee.

“Operating Lessee” shall mean KPA Leaseco Inc., a Virginia corporation, together
with its successors and permitted assigns.

“Operating Rent” shall mean all amounts to be paid to Borrower by Operating
Lessee pursuant to the Operating Lease.

“Other Charges” shall mean all ground rents, maintenance charges, impositions
other than Taxes, and any other charges, including, without limitation, vault
charges and license fees for the use of vaults, chutes and similar areas
adjoining the Property, now or hereafter levied or assessed or imposed against
the Property or any part thereof.

“Other Obligations” shall have the meaning as set forth in the Mortgage.

“Payment Date” shall mean the first (1st) day of every month during the term of
the Loan, to but excluding the Maturity Date.

“Permitted Encumbrances” shall mean, with respect to the Property, collectively,
(a) the Liens and security interests created by the Loan Documents, (b) all
Liens, encumbrances and other matters disclosed in the Title Insurance Policy
and Survey relating to the Property or any part thereof, (c) Liens, if any, for
Taxes imposed by any Governmental Authority not yet due or delinquent or are
being contested pursuant to Section 5.1.2 hereof, (d) mechanic’s, materialmen’s,
repairman’s and other like Liens arising in the ordinary course of business and
securing obligations that are not overdue or delinquent that are being contested
pursuant to the terms of the Mortgage, (e) Room License Agreements now existing,
(f) such other title and survey exceptions as Lender has approved or may approve
in writing in Lender’s sole discretion and (g) the Lien created by the Operating
Lease, which Permitted Encumbrances in the aggregate do not materially adversely
affect the value or use of the Property or Borrower’s ability to repay the Loan.

“Permitted Investments” shall have the meaning set forth in the Cash Management
Agreement.

“Permitted Release Date” shall mean the date that is the earlier of (a) three
(3) years from the Closing Date, or (b) two (2) years from the “start up day”
within the meaning of Section 860G(a)(9) of the Code of the REMIC Trust
established in connection with the last Securitization involving any portion of
the Loan.

 

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“Permitted Transfer” means any of the following: (a) any transfer, directly as a
result of the death of a natural person, of stock, membership interests or other
ownership interests previously held by the decedent in question to the Person or
Persons lawfully entitled thereto, (b) any transfer, directly as a result of the
legal incapacity of a natural person, of stock, membership interests or other
ownership interests previously held by such natural person to the Person or
Persons lawfully entitled thereto, (c) any transfer of shares in any Person
whose shares are publicly traded on any nationally recognized public exchange,
or (d) any transfer (direct or indirect) of limited partnership interest in
Innkeepers USA Limited Partnership, a Virginia limited partnership (“Innkeepers
LP”) provided that at all times one hundred percent (100%) of the general
partnership interests in Innkeepers LP are beneficially owned and controlled by
Sponsor.

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

“Personal Property” shall have the meaning set forth in the granting clause of
the Mortgage with respect to the Property.

“Physical Conditions Report” shall mean, with respect to the Property, that
certain Property Condition Report dated August 25, 2006 by EMG delivered to
Lender in connection with the closing of the Loan.

“Policies” shall have the meaning specified in Section 6.1(b) hereof.

“Policy” shall have the meaning specified in Section 6.1(b) hereof

“Prepayment Release Date” shall mean the Payment Date occurring in July, 2016.

“Property” shall have the meaning set forth in the Mortgage.

“Provided Information” shall mean any and all financial and other information
provided at any time by, or on behalf of, any Indemnifying Person with respect
to the Property, Borrower, Operating Lessee, Guarantor and/or Manager.

“Qualified Insurer” shall mean one or more financially sound and responsible
insurance companies authorized to do business in the State and having a claims
paying ability rating by at least two (2) of the Rating Agencies rating the
Securities (one of which shall be S&P if they are rating the Securities and one
of which will be Moody’s if they are rating the Securities) of “A” or better by
S&P and Fitch and “A” by Moody’s, or if only one Rating Agency is rating the
Securities, then only by such Rating Agency.

 

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“Qualified Manager” shall mean either (a) Manager; or (b) a Person identified on
Schedule VIII or (c) in the reasonable judgment of Lender, a reputable and
experienced management organization (which may be an Affiliate of Borrower)
possessing experience in managing properties similar in size, scope, use and
value as the Property, provided, that in the case of clause (c), Borrower shall
have obtained (i) prior written confirmation from the applicable Rating Agencies
that management of the Property by such Person will not cause a downgrade,
withdrawal or qualification of the then current ratings of the Securities or any
class thereof and (ii) if such Person is an Affiliate of Borrower, an Additional
Insolvency Opinion.

“Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other
nationally recognized statistical rating agency which has been approved by
Lender.

“REMIC Trust” shall mean a “real estate mortgage investment conduit” within the
meaning of Section 860D of the Code that holds the Note or any interest therein.

“Rents” shall mean, with respect to the Property, all rents, rent equivalents,
moneys payable as damages or in lieu of rent or rent equivalents, royalties
(including, without limitation, all oil and gas or other mineral royalties and
bonuses), income, receivables, receipts, revenues, deposits (including, without
limitation, security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other consideration of whatever form
or nature received by or paid to or for the account of or benefit of Borrower,
Operating Lessee or its agents or employees from any and all sources arising
from or attributable to the Property, and proceeds, if any, from business
interruption or other loss of income or insurance, including, without
limitation, all hotel receipts, revenues and credit card receipts collected from
guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational
facilities, all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the use and occupancy of property or rendering of services by Borrower
or Operating Lessee or any operator or manager of the hotel or the commercial
space located in the Improvements or acquired from others (including, without
limitation, from any Room License Agreement, or from the rental of any office
space, retail space, guest rooms or other space, halls, stores, and offices, and
deposits securing reservations of such space), license, lease, sublease and
concession fees and rentals, health club membership fees, food and beverage
wholesale and retail sales, service charges, vending machine sales and proceeds,
if any, from business interruption or other loss of income insurance.

“Replacement Management Agreement” shall mean, collectively, (a) either (i) a
management agreement with a Qualified Manager substantially in the same form and
substance as the Management Agreement, or (ii) a management agreement with a
Qualified Manager, which management agreement shall be reasonably acceptable to
Lender in form and substance, provided, with respect to this subclause (ii),
Lender, at its option, may require that Borrower shall have obtained prior
written confirmation from the applicable Rating Agencies that such management
agreement will not cause a downgrade, withdrawal or qualification of the then
current rating of the Securities or any class thereof and (b) an assignment of
management agreement and subordination of management fees substantially in the
form then used by Lender (or substantially the same form as the Agreement of
Manager delivered on the Closing Date of the Loan or such other form and
substance reasonably acceptable to Lender), executed and delivered to Lender by
Borrower and such Qualified Manager at Borrower’s expense.

 

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“Replacement Reserve Account” shall have the meaning set forth in Section 7.3.1
hereof.

“Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1
hereof.

“Replacement Reserve Monthly Deposit Amount” shall have the meaning set forth in
Section 7.3.1 hereof.

“Replacements” shall mean the furniture, fixtures and equipment required to keep
the Property in good order and repair or as required by the Management Agreement
or Franchise Agreement.

“Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund and
the Replacement Reserve Fund.

“Restaurant Lease” shall have the meaning set forth in Section 5.1.20 hereof.

“Restoration” shall mean the repair and restoration of the Property after a
Casualty or Condemnation as nearly as possible to the condition the Property was
in immediately prior to such Casualty or Condemnation.

“Restoration Threshold Amount” shall mean, as to the Property, an amount equal
to 4% of the original principal balance of the Loan.

“Room License Agreement” shall mean any short term license or similar agreement
for the use or occupancy of any meeting room, conference space, banquet
facilities, dining room or hotel room occupancy agreement.

“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill
Companies, or its successors and assigns as a Rating Agency.

“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance,
assignment, transfer, or grant of a Lien encumbering any legal or beneficial
interest, whether direct or indirect.

“Scheduled Defeasance Payments” shall mean scheduled payments of interest under
the Note for all monthly Payment Dates occurring after the Defeasance Date and
up to and including the Maturity Date (including the outstanding principal
balance on the Note as of the Maturity Date).

“Securities” shall have the meaning set forth in Section 9.1.1 hereof.

“Securitization” shall have the meaning set forth in Section 9.1.1 hereof.

 

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“Security Agreement” shall mean a security agreement in form and substance that
would be reasonably satisfactory to a prudent lender pursuant to which Borrower
grants Lender a perfected, first priority security interest in the Defeasance
Collateral Account and the Defeasance Collateral.

“Servicer” shall have the meaning set forth in Section 9.5 hereof.

“Servicing Agreement” shall have the meaning set forth in Section 9.5 hereof.

“Severed Loan Documents” shall have the meaning set forth in Section 8.2(b)
hereof.

“Special Purpose Entity” shall mean a limited liability company or limited
partnership which, at all times on and after the date hereof until the Loan is
repaid, complies with the following requirements unless it has received the
prior consent of Lender or a permitted administrative agent thereof; and, while
the Loan is securitized, unless it has received confirmation from each of the
applicable Rating Agencies that such action would not result in the
qualification, withdrawal, or downgrade of the ratings of any Securities or any
class thereof:

(i) the sole purpose conducted or promoted is to engage exclusively in the
following activities:

(A) to acquire, own, hold, sell, transfer, exchange, lease, operate, manage,
maintain, develop and improve, the Property

(B) intentionally omitted;

(C) to enter into and perform its obligations under the Operating Lease with
Operating Lessee relating to the Property;

(D) to enter into and perform its obligations under the Loan Documents;

(E) to sell, transfer, service, convey, dispose of, pledge, assign borrow money
against, finance, refinance or otherwise deal with the Property to the extent
permitted under the Loan Documents, or to repay the Loan;

(F) intentionally omitted;

(G) to engage in any lawful act or activity and to exercise any powers permitted
to limited liability companies organized under the laws of the State of Delaware
that are related or incidental to and necessary, convenient or advisable for the
accomplishment of the above-mentioned purposes.

(ii) does not have any assets other than those related to the purposes set forth
in subsection (i) above;

 

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(iii) maintains its own books, records, resolutions, agreements, financial
statements, entity documents and bank accounts separate from those of any other
Person;

(iv) pays its debts and liabilities from its own assets (to the extent it has
sufficient assets to do so) as the same shall become due;

(v) except with respect to any moneys in which (A) Manager or (B) Operating
Lessee may have an interest, and to the extent such moneys are held in the cash
management account established under the Cash Management Agreement or the
Lockbox Account to the extent required by and established under the Lockbox
Agreement, holds its assets in its own name (provided that in no event shall
assets from any source other than the Property be commingled therewith);

(vi) has no Indebtedness other than (A) the Loan and (B) liabilities incurred in
the ordinary course of business which do not violate the terms of this
Agreement;

(vii) except with respect to any moneys in which (A) Manager or (B) Operating
Lessee may have an interest, and to the extent such moneys are held in the cash
management account established under the Cash Management Agreement or the
Lockbox Account as required by and established under the Lockbox Agreement,
maintains its assets in such a manner that it will not be costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person (provided that in no event shall assets from any source other the
Property be commingled therewith);

(viii) except as contemplated by the Guaranty, does not have any of its
obligations guaranteed by an Affiliate;

(ix) at all times holds itself out and identifies itself to the public and all
other Persons as a separate and distinct entity under its own name or in a name
franchised or licensed to it by an entity other than an Affiliate of the Company
and not as a division or part of any other Person;

(x) files its own tax returns (except to the extent that it is required by law
to file consolidated tax returns unless it is a “tax disregarded entity” for tax
purposes and is not required to file tax returns under applicable law), and pays
any taxes required to be paid under applicable law;

(xi) does not (A) commingle its funds or assets with those of any other Person,
except with respect to any moneys in which (i) Manager or (ii) Operating Lessee
may have an interest, and to the extent such moneys are held in the cash
management account established under the Cash Management Agreement or the
Lockbox Account as required by and established under the Lockbox Agreement, and
(B) participates in any cash management system other than the cash management
systems which do not violate the terms of this Agreement (provided that in no
event shall assets from any source other than the Property be commingled
therewith);

 

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(xii) conducts its business only in its own name or in a name franchised or
licensed to it by an entity other than its Affiliate;

(xiii) complies with all material organizational formalities necessary to
maintain its separate existence;

(xiv) complies with all of the material terms and provisions contained in its
organizational documents;

(xv) maintains separate financial statements, showing its assets and liabilities
separate and apart from those of any other Person and not have its assets listed
on any financial statement of any other Person except as required by GAAP;
provided, however, that its assets may be included in a consolidated financial
statement of its Affiliate provided that, to the extent permitted by GAAP
(A) appropriate notation shall be made on such consolidated financial statements
to indicate the separateness of the Borrower from such Affiliate and to indicate
that the Borrower’s assets and liabilities are not available to satisfy the
debts and other obligations of such Affiliate or any other Person, other than
those of Operating Lessee, and (B) such assets shall also be listed on the
Borrower’s own separate balance sheet;

(xvi) except as contemplated by the Guaranty, pays its own liabilities and
expenses only out of its own funds and assets;

(xvii) maintains an arm’s-length relationship with its Affiliates, and, except
for capital contributions or capital distributions permitted under the terms and
conditions of the Company Agreement and properly reflected on the books and
records of the Borrower, not enter into or be a party to any transaction with
any member or any Affiliate of the Borrower except (A) in the ordinary course of
business, and (B) on terms that are intrinsically fair, commercially reasonable
and are no less favorable to the Borrower than would be obtained in a comparable
arm’s length transaction with an unrelated third party;

(xviii) except in connection with the Franchise Agreement, does not hold out its
credit or assets as being available to satisfy the obligations of any other
Person;

(xix) allocates fairly and reasonably any overhead expenses that are shared with
an Affiliate including for shared office space and for services performed by an
employer of an Affiliate;

(xx) uses separate stationery, invoices and checks bearing its own name;

(xxi) Intentionally omitted;

 

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(xxii) does not (A) assume or guarantee or become obligated for the debts of any
other Person, (B) except in connection with the Franchise Agreement, hold out
its credit as being available to satisfy the obligations of any other Person, or
(C) except for a pledge for the benefit of Lender pursuant to the Loan
Documents, pledge its assets for the benefit of any other Person;

(xxiii) corrects any known misunderstanding regarding its separate identity, not
identify itself as a division of any other Person, and not identify its members
or any Affiliate of them as a division or part of the Borrower;

(xxiv) to the extent of its assets, maintains adequate capital in light of its
contemplated business purpose, transactions and liabilities (but without giving
effect to any potential liability arising from any cross-collateralization under
the Loan Documents);

(xxv) observes all material Delaware limited liability company formalities;

(xxvi) does not acquire any obligation or securities of any Affiliate of the
Borrower, other than Operating Lessee;

(xxvii) pays the salaries of its own employees, if any, only from its own funds;

(xxviii) Intentionally omitted;

(xxix) does not guarantee any obligation of any Person, including any Affiliate,
or become obligated for the debts of any other Person or hold out its credit as
being available to pay the obligations of any other Person;

(xxx) does not engage, directly or indirectly, in any business other than as
required or permitted to be performed under subsection (i) and this subsection
(ii) of the definition of Special Purpose Entity, the Company Agreement, the
Management Agreement, the Loan Documents and all documents and certificates
contemplated thereby or delivered in connection therewith;

(xxxi) intentionally omitted;

(xxxii) does not make or permit to remain outstanding any loan or advance to, or
own or acquire any stock or securities of, any Person, except it may (A) invest
in Operating Lessee and those other investments permitted under the Loan
Documents, and (B) make any advance required or expressly permitted to be made
pursuant to any provisions of the Loan Documents and permit the same to remain
outstanding in accordance with such provisions;

(xxxiii) to the fullest extent permitted by law, does not engage in, seek or
consent to any dissolution, winding up, liquidation, consolidation, merger, sale
or transfer of any of its assets outside the ordinary course of its business,
other than those permitted sales which result in a permitted payment or
defeasance in full or in part of the Loan;

 

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(xxxiv) does not buy or hold evidence of indebtedness issued by any other Person
(other than cash or investment-grade securities issued by an entity that is not
an Affiliate of or subject to common ownership with the Borrower); or

(xxxv) does not form, acquire or hold any subsidiary (whether corporate,
partnership, limited liability company or other) or own any equity interest in
any other entity other than Operating Lessee.

“Sponsor” shall mean Innkeepers USA Trust, a Maryland real estate investment
trust.

“SPE Borrower” shall have the meaning as defined in the definition of
“Independent Manager”.

“State” shall mean Virginia.

“Survey” shall mean the survey of the Property delivered to Lender in connection
with the closing of the Loan.

“Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.2
hereof

“Taxes” shall mean all real estate and personal property taxes, assessments,
water rates or sewer rents, now or hereafter levied or assessed or imposed
against the Property or part thereof.

“Title Insurance Policy” shall mean, with respect to the Property, a mortgagee
title insurance policy issued with respect to the Property and insuring the lien
of the Mortgage encumbering the Property and delivered to Lender in connection
with the closing of the Loan.

“TI Excess” shall have the meaning set forth in Section 7.2 hereof.

“Transfer” shall have the meaning set forth in Section 5.2.10(a) hereof.

“Transferee” shall have the meaning set forth in Section 5.2.10(b)(ii) hereof.

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in
effect in the State of New York.

“Uniform System of Accounts” shall mean the most recent edition of the Uniform
System of Accounts for Hotels as adopted by the American Hotel and Motel
Association.

“U.S. Obligations” shall mean non redeemable securities evidencing an obligation
to timely pay principal and/or interest in a full and timely manner that are (a)

 

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obligations or securities not subject to prepayment, call or early redemption
which are direct obligations of, or obligations fully guaranteed as to timely
payment by, the United States of America or of any agency or instrumentality of
the United States of America, which qualify under § 1.860G-2(a)(8) of the
Treasury Regulations, (b) other non-callable “government securities” as defined
in Treasury Regulations Section 1.860G-2(a)(8)(i), as amended which will not
result in a reduction, downgrade or withdrawal of the ratings for the Securities
or any class thereof issued in connection with a Securitization and which are
then outstanding or (c) other non-callable instruments, which if a
Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code and which
will not result in a reduction, downgrade or withdrawal of the ratings for the
Securities or any class thereof issued in connection with a Securitization and
which are then outstanding. Any obligations or instruments pursuant to clause
(b) above and, provided same shall not constitute a “significant modification”
for REMIC purposes, clause (c) above, shall be subject to Lender’s reasonable
approval.

“Yield Maintenance Premium” shall mean the amount (if any) which, when added to
the remaining principal amount of the Note will be sufficient to purchase U.S.
Obligations providing the required Scheduled Defeasance Payments as and when
due.

Section 1.2. Principles of Construction. All references to sections and
schedules are to sections and schedules in or to this Agreement unless otherwise
specified. All uses of the word “including” shall mean “including, without
limitation” unless the context shall indicate otherwise. Unless otherwise
specified, the words “hereof’, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Unless otherwise specified,
all meanings attributed to defined terms herein shall be equally applicable to
both the singular and plural forms of the terms so defined. Whenever pursuant to
this Agreement or the other Loan Documents, Lender’s consent or approval is
stated as to not be “unreasonably withheld”, such consent or approval shall not
be unreasonably withheld, conditioned or delayed.

II. GENERAL TERMS

Section 2.1. Loan Commitment; Disbursement to Borrower.

2.1.1. Agreement to Lend and Borrow. Subject to and upon the terms and
conditions set forth herein, Lender hereby agrees to make and Borrower hereby
agrees to accept the Loan on the Closing Date.

2.1.2. Single Disbursement to Borrower. Borrower may request and receive only
one (1) borrowing hereunder in respect of the Loan and any amount borrowed and
repaid hereunder in respect of the Loan may not be reborrowed.

2.1.3. The Note, Mortgage and Loan Documents. The Loan shall be evidenced by the
Note and secured by the Mortgage, the Assignment of Leases and the other Loan
Documents.

 

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2.1.4. Use of Proceeds. Borrower shall use the proceeds of the Loan to (a) repay
and discharge any existing loans relating to the Property, (b) pay all past-due
Basic Carrying Costs, if any, with respect to the Property, (c) make deposits
into the Reserve Funds, (d) pay costs and expenses incurred in connection with
the Loan, (e) fund any working capital requirements of the Property, and
(f) distribute the balance, if any, in accordance with its organizational
documents.

Section 2.2. Interest Rate.

2.2.1. Interest Rate; Payment Generally. Interest on the outstanding principal
balance of the Loan evidenced by the Note shall accrue at the Interest Rate and
shall be calculated in accordance with Section 2.2.2. Borrower shall pay to
Lender (a) on the Closing Date, an amount equal to interest only on the
outstanding principal balance of the Loan from the Closing Date to September 30,
2006 and (b) on the Payment Date occurring in November, 2006 and on each Payment
Date thereafter up to but not including the Maturity Date, an amount equal to
the applicable Debt Service Payment Amount, which payments shall be applied by
Lender to interest due for the current Interest Period, and the balance, if any,
shall be applied to the outstanding principal balance of the Loan. The
outstanding principal balance of the Loan together with all accrued and unpaid
interest thereon through the end of the Interest Period in which the Maturity
Date occurs shall be due and payable on the Maturity Date. All amounts due under
the Note shall be payable without setoff, counterclaim or any other deduction
whatsoever. If the date on which any payment is due under the Note or this
Agreement is not a Business Day, such payment shall be due on the first Business
Day succeeding such date.

2.2.2. Interest Calculation. Interest on the outstanding principal balance of
the Loan shall be calculated by multiplying (a) the actual number of days
elapsed in the Interest Period for which the calculation is being made by (b) a
daily rate based on a three hundred sixty (360) day year by (c) the outstanding
principal balance of the Loan.

2.2.3. Default Rate. In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the outstanding principal balance of the
Loan and, to the extent permitted by law, all accrued and unpaid interest in
respect of the Loan and any other amounts due pursuant to the Loan Documents,
shall accrue interest at the Default Rate, calculated from the date such payment
was due without regard to any grace or cure periods contained herein.

2.2.4. Usury Savings. This Agreement, the Note and the other Loan Documents are
subject to the express condition that at no time shall Borrower be obligated or
required to pay interest on the principal balance of the Loan at a rate which
could subject Lender to either civil or criminal liability as a result of being
in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the
other Loan Documents, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of the
Maximum Legal Rate, the Interest Rate or the Default Rate, as the case may be,
shall be deemed to be immediately reduced to the Maximum Legal Rate and all
previous payments in excess of the Maximum Legal Rate shall be deemed to have
been payments in reduction of principal and not on account of the interest due
hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the sums due under the Loan, shall, to the extent
permitted by

 

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applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Loan until payment in full so that the rate or amount of
interest on account of the Loan does not exceed the Maximum Legal Rate of
interest from time to time in effect and applicable to the Loan for so long as
the Loan is outstanding.

Section 2.3. Loan Payment.

2.3.1. Payment on Maturity Date. Borrower shall pay to Lender on the Maturity
Date the outstanding principal balance of the Loan, all accrued and unpaid
interest through the end of the related Interest Period and all other amounts
due hereunder and under the Note, the Mortgage and the other Loan Documents.

2.3.2. Late Payment Charge. If any principal, interest or any other sums due
under the Loan Documents (excluding the amounts due on the Maturity Date) are
not paid by Borrower on or prior to the date on which is five calendar (5) days
after the date such payment is due, Borrower shall pay to Lender upon demand an
amount equal to the lesser of three percent (3%) of such unpaid sum or the
Maximum Legal Rate in order to defray the expense incurred by Lender in handling
and processing such delinquent payment and to compensate Lender for the loss of
the use of such delinquent payment. Any such amount shall be secured by the
Mortgage and the other Loan Documents to the extent permitted by applicable law.

2.3.3. Method and Place of Payment. Except as otherwise specifically provided
herein, all payments and prepayments under this Agreement and the Note shall be
made to Lender not later than 2:00 p.m., New York City time, on the date when
due and shall be made in lawful money of the United States of America by ACH as
directed by Lender, and any funds received by Lender after such time shall, for
all purposes hereof, be deemed to have been paid on the next succeeding Business
Day.

Section 2.4. Prepayments.

2.4.1. Voluntary Prepayments.

(a) Borrower shall not have the right to prepay the Loan in whole or in part
except in accordance with this Agreement.

(b) From and after the Prepayment Release Date, Borrower may, at its option and
upon fifteen (15) days prior written notice to Lender, prepay the Debt in whole,
but not in part, without payment of the Yield Maintenance Premium or any other
prepayment premium; provided, however, Borrower shall pay to Lender,
simultaneously with such prepayment, (i) all accrued and unpaid interest on the
outstanding principal balance of the Loan, (ii) interest on the outstanding
principal balance of the Loan from the date of such prepayment through the end
of the Interest Period in which such prepayment occurs, and (iii) all other
amounts due to Lender pursuant to the Loan Documents.

2.4.2. Mandatory Prepayments. If Lender is not obligated to make any Net
Proceeds available to Borrower for Restoration, an amount equal to one hundred
percent (100%) of such Net Proceeds shall be applied to the outstanding
principal balance of the Loan. Except as set forth in Section 2.4.3, no Yield
Maintenance Premium or other penalty shall be due in connection with a
prepayment made pursuant to this Section 2.4.2.

 

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2.4.3. Prepayments after Default. If following an Event of Default which is
continuing, payment of all or any part of the Loan (exclusive of any monthly
Debt Service Payment Amount) is tendered by Borrower or otherwise recovered by
Lender (including Net Proceeds), such tender or recovery shall be deemed a
voluntary prepayment by Borrower and Borrower shall pay, in addition to the Debt
interest on the outstanding principal amount of the Loan so tendered or
recovered by Lender through the end of the Interest Period in which such tender
or recovery occurs, and if such tender or prepayment occurs prior to the
Permitted Release Date, an amount equal to the greater of (i) the applicable
Yield Maintenance Premium calculated on the basis of the outstanding principal
amount of the Loan to be satisfied or prepaid or (ii) one (1%) percent of the
outstanding principal balance of the Loan.

Section 2.5. Release.

2.5.1. Release of the Property. Except as set forth in this Section 2.5, no
repayment or prepayment of all or any portion of the Loan shall cause, give rise
to a right to require, or otherwise result in, the release of the Lien of the
Mortgage on the Property. Lender shall, at the expense of Borrower, upon payment
in full of all principal and interest on the Loan and all other amounts due and
payable by Borrower under the Loan Documents in accordance with the terms and
provisions of the Note and this Agreement, promptly release the Lien of the
Mortgage from the Property in accordance with the provisions described in
Section 2.5.2.

2.5.2. Release upon Defeasance or Prepayment with Yield Maintenance.

(a) If Borrower has elected to prepay the entire Loan in accordance with
Section 2.4.1, the Property shall be released from the Lien of the Mortgage and
the other Loan Documents; and if Borrower has elected to defease the entire Loan
in accordance with Section 2.7, the Property shall be released from the Lien of
the Mortgage and the other Loan Documents, and the U.S. Obligations, pledged
pursuant to the Security Agreement, shall be the sole source of collateral
securing the Debt.

(b) In connection with the release of the Lien of the Mortgage and the other
applicable Loan Documents, Borrower shall submit to Lender, a release of Lien
(and related Loan Documents) for execution by Lender. Such release shall be in a
form appropriate in the jurisdiction in which the Property is located and that
would be satisfactory to a prudent lender acting reasonably. In addition,
Borrower shall comply with the provisions of Section 2.7 hereof, if applicable.

Section 2.6. Lockbox Account/Cash Management.

2.6.1. Payments Received under the Cash Management Agreement. Notwithstanding
anything to the contrary contained in this Agreement or the other Loan
Documents, and provided no Event of Default has occurred and is continuing,
Borrower’s obligations with respect to the payment of the monthly Debt Service
Payment Amount and amounts required to be deposited into the Reserve Funds, if
any, shall be deemed satisfied for any month to the extent sufficient amounts
are deposited in the Cash Management Account to satisfy such obligations
pursuant to the Cash Management Agreement on the dates each such payment is
required, regardless of whether any of such amounts are so applied by Lender.

 

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Section 2.7. Defeasance.

2.7.1. Voluntary Defeasance. Provided that no Event of Default shall then exist,
Borrower shall have the right at any time after the Permitted Release Date and
prior to the Prepayment Release Date to voluntarily defease the Loan in full but
not in part by and upon satisfaction of the following conditions (such event
being a “Defeasance Event”):

(i) Borrower shall provide not less than fifteen (15) days prior written notice
to Lender specifying the Payment Date (the “Defeasance Date”) on which the
Defeasance Event shall occur;

(ii) Borrower shall pay to Lender all accrued and unpaid interest on the
principal balance of the Note to and including the Defeasance Date;

(iii) Borrower shall pay to Lender all other sums, not including accrued or
scheduled interest or principal payments and otherwise without duplication of
the payment required by clause 2.7.1(a)(ii) above, then due to Lender under the
Note, this Agreement, the Mortgage, and the other Loan Documents;

(iv) Borrower shall deposit the Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of Sections 2.7.2
and 2.7.3 hereof;

(v) Intentionally Deleted;

(vi) Borrower shall execute and deliver to Lender a Security Agreement in
respect of the Defeasance Collateral Account and the Defeasance Collateral;

(vii) Borrower shall deliver an opinion of counsel for Borrower in a form that
would be satisfactory to a prudent lender acting reasonably stating, among other
things, that Borrower has legally and validly transferred and assigned the U.S.
Obligations and all obligations, rights and duties of Borrower under and to the
Note to the Successor Borrower, if any, that Lender has a perfected first
priority security interest in the Defeasance Collateral and the Defeasance
Collateral Account and that any REMIC Trust formed pursuant to a Securitization
will not fail to maintain its status as a “real estate mortgage investment
conduit” within the meaning of Section 860D of the Code as a result of such
Defeasance Event;

(viii) The applicable Rating Agencies shall have confirmed in writing that such
Defeasance Event will not result in a downgrading, withdrawal or qualification
of the respective ratings in effect immediately prior to such Defeasance Event
for the Securities issued in connection with the Securitization which are then
outstanding. If required by the applicable Rating Agencies, Borrower shall also
deliver or cause to be delivered a Nonconsolidation Opinion with respect to the
Successor Borrower in form and substance that would be satisfactory to a prudent
lender acting reasonably and satisfactory to the applicable Rating Agencies;

 

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(ix) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.7.1(a) have been satisfied;

(x) Borrower shall deliver a certificate of Borrower’s independent certified
public accountant certifying that the Defeasance Collateral will generate
monthly amounts on or prior to each successive Payment Date equal to or greater
than the Scheduled Defeasance Payments due on the applicable Payment Dates;

(xi) Borrower shall deliver such other certificates, documents or instruments as
Lender may reasonably request; and

(xii) Except to the extent included in the Defeasance Collateral, Borrower shall
pay all out-of-pocket costs and expenses of Lender reasonably incurred in
connection with the Defeasance Event, including any such costs and expenses
associated with a release of the Lien of the Mortgage as provided in Section 2.5
hereof as well as reasonable attorneys’ fees and expenses.

Nothing herein contained shall require Borrower to employ the services of a
commercial defeasance company in connection with a Defeasance.Event.

2.7.2. Successor Borrower. In connection with any Defeasance Event, Borrower may
or, at the request of the Rating Agencies, shall establish or designate a
successor entity (the “Successor Borrower”) which shall be a single purpose
bankruptcy remote entity with an Independent Manager, and Borrower shall
transfer and assign all of Borrower’s obligations, rights and duties under and
to the Note, together with Borrower’s interest in the pledged U.S. Obligations
to such Successor Borrower. Any Successor Borrower may be an Affiliate of
Borrower. Such Successor Borrower shall assume the obligations of Borrower under
the Note and the Security Agreement and Borrower shall be relieved of its
obligations under such documents and the other Loan Documents. Borrower shall
pay $1,000 to any such Successor Borrower as consideration for assuming the
obligations of Borrower under the Note and the Security Agreement.
Notwithstanding anything in this Agreement to the contrary, no other assumption
fee shall be payable upon a transfer of the Note, in accordance with this
Section 2.7.2, but Borrower shall pay all out-of-pocket costs and expenses
reasonably incurred by Lender, including Lender’s reasonable attorneys’ fees and
expenses, incurred in connection therewith.

2.7.3. Defeasance Collateral Account. On or before the date on which Borrower
delivers the Defeasance Collateral, Borrower shall open at any Eligible
Institution the defeasance collateral account (the “Defeasance Collateral
Account”) which shall at all times be an Eligible Account. The Defeasance
Collateral Account shall contain only (i) Defeasance Collateral, and (ii) cash
from interest and principal paid on the Defeasance Collateral. All cash from
interest and principal payments paid on the Defeasance Collateral shall be paid
over to Lender (i) on each monthly Payment Date and applied to accrued and
unpaid interest for the applicable Interest Period and (ii) on the Maturity
Date, to the outstanding principal amount of

 

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the Loan. Any cash from interest and principal paid on the Defeasance Collateral
not needed to pay the Scheduled Defeasance Payments shall be paid to Borrower
promptly following the Maturity Date. Borrower shall cause the Eligible
Institution at which the Defeasance Collateral is deposited to enter an
agreement with Borrower and Lender, satisfactory to Lender in its sole
discretion, pursuant to which such Eligible Institution shall agree to hold and
distribute the Defeasance Collateral in accordance with this Agreement. The
Borrower or Successor Borrower, as applicable, shall be the owner of the
Defeasance Collateral Account and shall report all income accrued on Defeasance
Collateral for federal, state and local income tax purposes in its income tax
return. Borrower shall prepay all cost and expenses associated with opening and
maintaining the Defeasance Collateral Account. Lender shall not in any way be
liable by reason of any insufficiency in the Defeasance Collateral Account.

III. INTENTIONALLY DELETED

IV. REPRESENTATIONS AND WARRANTIES

Section 4.1. Borrower Representations. Borrower represents and warrants as of
the Closing Date that:

4.1.1. Organization. Borrower has been duly organized and is validly existing
and in good standing with requisite power and authority to own its properties
and to transact the businesses in which it is now engaged. Borrower is duly
qualified to do business and is in good standing in each jurisdiction where it
is required to be so qualified in connection with its properties, businesses and
operations. Borrower possesses all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its properties and to
transact the businesses in which it is now engaged. The ownership interests in
Borrower are as set forth on the organizational chart attached hereto as
Schedule I.

4.1.2. Proceedings. Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents to which Borrower is a party. This Agreement and such other Loan
Documents have been duly executed and delivered by or on behalf of Borrower and
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, subject only to applicable
bankruptcy, insolvency and similar laws affecting rights of creditors generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law).

4.1.3. No Conflicts. The execution, delivery and performance of this Agreement
and the other Loan Documents by Borrower will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any Lien, charge or encumbrance (other
than pursuant to the Loan Documents) upon any of the property or assets of
Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement, organizational or other formation agreement, management agreement or
other agreement or instrument to which Borrower is a party or by which any of
Borrower’s property or assets is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority having jurisdiction over Borrower or any of
Borrower’s properties or assets, and any consent, approval, authorization,
order,

 

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registration or qualification of or with any court or any such Governmental
Authority required for the execution, delivery and performance by Borrower of
this Agreement or any other Loan Documents has been obtained and is in full
force and effect.

4.1.4. Litigation. There are no actions, suits or proceedings at law or in
equity by or before any Governmental Authority now pending or, to Borrower’s
knowledge, threatened against or affecting Borrower, Guarantor, Operating Lessee
or the Property, which actions, suits or proceedings, could reasonably be
expected to have a material adverse affect on the condition (financial or
otherwise) or business of Borrower, Guarantor, Operating Lessee, or the
condition or ownership of the Property.

4.1.5. Agreements. Neither Borrower nor Operating Lessee is a party to any
agreement or instrument or subject to any restriction which could reasonably be
expected to materially and adversely affect Borrower or the Property, or
Borrower’s business, properties or assets, operations or condition, financial or
otherwise. Borrower is not in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material agreement or instrument to which it is a
party or by which Borrower, Operating Lessee or the Property is bound. Borrower
has no material financial obligation under any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which Borrower is a
party or by which Borrower, Operating Lessee or the Property is otherwise bound,
other than (a) obligations permitted pursuant to clause (xvii) of the definition
of “Special Purpose Entity” set forth in Section 1.1 hereof and (b) obligations
under the Loan Documents.

4.1.6. Title. Borrower has good, marketable and insurable fee simple title to
the Property free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan Documents
and the Liens created by the Loan Documents (other than those Liens granted in
connection with existing financing which Lien will be satisfied simultaneously
with the funding of the Loan and released.) The Permitted Encumbrances in the
aggregate do not materially and adversely affect the value, operation or use of
the Property (as currently used) or Borrower’s ability to pay when due amounts
due to Lender in connection with the Loan. The Mortgage, when properly recorded
in the appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected first priority lien on the Property, subject only to Permitted
Encumbrances and the Liens created by the Loan Documents and (ii) perfected
security interests in and to, and perfected collateral assignments of, all
personalty (including the Leases) owned by Borrower, all in accordance with the
terms thereof, in each case subject only to any applicable Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan Documents
and the Liens created by the Loan Documents. Except as may be otherwise set
forth in the Title Insurance Policy, there are no claims for payment for work,
labor or materials affecting the Property which are or, to Borrower’s knowledge,
may reasonably be expected to become a Lien prior to, or of equal priority with,
the Liens created by the Loan Documents.

4.1.7. Solvency. Borrower has (a) not entered into this transaction or executed
the Note, this Agreement or any other Loan Documents with the actual intent to
hinder, delay or defraud any creditor and (b) received reasonably equivalent
value in exchange for its obligations under such Loan Documents. After giving
effect to the Loan, the fair saleable value of

 

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Borrower’s assets exceeds and will, immediately following the making of the
Loan, exceed Borrower’s total liabilities, including, without limitation,
subordinated, unliquidated, disputed and contingent liabilities. The fair
saleable value of Borrower’s assets is and will, immediately following the
making of the Loan, be greater than Borrower’s probable liabilities, including
the maximum amount that can reasonably be expected to become due and payable by
such Borrower in respect of its contingent liabilities on its debts as such
debts become absolute and matured. Borrower’s assets do not and, immediately
following the making of the Loan will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur debt and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such debt and liabilities as they mature (taking into account the
timing and amounts of cash to be received by Borrower and the amounts to be
payable on or in respect of obligations of Borrower). No petition in bankruptcy
has been filed against Borrower, the owner of any direct interest in Borrower,
Operating Lessee or Guarantor in the last seven (7) years, and neither Borrower,
the owner of any direct interest in Borrower, Operating Lessee or Guarantor in
the last seven (7) years has ever made an assignment for the benefit of
creditors or taken advantage of any insolvency act for the benefit of debtors.
Neither Borrower nor any of its Affiliates are contemplating either the filing
of a petition by it under any state or federal bankruptcy or insolvency laws or
the liquidation of all or a major portion of Borrower’s assets or property, and,
to Borrower’s knowledge, no Person is contemplating the filing of any such
petition against it, its sole member, Operating Lessee or Guarantor.

4.1.8. Full and Accurate Disclosure. No statement of fact made by Borrower in
this Agreement or in any of the other Loan Documents contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained herein or therein not misleading. There is no material
fact presently known to Borrower which has not been disclosed to Lender which
materially and adversely affects the Property or the business, operations or
condition (financial or otherwise) of Borrower.

4.1.9. No Plan Assets. Each of Borrower and Operating Lessee do not sponsor, is
not obligated to contribute to, and are not themselves an “employee benefit
plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA or
Section 4975 of the Code, and none of the assets of Borrower or Operating Lessee
constitute or will constitute “plan assets” of one or more such plans within the
meaning of 29 C.F.R. Section 2510.3-101 or Section 3(42) of ERISA. In addition,
(a) neither Borrower nor Operating Lessee is a “governmental plan” within the
meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower or
Operating Lessee are not subject to any state or other statute, regulation or
other restriction regulating investments of, or fiduciary obligations with
respect to, governmental plans within the meaning of Section 3(32) of ERISA
which is similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code and which prohibit or otherwise restrict the transactions contemplated
by this Agreement, including, but not limited to the exercise by Lender of any
of its rights under the Loan Documents.

4.1.10. Compliance. Except as otherwise expressly set forth in the Physical
Conditions Reports, the Survey, and the Phase I (and Phase II, if any)
environmental reports, or as otherwise identified on Schedule V, Borrower and
the Property and the use thereof comply, to Borrower’s knowledge, in all
material respects with all applicable Legal Requirements,

 

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including, without limitation, building and zoning ordinances and codes. To
Borrower’s knowledge, Borrower is not in any material default or violation of
any written order, writ, injunction, decree or demand of any Governmental
Authority. There has not been committed by Borrower or, to Borrower’s knowledge,
any other Person in occupancy of or involved with the operation or use of the
Property any act or omission affording the federal government or any other
Governmental Authority the right of forfeiture as against Borrower’s interest in
the Property or any part thereof or any monies paid in performance of Borrower’s
obligations under any of the Loan Documents.

4.1.11. Financial Information. All financial data, including, without
limitation, the statements of cash flow and income and operating expense but
excluding any historical balance sheet items, that have been delivered to Lender
in connection with the Loan (i) are true, complete and correct in all material
respects, (ii) accurately represent the results of operations of the Property
for the periods covered thereby, and (iii) to the extent prepared or audited by
an independent certified public accounting firm, have been prepared in
accordance with GAAP throughout the periods covered, except as disclosed
therein. Except for Permitted Encumbrances and Borrower’s obligations under the
Loan Documents, Borrower does not have any contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments that are known to Borrower and
reasonably likely to have a materially adverse effect on the Property or the
operation thereof as a hotel, except as referred to or reflected in said
financial statements. Since the date of such financial statements, there has
been no materially adverse change in the financial condition, operations or
business of Borrower from that set forth in said financial statements.

4.1.12. Condemnation. Except as otherwise disclosed to Lender in writing or in
the Title Insurance Policy, no Condemnation or other proceeding has been
commenced which is continuing or, to Borrower’s knowledge, is threatened or
contemplated with respect to all or any portion of the Property or for the
relocation of roadways providing access to the Property.

4.1.13. Federal Reserve Regulations. No part of the proceeds of the Loan will be
used for the purpose of purchasing or acquiring any “margin stock” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or for any other purpose which would be inconsistent with such Regulation U or
any other Regulations of such Board of Governors, or for any purposes prohibited
by Legal Requirements or by the terms and conditions of this Agreement or the
other Loan Documents.

4.1.14. Utilities and Public Access. Except as set forth in the Survey or Title
Policy or otherwise disclosed to Lender in writing, (a) the Property has rights
of access to one or more public ways and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service the Property for its
intended uses, (b) all public utilities necessary or convenient to the full use
and enjoyment of the Property are located either in the public right-of-way
abutting the Property (which are connected so as to serve the Property without
passing over other property) or in recorded easements serving the Property and
such easements are set forth in and insured by the Title Insurance Policy and
(c) all roads necessary for the use of the Property for its current purposes
have been completed and dedicated to public use and accepted by all Governmental
Authorities.

 

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4.1.15. Not a Foreign Person. Borrower is not a “foreign person” within the
meaning of § 1445(f)(3) of the Code.

4.1.16. Separate Lots. The Property is comprised of one (1) or more parcels
which constitute a separate tax lot or lots and does not constitute a portion of
any other tax lot not a part of the Property.

4.1.17. Assessments. Except as disclosed to Lender in writing or as set forth in
the Title Insurance Policy, (a) there are no pending or, to Borrower’s
knowledge, proposed special or other assessments for public improvements or
otherwise affecting the Property, (b) nor, to Borrower’s knowledge, are there
any contemplated improvements to the Property that could reasonably be expected
to result in such special or other assessments.

4.1.18. Enforceability. The Loan Documents are not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, Operating Lessee or
Guarantor, including the defense of usury, nor would the operation of any of the
terms of the Loan Documents, or the exercise of any right thereunder, render the
Loan Documents unenforceable (subject to principles of equity and bankruptcy,
insolvency and other laws generally affecting creditors’ rights and the
enforcement of debtors’ obligations and certain procedural requirements in
connection therewith), and neither Borrower, Operating Lessee nor Guarantor have
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.

4.1.19. No Prior Assignment. There are no prior assignments of the Leases, the
Room License Agreements or any portion of the Rents (other than to Operating
Lessee pursuant to the Operating Lease) due and payable or to become due and
payable which are outstanding other than those prior assignments of the Leases,
the Room License Agreements and Rents granted in connection with existing
financing which will be satisfied simultaneously with the funding of the Loan
and such assignments released.

4.1.20. Insurance. Borrower has obtained and has delivered to Lender certified
copies of the Policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement. No claims have been made or are
currently pending, outstanding or otherwise remain unsatisfied under any such
Policies, and neither Borrower nor, to Borrower’s knowledge, any other Person,
has done, by act or omission, anything which would materially impair the
coverage of any such Policies.

4.1.21. Use of Property. The Property is used exclusively as a hotel and other
appurtenant and related uses.

4.1.22. Certificate of Occupancy; Licenses. To Borrower’s knowledge, all
certifications, permits, licenses and approvals, including without limitation,
certificates of completion and occupancy permits and any applicable liquor
license required for the legal use, occupancy and operation of the Property as a
hotel and such other uses as permitted pursuant to this Agreement (collectively,
the “Licenses”), have been obtained and are in full force and effect, except for
where the failure to obtain such licenses or for such licenses to not be in full
force and effect does not have a material adverse effect with respect to the
Property or Borrower. To Borrower’s knowledge, the use being made of the
Property is in conformity with the Licenses issued for the Property.

 

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4.1.23. Flood Zone. Except as shown on the applicable Survey, none of the
Improvements on the Property are located in an area as identified by the Federal
Emergency Management Agency as an area having special flood hazards and, if so
located, the flood insurance required pursuant to Section 6.1(a)(i) is in full
force and effect with respect to the Property.

4.1.24. Physical Condition. To Borrower’s knowledge and except as expressly set
forth in the Physical Conditions Report or otherwise disclosed to Lender in
writing: (a) the Property, including, without limitation, all buildings,
improvements, parking facilities, sidewalks, storm drainage systems, roofs,
plumbing systems, HVAC systems, fire protection systems, electrical systems,
equipment, elevators, exterior sidings and doors, landscaping, irrigation
systems and all structural components, are in good condition, order and repair
in all material respects; and (b) there exists no structural or other material
defects or damages in the Property, whether latent or otherwise, and Borrower
has not received notice from any insurance company or bonding company of any
defects or inadequacies in the Property, or any part thereof, which would
adversely affect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.

4.1.25. Boundaries. To Borrower’s knowledge and except as expressly set forth in
the Survey, Title Insurance Policy or Physical Conditions Report, (a) all of the
material improvements which were included in determining the appraised value of
the Property lie wholly within the boundaries and building restriction lines of
the Property, (b) no improvements on adjoining properties encroach upon the
Property, and (c) no easements or other encumbrances upon the Property encroach
upon any of the Improvements, so as to affect the value or marketability of the
Property except those which are insured against by the Title Insurance Policy.

4.1.26. Leases. The Property is not subject to any leases other than the Leases
described on Schedule II and made a part hereof and the Operating Lease.
Operating Lessee is the owner and lessor of landlord’s interest in the Leases
other than the Operating Lease. Borrower is the owner and lessor of landlord’s
interest in the Operating Lease. No Person has any possessory interest in the
Property or right to occupy the same except under and pursuant to the provisions
of the Leases and Room License Agreements. To the Borrower’s knowledge, the
current Leases are in full force and effect and there are no defaults thereunder
by either party and there are no conditions that, with the passage of time or
the giving of notice, or both, would constitute defaults thereunder. To
Borrower’s knowledge, except as disclosed to Lender on Schedule II hereof,
(a) no Rent (including security deposits) has been paid more than one (1) month
in advance of its due date, (b) all work to be performed under each Lease has
been performed as required and has been accepted by the applicable tenant, and
any payments, free rent, partial rent, rebate of rent or other payments,
credits, allowances or abatements required to be given to any tenant has already
been received by such tenant, (c) there has been no prior sale, transfer or
assignment, hypothecation or pledge of any Lease or of the Rents received
therein which remains in effect, (d) in each case, unless otherwise indicated
thereon, no tenant listed on

 

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Schedule II has assigned its Lease or sublet all or any portion of the premises
demised thereby, no such tenant holds its leased premises under assignment or
sublease, nor does anyone except such tenant and its employees occupy such
leased premises, (e) no tenant under any Lease has a right or option pursuant to
such Lease or otherwise to purchase all or any part of the leased premises or
the building of which the leased premises are a part, and (f) no tenant under
any Lease has any right or option for additional space in the Improvements.

4.1.27. Survey. To Borrower’s knowledge, the Survey for the Property delivered
to Lender in connection with this Agreement does not fail to reflect any
material matter affecting the Property or the title thereto.

4.1.28. Intentionally Omitted.

4.1.29. Filing and Recording Taxes. All transfer taxes, deed stamps, intangible
taxes or other amounts in the nature of transfer taxes required to be paid by
any Person under applicable Legal Requirements currently in effect in connection
with the transfer of the Property to Borrower have been paid. All mortgage,
mortgage recording, stamp, intangible or other similar tax required to be paid
by any Person under applicable Legal Requirements currently in effect in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents, including, without
limitation, the Mortgage, have been paid or will be paid simultaneously with the
funding of the Loan, and, under current Legal Requirements and after giving
effect to the payment of such taxes, the Mortgage is enforceable in accordance
with its respective terms by Lender (or any subsequent holder thereof), subject
to principles of equity and bankruptcy, insolvency and other laws generally
applicable to creditors’ rights and the enforcement of debtors’ obligations.

4.1.30. Special Purpose Entity/Separateness.

(a) Borrower is a Special Purpose Entity and Operating Lessee is in compliance
with the separateness provisions of its certificate of incorporation.

(b) All of the assumptions made in the Insolvency Opinion, including, but not
limited to, any exhibits attached thereto, are true and correct in all respects
and any assumptions made in any subsequent non-consolidation opinion required to
be delivered in connection with the Loan Documents (an “Additional Insolvency
Opinion”), including, but not limited to, any exhibits attached thereto, will
have been and shall be true and correct in all respects as of the date when
made. Borrower has complied with all of the assumptions made with respect to
Borrower in the Insolvency Opinion.

(c) From the date of its organization, Borrower has complied with the special
purpose, bankruptcy remote provisions of its organizational documents.

4.1.31. Management Agreement. The Management Agreement is in full force and
effect and there is no default thereunder by any party thereto and no material
event has occurred that, with the passage of time and/or the giving of notice
would constitute a material default thereunder.

 

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4.1.32. Illegal Activity. No portion of the Property has been or will be
purchased with proceeds of any illegal activity.

4.1.33. No Change in Facts or Circumstances; Disclosure. All information
submitted by and on behalf of Borrower to Lender and in all financial
statements, rent rolls (including the rent roll attached hereto as Schedule II),
reports, certificates and other documents submitted by or on behalf of Borrower
in connection with the Loan or in satisfaction of the terms thereof and all
statements of fact made by Borrower in this Agreement or in any other Loan
Document, are accurate, complete and correct in all material respects. There has
been no material adverse change in any condition, fact, circumstance or event
that would make any such information inaccurate, incomplete or otherwise
misleading in any material respect or that otherwise materially and adversely
affects the use, operation or value of the Property or the business operations
or the financial condition of Borrower.

4.1.34. Investment Company Act. Borrower is not (a) an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended; (b) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (c) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.

4.1.35. Embargoed Person. As of the date hereof and at all times throughout the
term of the Loan, including after giving effect to any Transfers permitted
pursuant to the Loan Documents, (a) none of the funds or other assets of
Borrower, Operating Lessee and Guarantor constitute property of, or are
beneficially owned, directly or indirectly, by any person, entity or government
subject to trade restrictions under U.S. law, including but not limited to, the
International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The
Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders
or regulations promulgated thereunder with the result that the investment in
Borrower, Operating Lessee or Guarantor, as applicable (whether directly or
indirectly), is prohibited by law or the Loan made by the Lender is in violation
of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any
nature whatsoever in Borrower, Operating Lessee or Guarantor, as applicable,
with the result that the investment in Borrower, Operating Lessee or Guarantor,
as applicable (whether directly or indirectly), is prohibited by law or the Loan
is in violation of law; and (c) none of the funds of Borrower, Operating Lessee
or Guarantor, as applicable, have been derived from any unlawful activity with
the result that the investment in Borrower, Operating Lessee or Guarantor, as
applicable (whether directly or indirectly), is prohibited by law or the Loan is
in violation of law.

4.1.36. Place of Business; State of Organization. Borrower’s principal place of
business as of the date hereof is the address set forth in the introductory
paragraph of this Agreement. Borrower is organized under the laws of the State
of Delaware and Operating Lessee is organized under the laws of the State of
Virginia.

4.1.37. Intentionally Deleted.

 

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4.1.38. Operating Lease. The Operating Lease is in full force and effect and
there is no material default, breach or violation existing thereunder by
Borrower or Operating Lessee and no event has occurred that, with the passage of
time or the giving of notice, or both, would constitute a default, breach or
violation by any party thereunder. The terms and provisions of the Operating
Lease are subordinate to this Agreement and the Mortgage.

Section 4.2. Survival of Representations. Borrower agrees that all of the
representations and warranties of Borrower set forth in Section 4.1 hereof and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any amount remains owing to Lender under this Agreement or any of the
other Loan Documents. All representations, warranties, covenants and agreements
made in this Agreement or in the other Loan Documents by Borrower shall be
deemed to have been relied upon by Lender notwithstanding any investigation
heretofore or hereafter made by Lender or on its behalf.

Section 4.3. Knowledge and Other Matters. Whenever the term “to Borrower’s
knowledge” or any similar phrase is used in this Agreement or any other Loan
Document, the same shall mean the actual knowledge, after due inquiry and
investigation, of Dennis Craven, Mark Murphy, the general manager of the
Property and any Person who succeeds to their positions.

V. BORROWER COVENANTS

Section 5.1. Affirmative Covenants. From the date hereof and until payment and
performance in full of all obligations of Borrower under the Loan Documents or
the earlier release of the Lien of the Mortgage encumbering the Property (and
all related obligations) in accordance with the terms of this Agreement and the
other Loan Documents, Borrower hereby covenants and agrees with Lender that:

5.1.1. Existence; Compliance with Legal Requirements. Borrower shall do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its existence, rights, licenses, permits and franchises and comply with
all Legal Requirements applicable to it, Operating Lessee and the Property
except where the failure to comply with such Legal Requirements is not
reasonably likely to have a material adverse effect with respect to the Property
or Borrower; provided, however, Borrower’s obligation to comply with Legal
Requirements shall be suspended for so long as Borrower contests the
applicability or violation of such Legal Requirements pursuant to Section 5.1.1
hereof. There shall never be committed by Borrower, and Borrower shall never
permit any other Person in occupancy of or involved with the operation or use of
the Property to commit any act or omission affording the federal government or
any state or local government the right of forfeiture against the Property or
any part thereof, or any monies paid in performance of Borrower’s obligations
under any of the Loan Documents. Borrower hereby covenants and agrees not to
commit, permit or suffer to exist any act or omission affording such right of
forfeiture. Borrower shall at all times maintain, preserve and protect or cause
to be maintained, preserved and protected, all franchises and trade names and
preserve all the remainder of its property used or useful in the conduct of its
business and shall maintain or cause to be maintained the Property in good
working order and repair, and from time to time make, or cause to be made, all
reasonably necessary repairs, renewals, replacements, betterments and
improvements thereto, all as more fully provided in the Mortgage. Borrower

 

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shall keep the Property, or cause the Property to be kept, insured at all times
by financially sound and reputable insurers, to such extent and against such
risks, and maintain liability and such other insurance, as is more fully
provided in this Agreement. After prior written notice to Lender, Borrower, at
its own expense, may contest by appropriate legal proceeding promptly initiated
and conducted in good faith and with due diligence, the validity of any Legal
Requirement, the applicability of any Legal Requirement to Borrower, Operating
Lessee or the Property or any alleged violation of any Legal Requirement,
provided that (i) no Default or Event of Default has occurred (other than the
violation of the Legal Requirement then being contested) and remains uncured;
(ii) Borrower is permitted to do so under the provisions of any mortgage or deed
of trust superior in lien to the Mortgage; (iii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any
instrument to which Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be conducted in accordance with all
applicable statutes, laws and ordinances; (iv) neither the Property nor any part
thereof or interest therein will be in imminent danger of being sold, forfeited,
terminated, cancelled or lost; (v) Borrower shall promptly upon final
non-appealable determination thereof comply with any such Legal Requirement
determined to be valid or applicable or cure any violation of any Legal
Requirement; (vi) such proceeding shall suspend the enforcement of the contested
Legal Requirement against Borrower, Operating Lessee or the Property; and
(vii) Borrower shall furnish such security as may be required in the proceeding,
or as may be reasonably requested by Lender, to insure compliance with such
Legal Requirement, together with all interest and penalties payable in
connection therewith. Lender may apply any such security, as necessary to cause
compliance with such Legal Requirement at any time when, in the reasonable
judgment of Lender, the validity, applicability or violation of such Legal
Requirement is finally established or the Property (or any part thereof or
interest therein) shall be in imminent danger of being sold, forfeited,
terminated, cancelled or lost.

5.1.2. Taxes and Other Charges. Borrower shall pay or cause to be paid all Taxes
and Other Charges now or hereafter levied or assessed or imposed against the
Property or any part thereof prior to the date the same become delinquent;
provided, however, Borrower’s obligation to directly pay Taxes and Other Charges
shall be suspended for so long as Borrower complies with the terms and
provisions of Section 7.2 hereof or contests such Taxes or Other Charges
pursuant to the Mortgage. Borrower will deliver to Lender receipts for payment
or other evidence satisfactory to Lender that the Taxes and Other Charges have
been so paid or are not then delinquent within ten (10) Business Days after
Lender’s request. Borrower shall furnish to Lender receipts for the payment of
the Taxes and the Other Charges prior to the date the same shall become
delinquent (provided, however, Borrower is not required to furnish such receipts
for payment of Taxes in the event that such Taxes have been paid by Lender
pursuant to Section 7.2 hereof or Borrower is contesting same in accordance with
the terms hereof). Borrower shall not suffer and shall promptly cause to be paid
and discharged any Lien (other than Permitted Encumbrance) or charge whatsoever
which may be or become a Lien or charge against the Property (other than
Permitted Encumbrance), and shall promptly pay or cause to be paid for all
utility services provided to the Property. After prior written notice to Lender,
Borrower, or Operating Lessee, at its own expense, may contest by appropriate
legal proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
Taxes or Other Charges, provided that (i) no Default or Event of Default has
occurred and remains uncured; (ii) Borrower or Operating Lessee is permitted to
do so under the provisions of any mortgage or deed of trust superior in lien to
the

 

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Mortgage; (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower or
Operating Lessee is subject and shall not constitute a default thereunder and
such proceeding shall be conducted in accordance with all applicable statutes,
laws and ordinances; (iv) neither the Property nor any part thereof or interest
therein will be in imminent danger of being sold, forfeited, terminated,
cancelled or lost; (v) Borrower shall promptly upon final determination thereof
pay or cause the payment of the amount of any such Taxes or Other Charges,
together with all costs, interest and penalties which may be payable in
connection therewith; (vi) such proceeding shall suspend the collection of such
contested Taxes or Other Charges from the Property; and (vii) Borrower shall
furnish or cause to be furnished such security as may be required in the
proceeding, or as may be reasonably requested by Lender, to insure the payment
of any such Taxes or Other Charges, together with all interest and penalties
thereon. Lender may pay over any such cash deposit or part thereof held by
Lender to the claimant entitled thereto at any time when, in the judgment of
Lender, the entitlement of such claimant is established or the Property (or part
thereof or interest therein) shall be in danger of being sold, forfeited,
terminated, cancelled or lost or there shall be any danger of the Lien of the
Mortgage being primed by any related Lien.

5.1.3. Litigation. Upon acquiring knowledge thereof, Borrower shall give prompt
written notice to Lender of any litigation or governmental proceedings pending
or threatened in writing against the Property, Borrower, Operating Lessee and/or
Guarantor which could reasonably be expected to materially adversely affect
Borrower’s, Operating Lessee’s or Guarantor’s condition (financial or otherwise)
or business or the Property.

5.1.4. Access to the Property. Borrower shall permit, and cause Operating Lessee
to permit, agents, representatives and employees of Lender to inspect the
Property or any part thereof at reasonable hours upon reasonable advance notice.

5.1.5. Notice of Default. Borrower shall promptly advise Lender of any material
adverse change in Borrower’s condition, financial or otherwise, or of the
occurrence of any Default or Event of Default of which Borrower has knowledge.

5.1.6. Cooperate in Legal Proceedings. Borrower shall cooperate fully with
Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way adversely affect the rights of
Lender hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.

5.1.7. Perform Loan Documents. Borrower shall observe, perform and satisfy all
the terms, provisions, covenants and conditions of, and shall pay when due all
costs, fees and expenses to the extent required under the Loan Documents
executed and delivered by, or applicable to, Borrower.

5.1.8. Award and Insurance Benefits. Borrower shall cooperate with Lender in
obtaining for Lender the benefits of any Awards or Insurance Proceeds (subject
to the provisions of Section 6.4 hereof) lawfully or equitably payable in
connection with the Property, and Lender shall be reimbursed for any reasonable
expenses incurred in connection therewith (including attorneys’ fees and
disbursements, and the payment by Borrower of the expense of an appraisal on
behalf of Lender in case of Casualty or Condemnation affecting the Property or
any part thereof) out of such Insurance Proceeds.

 

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5.1.9. Further Assurances. Borrower shall, at Borrower’s sole cost and expense:

(a) furnish to Lender all instruments, documents, boundary surveys, footing or
foundation surveys, certificates, plans and specifications, appraisals, title
and other insurance reports and agreements, and each and every other document,
certificate, agreement and instrument required to be furnished by Borrower
pursuant to the terms of the Loan Documents;

(b) execute and deliver to Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary or desirable,
to evidence, preserve and/or protect the collateral at any time securing or
intended to secure the obligations of Borrower under the Loan Documents, as
Lender may reasonably require; and

(c) do and execute all and such further lawful and reasonable acts, conveyances
and assurances for the better and more effective carrying out of the intents and
purposes of this Agreement and the other Loan Documents, as Lender shall
reasonably require from time to time.

5.1.10. Principal Place of Business, State of Organization. Except as otherwise
set forth in Section 5.2.10, Borrower will not cause or permit any change to be
made in its name, identity (including its trade name or names), place of
organization or formation (as set forth in Section 4.1.36 hereof) or Borrower’s
limited liability company or limited partnership structure, as applicable,
unless Borrower shall have first notified Lender in writing of such change at
least thirty (30) days prior to the effective date of such change, and shall
have first taken all action required by Lender for the purpose of perfecting or
protecting the lien and security interests of Lender pursuant to this Agreement,
the Cash Management Agreement and the other Loan Documents and, in the case of a
change in Borrower’s structure, without first obtaining the prior consent of
Lender. Upon Lender’s request, Borrower shall execute and deliver additional
financing statements, security agreements and other instruments which may be
necessary to effectively evidence or perfect Lender’s security interest in the
Property as a result of such change of principal place of business or place of
organization. Borrower’s principal place of business and chief executive office
has been for the preceding four months (or, if less, the entire period of the
existence of Borrower) and will continue to be the address of Borrower set forth
at the introductory paragraph of this Agreement (unless Borrower notifies Lender
in writing at least thirty (30) days prior to the date of such change).
Borrower’s organizational identification number, if any, assigned by the state
of formation is 4206283. Borrower shall promptly notify Lender of any change in
its organizational identification number. If Borrower does not now have an
organizational identification number and later obtains one, Borrower promptly
shall notify Lender of such organizational identification number. At the request
of Lender, Borrower shall execute a certificate in form satisfactory to Lender
listing the trade names under which Borrower intends to operate the Property,
and representing and warranting that Borrower does business under no other trade
name with respect to the Property.

 

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5.1.11. Financial Reporting.

(a) Borrower will keep and maintain or will cause to be kept and maintained on a
Fiscal Year basis, in accordance with the Uniform System of Accounts and
reconciled in accordance with GAAP (or such other accounting basis acceptable to
Lender it being agreed that the accounting basis employed by Borrower as of the
date hereof is acceptable to Lender), proper and accurate books, records and
accounts reflecting all of the financial affairs of Borrower and all items of
income and expense in connection with the operation of the Property. Lender
shall have the right from time to time at all times during normal business hours
upon reasonable notice to examine such books, records and accounts at the office
of Borrower or any other Person maintaining such books, records and accounts and
to make such copies or extracts thereof as Lender shall desire. Upon the
occurrence and during the continuance of an Event of Default, Borrower shall pay
any costs and expenses incurred by Lender to examine Borrower’s accounting
records with respect to the Property, as Lender shall determine to be necessary
or appropriate in the protection of Lender’s interest.

(b) Borrower will furnish, or cause to be furnished, to Lender annually, within
ninety (90) days following the end of each Fiscal Year of Borrower, a complete
copy of Borrower’s and Operating Lessee’s financial statements prepared in
accordance with the Uniform System of Accounts and reconciled in accordance with
GAAP (or such other accounting basis acceptable to Lender) covering the Property
for such Fiscal Year and containing statements of profit and loss for Borrower,
Operating Lessee and the Property and a balance sheet for Borrower and Operating
Lessee. Such statements shall set forth the financial condition and the results
of operations for the Property for such Fiscal Year, and shall include, but not
be limited to, amounts representing annual Net Operating Income, Gross Income
from Operations and Operating Expenses. Together with such financial statements,
Borrower shall deliver Guarantor’s audited financial statements prepared by a
“Big Four” accounting firm or other independent certified public accountant
reasonably acceptable to Lender in accordance with the Uniform System of
Accounts and reconciled in accordance with GAAP (or such other accounting basis
acceptable to Lender). Financial statements delivered to Lender in accordance
with this Section shall be accompanied by (i) a comparison of the budgeted
income and expenses and the actual income and expenses for the prior Fiscal
Year, (ii) an Officer’s Certificate stating that, to such officer’s knowledge,
each such annual financial statement presents fairly, in all material respects,
the financial condition and the results of operations of Borrower, Operating
Lessee and the Property being reported upon and has been prepared in accordance
with the Uniform System of Accounts and reconciled in accordance with GAAP, and
(iii) occupancy statistics for the Property in form reasonably acceptable to
Lender. Together with Borrower’s annual financial statements, Borrower shall
furnish to Lender an Officer’s Certificate certifying as of the date thereof
whether there exists an event or circumstance which constitutes a Default or
Event of Default under the Loan Documents executed and delivered by, or
applicable to, Borrower and if such Default or Event of Default exists, the
nature thereof, the period of time it has existed and the action then being
taken to remedy the same.

(c) Borrower will furnish, or cause to be furnished, to Lender on or before
thirty (30) days after the end of each calendar quarter the following items,
accompanied by an Officer’s Certificate stating that such items are accurate and
complete and fairly present, in each case in all material respects, to such
officer’s knowledge after due inquiry and investigation, the

 

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financial condition and results of the operations of Borrower, Operating Lessee
and the Property (subject to normal year-end adjustments) as applicable: (i) a
occupancy report for the subject quarter, including an average daily rate;
(ii) quarterly and year-to-date operating statements (including Capital
Expenditures) prepared for each calendar quarter, noting Net Operating Income,
Gross Income from Operations, and Operating Expenses (not including any
contributions to the Replacement Reserve Fund), and other information necessary
and sufficient to fairly represent, in all material respects, to such officer’s
knowledge, the financial position and results of operation of the Property
during such calendar quarter, and containing a comparison of budgeted income and
expenses and the actual income and expenses together with a detailed explanation
of any variances of fifteen percent (15%) or more between budgeted and actual
amounts for such periods, all in form reasonably satisfactory to Lender; (iii) a
schedule of Net Operating Income; and (iv) the amount of all rent due pursuant
to the Operating Lease for the subject period. In addition, such Officer’s
Certificate shall also state the representations and warranties of Borrower set
forth in Section 4.1.30 and the covenants of Borrower set forth in
Section 5.1.23 hereof are true and correct as of the date of such certificate,
to the extent that such representations, warranties and covenants are true and
correct as of the date of such certificate (or, if not true, the extent same are
not true), and that there are no trade payables outstanding for more than sixty
(60) days that are not being contested in accordance with this Agreement. All
calculations of the Operating Rent due under the Operating Lease shall be
subject to verification by Lender. In addition, Borrower will furnish, or cause
to be furnished, to Lender on or before twenty (20) days after the end of each
calendar month, any monthly reports delivered to Borrower or Operating Lessee by
Manager pursuant to the Management Agreement.

(d) Borrower shall submit to Lender an Annual Budget not later than ten
(10) days prior to the commencement of each Fiscal Year. The Annual Budget shall
be subject to Lender’s written approval not to be unreasonably withheld (each
such Annual Budget, an “Approved Annual Budget”). In the event that Lender
reasonably objects to a proposed Annual Budget submitted by Borrower, Lender
shall advise Borrower of such objections within fifteen (15) days after receipt
thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise such Annual Budget and resubmit
the same to Lender. Lender shall advise Borrower of any objections to such
revised Annual Budget within ten (10) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
shall promptly revise the same in accordance with the process described in this
subsection until Lender approves the Annual Budget. Until such time that Lender
approves a proposed Annual Budget, the most recently Approved Annual Budget
shall apply.

(e) Any reports, statements or other information required to be delivered under
this Agreement shall be delivered (i) in paper form, and (ii) if requested by
Lender and within the capabilities of Borrower’s data systems without change or
modification thereto, in electronic form and prepared using a Microsoft Word for
Windows or WordPerfect for Windows files (which files may be prepared using a
spreadsheet program and saved as word processing files). Borrower agrees that
Lender may disclose information regarding the Property and Borrower that is
provided to Lender pursuant to this Section 5.1.11(e) in connection with the
Securitization to such parties requesting such information in connection with
such Securitization.

 

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5.1.12. Business and Operations. Borrower shall, and shall cause Operating
Lessee to, continue to engage in the businesses presently conducted by Borrower
and Operating Lessee as and to the extent the same are necessary for the
ownership, maintenance, management and operation of the Property. Borrower
shall, and shall cause Operating Lessee to, qualify to do business and will
remain in good standing under the laws of each jurisdiction as and to the extent
the same are required for the ownership, maintenance, management and operation
of the Property.

5.1.13. Title to the Property. Borrower will warrant and defend (a) the title to
the Property and every part thereof, subject only to Liens permitted hereunder
(including Liens described in Section 5.2.2 and Permitted Encumbrances) and
(b) the validity and priority of the Lien of the Mortgage and the Assignment of
Leases on the Property, subject only to Liens permitted hereunder (including
Liens described in Section 5.2.2 and Permitted Encumbrances), in each case
against the claims of all Persons whomsoever. Borrower shall reimburse Lender
for any losses, costs, damages or expenses (including reasonable attorneys’ fees
and court costs) incurred by Lender if an interest in the Property, other than
as permitted hereunder, is claimed by another Person.

5.1.14. Costs of Enforcement. In the event (a) that the Mortgage encumbering the
Property is foreclosed in whole or in part or that the Mortgage is put into the
hands of an attorney for collection, suit, action or foreclosure, (b) of the
foreclosure of any mortgage prior to or subsequent to the Mortgage encumbering
the Property in which proceeding Lender is made a party, or (c) of the
bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of
Borrower, Operating Lessee or any of its constituent Persons or an assignment by
Borrower or any of its constituent Persons for the benefit of its creditors,
Borrower, its successors or assigns, shall be chargeable with and agrees to pay
all costs of collection and defense, including attorneys’ fees and costs,
incurred by Lender or Borrower in connection therewith and in connection with
any appellate proceeding or post judgment action involved therein, together with
all required service or use taxes.

5.1.15. Estoppel Statement.

(a) After request by Lender, Borrower shall within ten (10) days furnish Lender
with a statement, duly acknowledged and certified, setting forth (i) the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the Interest Rate of the Note, (iv) the date installments of
interest and/or principal were last paid, (v) any offsets or defenses to the
payment of the Debt, if any, and (vi) that the Note, this Agreement, the
Mortgage and the other Loan Documents are valid, legal and binding obligations
and have not been modified or if modified, giving particulars of such
modification.

(b) After request by Borrower, Lender shall within ten (10) days furnish
Borrower with a statement, duly acknowledged and certified, setting forth
(i) the original principal amount of the Note, (ii) the unpaid principal amount
of the Note, (iii) the Interest Rate of the Note, (iv) the date installments of
interest and/or principal were last paid, (v) any offsets or defenses to the
payment of the Debt, if any, and (vi) that the Note, this Agreement, the
Mortgage and the other Loan Documents are valid, legal and binding obligations
and have not been modified or if modified, giving particulars of such
modification.

 

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(c) Borrower shall use its commercially reasonable efforts to deliver to Lender
upon request, tenant estoppel certificates from each commercial tenant leasing
space at the Property in excess of 5,000 square feet in form and substance
reasonably satisfactory to Lender (it being agreed that the form or content
required by the applicable Lease shall be deemed to be satisfactory to Lender)
provided that Borrower shall not be required to deliver such certificates more
frequently than two (2) times in any calendar year.

5.1.16. Loan Proceeds. Borrower shall use the proceeds of the Loan received by
it on the Closing Date only for the purposes set forth in Section 2.1.4 hereof.

5.1.17. Performance by Borrower. Borrower shall in a timely manner observe,
perform and fulfill each and every covenant, term and provision of each Loan
Document executed and delivered by, or applicable to, Borrower, and shall not
enter into or otherwise suffer or permit any amendment, waiver, supplement,
termination or other modification of any Loan Document executed and delivered
by, or applicable to, Borrower without the prior written consent of Lender.

5.1.18. Confirmation of Representations. Borrower shall deliver, in connection
with any Securitization, certificates of the relevant Governmental Authorities
in all relevant jurisdictions indicating the good standing and qualification of
Borrower, Operating Lessee and Guarantor as of the date of the Securitization.

5.1.19. No Joint Assessment. Borrower shall not suffer, permit or initiate the
joint assessment of the Property (a) with any other real property constituting a
tax lot separate from the Property, and (b) which constitutes real property with
any portion of the Property which may be deemed to constitute personal property,
or any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to such real
property portion of the Property.

5.1.20. Leasing Matters. (a) Any Leases with respect to the Property written
after the date hereof, for more than 5,000 square feet shall be approved by
Lender, which approval shall not be unreasonably withheld, including approval
for the approximately 8,000 square feet of space intended to be leased to be
used as a restaurant (the “Restaurant Lease”). Upon request, Borrower shall
furnish Lender with executed copies of all Leases. All renewals of Leases and
all proposed Leases shall provide for rental rates comparable to existing local
market rates. All proposed Leases shall be on commercially reasonable terms and
shall not contain any terms which would materially and adversely affect Lender’s
rights under the Loan Documents. All Leases executed after the date hereof shall
provide that they are subordinate to the Mortgage encumbering the Property and
that the lessee agrees to attorn to Lender or any purchaser at a sale by
foreclosure or power of sale. Borrower shall (i) observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (ii) enforce the terms, covenants and conditions contained in
the Leases upon the part of the lessee thereunder to be observed or performed in
a commercially reasonable manner and in a manner which is reasonably likely not
to impair the value of the Property; (iii) not amend or modify any of the
material provisions of any Lease in a manner reasonably likely to have a
Material Adverse Effect; (iv) not terminate or accept the surrender of any Lease
except that a termination by Borrower or Operating Lessee or acceptance of
surrender by a tenant of any Leases shall be

 

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permitted by reason of a tenant default and then only in a commercially
reasonable manner to preserve and protect the Property; provided, however, that
no such termination or acceptance of surrender of any Lease covering more than
5,000 square feet will be permitted without the written consent of Lender;
(v) not collect any of the rents more than one (1) month in advance (other than
security deposits); (vi) not execute any other assignment of lessor’s interest
in the Leases or the Rents (except as contemplated by the Loan Documents);
(vii) execute and deliver at the request of Lender all such further assurances,
confirmations and assignments in connection with the Leases as Lender shall from
time to time reasonably require; and (viii) and cause Operating Lessee to comply
with clauses (i) through (vii) hereof. Notwithstanding anything to the contrary
contained herein, neither Borrower nor Operating Lessee shall enter into a lease
of all or substantially all of the Property without Lender’s prior written
consent.

(b) With regard to any action described in this Section 5.1.20 for which
Lender’s consent is required, Lender shall not withhold its consent or
disapproval to any such action for more than twenty (20) Business Days after
request for approval thereof has been made by Borrower, accompanied by a
detailed description of the request for which approval is sought, provided that
Borrower submits such request for Lender’s approval in an envelope labeled
“Priority” and delivered to Lender by overnight delivery and otherwise in
accordance with the provisions of Section 10.6 and which request shall state at
the top of the first page in bold lettering in 14 pt. font “LENDER’S RESPONSE IS
REQUIRED WITHIN TWENTY (20) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO
THE TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER.” In the event
that Lender fails to either approve such request or disapprove such request
(such disapproval stating the reasons for such disapproval) for more than twenty
(20) Business Days after receipt thereof, Borrower shall deliver to Lender a
second request, which second request shall contain the material transmitted with
the first request, in an envelope labeled “Priority” and delivered to Lender by
overnight delivery and otherwise in accordance with the provisions of
Section 10.6 and which request shall state at the top of the first page in bold
lettering in 14 pt. font “SECOND REQUEST: LENDER’S RESPONSE IS REQUIRED WITHIN
TEN (10) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN
AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER.” In the event that Lender fails to
either approve such second request or disapprove such second request (such
disapproval stating the reasons for such disapproval) for more than ten
(10) Business Days after receipt thereof, the action that was the subject of
said request shall be deemed approved.

5.1.21. Alterations. Borrower shall obtain Lender’s prior written consent to any
Alterations to any Improvements costing in excess of the Alteration Threshold
Amount with respect to the Property, which consent shall not be unreasonably
withheld except with respect to Alterations that could reasonably be expected to
have a Material Adverse Effect. Notwithstanding the foregoing, Lender’s consent
shall not be required in connection with any Alterations that will not have a
Material Adverse Effect, provided that such Alterations are made in connection
with (a) tenant improvement work performed pursuant to the terms of any Lease
executed on or before the date hereof, (b) tenant improvement work performed
pursuant to the terms and provisions of a Lease and not adversely affecting any
structural component of any Improvements, any utility or HVAC system contained
in any Improvements or the exterior of any building constituting a part of any
Improvements, (c) Alterations performed in connection with the Restoration of
the Property after the occurrence of a Casualty or Condemnation in

 

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accordance with the terms and provisions of this Agreement, or (d) the
requirements of the Franchise Agreement. If the total unpaid amounts due and
payable with respect to Alterations to the Improvements other than the Planned
Improvements (other than such amounts to be paid or reimbursed by tenants under
the Leases or from existing Reserves) shall at any time exceed the Alteration
Threshold Amount, Borrower shall promptly deliver to Lender as security for the
payment of such amounts and as additional security for Borrower’s obligations
under the Loan Documents any of the following: (A) cash, (B) U.S. Obligations,
(C) other securities having a rating acceptable to Lender and, after
Securitization, that the applicable Rating Agencies have confirmed in writing
will not, in and of itself, result in a downgrade, withdrawal or qualification
of the initial, or, if higher, then current ratings assigned to any Securities
or any class thereof in connection with any Securitization or (D) a completion
and performance bond or an irrevocable letter of credit (payable on sight draft
only) issued by a financial institution having a rating by S&P of not less than
“A-1+” and by Moody’s if not less than “P-1” if the term of such bond or letter
of credit is no longer than three (3) months or, if such term is in excess of
three (3) months, issued by a financial institution having a rating that is
acceptable to Lender and, after Securitization, that the applicable Rating
Agencies have confirmed in writing will not, in and of itself, result in a
downgrade, withdrawal or qualification of the initial, or, if higher, then
current ratings assigned to any Securities or class thereof in connection with
any Securitization. Such security shall be in an amount equal to the excess of
the total unpaid amounts with respect to Alterations to the Improvements on the
Property (other than such amounts to be paid or reimbursed by tenants under the
Leases) over the Alteration Threshold Amount shall be applied from time to time
at the request of Borrower to pay (or reimburse Borrower) for such Alterations
as the related work is performed (subject to Lender’s reasonable oversight and
approval prior to any such application).

5.1.22. Operation of Property.

(a) Borrower shall cause the Property to be operated, in all material respects,
in accordance with Management Agreement (or Replacement Management Agreement).
Except as otherwise expressly provided in Section 2.5 hereof, in the event that
any Management Agreement expires or is terminated (without limiting any
obligation of Borrower to obtain Lender’s consent to any termination or
modification of the Management Agreement in accordance with the terms and
provisions of this Agreement), Borrower shall , or shall cause Operating Lessee
to enter into a Replacement Management Agreement with Manager or another
Qualified Manager, as applicable, prior to the date that such failure would
become an Event of Default.

(b) Except as otherwise expressly provided in Section 2.5 hereof, Borrower
shall, or shall cause Operating Lessee to: (i) promptly perform and/or observe,
in all material respects, all of the covenants and agreements required to be
performed and observed under the Management Agreement and do all things
necessary to preserve and to keep unimpaired its material rights thereunder;
(ii) promptly notify Lender of any material default under the Management
Agreement of which it is aware; (iii) promptly deliver to Lender a copy of each
financial statement, business plan, capital expenditures plan, notice, report
and estimate received by Borrower or Operating Lessee under the Management
Agreement; and (iv) enforce the performance and observance of all of the
covenants and agreements required to be performed and/or observed by Manager
under the Management Agreement, in a commercially reasonable manner.

 

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5.1.23. Special Purpose Entity/Separateness. Borrower will, at all times (a) be
a Special Purpose Entity, and (b) comply with all of the material assumptions
contained in the Insolvency Opinion. Borrower shall cause Operating Lessee to
comply with the separateness provisions of the Certificate of Incorporation of
Operating Lessee. Borrower will cause each other Person covered by the
Insolvency Opinion to comply with all of the material assumptions contained in
the Insolvency Opinion.

5.1.24. Franchise Agreement. Borrower shall, and shall cause Operating Lessee to
comply in all respects with the terms and conditions of the Franchise Agreement.

5.1.25. Operating Leases. Except as otherwise expressly provided in Section 2.5
hereof; Borrower shall (a) cause the hotel located on the Property to be
operated pursuant to the Operating Lease; (b) promptly perform and/or observe
all of the covenants, agreements and obligations required to be performed and
observed by Borrower under the Operating Lease and do all things necessary to
preserve and to keep unimpaired its material rights thereunder; (c) promptly
notify Lender of any default under the Operating Lease; (d) promptly deliver to
Lender a copy of each financial statement, business plan, capital expenditures
plan, notice, report and estimate received by Borrower under the Operating
Lease; (e) promptly enforce the performance and observance of all of the
covenants and agreements required to be performed and/or observed by the
Operating Lessee under the Operating Lease; (f) cause Operating Lessee to
deposit all Rents into the Lockbox Account; and (g) maintain or cause Operating
Lessee to maintain all Licenses necessary for the operation of the Property as a
hotel with related retail uses.

Section 5.2. Negative Covenants. From the date hereof until payment and
performance in full of all obligations of Borrower under the Loan Documents or
the earlier release of the Lien of the Mortgage encumbering the Property and any
other collateral in accordance with the terms of this Agreement and the other
Loan Documents, Borrower covenants and agrees with Lender that it will not do,
directly or indirectly, any of the following:

5.2.1. Operation of Property. Except as otherwise expressly provided in
Section 2.5 hereof, Borrower shall not, and shall not permit or allow Operating
Lessee to, without Lender’s prior written consent: (i) surrender, terminate or
cancel, the Management Agreement; provided, that without Lender’s consent,
Borrower may replace or cause Operating Lessee to replace, the Manager so long
as the replacement manager is a Qualified Manager pursuant to a Replacement
Management Agreement; or (ii) amend or modify, or allow Operating Lessee to
amend or modify, the Management Agreement in any material respect; or
(iii) amend or modify the Franchise Agreement in any material respect.

5.2.2. Liens. Borrower shall not create, incur, assume or suffer to exist any
Lien on any portion of the Property or permit any such action to be taken,
except:

(i) Permitted Encumbrances;

(ii) Liens created by or permitted pursuant to the Loan Documents;

 

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(iii) Room License Agreements hereafter entered into in the ordinary course of
operating the Property; and

(iv) Liens for Taxes or Other Charges not yet due.

5.2.3. Dissolution. Borrower shall not (a) engage in any dissolution,
liquidation or consolidation or merger with or into any other business entity,
(b) engage in any business activity not within its authorized purposes as set
forth in its organizational documents, (c) transfer, lease or sell, in one
transaction or any combination of transactions, the assets or all or
substantially all of the properties or assets of Borrower except to the extent
permitted by the Loan Documents, (d) modify, amend, waive or terminate its
organizational documents or its qualification and good standing in any
jurisdiction or (e) cause Operating Lessee to (i) dissolve, wind up or liquidate
or take any action, or omit to take an action, as a result of which the
Operating Lessee would be dissolved, wound up or liquidated in whole or in part,
or (ii) amend, modify or waive any of the material provisions of the
organizational documents of Operating Lessee or terminate the organizational
documents of the Operating Lessee, in each case, without obtaining the prior
written consent of Lender or Lender’s designee but no amendment to the
organizational documents of the Operating Lessee shall amend or modify any of
the special purpose, bankruptcy-remoteness provisions thereof.

5.2.4. Change in Business. Borrower shall not permit, allow or otherwise cause
Operating Lessee to enter into any line of business or make any material change
in the scope or nature of its business objectives, purposes or operations, or
undertake or participate in activities other than, in each case, activities
within the scope of its authorized purposes as set forth in its organizational
documents in effect as of the date hereof, as the same may be amended, restated
or modified from time to time in accordance with the provisions of this
Agreement and the other Loan Documents.

5.2.5. Debt Cancellation. Borrower shall not cancel or otherwise forgive or
release any claim or debt (other than termination of Leases in accordance
herewith) owed to Borrower by any Person, except for adequate consideration and
in the ordinary course of Borrower’s business.

5.2.6. Zoning. Borrower shall not initiate or consent to any zoning
reclassification of any portion of the Property or seek any variance under any
existing zoning ordinance or use or permit the use of any portion of the
Property in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender.

5.2.7. Debt. Borrower shall not create, incur or assume any Indebtedness other
than the Debt except to the extent expressly permitted hereby.

5.2.8. No Joint Assessment. Borrower shall not suffer, permit or initiate the
joint assessment of the Property with (a) any other real property constituting a
tax lot separate from the Property, or (b) any portion of the Property which may
be deemed to constitute personal property, or any other procedure whereby the
Lien of any taxes which may be levied against such personal property shall be
assessed or levied or charged to the Property

 

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5.2.9. ERISA.

(a) (a) Borrower shall not, and Borrower shall not permit Operating Lessee to
engage in any transaction which would cause any obligation, or action taken or
to be taken, hereunder (or the exercise by Lender of any of its rights under the
Note, this Agreement or the other Loan Documents) to (i) be a non-exempt (under
a statutory or administrative class exemption) prohibited transaction under
ERISA or (ii) violate any state statute regulating investment of, or fiduciary
obligations with respect to, “governmental plans” within the meaning of
Section 3(32) of ERISA.

(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as reasonably requested by Lender, that (A) neither Borrower nor Operating
Lessee is, and neither Borrower nor Operating Lessee maintains, an “employee
benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I
of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA;
(B) neither Borrower nor Operating Lessee is subject to any state statute
regulating investment of, or fiduciary obligations with respect to governmental
plans and (C) one or more of the following circumstances is true:

(i) Equity interests in Borrower are publicly offered securities, within the
meaning of 29 C.F.R. § 2510.3-101(b)(2);

(ii) Less than twenty-five percent (25%) of each outstanding class of equity
interests in Borrower is held by “benefit plan investors” within the meaning of
29 C.F.R. § 2510.3-101(0(2); or

(iii) Borrower qualifies as an “operating company” or a “real estate operating
company” within the meaning of 29 C.F.R. § 2510.3-101(c) or (e).

5.2.10. Transfers.

(a) Without the prior written consent of Lender, and except to the extent
otherwise set forth in this Section 5.2.10 and Section 2.5 hereof, Borrower
shall not, and shall not permit any Person owning a direct or indirect interest
in Borrower or Operating Lessee to do any of the following (collectively, a
“Transfer”): (i) sell, convey, mortgage, grant, bargain, encumber, pledge,
assign, grant options with respect to, or otherwise transfer or dispose of
(voluntarily or involuntarily, by operation of law or otherwise, and whether or
not for consideration or of record) the Property or any direct or indirect
interest therein, or (ii) permit a Sale or Pledge of a direct or indirect
interest in Borrower or Operating Lessee, other than (A) the Operating Lease,
(B) pursuant to Leases of space in the Improvements to tenants in accordance
with the provisions of Section 5.1.20, (C) the Room License Agreements, and
(D) Permitted Transfers.

(b) Notwithstanding the foregoing, a sale or conveyance by Borrower of the
Property subject to the lien of the Mortgage (but not any other mortgage, lien
or other encumbrance (other than the Permitted Encumbrances and Room License
Agreements hereafter entered into in the ordinary course of operating the
Property)) is permitted provided that the following conditions are satisfied:

(i) no Event of Default shall have occurred and be continuing and such sale or
conveyance shall not result in an Event of Default;

 

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(ii) the Person to whom the Property is sold or conveyed (the “Transferee”)
satisfies the requirements of a Special Purpose Entity and the organizational
documents of the Transferee are reasonably acceptable to Lender and, after a
Securitization, to the Rating Agencies;

(iii) if such sale or conveyance occurs prior to a Securitization, Lender shall
have consented to such sale or conveyance, which consent shall not be
unreasonably withheld;

(iv) Lender has received an Additional Insolvency Opinion which may be relied
upon by Lender, the Rating Agencies and their respective successors and assigns,
with respect to the Transferee and its applicable affiliates, which Additional
Insolvency Opinion shall be reasonably acceptable to Lender or, after a
Securitization, the Rating Agencies;

(v) the Transferee shall execute an assumption, effective as of the date of
transfer, of all of the obligations of the Borrower thereafter arising or to be
performed under this Agreement, the Mortgage and the other Loan Documents,
subject, however, to the provisions of Section 9.3 hereof and upon such
assumption, Borrower shall be released from all liabilities and obligations
under the Loan Documents;

(vi) following such sale or conveyance the property manager of the Property must
be a Qualified Manager; and

(vii) the Transferee pays to Lender a loan assumption fee of 1% of the then
outstanding principal amount of the Loan;

(viii) if, after giving effect to such Transfer, Sponsor does not own at least
51% of the equity interests in Borrower and control Borrower, the Rating
Agencies have confirmed that such sale or conveyance, in and of itself, will not
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to the Securities; and

(ix) Borrower pays Lender’s reasonable costs and expenses (including any fees
due to the Rating Agencies) in connection with the sale or conveyance.

(c) A Transfer (but not a pledge, hypothecation, creation of a security interest
in or other encumbrance) of any direct or indirect interests in Borrower is
permitted provided that the following conditions are satisfied:

(i) if such sale or conveyance occurs prior to a Securitization, Lender shall
have consented to such sale or conveyance, which consent shall not be
unreasonably withheld; provided however, Lender’s consent shall not be required
if, after giving effect to the Transfer, Sponsor owns not less than 51% of the
equity interests in Borrower and controls, directly or indirectly, Borrower;

 

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(ii) if as a result of any such Transfer or series of Transfers more than 49% of
the direct or indirect ownership interests in Borrower shall be transferred to a
Person individually or together with its Affiliates not owning at least 49% of
the direct or indirect ownership interests in Borrower immediately prior to such
Transfer (or as reflected in the most recent Additional Insolvency Opinion
delivered to Lender), Borrower shall deliver to Lender an Additional Insolvency
Opinion which may be relied upon by Lender, the Rating Agencies and their
respective counsel, successors and assigns, with respect to the proposed
transfer or sale, which Additional Insolvency Opinion shall be reasonably
acceptable to Lender and, after a Securitization, the Rating Agencies;

(iii) at the time of such Transfer no Event of Default has occurred and is
continuing;

(iv) following such Transfer the property manager of the Property must be a
Qualified Manager;

(v) if, after giving effect to such Transfer, Sponsor does not own at least 51%
of the equity interests in Borrower and control Borrower, the Rating Agencies
shall have confirmed that such Transfer, in and of itself, will not result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
the Securities

(vi) Borrower shall pay, or cause to be paid, to Lender its reasonable
out-of-pocket expenses (including any fees due to the Rating Agencies) in
connection with such sale or conveyance; and

(vii) in connection with any Transfer as a result of which Sponsor will not own
at least 51% of the equity interests in Borrower and control, directly or
indirectly, Borrower, Borrower shall give or cause to be given written notice to
Lender of the proposed Transfer not later than fifteen (15) days prior thereto,
which notice shall set forth the name of the Person to which the interest in
Borrower is to be transferred, identify the proposed transferee and set forth
the date the Transfer is expected to be effective and (A) Lender shall have
consented to such Transfer and (B) Borrower shall pay to Lender a loan
assumption fee of 1% of the then outstanding principal amount of the Loan.

5.2.11. Operating Lease. Except as otherwise expressly provided in Sections 2.5
and 5.1.26 hereof, without Lender’s prior written consent which consent shall
not be unreasonably withheld, Borrower shall not (a) surrender, terminate or
cancel the Operating Lease; (b) reduce or consent to the reduction of the term
of the Operating Lease; (c) increase or consent to the increase of the amount of
any charges under the Operating Lease; (d) modify, change, supplement, alter or
amend any of the material provisions of the Operating Lease or waive or release
any of Borrower’s material rights and remedies under the Operating Lease;
(e) grant its consent or approval as may be requested or required in connection
with the terms and provisions of the Operating Lease; (f) declare any default or
event of default under the Operating Lease or pursue any of Borrower’s rights or
remedies thereunder in connection therewith or (g) permit, suffer or consent to
an assignment of the Operating Lease by Operating Lessee.

 

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Notwithstanding the foregoing, Lender’s prior written consent shall not be
required in connection with commercially reasonable adjustments of rent payable
under the Operating Lease in connection with a renewal or extension of the
Operating Lease.

VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS

Section 6.1. Insurance. (a) Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and the Property providing at least the
following coverages:

(i) comprehensive all risk insurance (“Special Form”) including, but not limited
to, loss caused by any type of windstorm or hail on the Improvements and the
Personal Property, (A) in an amount equal to one hundred percent (100%) of the
“Full Replacement Cost”, which for purposes of this Agreement shall mean actual
replacement value (exclusive of costs of excavations, foundations, underground
utilities and footings) with a waiver of depreciation, but the amount shall in
no event be less than the outstanding principal balance of the Loan
(B) containing an agreed amount endorsement with respect to the Improvements and
Personal Property waiving all co-insurance provisions or to be written on a no
co-insurance form; (C) providing for no deductible in excess of Ten Thousand and
00/100 Dollars ($10,000.00) for all such insurance coverage and (D) if any of
the Improvements or the use of the Property shall at any time constitute legal
non-conforming structures or uses, coverage for loss due to operation of law in
an amount equal to the full Replacement Cost, coverage for demolition costs and
coverage for increased costs of construction. In addition, Borrower shall
obtain: (x) if any portion of the Improvements is currently or at any time in
the future located in a federally designated “special flood hazard area”, flood
hazard insurance in an amount equal to the lesser of (1) the outstanding
principal balance of the Loan or (2) the maximum amount of such insurance
available under the National Flood Insurance Act of 1968, the Flood Disaster
Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as
each may be amended or such greater amount as Lender shall require and
(y) earthquake insurance in amounts and in form and substance satisfactory to
Lender in the event the Property is located in an area with a high degree of
seismic activity;

(ii) business income insurance (A) with loss payable to Lender; (B) insuring
against all risks required to be covered by the insurance provided for in
subsection (i) above; (C) with a limit of insurance adequate to cover one
hundred percent (100%) of the projected gross revenues from the operation of the
Property (as reduced to reflect expenses not incurred during a period of
Restoration) for a period of at least eighteen (18) months after the date of the
Casualty; and (d) containing an extended period of indemnity endorsement which
provides that after the physical loss to the Improvements and the Personal
Property has been repaired, the continued loss of income will be insured until
such income returns to the same level it was prior to the loss, or the
expiration of 360 days from the date that the Property is repaired or replaced
and operations are resumed, whichever first occurs, and notwithstanding that the
policy may expire prior to the end of such period. The amount of such business
income insurance shall be determined prior to the date hereof and at least once
each year thereafter based on Borrower’s reasonable

 

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estimate of the gross revenues from the Property for the succeeding twelve
(12) month period. Notwithstanding the provisions of Section 2.6 hereof, all
proceeds payable to Lender pursuant to this subsection shall be held by Lender
and, provided no Event of Default is continuing, shall be applied to (I) the
monthly Debt Service Payment Amounts and the other obligations secured by the
Loan Documents from time to time as such payments and obligations become due and
payable hereunder and under the Note and (II) Operating Expenses approved by
Lender in Lender’s reasonable discretion; provided, however, that nothing herein
contained shall be deemed to relieve Borrower of its obligations to pay the
obligations secured by the Loan Documents on the respective dates of payment
provided for in the Note and the other Loan Documents except to the extent such
amounts are actually paid out of the proceeds of such business income insurance;

(iii) at all times during which structural construction, repairs or Alterations
are being made with respect to the Improvements, and only if the Property
coverage form does not otherwise apply, (A) owner’s contingent or protective
liability insurance, otherwise known as Owner Contractor’s Protective Liability,
covering claims not covered by or under the terms or provisions of the above
mentioned commercial general liability insurance policy and (B) the insurance
provided for in subsection (i) above written in a so-called builder’s risk
completed value form (1) on a non-reporting basis, (2) against all risks insured
against pursuant to subsection (i) above, (3) including permission to occupy the
Property and (4) with an agreed amount endorsement waiving co-insurance
provisions;

(iv) comprehensive boiler and machinery insurance, if steam boilers or other
pressure-fixed vessels are in operation, in amounts as shall be reasonably
required by Lender on terms consistent with the commercial property insurance
policy required under subsection (i) above;

(v) commercial general liability insurance against claims for personal injury,
bodily injury, death or property damage occurring upon, in or about the
Property, such insurance (A) to be on the so-called “occurrence” form with a
combined limit of not less than Two Million and 00/100 Dollars ($2,000,000.00)
in the aggregate and One Million and 00/100 Dollars ($1,000,000.00) per
occurrence; (B) to continue at not less than the aforesaid limit until required
to be changed by Lender in writing by reason of changed economic conditions
making such protection inadequate and (C) to cover at least the following
hazards: (1) premises and operations; (2) products and completed operations on
an “if any” basis; (3) independent contractors; (4) blanket contractual
liability for all written contracts and (5) contractual liability covering the
indemnities contained in Article 9 of the Mortgage to the extent the same is
available;

(vi) automobile liability coverage for all owned and non-owned vehicles,
including rented and leased vehicles containing minimum limits per occurrence of
One Million Dollars and 00/100 Dollars ($1,000,000.00);

(vii) worker’s compensation and employee’s liability subject to the worker’s
compensation laws of the applicable state;

 

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(viii) umbrella and excess liability insurance in an amount not less than One
Hundred Million and 00/100 Dollars ($100,000,000.00) per occurrence on terms
consistent with the commercial general liability insurance policy required under
subsection (v) above, including, but not limited to, supplemental coverage for
employer liability and automobile liability, which umbrella liability coverage
shall apply in excess of the automobile liability coverage in clause (vi) above;

(ix) the insurance required under this Section 6.1(a) above shall insure
against, if commercially available, perils of terrorism and acts of terrorism
and Borrower shall maintain insurance for loss resulting from perils and acts of
terrorism on terms (including amounts) consistent with those required under
Sections 6.1(a) above at all times during the term of the Loan; and

(x) upon sixty (60) days written notice, such other reasonable insurance,
including, but not limited to, mold, sinkhole or land subsidence insurance, and
in such reasonable amounts as Lender from time to time may reasonably request
against such other insurable hazards which at the time are commonly insured
against for property similar to the Property located in or around the region in
which the Property is located.

(b) All insurance provided for in Section 6.1(a) hereof, shall be obtained under
valid and enforceable policies (collectively, the “Policies” or in the singular,
the “Policy”). The Policies shall be issued by a Qualified Insurer. The Policies
described in Section 6.1 hereof (other than those strictly limited to liability
protection) shall designate Lender as loss payee. Not less than ten (10) days
prior to the expiration dates of the Policies theretofore furnished to Lender,
certificates of insurance evidencing the Policies accompanied by evidence
satisfactory to Lender of payment of the premiums due thereunder (the “Insurance
Premiums”), shall be delivered by Borrower to Lender or, alternatively, Borrower
shall advise Lender of the status of such renewals within such ten (10) day
period, with certificates of insurance evidencing the Policies delivered prior
to expiration.

(c) Any blanket insurance Policy shall specifically allocate to the Property the
amount of coverage from time to time required hereunder and shall otherwise
provide the same protection as would a separate Policy insuring only the
Property in compliance with the provisions of Section 6.1(a) hereof.

(d) All Policies provided for or contemplated by Section 6.1(a) hereof, except
for the Policy referenced in Section 6.1(a)(vii) of this Agreement, shall name
Borrower and Operating Lessee (as their interest may appear) as the insured and
Lender as the additional insured, as its interests may appear, and in the case
of property damage, boiler and machinery, flood and earthquake insurance, shall
contain a so-called New York standard non-contributing mortgagee clause or its
equivalent in favor of Lender providing that the loss thereunder shall be
payable to Lender. Any insurance maintained by Operating Lessee pursuant to the
Operating Lease shall name Borrower and Lender as additional insureds, as their
interests may appear.

(e) All Policies pertaining to property related insurance (except where excepted
below) shall contain clauses or endorsements to the effect that:

(i) no act or negligence of Borrower, or anyone acting for Borrower, or of any
tenant or other occupant, or failure to comply with the provisions of any
Policy, which might otherwise result in a forfeiture of the insurance or any
part thereof, shall in any way affect the validity or enforceability of the
insurance insofar as Lender is concerned;

 

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(ii) the property and liability Policies shall not be materially changed (other
than to increase the coverage provided thereby) or canceled without at least
thirty (30) days written notice to Lender and any other party named therein as
an additional insured;

(iii) the issuers thereof shall give written notice to Lender if the Policy has
not been renewed thirty (30) days prior to its expiration; and

(iv) Lender shall not be liable for any Insurance Premiums thereon or subject to
any assessments thereunder when not in conflict with mortgagee or loss payable
endorsements.

(f) If at any time Lender is not in receipt of written evidence that all
insurance required hereunder is in full force and effect, Lender shall have the
right, without notice to Borrower, to take such action as Lender deems necessary
to protect its interest in the Property, including, without limitation, the
obtaining of such insurance coverage as Lender in its sole discretion deems
appropriate without notice to Borrower. All premiums incurred by Lender in
connection with such action or in obtaining such insurance and keeping it in
effect shall be paid by Borrower to Lender upon demand and, until paid, shall be
secured by the Mortgage and shall bear interest at the Default Rate.

(g) Any blanket insurance Policy shall specifically allocate to the Property the
amount of coverage from time to time required hereunder and shall otherwise
provide the same protection as would a separate Policy insuring only the
Property in compliance with the provisions of Section 6.1(a). If the insurance
described in Section 6.1(a)(î), (ii) and (iii) is written on a blanket basis, a
breakdown of the properties’ insurable value shall be provided to Lender upon
Lender’s request.

Section 6.2. Casualty. If the Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty (a “Casualty”), and such Casualty has
caused damage to the Property which, in Borrower’s reasonable estimation, is in
excess of $250,000, Borrower shall give prompt notice of such damage to Lender
and, to the extent that the Net Proceeds are made available to Borrower pursuant
to Section 6.4, shall promptly commence and diligently prosecute the completion
of the Restoration of the Property pursuant to Section 6.4 hereof as nearly as
possible to the condition the Property was in immediately prior to such
Casualty. Borrower shall pay all costs of such Restoration whether or not such
costs are covered by insurance. Lender may, but shall not be obligated to make
proof of loss if not made promptly by Borrower. In addition, Lender may
participate in any settlement discussions with any insurance companies (and
shall approve the final settlement, which approval shall not be unreasonably
withheld) with respect to any Casualty in which the Net Proceeds or the costs of
completing the Restoration are equal to or greater than the Restoration
Threshold Amount and Borrower shall deliver to Lender all instruments required
by Lender to permit such participation.

 

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Section 6.3. Condemnation. Borrower shall promptly give Lender notice of the
actual or threatened commencement of any proceeding for the Condemnation of the
Property and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such
proceedings, and Borrower shall from time to time deliver to Lender all
instruments requested by it to permit such participation. Borrower shall, at its
expense, diligently prosecute any such proceedings, and shall consult with
Lender, its attorneys and experts, and cooperate with them in the carrying on or
defense of any such proceedings. Notwithstanding any taking by any public or
quasi-public authority through Condemnation or otherwise (including, but not
limited to, any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the Debt
shall not be reduced until any Award shall have been actually received and
applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. Lender shall not be limited to the interest
paid on the Award by the condemning authority but shall be entitled to receive
out of the Award interest at the rate or rates provided herein or in the Note.
If the Property or any portion thereof is taken by a condemning authority, to
the extent that the Net Proceeds are made available to Borrower pursuant to
Section 6.4, Borrower shall promptly commence and diligently prosecute the
Restoration of the Property or any portion thereof pursuant to Section 6.4
hereof and otherwise comply with the provisions of Section 6.4 hereof. If the
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of the Award, Lender shall have the right, whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive the
Award, or a portion thereof sufficient to pay the Debt.

Section 6.4. Restoration. The following provisions shall apply in connection
with the Restoration of the Property:

(a) If the Net Proceeds shall be less than the Restoration Threshold Amount and
the costs of completing the Restoration shall be less than the Restoration
Threshold Amount, the Net Proceeds will be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in Section 6.4(b)(i)
hereof are met and Borrower delivers to Lender a written undertaking to
expeditiously commence and to satisfactorily complete with due diligence the
Restoration in accordance with the terms of this Agreement.

(b) If the Net Proceeds are equal to or greater than the Restoration Threshold
Amount or the costs of completing the Restoration is equal to or greater than
the Restoration Threshold Amount Lender shall make the Net Proceeds available
for the Restoration in accordance with the provisions of this Section 6.4. The
term “Net Proceeds” for purposes of this Section 6.4 shall mean: (i) the net
amount of all insurance proceeds received by Lender pursuant to
Section 6.1(a)(i), (iv), (ix) and (x) as a result of such damage or destruction,
after deduction of its reasonable costs and expenses (including, but not limited
to, reasonable counsel fees), if any, in collecting same (“Insurance Proceeds”),
or (ii) the net amount of the Award, after deduction of its reasonable costs and
expenses (including, but not limited to, reasonable counsel fees), if any, in
collecting same (“Condemnation Proceeds”), whichever the case may be.

 

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(i) The Net Proceeds shall be made available to Borrower for Restoration
provided that (i) the Management Agreement requires the application of Net
Proceeds to the Restoration or (ii) each of the following conditions are met:

(A) no Event of Default shall have occurred and be continuing;

(B) (1) in the event the Net Proceeds are Insurance Proceeds, less than
twenty-five percent (25%) of the total floor area of the Improvements on the
Property has been damaged, destroyed or rendered unusable as a result of such
Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less
than ten percent (10%) of the land constituting the Property is taken, and such
land is located along the perimeter or periphery of the Property, and no portion
of the Improvements is located on such land;

(C) Borrower shall commence the Restoration as soon as reasonably practicable
(but in no event later than one hundred eighty (180) days after such Casualty or
Condemnation, whichever the case may be, occurs) and shall diligently pursue the
same to satisfactory completion;

(D) Lender shall be satisfied that any operating deficits, including all
scheduled payments of interest under the Note, which will be incurred with
respect to the Property as a result of the occurrence of any such Casualty or
Condemnation, whichever the case may be, will be covered out of (1) the Net
Proceeds, (2) the insurance coverage referred to in Section 6.1(a)(ii) hereof,
if applicable, or (3) by other funds of Borrower;

(E) Lender shall be satisfied that the Restoration will be completed on or
before the earlier of (1) three months prior to the Maturity Date, (2) such time
as may be required under all applicable Legal Requirements in order to repair
and restore the Property to the condition it was in immediately prior to such
Casualty or to as nearly as possible the condition it was in immediately prior
to such Condemnation, as applicable, or (3) the expiration of the insurance
coverage referred to in Section 6.1(a)(ii) hereof (unless other funds have been
provided to by Borrower to pay any operating deficits);

(F) the Property and the use thereof after the Restoration will be in compliance
with and permitted under all applicable Legal Requirements;

(G) the Restoration shall be done and completed by Borrower in an expeditious
and diligent fashion and in compliance with all applicable Legal Requirements;

 

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(H) such Casualty or Condemnation, as applicable, does not result in the
permanent loss of access to the Property or the related Improvements;

(I) Borrower shall deliver, or cause to be delivered, to Lender a signed
detailed budget approved in writing by Borrower’s architect or engineer stating
the entire cost of completing the Restoration, which budget shall be reasonably
acceptable to Lender; and

(J) the Net Proceeds together with any cash or cash equivalent deposited by
Borrower with Lender are sufficient in Lender’s reasonable determination to
cover the cost of the Restoration.

(ii) The Net Proceeds shall be held by Lender in an Eligible Account at a
financial institution reasonably acceptable to Lender and, until disbursed in
accordance with the provisions of this Section 6.4(b), shall constitute
additional security for the Debt and Other Obligations under the Loan Documents.
The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower
from time to time during the course of the Restoration, upon receipt of evidence
satisfactory to Lender that (A) all materials installed and work and labor
performed (except to the extent that they are to be paid for out of the
requested disbursement) in connection with the Restoration have been or will be
contemporaneously therewith paid for in full, and (B) there exist no notices of
pendency, stop orders, mechanic’s or materialman’s liens or notices of intention
to file same, or any other liens or encumbrances of any nature whatsoever on the
Property (other than Permitted Encumbrances and Liens permitted pursuant to
Section 5.2.2) which have not either been fully bonded to the satisfaction of
Lender and discharged of record or in the alternative fully insured to the
satisfaction of Lender by the title company issuing the Title Insurance Policy.

(iii) All plans and specifications, if any, required in connection with the
Restoration shall be subject to prior review and approval in all respects by
Lender (such approval not be unreasonably withheld and by an independent
consulting engineer selected by Lender which approval shall not be unreasonably
withheld (the “Casualty Consultant”). Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or obtained in
connection with the Restoration. The identity of the contractors, subcontractors
and materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Lender and the Casualty Consultant which review and acceptance shall not be
unreasonably withheld. All costs and expenses incurred by Lender in connection
with making the Net Proceeds available for the Restoration including, without
limitation, reasonable counsel fees and disbursements and the Casualty
Consultant’s fees, shall be paid by Borrower.

(iv) In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term “Casualty Retainage”
shall mean an amount equal to

 

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ten percent (10%) of the costs actually incurred for work in place as part of
the Restoration, as certified by the Casualty Consultant, until the Restoration
has been completed. The Casualty Retainage shall in no event, and
notwithstanding anything to the contrary set forth above in this Section 6.4(b),
be less than the amount actually held back by Borrower from contractors,
subcontractors and materialmen engaged in the Restoration. The Casualty
Retainage shall not be released until the Casualty Consultant certifies to
Lender that the Restoration has been completed in accordance with the provisions
of this Section 6.4(b) and that all approvals necessary for the re-occupancy and
use of the Property have been obtained from all appropriate governmental and
quasi-governmental authorities, and Lender receives evidence satisfactory to
Lender that the costs of the Restoration have been paid in full or will be paid
in full out of the Casualty Retainage; provided, however, that Lender will
release the portion of the Casualty Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the Restoration as of the
date upon which the Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the contractor’s,
subcontractor’s or materialman’s contract, the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full of all
sums due to the contractor, subcontractor or materialman as may be reasonably
requested by Lender or by the title company issuing the Title Insurance Policy,
and Lender receives an endorsement to the Title Insurance Policy insuring the
continued priority of the lien of the Mortgage and evidence of payment of any
premium payable for such endorsement. If required by Lender, the release of any
such portion of the Casualty Retainage shall be approved by the surety company,
if any, which has issued a payment or performance bond with respect to the
contractor, subcontractor or materialman.

(v) Lender shall not be obligated to make disbursements of the Net Proceeds more
frequently than once every calendar month, but, subject to compliance with the
other provisions of this Section 6.4, Lender will make such disbursements at
least once per calendar month.

(vi) If at any time the Net Proceeds or the undisbursed balance thereof shall
not, in the reasonable opinion of Lender in consultation with the Casualty
Consultant, be sufficient to pay in full the balance of the costs which are
estimated by the Casualty Consultant to be incurred in connection with the
completion of the Restoration, Borrower shall deposit the deficiency (the “Net
Proceeds Deficiency”) with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall
be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
Section 6.4(b) shall constitute additional security for the Debt and Other
Obligations under the Loan Documents.

(vii) The excess, if any, of the Net Proceeds (and the remaining balance, if
any, of the Net Proceeds Deficiency) deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Section 6.4(b), and the receipt by Lender
of evidence satisfactory to

 

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Lender that all costs incurred in connection with the Restoration have been paid
in full, shall be released to Borrower provided no Event of Default shall have
occurred and shall be continuing under the Note, this Agreement or any of the
other Loan Documents.

(c) All Net Proceeds not required (i) to be made available for the Restoration
or (ii) to be returned to Borrower as excess Net Proceeds pursuant to
Section 6.4(b)(vii) hereof shall be applied toward the payment of the Debt in
accordance with Section 2.4.2.

(d) In the event of foreclosure of the Mortgage, or other transfer of title of
the Property in extinguishment in whole or in part of the Debt all right, title
and interest of Borrower in and to the Policies that are not blanket Policies
then in force concerning such the Property and all proceeds payable thereunder
shall thereupon vest in the purchaser at such foreclosure or Lender or other
transferee in the event of such other transfer of title.

VII. RESERVE FUNDS

Section 7.1. Required Repairs. Borrower shall complete, or cause to be
completed, the Required Repairs, if any, set forth on Schedule III, within the
time period set forth on Schedule III.

Section 7.2. Tax and Insurance Escrow Fund. Borrower shall deposit or cause to
be deposited with Lender on each Payment Date (a) one-twelfth (1/12) of the
Taxes that Lender estimates will be payable during the next ensuing twelve
(12) months in order to accumulate sufficient funds to pay all such Taxes at
least thirty (30) days prior to their respective due dates, and (b) one-twelfth
(1/12) of the Insurance Premiums that Lender reasonably estimates will be
payable for the renewal of the coverage afforded by the Policies upon the
expiration thereof in order to accumulate sufficient funds to pay all such
Insurance Premiums at least thirty (30) days prior to the expiration of the
Policies (said amounts in (a) and (b) above hereinafter called the “Tax and
Insurance Escrow Fund”). Amounts on deposit in the Tax and Insurance Escrow Fund
shall be applied to payments of Taxes and Insurance Premiums required to be made
by Borrower pursuant to Section 5.1.2 hereof and under the Mortgage. In making
any payment relating to the Tax and Insurance Escrow Fund, Lender may do so
according to any bill, statement or estimate procured from the appropriate
public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof, unless Borrower is contesting the Taxes in
accordance with Section 5.1.2 hereof and Borrower has so notified Lender. Upon
written notice from Borrower to Lender, provided that the Tax and Insurance
Escrow Fund contains sufficient funds for such purpose, Lender shall use
reasonable efforts to pay any Taxes at such time as will provide the maximum
discount allowable by law to Borrower, but the failure of Lender to pay such
Taxes early enough to obtain any discount shall not result in any liability from
Lender to Borrower. If the amount of the Tax and Insurance Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to
Section 5.1.2 hereof (the “TI Excess”), Lender shall promptly return, or cause
to be returned, any excess to Borrower or, at Borrower’s direction, to Operating
Lessee. Any amount remaining in the Tax and Insurance Escrow Fund after the Debt
has been paid in full shall be returned to Borrower or, at Borrower’s direction,
to Operating Lessee. In allocating such excess, Lender may deal with the Person
shown on the records of Lender to be the Owner

 

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of the Property. If at any time Lender reasonably determines that the Tax and
Insurance Escrow Fund is not or will not be sufficient to pay Taxes and
Insurance Premiums by the dates set forth in (a) and (b) above, Lender shall
notify Borrower of such determination and Borrower shall increase its monthly
payments by the amount that Lender estimates is sufficient to make up the
deficiency at least thirty (30) days prior to the due date of the Taxes and/or
thirty (30) days prior to expiration of the Policies, as the case may be.
Notwithstanding the foregoing, Lender agrees that upon delivery to Lender by
Borrower of evidence satisfactory to Lender that the Policies of insurance
required to be maintained by Borrower pursuant to Section 6.1(a) are maintained
pursuant to blanket insurance Policies covering the Property and other
properties and which blanket insurance Policies otherwise comply with the
requirements of Section 6.1 and the Insurance Premiums payable in connection
therewith have been prepaid for not less than one year in advance (or, for the
period of coverage under the Policies as to which Certificates are delivered at
closing, such period, if less than one year), Lender will waive the requirement
that Borrower deposit Insurance Premiums into the Tax and Insurance Escrow Fund.
Upon request of Lender, Borrower shall provide evidence satisfactory to Lender
that the Insurance Premiums payable in connection with such blanket insurance
Policies are paid as soon as appropriate evidence is reasonably available.

Section 7.3. Replacements and Replacement Reserve.

7.3.1. Replacement Reserve Fund. Borrower shall deposit or cause to be deposited
into an account with Lender (the “Replacement Reserve Account”) each calendar
month, an amount equal to the greater of (i) the actual percentage of the Gross
Income from Operations for the most recently reported month required to be
expended (without duplication) under the Management Agreement or the Franchise
Agreement for Replacements, and (ii) four percent (4%) of Gross Income from
Operations from the Property for the most recently reported month (the greater
of such amounts for any month being referred to herein as the “Replacement
Reserve Monthly Deposit Amount”). Amounts deposited into the Replacement Reserve
Account shall hereinafter be referred to as Borrower’s “Replacement Reserve
Fund”.

7.3.2. Disbursements from Replacement Reserve Account. Provided that a Event of
Default shall have not occurred and be continuing, Borrower, or at Borrower’s
direction, Operating Lessee or Manager, shall be entitled to disbursements from
the Replacement Reserve Account to pay, or to reimburse Borrower, Manager or
Operating Lessee for, the costs of Replacements as such costs are incurred.

7.3.3. Performance of Replacements.

(a) Borrower shall make, or cause to be made, Replacements when required in
order to keep the Property in condition and repair consistent with other first
class, full service hotels in the same market segment in the metropolitan area
in which the Property is located, and to keep the Property or any portion
thereof from deteriorating beyond normal wear and tear. Borrower shall complete,
or cause to be completed, all Replacements in a good and workmanlike manner as
soon as practicable following the commencement of making each such Replacement.
Borrower shall provide to Lender, or cause Manager to provide to Lender during
the performance of any Replacements copies of receipts evidencing that such
Replacements have been made and paid for, together with a certification from
Borrower (or Manager on behalf of Borrower) that such Replacements evidenced by
such receipts have been made.

 

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(b) (i) Lender reserves the right, at its option, to approve all contracts or
work orders with materialmen, mechanics, suppliers, subcontractors, contractors
or other parties providing labor or materials in connection with a single
Replacement (or multiple Replacements which together constitute a single
project) to be funded from the Replacement Reserve Account, the total cost of
which is equal to or greater than $500,000.00 which approval shall not be
unreasonably withheld. In the event that any materials for which the request is
made have not been incorporated into the Property, such materials shall be on
site at the Property and be properly secured. Upon Lender’s request, Borrower
shall assign any contract or subcontract entered into by Borrower to Lender.

(ii) With regard to any action described in this Section 7.3.3(b) for which
Lender’s consent is required, Lender shall not withhold its consent or
disapproval to any such action for more than ten (10) Business Days after
request for approval thereof has been made by Borrower, accompanied by a
detailed description of the request for which approval is sought, provided that
Borrower submits such request for Lender’s approval in an envelope labeled
“Priority” and delivered to Lender by overnight delivery and otherwise in
accordance with the provisions of Section 10.6 and which request shall state at
the top of the first page in bold lettering in 14 pt. font “LENDER’S RESPONSE IS
REQUIRED WITHIN TEN (10) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE
TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER.” In the event that
Lender fails to either approve such request or disapprove such request (such
disapproval stating the reasons for such disapproval) for more than ten
(10) Business Days after receipt thereof, Borrower shall deliver to Lender a
second request, which second request shall contain the material transmitted with
the first request, in an envelope labeled “Priority” and delivered to Lender by
overnight delivery and otherwise in accordance with the provisions of
Section 10.6 and which request shall state at the top of the first page in bold
lettering in 14 pt. font “SECOND REQUEST: LENDER’S RESPONSE IS REQUIRED WITHIN
TEN (10) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN
AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER.” In the event that Lender fails to
either approve such second request or disapprove such second request (such
disapproval stating the reasons for such disapproval) for more than ten
(10) Business Days after receipt thereof, the action that was the subject of
said request shall be deemed approved.

(c) In the event that Lender determines in its reasonable discretion that any
Replacement is not being performed in a workmanlike or timely manner or that any
Replacement has not been completed in a workmanlike or timely manner, Lender
shall have the option to withhold disbursement for such unsatisfactory
Replacement and in the event that such Replacement is deemed by Lender to affect
the life, health or safety of Persons which may be present at the Property, to
proceed under existing contracts or to contract with third parties to complete
such Replacement and to apply the Replacement Reserve Fund toward the labor and
materials necessary to complete such Replacement, provided, that Lender shall
provide five (5) days prior to notice to Borrower before taking such action.

 

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(d) In order to facilitate Lender’s completion or making of such Replacements
pursuant to Section 7.3.3(c) above, Borrower grants Lender (and shall cause
Operating Lessee to grant to Lender) the right to enter onto the Property and
perform any and all work and labor necessary to complete or make such
Replacements and/or employ watchmen to protect the Property from damage. All
sums so expended by Lender, to the extent not from the Replacement Reserve Fund,
shall be deemed to have been advanced under the Loan to Borrower and secured by
the Mortgage. For this purpose Borrower constitutes and appoints Lender its true
and lawful attorney-in-fact with full power of substitution, but exercisable
only to the extent Lender is authorized to take action on behalf of Borrower
pursuant to clause (c) preceding, to complete or undertake such Replacements in
the name of Borrower. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Borrower empowers said
attorney-in-fact as follows: (i) to use any funds in the Replacement Reserve
Account for the purpose of making or completing such Replacements; (ii) to make
such additions, changes and corrections to such Replacements as shall be
necessary or desirable to complete such Replacements; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for such purposes; (iv) to pay, settle or compromise all existing bills
and claims which are or may become Liens against the Property, or as may be
necessary or desirable for the completion of such Replacements, or for clearance
of title; and (v) to execute all applications and certificates in the name of
Borrower which may be required by any of the contract documents.

(e) Nothing in this Section 7.3.3 shall: (i) make Lender responsible for making
or completing any Replacements; (ii) require Lender to expend funds in addition
to the Replacement Reserve Fund to make or complete any Replacement;
(iii) obligate Lender to proceed with any Replacements; or (iv) obligate Lender
to demand from Borrower additional sums to make or complete any Replacement.

(f) Borrower shall permit Lender and Lender’s agents and representatives
(including, without limitation, Lender’s engineer, architect, or inspector) or
third parties making Replacements pursuant to Section 7.3.3(c) to enter onto the
Property during normal business hours (subject to the rights of tenants under
their Leases) to inspect the progress of any Replacements and all materials
being used in connection therewith, to examine all plans and shop drawings
relating to such Replacements which are or may be kept at the Property, and to
complete any Replacements made pursuant to Section 7.3.3(c). Borrower shall
cause all contractors and subcontractors to cooperate with Lender or Lender’s
representatives or such other persons described above in connection with
inspections described in this Section 7.3.3(f) or the completion of Replacements
pursuant to Section 7.3.3(c).

(g) The Replacements and all materials, equipment, fixtures, or any other item
comprising a part of any Replacement shall be constructed, installed or
completed, as applicable, free and clear of all mechanic’s, materialmen’s or
other liens (except for those Liens existing on the date of this Agreement which
have been approved in writing by Lender or otherwise contested in accordance
with Section 5.1.2 hereof).

(h) All Replacements shall comply with all applicable Legal Requirements of all
Governmental Authorities having jurisdiction over the Property and applicable
insurance requirements including, without limitation, applicable building codes,
special use permits, environmental regulations, and requirements of insurance
underwriters.

 

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(i) In addition to any insurance required under the Loan Documents, Borrower
shall provide or cause to be provided workmen’s compensation insurance,
builder’s risk, and public liability insurance and other insurance to the extent
required under applicable law in connection with a particular Replacement. All
such policies shall be in form and amount reasonably satisfactory to Lender. All
such policies which can be endorsed with standard mortgagee clauses making loss
payable to Lender or its assigns shall be so endorsed. Certified copies of such
policies shall be delivered to Lender.

7.3.4. Failure to Make Replacements. Upon the occurrence and during the
continuance of an Event of Default Lender may use the Replacement Reserve Fund
(or any portion thereof) for any purpose, including but not limited to
completion of the Replacements as provided in Section 7.3.3, or for any other
repair or replacement to the Property or toward payment of the Debt in such
order, proportion and priority as Lender may determine in its sole discretion.
Lender’s right to withdraw and apply the Replacement Reserve Funds shall be in
addition to all other rights and remedies provided to Lender under this
Agreement and the other Loan Documents. Borrower shall assign to Lender all
rights and claims Borrower may have against all persons or entities supplying
labor, materials or other services which are to be paid from or secured by the
Reserve Funds; provided, however, that Lender may not pursue any such right or
claim unless an Event of Default shall have occurred and remains uncured.

7.3.5. Balance in the Replacement Reserve Account. The insufficiency of any
balance in the Replacement Reserve Account shall not relieve Borrower from its
obligation to fulfill all preservation and maintenance covenants in the Loan
Documents.

Section 7.4. Reserve Funds, Generally. Lender shall have a first-priority
perfected security interest in all of Borrower’s right, title and interest in,
to and under (a) each of the Reserve Funds, (b) any and all monies now or
hereafter deposited in each Reserve Fund and (c) all proceeds of the foregoing
as additional security for payment of the Debt. Until expended, applied or
released in accordance herewith, the Reserve Funds shall constitute additional
security for the Debt. Upon the occurrence and during the continuance of an
Event of Default, Lender may, in addition to any and all other rights and
remedies available to Lender, apply any sums then present in any or all of the
Reserve Funds to the payment of the Debt in any order in its sole discretion.
The Reserve Funds shall be held in an Eligible Account in Permitted Investments
in accordance with the terms and provisions of the Cash Management Agreement.
Notwithstanding the foregoing or anything to the contrary contained herein, all
interest and other income on all Reserve Funds shall be the sole property of and
shall be paid as set forth in the Cash Management Agreement. Borrower shall be
responsible for payment of any federal, state or local income or other tax
applicable to the interest earned on the Reserve Funds. Borrower shall not,
without obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in any Reserve Fund or the monies or other assets
deposited therein or permit any lien or encumbrance to attach thereto, or any
levy to be made thereon, or any UCC-1 Financing Statements, except those naming
Lender as the secured party, to be filed with respect thereto. Lender shall not
be liable for any loss sustained on the investment of any funds constituting the
Reserve Funds. Borrower shall indemnify Lender and hold Lender harmless

 

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from and against any and all actions, suits, claims, demands, liabilities,
losses, damages, obligations and costs and expenses (including litigation costs
and reasonable attorneys fees and expenses) arising from or in any way connected
with the Reserve Funds or the performance of the obligations for which the
Reserve Funds were established.

VIII. DEFAULTS

Section 8.1. Event of Default. (a) Each of the following events shall constitute
an event of default hereunder (an “Event of Default”):

(i) if (A) any installment of the Debt Service Payment Amount is not paid on or
prior to the fifth (5) calendar day after the date when due, (B) the payment due
on the Maturity Date is not paid on or prior to the date when due or (C) any
other portion of the Debt is not paid on or within five (5) days after the same
is due;

(ii) if any of the Taxes are not paid on or prior to the date such Taxes become
delinquent (after expiration of any applicable grace periods allowed under
applicable law), other than Taxes being contested pursuant to Section 5.1.2
hereof;

(iii) if the Policies are not kept in full force and effect, or if certified
copies of the Policies or certificates evidencing the insurance required by
Section 6.1(a) are not delivered to Lender within ten (10) Business Days after
written request;

(iv) if any violation of the provisions of Section 5.2.10 hereof occurs;

(v) if any representation or warranty made by Borrower herein or in any other
Loan Document, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to Lender in connection with the
Loan shall have been intentionally false or misleading in any respect as of the
date the representation or warranty was made;

(vi) if Borrower, Operating Lessee, Guarantor or any other guarantor under any
guaranty issued in connection with the Loan shall make a general assignment for
the benefit of creditors;

(vii) if a receiver, liquidator or trustee shall be appointed for Borrower,
Operating Lessee, Guarantor or any other guarantor under any guarantee issued in
connection with the Loan or if Borrower, Operating Lessee, Guarantor or such
other guarantor shall be adjudicated a bankrupt or insolvent, or if any petition
for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy
law, or any similar federal or state law, shall be filed by or against,
consented to, or acquiesced in by, Borrower, Operating Lessee, Guarantor or such
other guarantor, or if any proceeding for the dissolution or liquidation of
Borrower, Operating Lessee, Guarantor or such other guarantor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower, Operating Lessee,
Guarantor or such other guarantor, upon the same not being discharged, stayed or
dismissed within ninety (90) days;

 

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(viii) if Borrower assigns its rights under this Agreement or any of the other
Loan Documents or any interest herein or therein in contravention of the Loan
Documents;

(ix) if Borrower breaches any representation, warranty or covenant contained in
Sections 4.1.30 or 5.1.23 hereof;

(x) if any of the assumptions contained in the Insolvency Opinion delivered to
Lender in connection with the Loan, or in any Additional Insolvency Opinion
delivered subsequent to the closing of the Loan, is or shall become untrue in
any material respect;

(xi) if a material default has occurred and continues beyond any applicable cure
period under the Franchise Agreement and as a result thereof the franchisor
terminates or cancels the Franchise Agreement (or any Replacement Management
Agreement);

(xii) if Borrower shall continue to be in Default under any of the other terms,
covenants or conditions of this Agreement or under any of the other Loan
Documents not specified in subsections (i) to (xi) above, for ten (10) Business
Days after notice to Borrower from Lender, in the case of any Default which can
be cured by the payment of a sum of money, or for thirty (30) days after notice
from Lender in the case of any other Default; provided, however, that if such
non-monetary Default is susceptible of cure but cannot reasonably be cured
within such thirty (30) day period and provided, further, that Borrower shall
have commenced to cure such Default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for such time as is reasonably necessary for
Borrower in the exercise of due diligence to cure such Default, such additional
period not to exceed ninety (90) days;

(xiii) if Operating Lessee ceases to do business as a hotel at the Property or
terminates such business for any reason whatsoever (other than temporary
cessation in connection with any continuous and diligent renovation or
restoration of the Property following a Casualty or Condemnation); or

(xiv) if (A) a material default has occurred and continues beyond any applicable
cure period under the Operating Lease, (B) the Operating Lease is amended,
modified or terminated in violation of the terms of this Agreement, or
(C) Borrower fails to enforce the material terms and provisions of the Operating
Lease, except as otherwise expressly provided in this Agreement.

(b) During the continuance of an Event of Default (other than an Event of
Default described in clauses (vi) or (vii) above) in addition to any other
rights or remedies available to it pursuant to this Agreement and the other Loan
Documents or at law or in equity, Lender may take such action, without notice or
demand, that Lender deems advisable to protect and enforce its rights against
Borrower and in and to the Property, including, without limitation, declaring
the Debt to be immediately due and payable, and Lender may enforce or avail
itself of any or all rights or remedies provided in the Loan Documents against
Borrower and the Property,

 

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including, without limitation, all rights or remedies available at law or in
equity; and upon any Event of Default described in clauses (vi) or (vii) above,
the Debt and Other Obligations of Borrower hereunder and under the other Loan
Documents shall immediately and automatically become due and payable, without
notice or demand, and Borrower hereby expressly waives any such notice or
demand, anything contained herein or in any other Loan Document to the contrary
notwithstanding.

Section 8.2. Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default, all
or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrower under this Agreement or any of the other
Loan Documents executed and delivered by, or applicable to, Borrower or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to the Property. Any such actions taken by Lender shall
be cumulative and concurrent and may be pursued independently, singularly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents. Without limiting the generality of the foregoing, Borrower agrees
that if an Event of Default is continuing (i) Lender is not subject to any “one
action” or “election of remedies” law or rule, and (ii) all liens and other
rights, remedies or privileges provided to Lender shall remain in full force and
effect until Lender has exhausted all of its remedies against the Property and
the Mortgage has been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full.

(b) Lender shall have the right from time to time during the existence of an
Event of Default to sever the Note and the other Loan Documents into one or more
separate notes, mortgages and other security documents (the “Severed Loan
Documents”) in such denominations as Lender shall determine in its sole
discretion for purposes of evidencing and enforcing its rights and remedies
provided hereunder. Borrower shall execute and deliver to Lender from time to
time, promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender. Borrower hereby absolutely and irrevocably appoints Lender as its true
and lawful attorney, coupled with an interest, in its name and stead to make and
execute all documents necessary or desirable to effect the aforesaid severance,
Borrower ratifying all that its said attorney shall do by virtue thereof;
provided, however, Lender shall not make or execute any such documents under
such power until three (3) days after notice has been given to Borrower by
Lender of Lender’s intent to exercise its rights under such power. Borrower
shall be obligated to pay any costs or expenses incurred in connection with the
preparation, execution, recording or filing of the Severed Loan Documents and
the Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents and any such representations and
warranties contained in the Severed Loan Documents will be given by Borrower
only as of the Closing Date.

 

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(c) Any amounts recovered from the Property after the occurrence and during the
continuance of an Event of Default may be applied by Lender toward the payment
of any interest and/or principal of the Loan and/or any other amounts due under
the Loan Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.

Section 8.3. Remedies Cumulative; Waivers. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents, or existing at law or in equity or
otherwise. Lender’s rights, powers and remedies may be pursued singularly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender’s sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrower shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrower or to impair any remedy, right or power consequent
thereon.

IX. SPECIAL PROVISIONS

Section 9.1. Secondary Market Transactions.

9.1.1. Sale of Notes and Securitization. At the request of the holder of the
Note and at Lender’s sole cost and expense and, to the extent not already
required to be provided by Borrower under this Agreement, Borrower shall use
reasonable efforts to provide information not in the possession of the holder of
the Note or to satisfy the market standards to which the holder of the Note
customarily adheres or which may be reasonably required in the marketplace or by
the Rating Agencies in connection with the sale of the Note or participations
therein or the first successful securitization (such sale and/or securitization,
the “Securitization”) of rated single or multi-class securities (the
“Securities”) secured by or evidencing ownership interests in the Note and the
Mortgage, including, without limitation, to:

(a) provide such financial and other information with respect to the Property,
Borrower and the Manager, if any, (ii) provide budgets relating to the Property
and (iii) in accordance with the terms of this Agreement, to permit to be
performed such site inspection, appraisals, market studies, environmental
reviews and reports (Phase I’s and, if appropriate, Phase II’s), engineering
reports and other due diligence investigations of the Property, as may be
reasonably requested by the holder of the Note or the Rating Agencies or as may
be necessary or reasonably appropriate in connection with the Securitization
(the “Provided Information”), together, if customary, with appropriate
verification and/or consents of the Provided Information through letters of
auditors or opinions of counsel of independent attorneys acceptable to Lender
and the Rating Agencies;

(b) at Lender’s expense, cause counsel to render opinions or update existing
opinions, which may be relied upon by the holder of the Note, the Rating
Agencies and their respective counsel, agents and representatives, as to
non-consolidation, fraudulent conveyance, and true sale and/or lease or any
other opinion customary in securitization transactions, which counsel and
opinions shall be reasonably satisfactory to the holder of the Note and the
Rating Agencies;

 

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(c) make such representations and warranties as of the closing date of the
Securitization with respect to the Property, Borrower, Operating Lessee, Manager
and the Loan Documents as are customarily provided in securitization
transactions and as may be reasonably requested by the holder of the Note or the
Rating Agencies and consistent with the facts covered by such representations
and warranties as they exist on the date thereof, including the representations
and warranties made in the Loan Documents; and

(d) execute such amendments to the Loan Documents and organizational documents
as may be reasonably requested by the holder of the Note or the Rating Agencies
or otherwise to effect the Securitization; provided, however, that Borrower
shall not be required to modify or amend any Loan Document if such modification
or amendment would (i) change the initial weighted average interest rate of the
Loan (although, application of principal repayments or the Debt Service Payment
Amount in a manner determined by Lender in its sole discretion may affect the
actual weighted average interest rate of the Loan subsequent to such
modification), the stated maturity or the required amortization set forth in the
Note, (ii) modify or amend any other material or economic term of the Loan,
(iii) modify Section 8.1.1 hereof, or (iv) in the reasonable judgment of
Borrower, materially increase Borrower’s obligations and liabilities under the
Loan Documents or materially decrease the rights of Borrower under the Loan
Documents.

9.1.2. Loan Components; Mezzanine Loans.

(a) Borrower covenants and agrees that in connection with any Securitization of
the Loan, upon Lender’s reasonable request and at Lender’s sole cost and
expense, Borrower shall deliver one or more new component notes to replace the
original note or modify the original note to reflect multiple components of the
Loan (and such new notes or modified note shall have the same initial weighted
average coupon as the original note) and modify the Cash Management Agreement
with respect to the newly created components such that the pricing and
marketability of the Securities and the size of each class of Securities and the
rating assigned to each such class by the Rating Agencies shall provide the most
favorable rating levels and achieve the optimum bond execution for the Loan
provided, however, that Borrower shall not be required to deliver one or more
new component notes to replace the original note if such modification or
amendment (i) change the initial weighted average interest rate of the Loan
(although, application of principal repayments or the Debt Service Payment
Amount in a manner determined by Lender in its sole discretion may affect the
actual weighted average interest rate of the Loan subsequent to such
modification), the stated maturity or the required amortization set forth in the
Note, (ii) modify or amend any other material or economic term of the Loan,
(iii) modify Section 8.1.1 hereof, or (iv) in the reasonable judgment of
Borrower, materially increase Borrower’s obligations and liabilities under the
Loan Documents or materially decrease the rights of Borrower under the Loan
Documents.

(b) Borrower covenants and agrees that after the Closing Date and prior to a
Securitization, Lender shall have the right to create one or more mezzanine
loans (each, a “Mezzanine Loan”), to establish different interest rates and to
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the Loan and to require the payment of the Loan and any such Mezzanine Loan(s)
in such order of priority as may be designated by Lender; provided, that (i) in
no event shall the initial weighted average interest rate of the Loan and any
such Mezzanine Loan(s) following any such reallocation or modification change
from the weighted average interest rate in effect immediately preceding such
reallocation, modification or creation of any Mezzanine Loan(s) (except in
connection with any mandatory prepayment as a result of a casualty or
condemnation in accordance with Section 2.4.2 hereof or as a result of payments
made during an Event of Default, which may result in a change in the weighted
average interest rate and, in the case of an Event of Default and a default
under any Mezzanine Loan, apply principal, interest rates and amortization
between and among the Loan and the Mezzanine Loan(s) in a manner specified by
Lender in its sole discretion), and (ii) except as expressly provided in each of
the parentheticals above, none of the foregoing actions shall have a material
adverse affect on Borrower and shall not prejudice any of the rights or
obligations of Borrower under the Loan Documents. Borrower shall execute and
deliver such documents as shall reasonably be required by Lender as promptly as
possible under the circumstances in connection with this Section 9.1.2, all in
form and substance reasonably satisfactory to Lender and the Rating Agencies,
including, without limitation, in connection with the creation of any Mezzanine
Loan, a promissory note and loan documents necessary to evidence such Mezzanine
Loan, which loan documents shall be substantially the same in substance as the
Loan Documents and Borrower shall execute such amendments to the Loan Documents
as are necessary in connection with the creation of such Mezzanine Loan.
Further, in connection with any Mezzanine Loan, Borrower shall deliver to Lender
opinions of legal counsel with respect to due execution, authority and
enforceability of the Loan Documents, as amended, and an Additional Insolvency
Opinion for the Loan and the Mezzanine Loan, each as reasonably acceptable to
Lender, prospective investors and/or the Rating Agencies.

9.1.3. Secondary Market Transaction Costs. All out-of-pocket costs and expenses
incurred by Borrower in connection with Borrower’s complying with requests made
under Section 9.1 (including, without limitation, the fees and expenses of the
Rating Agencies and Borrower’s and Lender’s reasonable legal counsel) shall be
paid by Lender.

Section 9.2. Securitization Indemnification.

(a) Borrower understands that certain of the Provided Information may be
included in disclosure documents in connection with the Securitization,
including, without limitation, a prospectus, prospectus supplement or private
placement memorandum (each, a “Disclosure Document”) and may also be included in
filings with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended (the “Securities Act”), or the Securities and Exchange
Act of 1934, as amended (the “Exchange Act”), or provided or made available to
investors or prospective investors in the Securities, the Rating Agencies, and
service providers relating to the Securitization. In the event that the
Disclosure Document is required to be revised prior to the sale of all
Securities, Borrower will cooperate with the holder of the Note in updating the
Disclosure Document by providing all current information necessary to keep the
Disclosure Document accurate and complete in all material respects.

(b) Borrower agrees to provide in connection with each of (i) a preliminary and
a private placement memorandum or (ii) a preliminary and final prospectus or
prospectus supplement, as applicable, an indemnification certificate
(A) certifying that Borrower has

 

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carefully examined such memorandum or prospectus, as applicable, including
without limitation, the sections entitled “Special Considerations,” “Description
of the Mortgages,” “Description of the Mortgage Loans and Mortgaged Property,”
“The Manager,” “The Borrower” and “Certain Legal Aspects of the Mortgage Loan,”
and such sections (and any other sections reasonably requested) do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading, (B) indemnifying
Lender (and for purposes of this Section 9.2, Lender hereunder shall include its
officers and directors), each of its directors, each of its officers who have
signed the Registration Statement and each Person or entity who controls the
Affiliate within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act (collectively, the “Lender Group”), and Lender, each of its
directors and each Person who controls Lender within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act (collectively, the
“Underwriter Group”) for any losses, claims, damages or liabilities to which
Lender, the Lender Group or the Underwriter Group may become subject insofar as
such losses, claims, damages or liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such sections or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated in such sections or
necessary in order to make the statements in such sections or in light of the
circumstances under which they were made, not misleading (collectively, the
“Liabilities”) and (C) agreeing to reimburse Lender, the Lender Group and the
Underwriter Group for any legal or other expenses reasonably incurred by Lender
in connection with defending the Liabilities; provided, however, that Borrower
will be liable in any such case under clauses (B) or (C) above only to the
extent that any such loss claim, damage or liability arises out of or is based
upon any such untrue statement or omission made therein in reliance upon and in
conformity with information furnished to Lender by or on behalf of Borrower in
connection with the preparation of the memorandum or prospectus or in connection
with the underwriting of the debt, including, without limitation, financial
statements of Borrower, operating statements, rent rolls, environmental site
assessment reports and property condition reports with respect to the Property.
This indemnity agreement will be in addition to any liability which Borrower may
otherwise have. Moreover, the indemnification provided for in Clauses (B) and
(C) above shall be effective whether or not an indemnification certificate
described in (A) above is provided and shall be applicable based on information
previously provided by Borrower or its Affiliates if Borrower does not provide
the indemnification certificate.

(c) In connection with filings under the Exchange Act, Borrower agrees to
indemnify (i) Lender, the Lender Group and the Underwriter Group for Liabilities
to which Lender, the Lender Group or the Underwriter Group may become subject
insofar as the Liabilities arise out of or are based upon the omission or
alleged omission to state in the Provided Information a material fact required
to be stated in the Provided Information in order to make the statements in the
Provided Information, in light of the circumstances under which they were made
not misleading and (ii) reimburse Lender, the Lender Group or the Underwriter
Group for any legal or other expenses reasonably incurred by Lender, the Lender
Group or the Underwriter Group in connection with defending the Liabilities.

(d) Promptly after receipt by an indemnified party under this Section 9.2 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 9.2, notify the

 

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indemnifying party in writing of the commencement thereof, but the omission to
so notify the indemnifying party will not relieve the indemnifying party from
any liability which the indemnifying party may have to any indemnified party
hereunder except to the extent that failure to notify causes prejudice to the
indemnifying party. In the event that any action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it (or they)
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
After notice from the indemnifying party to such indemnified party under this
Section 9.2 the indemnifying party shall not be responsible for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof; provided, however, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there are any legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall promptly notify the indemnifying party in writing, and
shall have the right to select separate counsel to assert such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party to parties. The indemnifying party shall not be liable for the
expenses of more than one such separate counsel unless an indemnified party
shall have reasonably concluded that there may be legal defenses available to it
that are different from or additional to those available to another indemnified
party.

(e) In order to provide for just and equitable contribution in circumstances in
which the indemnity agreements provided for in Section 9.2(b) or (c) is or are
for any reason held to be unenforceable by an indemnified party in respect of
any losses, claims, damages or liabilities (or action in respect thereof)
referred to therein which would otherwise be indemnifiable under Section 9.2(b)
or (c), the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such losses, claims, damages or liabilities
(or action in respect thereof); provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the following factors
shall be considered: (i) Lender’s and Borrower’s relative knowledge and access
to information concerning the matter with respect to which claim was asserted;
(ii) the opportunity to correct and prevent any statement or omission; and
(iii) any other equitable considerations appropriate in the circumstances.
Lender and Borrower hereby agree that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation.

(f) The liabilities and obligations of both Borrower and Lender under this
Section 9.2 shall survive the termination of this Agreement and the satisfaction
and discharge of the Debt.

Section 9.3. Exculpation. Subject to the qualifications below, the Debt and the
Other Obligations shall be non-recourse to Borrower, Guarantor and their
respective Affiliates and Lender shall not enforce the liability and obligation
of Borrower to perform and observe the obligations contained in the Note, this
Agreement, the Mortgage or the other Loan Documents by

 

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any action or proceeding wherein a money judgment shall be sought against
Borrower, Guarantor and their respective Affiliates except that Lender may bring
a foreclosure action, an action for specific performance of non-monetary
obligations or any other appropriate action or proceeding to enable Lender to
enforce and realize upon its interest under the Note, this Agreement, the
Mortgage and the other Loan Documents, or in the Property, the Rents, or any
other collateral given to Lender pursuant to the Loan Documents; provided,
however, that, except as specifically provided herein, any judgment in any such
action or proceeding shall be enforceable against Borrower only to the extent of
Borrower’s interest in the Property, in the Rents and in any other collateral
given to Lender, and Lender, by accepting the Note, this Agreement, the Mortgage
and the other Loan Documents, agrees that it shall not sue for, seek or demand
any deficiency judgment against Borrower or its Affiliates in any such action or
proceeding under or by reason of or under or in connection with the Note, this
Agreement, the Mortgage or the other Loan Documents. The provisions of this
Section 9.3 shall not, however, (a) constitute a waiver, release or impairment
of any obligation evidenced or secured by any of the Loan Documents; (b) impair
the right of Lender to name Borrower as a party defendant in any action or suit
for foreclosure and sale under any of the Mortgage; (c) affect the validity or
enforceability of the Guaranty or any other guaranty made in connection with the
Loan or any of the rights and remedies of Lender thereunder; (d) impair the
right of Lender to obtain the appointment of a receiver with respect to the
Property; (e) impair the enforcement of any of the Assignment of Leases;
(f) constitute a prohibition against Lender to seek a deficiency judgment
against Borrower in order to fully realize the security granted by the Mortgage
to the extent necessary to commence any other appropriate action or proceeding
in order for Lender to exercise its remedies against all of the Property; or
(g) constitute a waiver of the right of Lender to enforce the liability and
obligation of Borrower, by money judgment or otherwise, to the extent of any
actual loss, damage, cost, expense, liability, claim or other obligation
actually incurred by Lender but excluding consequential, special or punitive
damages (including attorneys’ fees and costs reasonably incurred) arising out of
or in connection with the following:

(a) fraud or intentional misrepresentation by Borrower, Operating Lessee or
Guarantor in connection with the Loan;

(b) willful misconduct of Borrower or Operating Lessee;

(c) damage to the Property as a result of the gross negligence or willful
misconduct of Borrower, Operating Lessee or Guarantor;

(d) the breach of any representation, warranty, covenant or indemnification
provision in the Environmental Indemnity Agreement concerning environmental
laws, hazardous substances and asbestos and any indemnification of Lender with
respect thereto;

(e) the removal or disposal of any material portion of the Property by Borrower
or Operating Lessee upon and during the continuance of an Event of Default in
violation of the Loan Agreement;

(f) the misappropriation or conversion by Borrower or Operating Lessee of
(A) any Insurance Proceeds paid by reason of any Casualty to the Property,
(B) any Awards or other amounts received in connection with the Condemnation of
all or a portion of the Property,

 

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(C) any Rents following an Event of Default, or (D) any Rents or other amounts
which should have been deposited in the Lockbox Account but were diverted
therefrom by Borrower, Operating Lessee or Guarantor;

(g) failure of Borrower, Operating Lessee to pay Taxes or other charges which
give rise to Liens on the Property except to the extent that Gross Income from
Operations after payment of Debt Service was insufficient to pay such Taxes or
other charges; and

(h) the failure of Borrower or Operating Lessee to obtain Lender’s prior written
consent to any Indebtedness voluntarily incurred by Borrower or the voluntary
grant or creating of any Lien (other than Permitted Encumbrances) encumbering
the Property, or the failure of Borrower to obtain Lender’s prior written
consent to any voluntary Transfer in each case as may be required by the Loan
Agreement; and

(i) any material interference or material resistance (including, without
limitation, any action reasonably likely to cause a material delay to Lender) by
Borrower, Operating Lessee, Guarantor or any of their respective Affiliates,
agents, employees, members, partners, directors or officers, with Lender’s
exercise of any and all of its rights and remedies under the Loan Documents, at
law or in equity (provided that defending any demand for payment solely on the
grounds that the demanded amount had already been paid and not returned or
otherwise disgorged, shall not trigger liability under this clause (i)).

Borrower shall be liable for the entire amount of the Debt in the event of:

(i) Borrower filing a voluntary petition under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law;

(ii) the filing by any Person other than Lender of an involuntary petition
against Borrower under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law in which Borrower colludes with such Person, or
solicits or causes to be solicited petitioning creditors for any involuntary
petition against Borrower from any Person;

(iii) Borrower filing an answer consenting to or joining in any involuntary
petition filed against it, by any Person other than Lender under the Bankruptcy
Code or any other Federal or state bankruptcy or insolvency law unless the
opposition of Borrower to such involuntary petition would violate any Rule 11 of
the Federal Rules of Civil Procedure, Rule 9011 of the Federal Rules of
Bankruptcy Procedure or any other similar state law;

(iv) Borrower consenting to or joining in an application for the appointment of
a custodian, receiver, trustee, or examiner for Borrower or any portion of the
Property;

(v) Borrower making an assignment for the benefit of creditors, or admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its debts
as they become due unless the opposition of Borrower to such involuntary
petition would violate any Rule 11 of the Federal Rules of Civil Procedure, Rule
9011 of the Federal Rules of Bankruptcy Procedure or any other similar state
law; and

(vi) Borrower violating the Single Purpose Entity provisions of its
organizational documents.

 

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Section 9.4. Matters Concerning Manager. Subject to any contrary or other terms
and conditions of the Agreement of Manager, if (a) an Event of Default has
occurred and is continuing under this Agreement or any of the other Loan
Documents and the Lender has accelerated the Debt, (b) a monetary or material
non-monetary default of the Manager has occurred and is continuing under any
Management Agreement beyond any applicable notice and cure, or (c) a Bankruptcy
Action of Manager shall have occurred and be continuing, then in each case to
the extent permitted by applicable law, Borrower shall, or shall cause Operating
Lessee to, at the request of Lender, terminate the applicable Management
Agreement and replace the Manager with a Qualified Manager pursuant to a
Replacement Management Agreement, it being understood and agreed that the
management fee for such Qualified Manager shall not exceed then prevailing
market rates.

Section 9.5. Servicer. At the option of Lender, the Loan may be serviced by a
servicer/trustee (any such servicer/trustee, together with its agents, nominees
or designees, are collectively referred to as “Servicer”) selected by Lender and
Lender may delegate all or any portion of its responsibilities under this
Agreement and the other Loan Documents to Servicer pursuant to a servicing
agreement (the “Servicing Agreement”) between Lender and Servicer. Lender shall
be responsible for the regular monthly or periodic servicing fee relating to or
arising under the Servicing Agreement; Borrower will be responsible for any
special or extraordinary servicing fees due to Servicer under the Servicing
Agreement.

X. MISCELLANEOUS

Section 10.1. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the legal representatives, successors and assigns of such
party. All covenants, promises and agreements in this Agreement, by or on behalf
of Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.

Section 10.2. Intentionally Omitted.

Section 10.3. Governing Law. (a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF
NEW YORK, THE LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF
NEW YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO 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 EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS

 

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AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER 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 CONFLICTS OF LAWS) AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE
PROVISIONS FOR THE CREATION AND ENFORCEMENT OF THE LIENS ON REAL PROPERTY
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED
BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE
CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE
OTHER LOAN DOCUMENTS, AND, EXCEPT AS AFORESAID, THIS AGREEMENT, THE NOTE 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.

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY 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 BORROWER
AND LENDER EACH WAIVE 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
BORROWER AND LENDER EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND
APPOINT:

CT CORPORATION SYSTEM

111 EIGHTH AVENUE

NEW YORK, NEW YORK 10011

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 AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON

 

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BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.
BORROWER (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 (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.

Section 10.4. Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement,
or of the Note, or of any other Loan Document, nor consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given. Except as otherwise expressly provided herein, no
notice to, or demand on Borrower, shall entitle Borrower to any other or future
notice or demand in the same, similar or other circumstances.

Section 10.5. Delay Not a Waiver. Neither any failure nor any delay on the part
of Lender in insisting upon strict performance of any term, condition, covenant
or agreement, or exercising any right, power, remedy or privilege hereunder, or
under the Note or under any other Loan Document, or any other instrument given
as security therefor, shall operate as or constitute a waiver thereof, nor shall
a single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege. In particular, and not
by way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, the Note or any other Loan Document, Lender shall
not be deemed to have waived any right either to require prompt payment when due
of all other amounts due under this Agreement, the Note or the other Loan
Documents, or to declare a default for failure to effect prompt payment of any
such other amount.

Section 10.6. Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, return receipt
requested or (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, and by telecopier (with
answer back acknowledged), addressed as follows (or at such other address and
Person as shall be designated from time to time by any party hereto, as the case
may be, in a written notice to the other parties hereto in the manner provided
for in this Section):

 

Borrower:   

KPA TYSON CORNER RI LLC

340 Royal Poinciana Way, Suite 306

Palm Beach, Florida 33480

Attention: Mark Murphy or Dennis Craven

Facsimile No.: (561) 835-0457

 

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with a copy to:

  

Hunton & Williams LLP

1900 K Street, N.W.

Washington, District of Columbia 20006

Attention: Thomas F. Kaufman, Esq.

Facsimile No.: (202) 778-2201

Lender:   

Merrill Lynch Mortgage Lending, Inc.

Four World Financial Center, 16th Floor

New York, New York 10080

Attention: Dominick Guerriero

Facsimile No. (212) 449-7684

with a copy to:   

Dechert LLP

30 Rockefeller Plaza

New York, New York 10112

Attention: Lawrence A. Ceriello, Esq.

Facsimile No. (212) 698-3599

A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy, upon the first attempted delivery on a
Business Day; or in the case of telecopy, upon sender’s receipt of a
machine-generated confirmation of successful transmission after advice by
telephone to recipient that a telecopy notice is forthcoming.

Section 10.7. Trial by Jury. BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.

Section 10.8. Headings. The Article and/or Section headings and the Table of
Contents in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.

Section 10.9. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

 

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Section 10.10. Preferences. Lender shall have the continuing and exclusive right
to apply or reverse and reapply any and all payments by Borrower to any portion
of the obligations of Borrower hereunder. To the extent Borrower makes a payment
or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.

Section 10.11. Waiver of Notice. Borrower shall not be entitled to any notices
of any nature whatsoever from Lender except with respect to matters for which
this Agreement or the other Loan Documents specifically and expressly provide
for the giving of notice by Lender to Borrower and except with respect to
matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Agreement or the other Loan Documents do not specifically and expressly
provide for the giving of notice by Lender to Borrower.

Section 10.12. Remedies of Borrower. In the event that a claim or adjudication
is made that Lender, or its respective agent has acted unreasonably or
unreasonably delayed acting in any case where by law or under this Agreement or
the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender
nor its respective agents shall be liable for any monetary damages, and
Borrower’s sole remedies shall be limited to commencing an action seeking
injunctive relief or declaratory judgment. The parties hereto agree that any
action or proceeding to determine whether Lender has acted reasonably shall be
determined by an action seeking declaratory judgment.

Section 10.13. Expenses; Indemnity. Borrower covenants and agrees to pay or, if
Borrower fails to pay, to reimburse, Lender upon receipt of written notice from
Lender for all reasonable costs and expenses (including reasonable attorneys’
fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Loan Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrower
required under this Agreement or the other Loan Documents; (ii) Borrower’s
ongoing performance of and compliance with Borrower’s respective agreements and
covenants contained in this Agreement and the other Loan Documents on its part
to be performed or complied with after the Closing Date, including, without
limitation, confirming compliance with environmental and insurance requirements;
(iii) the negotiation, preparation, execution, delivery and administration of
any consents, amendments, waivers or other modifications to this Agreement and
the other Loan Documents and any other documents or matters requested by Lender;
(iv) securing Borrower’s compliance with any requests made pursuant to the
provisions of this Agreement; (v) the filing and recording fees and expenses,
title insurance and reasonable fees and expenses of counsel for providing to
Lender all required legal opinions, and other similar expenses incurred in
creating and perfecting the Liens in favor of Lender pursuant to this Agreement
and the other Loan Documents; (vi) enforcing or preserving any rights, in
response to

 

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third party claims or the prosecuting or defending of any action or proceeding
or other litigation, in each case against, under or affecting Borrower, this
Agreement, the other Loan Documents, the Property or any other security given
for the Loan; (vii) a default under Section 5.2.9 hereof, including, without
limitation, reasonable attorneys’ fees and costs incurred in the investigation,
defense, and settlement of losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any individual
prohibited transaction exemption under ERISA, the Code, any State statute or
other similar law that may be required and (viii) enforcing any obligations of
or collecting any payments due from Borrower under this Agreement, the other
Loan Documents or with respect to the Properties (including any fees incurred by
Servicer in connection with the transfer of the Loan to a special servicer
during an Event of Default) or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a “work-out” or of any insolvency or bankruptcy proceedings with
respect to any Borrower, Operating Lessee or Guarantor; provided, however, that
(a) Borrower shall not be obligated for the payment of any fees, costs, or
expenses which are payable by Lender pursuant to Section 9.1.5, (b) from and
after a Syndication, Borrower shall not be required to pay or reimburse any
Co-Lender for any fees, costs or expenses incurred by such Co-Lender (provided,
that Borrower will be required to pay the fees, costs or expenses incurred by
Administrative Agent on behalf of the Co-Lenders to the same extent Borrower
would have been required by this Section 10.13 to pay such fees, costs and
expenses if incurred by Lender prior to a Syndication), and (c) Borrower shall
not be liable for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender. Any cost and expenses due and payable to Lender may be
paid from any amounts in the Lockbox Account or Cash Management Account, as
applicable.

(a) Borrower shall indemnify, defend and hold harmless Lender from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for Lender in connection with any investigative,
administrative or judicial proceeding commenced or threatened against Lender),
that may be imposed on, incurred by, or asserted against Lender in any manner
relating to or arising out of (i) any breach by Borrower of its obligations
under, or any material misrepresentation by Borrower contained in, this
Agreement or the other Loan Documents, or (ii) the use or intended use of the
proceeds of the Loan (collectively, the “Indemnified Liabilities”); provided,
however, that (a) Borrower shall not have any obligation to Lender hereunder to
the extent that such Indemnified Liabilities arise from the gross negligence,
illegal acts, fraud or willful misconduct of Lender, (b) from and after a
Syndication, Borrower shall not be required to pay for the fees and expenses of
more than one law firm for all Co-Lenders and the Administrative Agent, and
(c) without limiting clause (b) preceding, to the extent not precluded by a
conflict of interest, Lender shall endeavor to work cooperatively with Borrower
with a view toward minimizing the legal and other expenses associated with any
defense and any potential settlement or judgment. To the extent that the
undertaking to indemnify, defend and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Lender. Borrower further agrees that, without
Administrative Agent’s or the Co-Lenders’ prior written consent, it will not
enter into any settlement of a lawsuit, claim or other proceeding arising or
relating to any Indemnified Liability unless such settlement includes an
explicit and unconditional release from the party bringing such lawsuit, claim
or other proceeding of Administrative Agent and each Co-Lender.

 

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(b) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to
reimburse Lender for, any fees and expenses incurred by any Rating Agency in
connection with any consent, approval, waiver or confirmation obtained from such
Rating Agency in connection with any action taken or proposed to be taken by
Borrower pursuant to the terms and conditions of this Agreement or any other
Loan Document and Lender shall be entitled to require payment of such fees and
expenses as a condition precedent to the obtaining of any such consent,
approval, waiver or confirmation.

Section 10.14. Schedules Incorporated. The Schedules annexed hereto are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.

Section 10.15. Offsets, Counterclaims and Defenses. Any assignee of Lender’s
interest in and to this Agreement, the Note and the other Loan Documents shall
take the same free and clear of all offsets, counterclaims or defenses which are
unrelated to such documents which Borrower may otherwise have against any
assignor of such documents, and no such unrelated counterclaim or defense shall
be interposed or asserted by Borrower in any action or proceeding brought by any
such assignee upon such documents and any such right to interpose or assert any
such unrelated offset, counterclaim or defense in any such action or proceeding
is hereby expressly waived by Borrower.

Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries.
Borrower and Lender intend that the relationships created hereunder and under
the other Loan Documents be solely that of borrower and lender. Nothing herein
or therein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and Lender and
each Co-Lender nor to grant Lender or any Co-Lender any interest in the
Properties other than that of mortgagee, beneficiary or lender.

(a) This Agreement and the other Loan Documents are solely for the benefit of
Lender and Borrower and nothing contained in this Agreement or the other Loan
Documents (except with respect to Persons intended to be exculpated under
Section 9.3 hereof) shall be deemed to confer upon anyone other than Lender and
Borrower any right to insist upon or to enforce the performance or observance of
any of the obligations contained herein or therein. All conditions to the
obligations of Lender to make the Loan hereunder are imposed solely and
exclusively for the benefit of Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make the Loan in the absence of
strict compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender’s sole
discretion, Lender deems it advisable or desirable to do so.

Section 10.17. Publicity. All news releases, publicity or advertising by
Borrower or any of its Affiliates through any media intended to reach the
general public which refers to the Loan Documents or the financing evidenced by
the Loan Documents, to Lender, or any of its Affiliates shall be subject to the
prior written approval of Lender.

 

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Section 10.18. Waiver of Marshalling of Assets. To the fullest extent permitted
by law, Borrower, for itself and its successors and assigns, waives all rights
to a marshalling of the assets of Borrower, Borrower’s partners and others with
interests in Borrower and of the Property, or to a sale in inverse order of
alienation in the event of foreclosure of the Mortgage and agrees not to assert
any right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Lender under the Loan Documents to a sale of the Property for the
collection of the Debt without any prior or different resort for collection or
of the right of Lender to the payment of the Debt out of the net proceeds of the
Property in preference to every other claimant whatsoever.

Section 10.19. Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents.

Section 10.20. Conflict; Construction of Documents; Reliance. In the event of
any conflict between the provisions of this Agreement and any of the other Loan
Documents, the provisions of this Agreement shall control. The parties hereto
acknowledge that they were represented by competent counsel in connection with
the negotiation, drafting and execution of the Loan Documents and that such Loan
Documents shall not be subject to the principle of construing their meaning
against the party which drafted same. Borrower acknowledges that, with respect
to the Loan, Borrower shall rely solely on its own judgment and advisors in
entering into the Loan without relying in any manner on any statements,
representations or recommendations of Lender or any parent, subsidiary or
Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in
the exercise of any rights or remedies available to it under any of the Loan
Documents or any other agreements or instruments which govern the Loan by virtue
of the ownership by it or any parent, subsidiary or Affiliate of Lender of any
equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any action on the
basis of the foregoing with respect to Lender’s exercise of any such rights or
remedies. Borrower acknowledges that Lender engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its
Affiliates.

Section 10.21. Brokers and Financial Advisors. Borrower and Lender each hereby
represent to the other that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. Borrower hereby agrees to
indemnify, defend and hold Lender harmless from and against any and all claims,
liabilities, costs and expenses of any kind (including Lender’s attorneys’ fees
and expenses) in any way relating to or arising from a claim by any Person that
such Person acted on behalf of Borrower in connection with the transactions
contemplated herein. The provisions of this Section 10.21 shall survive the
expiration and termination of this Agreement and the payment of the Debt.

 

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Section 10.22. Prior Agreements. This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, including, without limitation,
the Summary of Principal Terms dated August 1, 2006 (as amended) between
Borrower and Lender are superseded by the terms of this Agreement and the other
Loan Documents.

Section 10.23. Execution in Counterparts. This Agreement and the other Loan
Documents may be executed in any number of counterparts and by different parties
hereto or thereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute one
and the same agreement.

Section 10.24. Entire Agreement. This Agreement, taken together with all of the
other Loan Documents and all certificates and other documents delivered by
Borrower to Lender, embody the entire agreement and supersede all prior
commitments, agreements, representations, and understandings, written or oral,
relating to the subject matter hereof, and may not be contradicted or varied by
evidence of prior, contemporaneous, or subsequent oral agreements or discussions
of the parties hereto.

Section 10.25. Time is of the Essence. The parties hereto agree that time is of
the essence under this Agreement and the other Loan Documents and the
performance of each of the covenants and agreements contained herein and
therein.

[NO FURTHER TEXT ON THIS PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their duly authorized representatives, all as of the day and year
first above written.

 

BORROWER: KPA TYSONS CORNER RI LLC, a Delaware limited liability company By:  

Innkeepers USA Limited Partnership, a

Virginia limited partnership, its Sole Member

  By:   Innkeepers Financial Corporation, a Virginia corporation, its General
Partner     By:  

/s/ Dennis Craven

    Name:   Dennis Craven     Title:   Vice President and Treasurer

(Signature continue on following page)

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LENDER:

MERRILL LYNCH MORTGAGE LENDING, INC.,

a Delaware corporation

By:  

/s/ Dominick F. Guerriero

Name:   Dominick F. Guerriero Title:   Vice President

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SCHEDULE I

ORGANIZATIONAL CHART

(Attached)

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SCHEDULE II

LEASES

N/A

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SCHEDULE III

REQUIRED REPAIRS

The following repairs must be completed by March 31, 2007:

 

1) Re-striping of the parking lot in add two (2) automobile parking spaces.

 

2) Provide adequate number of designated parking stalls and signage for vans.

 

3) Provide access aisles adjacent to parking spaces, crossing hazardous vehicle
areas, from main roadways or public transportation stops to the building
sidewalks and entrances.

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SCHEDULE IV

RESERVED

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SCHEDULE V

EXCEPTIONS TO REPRESENTATION

None

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SCHEDULE VI

RESERVED

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SCHEDULE VII

MANAGEMENT AGREEMENT

(Attached)

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SCHEDULE VIII

IDENTIFICATION OF CERTAIN QUALIFIED MANAGERS

None.