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Exhibit 10.94

MEZZANINE LOAN AND SECURITY AGREEMENT
(Senior Mezzanine)
 

Dated as of February 9, 2005
 

 
Between
 

 
CNL HOTEL DEL SENIOR MEZZ PARTNERS, LP
as Mezzanine Borrower
 

 
and
 

 
GERMAN AMERICAN CAPITAL CORPORATION,
as Mezzanine Lender
 

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TABLE OF CONTENTS
Page
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
 
Section 1.1
Definitions
1
Section 1.2
Principles of Construction
23
     
II. GENERAL TERMS
 
Section 2.1
Loan; Disbursement to Mezzanine Borrower
23
Section 2.2
Interest; Loan Payments; Late Payment Charge
24
Section 2.3
Prepayments
25
Section 2.4
Regulatory Change; Taxes
27
Section 2.5
Conditions Precedent to Closing
28
   
III. CASH MANAGEMENT
 33
Section 3.1
Cash Management

   
IV. REPRESENTATIONS AND WARRANTIES
 
Section 4.1
Mezzanine Borrower Representations
42
Section 4.2
Survival of Representations
50
   
V. MEZZANINE BORROWER COVENANTS
 
Section 5.1
Affirmative Covenants
51
Section 5.2
Negative Covenants
61
   
VI. INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
 
Section 6.1
Insurance Coverage Requirements
65
Section 6.2
Condemnation and Insurance Proceeds
66
Section 6.3
Certificates
67
   
VII. INTENTIONALLY OMITTED
     
VIII. TRANSFERS, INDEBTEDNESS AND SUBORDINATE LIENS
 
Section 8.1
Restrictions on Transfers and Indebtedness
67
Section 8.2
Sale of Building Equipment and Immaterial Transfers and Easements by Mortgage
Borrower
68
Section 8.3
Intentionally Omitted
68
Section 8.4
Transfers of Interests in Mezzanine Borrower
68
Section 8.5
Loan Assumption
69

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Section 8.6
Notice Required; Legal Opinions
72
Section 8.7
Leases
72
   
IX. INTEREST RATE CAP AGREEMENT
 
Section 9.1
Interest Rate Cap Agreement
74
Section 9.2
Pledge and Collateral Assignment
74
Section 9.3
Covenants
75
Section 9.4
Representations and Warranties
76
Section 9.5
Payments
77
Section 9.6
Remedies
77
Section 9.7
Sales of Rate Cap Collateral (Senior Mezzanine)
80
Section 9.8
Public Sales Not Possible
80
Section 9.9
Receipt of Sale Proceeds
81
Section 9.10
Extension Interest Rate Cap Agreement (Senior Mezzanine)
81
     
X. RESERVED
     
XI. BOOKS AND RECORDS, FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION
Section 11.1
Books and Records
81
Section 11.2
Financial Statements
82
   
XII. ENVIRONMENTAL MATTERS
 
Section 12.1
Representations
83
Section 12.2
Covenants
83
Section 12.3
Environmental Reports
84
Section 12.4
Environmental Indemnification
84
Section 12.5
Recourse Nature of Certain Indemnifications
85
     
XIII. RESERVED
       
XIV. RESERVED
     
XV. ASSIGNMENTS AND PARTICIPATIONS
 
Section 15.1
Assignment and Acceptance
86
Section 15.2
Effect of Assignment and Acceptance
86
Section 15.3
Content
86
Section 15.4
Register
87
Section 15.5
Substitute Notes
87
Section 15.6
Participations
88

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Section 15.7
Disclosure of Information
88
Section 15.8
Security Interest in Favor of Federal Reserve Bank
89
     
XVI. RESERVED
       
XVII. DEFAULTS
 
Section 17.1
Event of Default
89
Section 17.2
Remedies
93
Section 17.3
Remedies Cumulative; Waivers
95
Section 17.4
Costs of Collection
95
Section 17.5
Distribution of Collateral Proceeds
95
   
XVIII. SPECIAL PROVISIONS
 
Section 18.1
Exculpation
96
     
XIX. MISCELLANEOUS
 
Section 19.1
Survival
98
Section 19.2
Mezzanine Lender's Discretion
99
Section 19.3
Governing Law
99
Section 19.4
Modification, Waiver in Writing
100
Section 19.5
Delay Not a Waiver
100
Section 19.6
Notices
101
Section 19.7
TRIAL BY JURY
102
Section 19.8
Headings
103
Section 19.9
Severability
103
Section 19.10
Preferences
103
Section 19.11
Waiver of Notice
103
Section 19.12
Expenses; Indemnity
104
Section 19.13
Exhibits and Schedules Incorporated
106
Section 19.14
Offsets, Counterclaims and Defenses
106
Section 19.15
Liability of Assignees of Mezzanine Lender
106
Section 19.16
No Joint Venture or Partnership; No Third Party Beneficiaries
107
Section 19.17
Publicity
107
Section 19.18
Waiver of Marshalling of Assets
107
Section 19.19
Waiver of Counterclaim and other Actions
108
Section 19.20
Conflict; Construction of Documents; Reliance
108

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Section 19.21
Prior Agreements
108
Section 19.22
Counterparts
109
Section 19.23
Disclosure
109

EXHIBITS AND SCHEDULES

EXHIBIT A
INTENTIONALLY OMITTED
EXHIBIT B
FORM OF PLEDGE ACKNOWLEDGEMENT
EXHIBIT C
SINGLE PURPOSE ENTITY PROVISIONS
EXHIBIT D
ENFORCEABILITY OPINION REQUIREMENTS
EXHIBIT E
NON-CONSOLIDATION OPINION REQUIREMENTS
EXHIBIT F
COUNTERPARTY OPINION REQUIREMENTS
EXHIBIT G
FORM OF TENANT ESTOPPEL LETTER
EXHIBIT H
BORROWER ORGANIZATIONAL STRUCTURE
EXHIBIT I
INTEREST RATE CAP AGREEMENT REQUIREMENTS
EXHIBIT J
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
EXHIBIT K
INTENTIONALLY OMITTED
EXHIBIT L
INTENTIONALLY OMITTED
EXHIBIT M
COUNTERPARTY ACKNOWLEDGMENT
EXHIBIT N
INTENTIONALLY OMITTED
EXHIBIT O
FORM OF INDEPENDENT DIRECTOR CERTIFICATE
EXHIBIT P
INTENTIONALLY OMITTED
EXHIBIT Q
INTENTIONALLY OMITTED
EXHIBIT R
ARTICLE 8 OPT IN LANGUAGE
   
SCHEDULE I
LITIGATION SCHEDULE
SCHEDULE II
INTENTIONALLY DELETED
SCHEDULE III
PRE-APPROVED TRANSFEREES
SCHEDULE IV
PRE-APPROVED MANAGERS

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MEZZANINE LOAN AND SECURITY AGREEMENT
(Senior Mezzanine)
 
THIS MEZZANINE LOAN AND SECURITY AGREEMENT (Senior Mezzanine), dated as of
February 9, 2005 (as amended, restated, replaced, supplemented or otherwise
modified from time to time, this Agreement), between CNL HOTEL DEL SENIOR MEZZ
PARTNERS, LP, a Delaware limited partnership (Mezzanine Borrower) having an
office c/o CNL Hotels & Resorts, Inc, Center at City Commons, 450 South Orange
Avenue, Orlando, Florida 32801 and GERMAN AMERICAN CAPITAL CORPORATION, a
Maryland corporation, having an address at 60 Wall Street, 10th Floor, New York,
New York 10005 (together with its successors and assigns, Mezzanine Lender).
 
W I T N E S S E T H:

WHEREAS, Mezzanine Borrower desires to obtain the Loan (as hereinafter defined)
from Mezzanine Lender;
 
WHEREAS, Mezzanine Lender is willing to make the Loan to Mezzanine Borrower,
subject to and in accordance with the terms of this Agreement and the other Loan
Documents (Senior Mezzanine) (as hereinafter defined).
 
NOW, THEREFORE, in consideration of the making of the Loan by Mezzanine 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:
 
     Acceptable Counterparty shall mean a bank or other financial institution
which has a long-term unsecured debt or counterparty rating of "A+" or higher by
S&P and its equivalent by Moody's and, if the counterparty is rated by Fitch, by
Fitch.
 
     Acceptable Management Agreement shall mean, with respect to the Property, a
new or amended management agreement with the Manager which agreement shall be
upon terms and conditions no less favorable in all material respects to the
Mezzanine Borrower, Operating Lessee, and Mezzanine Lender than those contained
in the Management Agreement or any new or amended management agreement entered
into by Mortgage Borrower, Operating Lessee, and/or Manager with respect to the
Property in accordance with the terms of Section 5.2.14 hereof.
 

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      Acceptable Manager shall mean (i) the current Manager as of the Closing
Date or any wholly owned Affiliate (whether direct or indirect) of KSL DC
Operating, LLC, or a member of KSL DC Operating LLC, or KSL II Management
Operations, LLC (ii) at any time after the Closing Date, any Pre-approved
Manager listed on Schedule IV hereto, provided each such property manager
continues to be Controlled by substantially the same Persons Controlling such
property manager as of the Closing Date (or if such Manager is a publicly traded
company, such Manager continues to be publicly traded on an established
securities market), (iii) any other hotel management company that manages a
system of at least six (6) hotels or resorts of a class and quality at least as
comparable to the Property (as reasonably determined by Manager and Operating
Lessee; provided, however Operating Lessee shall obtain Mortgage Lender’s prior
approval of such determination, not to be unreasonably withheld), and containing
not fewer than 1,500 hotel rooms in the aggregate (including condominium units
under management) in the aggregate, (iv) any Close Affiliate of any of the
foregoing Persons or (v) any other reputable and experienced professional hotel
management company (A) whose competence, qualifications, and experience in
managing properties of a quality equal to or exceeding the quality of the
Property are comparable to, or greater than that of the current Manager as of
the Closing Date, or a Close Affiliate thereof and (B) with respect to which
Mezzanine Lender has consented to in writing.
 
Account Agreement (Mortgage) shall mean the Account and Control Agreement, dated
as of the date hereof, among Mortgage Lender, Mortgage Borrower and Cash
Management Bank (Mortgage).
 
Account Agreement (Senior Mezzanine) shall mean the Account and Control
Agreement (Senior Mezzanine), dated the date hereof, among Mezzanine Lender,
Mezzanine Borrower and Cash Management Bank (Senior Mezzanine).
 
Account Collateral (Senior Mezzanine) shall have the meaning set forth in
Section 3.1.2.
 
Acknowledgment shall mean the Acknowledgment, dated on or about the date hereof
made by Counterparty, or as applicable, Acceptable Counterparty in the form of
Exhibit M.
 
Additional Non-Consolidation Opinion shall have the meaning set forth in Section
4.1.20(b).
 
Affiliate shall mean, with respect to any specified Person, any other Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common Control with, or any general partner or managing member in, such
specified Person.
 
Agreement shall mean this Agreement, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
 
Approved Bank shall have the meaning set forth in the Account Agreement (Senior
Mezzanine).
 

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Assignment and Acceptance shall mean an assignment and acceptance entered into
by Mezzanine Lender and an assignee, and accepted by Mezzanine Lender in
accordance with Article XV and in substantially the form of Exhibit J or such
other form customarily used by Mezzanine Lender in connection with the
participation or syndication of mortgage or mezzanine loans at the time of such
assignment.
 
Assignment of Management Agreement (Senior Mezzanine) shall mean that certain
Manager's Consent, Subordination of Management Agreement, and Non-disturbance
Agreement (Senior Mezzanine), dated the date hereof, among Mezzanine Lender,
Mezzanine Borrower, Operating Lessee, and Manager, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
 
Assignment of Management Agreement (Mortgage) shall mean that certain Manager's
Consent, Subordination of Management Agreement, and Non-disturbance Agreement,
dated the date hereof, among Mortgage Lender, Mortgage Borrower and Manager, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
 
Bankruptcy Code shall mean Title 11, U.S.C.A., as amended from time to time and
any successor statute thereto.
 
Beneficial when used in the context of beneficial ownership has the analogous
meaning to that specified in Rule 13d-3 under the Securities Exchange Act of
1934, as amended.
 
Best of Mezzanine Borrower's Knowledge, shall mean the actual (as opposed to
imputed or constructive) present knowledge of: Eric Resnick, Peter McDermott,
John Brady, and Barry Bloom after due inquiry, and without creating any personal
liability on the part of any said individuals. In the case where the term "Best
of Mezzanine Borrower's Knowledge" is used in the context of representations or
warranties of Borrower to be made after the date hereof, the term shall include
the Person or Persons, as applicable, that occupy the capacities of said
individuals on the date such representation or warranty is made to the extent
that one or more of such individuals no longer occupy their current capacities.
 
Budget shall have the meaning set forth in the Loan Agreement (Mortgage).
 
Building Equipment shall have the meaning set forth in the Security Instrument.
 
Business Day shall mean any day other than a Saturday, Sunday or any other day
on which national banks in New York, California or in the state in which
Servicer is located are not open for business. When used with respect to an
Interest Determination Date, Business Day shall mean any day on which dealings
in deposits in U.S. Dollars are transacted in the London interbank market.
 

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Capital Expenditures shall mean any amount incurred in respect of capital items
which in accordance with GAAP would not be included in Mortgage Borrower’s
annual financial statements for an applicable period as an operating expense of
the Property.
 
Cash Management Bank (Senior Mezzanine) shall mean LaSalle Bank National
Association or any successor Approved Bank acting as Cash Management Bank
(Senior Mezzanine) under the Account Agreement (Senior Mezzanine) or other
financial institution approved by the Mezzanine Lender.
 
Cash Management Bank (Mortgage) shall have the meaning set forth in the Loan
Agreement (Mortgage).
 
Close Affiliate shall mean with respect to any Person (the "First Person") any
other Person (each, a "Second Person") which is an Affiliate of the First Person
and in respect of which any of the following are true: (a) the Second Person
owns, directly or indirectly, at least 75% of all of the legal, Beneficial
and/or equitable interest in such First Person, (b) the First Person owns,
directly or indirectly, at least 75% of all of the legal, Beneficial and/or
equitable interest in such Second Person, or (c) a third Person owns, directly
or indirectly, at least 75% of all of the legal, Beneficial and/or equitable
interest in both the First Person and the Second Person.
 
Closing Date shall mean the date of this Agreement set forth in the first
paragraph hereof.
 
Closing Date NOI shall mean $37,883,902.
 
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.
 
Collateral shall mean collectively (i) all of the Pledged Collateral and all
proceeds thereof, (ii) all Receipts, (iii) any stock certificates or other
certificates, membership interest certificates or instruments evidencing any of
the foregoing property described in clauses (i) and (ii) above, (iv) the Rate
Cap Collateral (Senior Mezzanine), (v) the Account Collateral (Senior Mezzanine)
and (vi) all other rights appurtenant to the property described in clauses (i)
through (v) above.
 
Collateral Accounts shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Collateral Accounts (Intermediate Mezzanine) shall have the meaning set forth in
the Intermediate Mezzanine Loan Agreement.
 
Collateral Accounts (Junior Mezzanine) shall have the meaning set forth in the
Junior Mezzanine Loan Agreement.
 

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Collateral Accounts (Senior Mezzanine) shall have the meaning set forth in
Section 3.1.1.
 
Control shall mean (i) the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise and
(ii) the ownership, direct or indirect, of no less than 51% of the voting
securities of such Person, and the terms Controlled, Controlling and Common
Control shall have correlative meanings.
 
Counterparty shall mean the counterparty to the Interest Rate Cap Agreement
(Senior Mezzanine) and any counterparty under a Replacement Interest Rate Cap
Agreement (Senior Mezzanine) or Extension Interest Rate Cap Agreement and, if
applicable, any credit support provider identified in the Interest Rate Cap
Agreement, Replacement Interest Rate Cap Agreement (Senior Mezzanine) or
Extension Interest Rate Cap Agreement.
 
Counterparty Opinion shall have the meaning set forth in Section 9.3(f).
 
Debt shall mean, with respect to any Person at any time, (a) indebtedness or
liability of such Person for borrowed money whether or not evidenced by bonds,
debentures, notes or other instruments, or for the deferred purchase price of
property or services; (b) obligations of such Person as lessee under leases
which should have been or should be, in accordance with GAAP, recorded as
capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for, or liabilities incurred on the account of, such Person; (e) obligations or
liabilities of such Person arising under letters of credit, credit facilities or
other acceptance facilities; (f) obligations of such Person under any guarantees
or other agreement to become secondarily liable for any obligation of any other
Person, 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 otherwise to
assure a creditor against loss; (g) obligations of such Person secured by any
Lien on any property of such Person, whether or not the obligations have been
assumed by such Person; or (h) obligations of such Person under any interest
rate or currency exchange agreement.
 
Debt Service (Senior Mezzanine) shall mean, with respect to any particular
period of time, scheduled interest payments under the Mezzanine Note.
 
Default shall mean the occurrence of any event hereunder or under any other Loan
Document (Senior Mezzanine) which, but for the giving of notice or passage of
time, or both, would be an Event of Default.
 
Default Rate shall have the meaning set forth in the Note.
 
Disqualified Transferee shall mean any Person or its Close Affiliate that, (i)
has (within the past five (5) years) defaulted, or is now in default, beyond any
applicable cure period, of its material obligations, under any material written
agreement with Mezzanine Lender, any Affiliate of Mezzanine Lender, or, unless
approved by the
 

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Mezzanine Lender, any other financial institution or other person providing or
arranging financing; (ii) has been convicted in a criminal proceeding for a
felony or a crime involving moral turpitude or that is an organized crime figure
or is reputed (as determined by Mezzanine Lender in its sole discretion) to have
substantial business or other affiliations with an organized crime figure; (iii)
has at any time filed a voluntary petition under the Bankruptcy Code or any
other federal or state bankruptcy or insolvency law; (iv) as to which an
involuntary petition (which was not subsequently dismissed within one hundred
twenty (120) days) has at any time been filed under the Bankruptcy Code or any
other federal or state bankruptcy or insolvency law; (v) has at any time filed
an answer consenting to or acquiescing 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; (vi) has at any time consented to or acquiesced in
or joined in an application for the appointment of a custodian, receiver,
trustee or examiner for itself or any of its property; (vii) has at any time
made an assignment for the benefit of creditors, or has at any time admitted its
insolvency or inability to pay its debts as they become due; or (viii) has been
found by a court of competent jurisdiction or other governmental authority in a
comparable proceeding to have violated any federal or state securities laws or
regulations promulgated thereunder.
 
Downgrade shall have the meaning as set forth in Section 9.3(c) hereof.
 
Eligibility Requirements means, with respect to any Person, that such Person (i)
has total assets (in name or under management) in excess of $600,000,000 and
(except with respect to a pension advisory firm or similar fiduciary)
capital/statutory surplus or shareholder's equity of $250,000,000 and (ii) is
regularly engaged in the business of making or owning commercial real estate
loans or operating commercial properties.
 
Eligible Account has the meaning set forth in the Account Agreement (Senior
Mezzanine).
 
Environmental Certificate shall have the meaning set forth in Section 12.2.1.
 
Environmental Claim shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Environmental Event shall have the meaning set forth in Section 12.2.1.
 
Environmental Indemnity (Senior Mezzanine) shall mean the Environmental
Indemnity, dated the date hereof, made by Guarantor in favor of Mezzanine
Lender.
 
Environmental Law shall have the meaning provided in the Environmental Indemnity
(Senior Mezzanine).
 
Environmental Reports shall have the meaning set forth in Section 12.1.
 

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ERISA shall mean the United States Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder.
 
ERISA Affiliate shall have the meaning set forth in Section 4.1.9.
 
Event of Default shall have the meaning set forth in Section 17.1(a).
 
Excess Cash Flow shall mean "Excess Cash Flow" as defined in the Loan Agreement
(Mortgage).
 
Exculpated Parties shall have the meaning set forth in Section 18.1.1.
 
Excusable Delay shall men 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 Mezzanine Borrower or Mortgage Borrower,
but Mezzanine Borrower's or Mortgage Borrower's lack of funds in and of itself
shall not be deemed a cause beyond the control of Mezzanine Borrower or Mortgage
Borrower, as applicable.
 
Extension Interest Rate Cap Agreement shall mean, following the Mezzanine
Borrower's exercise of its option to extend the Maturity Date pursuant to
Section 5 of the Mezzanine Note, an Interest Rate Cap Agreement or Agreements
(together with the confirmations and schedules relating thereto), each from an
Acceptable Counterparty and satisfying the requirements set forth on Exhibit I
hereto; provided that, to the extent any such interest rate cap agreement does
not meet the foregoing requirements, an "Extension Interest Rate Cap Agreement"
shall be such interest rate cap agreement as may be approved by each of the
Mezzanine Lender in its sole discretion).
 
Fiscal Year shall mean the period commencing on the Closing Date and ending on
and including December 31 of the calendar year in which the Closing Date occurs
and thereafter each twelve month period commencing on January 1 and ending on
December 31 until the Debt is repaid in full, or such other common fiscal year
of Borrower as Borrower may select from time to time with the prior consent of
Lender, such consent not to be unreasonably withheld.
 
GAAP shall mean the generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession, to the extent such principles are applicable
to the facts and circumstances on the date of determination, as appropriately
modified by the Uniform System, and as further modified for purposes of
calculating Net Membership Cash Flow.
 
General Partner shall mean CNL Hotel Del Senior Mezz Partners GP, LLC, a
Delaware limited liability company.
 

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Governmental Authority shall mean any court, board, agency, commission, office
or other authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence.
 
Guarantor shall mean, collectively, CNL Hospitality Partners, LP, a Delaware
limited partnership and KSL DC Operating, LLC, a Delaware limited liability
company.
 
Hazardous Materials shall have the meaning provided in the Environmental
Indemnity (Senior Mezzanine).
 
Holding Account shall mean the "Holding Account" and various sub-accounts to the
Holding Account established pursuant to the Loan Agreement (Mortgage) as in
effect on the date hereof.
 
Impositions shall have the meaning set forth in the Loan Agreement (Mortgage).
 
Increased Costs shall have the meaning set forth in Section 2.4.1.
 
Indebtedness shall mean, at any given time, the Principal Amount, together with
all accrued and unpaid interest thereon and all other obligations and
liabilities due or to become due to Mezzanine Lender pursuant hereto, under the
Mezzanine Note or in accordance with the other Loan Documents (Senior Mezzanine)
and all other amounts, sums and expenses paid by or payable to Mezzanine Lender
hereunder or pursuant to the Mezzanine Note or the other Loan Documents (Senior
Mezzanine).
 
Indemnified Parties shall have the meaning set forth in Section 19.12(b).
 
Independent shall mean, when used with respect to any Person, a Person who: (i)
does not have any direct financial interest or any material indirect financial
interest in Mortgage Borrower, Mezzanine Borrower, Intermediate Mezzanine
Borrower, Junior Mezzanine Borrower, or in any of their Affiliates, (ii) is not
connected with Mortgage Borrower, Mezzanine Borrower, Intermediate Mezzanine
Borrower, Junior Mezzanine Borrower, or any of their Affiliates, as an officer,
employee, promoter, underwriter, trustee, partner, member, manager, creditor,
director, supplier, customer or person performing similar functions and (iii) is
not a member of the immediate family of a Person defined in (i) or (ii) above.
 
Independent Architect shall mean an architect, engineer or construction
consultant selected by Mezzanine Borrower or Mortgage Borrower, as applicable,
which is Independent, licensed to practice in the State and has at least five
(5) years of architectural experience and which is reasonably acceptable to
Mezzanine Lender.
 

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Independent Director, Independent Manager, or Independent Member shall mean a
Person who is not and will not be while serving and has never been (i) a member
(other than an Independent Member), manager (other than an Independent Manager),
director, (other than an Independent Director), employee, attorney, or counsel
of Mezzanine Borrower, Mezzanine Borrower, Intermediate Mezzanine Borrower,
Junior Mezzanine Borrower, or their Affiliates (provided that Mortgage Borrower,
Mezzanine Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower,
and each of their respective general partners, may not have the same Independent
Directors, Independent Managers or Independent Members), (ii) in the seven (7)
years prior to the Closing Date, a customer, supplier or other Person who
derives more than 1% of its purchases or revenues from its activities with
Mezzanine Borrower, Mortgage Borrower, Intermediate or their Affiliates, (iii) a
direct or indirect legal or beneficial owner in such entity or any of its
Affiliates, (iv) a member of the immediate family of any member, manager,
employee, attorney, customer, supplier or other Person referred to above, or (v)
a person Controlling or under the common Control of anyone listed in (i) through
(iv) above. A Person that otherwise satisfies the foregoing shall not be
disqualified from serving as an Independent Director or Independent Manager or
Independent Member if such individual is at the time of initial appointment, or
at any time while serving as such, is an Independent Director or Independent
Manager or Independent Member, as applicable, of a Single Purpose Entity
affiliated with Mezzanine Borrower, other than the Mortgage Borrower, Mezzanine
Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower, or each of
their respective general partners.
 
Initial LIBOR Cap Strike Rate shall mean 4%.
 
Insurance Requirements shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Interest Determination Date shall have the meaning set forth in the Mezzanine
Note.
 
Interest Period shall have the meaning set forth in the Mezzanine Note.
 
Interest Rate Cap Agreement (Senior Mezzanine) shall mean an Interest Rate
Agreement or Agreements (together with the confirmation and schedules relating
thereto), or, with Mezzanine Lender's prior written consent (which shall not be
unreasonably withheld or delayed), a swap or other interest rate hedging
instrument, each between a Counterparty and Mezzanine Borrower obtained by
Mezzanine Borrower and collaterally assigned to Mezzanine Lender pursuant to
this Agreement, and each satisfying the requirements set forth in Exhibit I and,
in the case of a swap or other interest rate hedging agreement consented to by
Mezzanine Lender, any additional requirements of the Rating Agencies).
 
Intermediate Mezzanine Account shall mean account number 722386.1 at LaSalle
Bank National Association.
 

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Intermediate Mezzanine Borrower shall mean CNL Hotel Del Intermediate Mezz
Partners, LP, a Delaware limited partnership.
 
Intermediate Mezzanine Lender shall mean German American Capital Corporation, a
Maryland corporation, its successors and assigns.
 
Intermediate Mezzanine Loan shall mean the $20,000,000 mezzanine loan from
Intermediate Mezzanine Lender to the Intermediate Mezzanine Borrower.
 
Intermediate Mezzanine Loan Agreement shall mean that certain Mezzanine Loan and
Security Agreement (Intermediate Mezzanine), dated as of the date hereof,
between Intermediate Mezzanine Borrower, as borrower, and Intermediate Mezzanine
Lender, as lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
 
Intermediate Mezzanine Loan Default Notice shall mean a notice from Intermediate
Mezzanine Lender (upon which Lender may conclusively rely without any inquiry
into the validity thereof) that an "Event of Default" has occurred and is
continuing under any of the Intermediate Mezzanine Loan Documents.
 
Intermediate Mezzanine Loan Default Revocation Notice shall shall have the
meaning set forth in Section 3.1.6(f).
 
Junior Mezzanine Account shall mean an account to be established at LaSalle Bank
National Association in the event the Junior Mezzanine Account is funded.
 
Junior Mezzanine Borrower shall mean CNL Hotel Del Junior Mezz Partners, LP, a
Delaware limited partnership.
 
Junior Mezzanine Lender shall mean German American Capital Corporation, a
Maryland corporation, its successors and assigns.
 
Junior Mezzanine Loan shall mean the $60,000,000 mezzanine loan from Junior
Mezzanine Lender to the Junior Mezzanine Borrower, to be funded on or after the
date hereof, that will be evidenced and secured by the Junior Mezzanine Loan
Documents.
 
Junior Mezzanine Loan Agreement shall mean that certain Mezzanine Loan and
Security Agreement (Junior Mezzanine), to be funded on or after the date hereof,
between Junior Mezzanine Borrower, as borrower, and Junior Mezzanine Lender, as
lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
 
Junior Mezzanine Loan Default Notice shall mean a notice from Junior Mezzanine
Lender (upon which Lender may conclusively rely without any inquiry into the
validity thereof) that an "Event of Default" has occurred and is continuing
under any of the Junior Mezzanine Loan Documents.
 

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Junior Mezzanine Loan Default Revocation Notice shall shall have the meaning set
forth in Section 3.1.6(f).
 
Late Payment Charge shall have the meaning set forth in Section 2.2.3.
 
Lease shall have the meaning set forth in the Loan Agreement (Mortgage).
 
Legal Requirements shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
LIBOR shall have the meaning set forth in the Mezzanine Note.
 
LIBOR Margin shall have the meaning set forth in the Mezzanine Note.
 
LIBOR Rate shall have the meaning set forth in the Mezzanine Note.
 
Lien shall mean any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance or charge on or
affecting Mortgage Borrower, Mezzanine Borrower, the Collateral, the Property,
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, and the filing of mechanic's, materialmen's and other
similar liens and encumbrances.
 
Loan shall mean the loan in the amount of $90,000,000 made by Mezzanine Lender
to Mezzanine Borrower pursuant to this Agreement.
 
Loan (Mortgage) or Mortgage Loan shall mean the loan in the amount of
$230,000,000 made by Mortgage Lender to Mortgage Borrower pursuant to the Loan
Agreement (Mortgage).
 
Loan Agreement (Mortgage) shall mean the Loan and Security Agreement, dated as
of the date hereof, between Mortgage Borrower, as borrower and Mortgage Lender,
as lender.
 
Loan Documents (Senior Mezzanine) shall mean, collectively, this Agreement, the
Mezzanine Note, the Account Agreement (Senior Mezzanine), the Recourse Guaranty
(Senior Mezzanine), the Environmental Indemnity (Senior Mezzanine) and the
Pledge and any and all other agreements, instruments or documents executed by
Mezzanine Borrower (or another Person) evidencing, securing or delivered in
connection with the Loan and the transactions contemplated thereby, including,
without limitation, any certificates or representations delivered by or on
behalf of Mezzanine Borrower, any Affiliate of Mezzanine Borrower, Manager or
any Affiliate of Manager (including, without limitation, any certificates in
connection with any legal opinions delivered on the date hereof).
 

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Loan Documents (Mortgage) shall mean, collectively, the Loan Agreement
(Mortgage), the Mortgage Note, the Security Instrument, the Assignment of
Leases, the Trademark Security Agreement (Mortgage), the Environmental Indemnity
(Mortgage), the Assignment of Management Agreement (Mortgage), the Account
Agreement (Mortgage), the Recourse Guaranty (Mortgage) and all other documents
executed and/or delivered by Mortgage Borrower in connection with the Loan
(Mortgage) including any certifications or representations delivered by or on
behalf of Mortgage Borrower, any Affiliate of Mortgage Borrower, Manager, or any
Affiliate of the Manager (including, without limitation, any certificates in
connection with any legal opinions delivered on the date hereof), together with
all of the Accommodation Security Documents executed by the Operating Lessee. 
 
Low DSCR Period shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Management Agreement shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Management Control shall mean, with respect to any direct or indirect interest
in the Mortgage Borrower or the Property (not including Manager under an
Approved Management Agreement), the power and authority to make and implement or
cause to be made and implemented all material decisions with respect to the
operation, management, financing and disposition of the specified interest.
 
Management Fee shall mean an amount equal to the monthly property management
fees payable to the Manager pursuant to the terms of the Management Agreement
for management services, the Group Services Fee (including, but not limited to,
the Sales and Marketing Group Services Expense payable monthly to Manager equal
to up to one percent (1%) of Hotel Revenues), incentive management fees and any
other fees described in the Management Agreement, and any allocated franchise
fees.
 
Manager shall mean KSL DC Management LLC, or any replacement "Manager" appointed
in accordance with Section 5.2.14 hereof.
 
Manager Accounts shall mean the "Bank Accounts" (as defined in the Management
Agreement) maintained by Manager in the name of Mortgage Borrower or Operating
Lessee with respect to the Property and in accordance with the terms of each
Management Agreement.
 
Material Adverse Effect shall mean any event or condition that has a material
adverse effect on (i) the Property taken as a whole, (ii) the use, operation, or
value of the Property, (iii) the business, profits, operations or financial
condition of Mortgage Borrower or Mezzanine Borrower, (iv) the ability of
Mezzanine Borrower to repay the principal and interest of the Loan as it becomes
due or to satisfy any of Mezzanine Borrower's obligations under the Loan
Documents (Senior Mezzanine), (v) the ability of Mortgage Borrower to repay the
principal and interest of the Loan (Mortgage) as it becomes due or to satisfy
any of Mortgage Borrower's obligations under
 

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the Loan Documents (Mortgage), (vi) the validity or enforceability of any of the
Loan Documents (Senior Mezzanine) against any party thereto, (vii) the
Collateral taken as a whole or (viii) the priority of the Liens in favor of
Mezzanine Lender.
 
Material Lease shall mean any Lease (a) demising a premises within the Property
that is more than 10,000 net rentable square feet or (b) that is for a term
equal to or greater than sixty (60) months.
 
Maturity Date shall have the meaning set forth in the Mezzanine Note.
 
Maturity Date Payment shall have the meaning set forth in the Mezzanine Note.
 
Maximum Legal Rate shall mean the maximum non-usurious 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 Mezzanine Note and as
provided for herein or the other Loan Documents (Senior Mezzanine), 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.
 
Maximum Pay Rate shall mean, (A) the Initial LIBOR Cap Strike Rate through the
Initial Maturity Date and (B) during the term of each Extension Option (as
defined in the Mezzanine Note), the lesser of (i) the product of (x) 6% and (y)
a fraction, the numerator of which is trailing twelve month Net Operating Income
as of the end of the Initial Maturity Date (or First Extended Maturity Date) and
the denominator of which is Closing Date NOI and (ii) the rate, which when added
to the average of the LIBOR Margin (Mortgage) and the LIBOR Margin applicable to
each of the Mezzanine Loans (such average weighted to reflect the size of the
associated Loan or Mezzanine Loan, as applicable, as a percentage of the total
combined outstanding principal balance of the Loan and Mezzanine Loans), equals
10.50%.
 
Mezzanine Borrower has the meaning set forth in the first paragraph of this
Agreement.
 
Mezzanine Borrower's Account shall mean following account, or such other account
with any Person subsequently identified in a written notice from Mezzanine
Borrower to Mezzanine Lender, which Mezzanine Borrower's Account shall be under
the sole dominion and control of Mezzanine Borrower:
 
Bank: Bank of America, Los Angeles, CA
ABA#: 121000358
Attention: Haik Melkonyan
Account Name: Concentration Account
Account Number: 12355-57180

Mezzanine Debt Service Reserve Account shall have the meaning set forth in
Section 3.1.1.
 

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Mezzanine Lender shall have the meaning set forth in the first paragraph of this
Agreement.
 
Mezzanine Lender Monthly Debt Service Notice Letter shall have the meaning set
forth in Section 3.1.6(e).
 
Mezzanine Note shall mean that certain Mezzanine Note (Senior Mezzanine), dated
as of the date hereof in the principal amount of NINETY MILLION DOLLARS
($90,000,000), made by Mezzanine Borrower in favor of Mezzanine Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
 
Mortgage Borrower shall mean CNL Hotel Del Partners, LP, a Delaware limited
partnership.
 
Mortgage Borrower General Partner shall mean CNL Hotel Del Partners GP, LLC, a
Delaware limited liability company, the general partner of Mortgage Borrower.
 
Mortgage Default shall have the meaning ascribed to "Default" in the Loan
Agreement (Mortgage).
 
Mortgage Event of Default shall have the meaning ascribed to "Event of Default"
in the Loan Agreement (Mortgage).
 
Mortgage Lender shall mean German American Capital Corporation, its successors
and assigns.
 
Mortgage Loan shall mean the loan in the amount of $230,000,000 made by Mortgage
Lender to Mortgage Borrower pursuant to the Loan Agreement (Mortgage).
 
Mortgage Note shall have the meaning ascribed to "Note" in the Loan Agreement
(Mortgage). 
 
Net Excess Cash Flow shall have the meaning set forth in Section 3.1.6(a).
 
Net Excess Cash Flow Commencement Date shall have the meaning set forth in
Section 3.1.6(a).
 
Net Membership Cash Flow shall mean the net cash flow (whether positive or
negative) consisting of the following, to the extent not otherwise accounted for
in Hotel Revenue or Operating Expenses in accordance with GAAP: (a) cash
received from sales of new club memberships and conversions of existing club
memberships to new club memberships (including deposits and ongoing dues
relating thereto), plus (b) cash principal payments received on membership notes
evidencing the financing of the purchase of new club memberships or the
conversion of existing club
 

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memberships, less (c) cash paid to cancel or recall existing club memberships
and refunds of new club membership sales.
 
Net Operating Income shall mean, for any specified period, the excess of
Operating Income over Operating Expenses for the trailing twelve (12) month
period.
 
Non-Consolidation Opinion shall have the meaning provided in Section 2.5.5. 
 
OFAC List means the list of specially designated nationals and blocked persons
subject to financial sanctions that is maintained by the U.S. Treasury
Department, Office of Foreign Assets Control and accessible through the internet
website www.treas.gov/ofac/t11sdn.pdf.
 
Notes shall mean, collectively, the Mortgage Note and the Mezzanine Note.
 
Obligations shall mean, collectively, the Obligations (Senior Mezzanine),
Obligations (Intermediate Mezzanine), Obligations (Junior Mezzanine), and the
Obligations (Mortgage).
 
Obligations (Intermediate Mezzanine) shall have the meaning set forth in the
Intermediate Mezzanine Loan Agreement.
 
Obligations (Junior Mezzanine) shall have the meaning set forth in the Junior
Mezzanine Loan Agreement.
 
Obligations (Mortgage) shall have the meaning ascribed to "Obligations" in the
Loan Agreement (Mortgage).
 
Obligations (Senior Mezzanine) shall mean all indebtedness, obligations and
liabilities of Mezzanine Borrower, CNL Hospitality Partners, LP, Guarantor and
General Partner to Mezzanine Lender, under this Agreement or any of the other
Loan Documents (Senior Mezzanine) or in respect of the Loan or the Mezzanine
Note, or other instrument at any time evidencing any of the foregoing, whether
existing on the date of this Agreement or arising or incurred hereafter, direct
or indirect, joint or several, absolute or continent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise.
 
Officer's Certificate shall mean a certificate executed by an authorized
signatory of Mezzanine Borrower that is familiar with the financial condition of
Mezzanine Borrower, the Mortgage Borrower and the operation of the Property or
the particular matter which is the subject of such Officer's Certificate.
 
Operating Expenses shall have the meaning set forth in the Loan Agreement
(Mortgage).
 

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Operating Income shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Operating Lessee shall mean Hotel Del Coronado, LP, a Delaware limited
partnership.
 
Opinion of Counsel shall mean opinions of counsel of law firm(s) licensed to
practice in California, New York, and Delaware selected by Mezzanine Borrower
and reasonably acceptable to Mezzanine Lender.
 
Other Charges shall mean maintenance charges, impositions other than
Impositions, 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 by any Governmental Authority, other than those required to be
paid by a Tenant pursuant to its respective Lease.
 
Other Taxes shall have the meaning set forth in Section 2.4.3.
 
Payment Date shall have the meaning set forth in the Mezzanine Note.
 
Permitted Borrower Transferee shall mean any entity (i) that is experienced in
owning and operating (including acting as asset manager of) properties similar
to the Property, (ii) that either (a) has a net worth together with its Close
Affiliates, as of a date no more than six (6) months prior to the date of the
transfer of at least $300 Million (exclusive of the Property) and, immediately
prior to such transfer, controls, together with its Close Affiliates real estate
equity assets of at least $1 Billion or (b) together with its Close Affiliates
owns or has under management or acts as the exclusive fund manager or investment
advisor, at the time of the transfer, not fewer than 6 luxury resort hotels
(excluding the Property) containing not fewer than 3,000 hotel rooms in the
aggregate and (iii) that is not a Disqualified Transferee.
 
Permitted Debt shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Permitted Debt (Senior Mezzanine) shall mean the Mezzanine Note and other
obligations, indebtedness and liabilities specifically provided for in any Loan
Document (Senior Mezzanine) and secured by this Agreement and the Pledge and the
other Loan Documents (Senior Mezzanine).
 
Permitted Encumbrances shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Permitted Fund Manager means any Person that on the date of determination is (i)
a nationally-recognized manager of investment funds investing in debt or equity
interests relating to commercial real estate, (ii) investing through a fund with
committed capital of at least $250,000,000 and (iii) not subject to a bankruptcy
proceeding.
 

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Permitted Investments shall have the meaning set forth in the Account Agreement
(Senior Mezzanine).
 
Permitted Loan Amendment shall have the meaning set forth in Section 5.1.18(b).
 
Permitted Mezzanine Transfer shall mean (a) a pledge of direct or indirect
equity interests in Mezzanine Borrower, Intermediate Mezzanine Borrower, or
Junior Mezzanine Borrower to secure the Intermediate Mezzanine Loan, Junior
Mezzanine Loan, or Revolving Credit Loan, and (b) any foreclosure (or transfer
in lieu thereof) in respect of the Intermediate Mezzanine Loan, Junior Mezzanine
Loan, or Revolving Credit Loan, provided that the acquirer at foreclosure (or
transfer in lieu thereof) (i) shall be a Qualified Transferee or (ii) shall have
received Mezzanine Lender's prior written consent prior to such foreclosure (or
such transfer in lieu of foreclosure), subject in the case of each of clauses
(i) and (ii) to the requirement that the Intermediate Mezzanine Borrower, Junior
Mezzanine Borrower, and Revolving Credit Borrower deliver to Mezzanine Lender,
the Mortgage Lender and the Rating Agencies a nonconsolidation opinion
satisfactory to the Rating Agencies with respect to any Person having more than
a 49% direct or indirect equity interest (either individually or together with
any interests held by an affiliate of such Person) in Borrower.
 
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.
 
Physical Conditions Report shall mean with respect to the Property,
collectively, the (i) seismic report and (ii) structural engineering report
(prepared by an Independent Architect), both of which have been (a) addressed to
Mezzanine Lender, (b) prepared based on a scope of work determined by Mortgage
Lender in Mortgage Lender’s reasonable discretion, and (c) in form and content
acceptable to Mortgage Lender in Mortgage Lender’s reasonable discretion,
together with any amendments or supplements thereto.
 
Plan shall have the meaning set forth in Section 4.1.9(a).
 
Pledge shall mean that certain Pledge and Security Agreement (Senior Mezzanine),
dated as of the date hereof, from Mezzanine Borrower to Mezzanine Lender
pledging (i) Mezzanine Borrower's 99.5% direct partnership interests in Mortgage
Borrower and (ii) Mezzanine Borrower’s 100% direct membership interest in
Mortgage Borrower General Partner.
 
Pledged Collateral shall have the meaning set forth in the Pledge.
 
Pre-approved Manager shall mean any entity set forth on Schedule IV hereof
(which schedule is identical to the schedule of "Qualified Managers" contained
in the Management Agreement).
 

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Pre-approved Transferee shall mean any of the entities set forth on Schedule III
hereof, or any Close Affiliates thereof, provided any of the foregoing entities
or their Close Affiliates shall only be a "Pre-approved Transferee" if (i) such
entity continues to be Controlled by substantially the same Persons Controlling
such entity as of the Closing Date or if such Pre-approved Transferee is a
publicly traded company, such Pre-approved Transferee continues to be publicly
traded on an established securities market, (ii) there has been no material
adverse change in the financial condition or results of operations of such
entity since the Closing Date, (iii) such entity is not a Disqualified
Transferee and (iv) if such entity as of the Closing Date is rated (a)
"Investment Grade," there has been no deterioration in such entity's long-term
or short-term credit rating (if any) since the Closing Date below "BBB-" or (b)
below "Investment Grade", there has been no deterioration in such entity's
long-term or short-term credit rating (if any) since the Closing Date.
 
Prepayment Fee shall have the meaning set forth in the Mezzanine Note.
 
Principal Amount shall have the meaning set forth in the Mezzanine Note.
 
Proceeds shall have the meaning set forth in the Loan Agreement (Mortgage)
 
Prohibited Loan Amendment shall have the meaning specified in Section 5.1.18(b).
 
Prohibited Person means any Person identified on the OFAC List or any other
Person with whom a U.S. Person may not conduct business or transactions by
prohibition of Federal law or Executive Order of the President of the United
States of America.
 
Property shall have the meaning set forth in the Loan Agreement (Mortgage).
 
Qualified Transferee shall mean one or more of the following:
 
(i) a real estate investment trust, bank, saving and loan association,
investment bank, insurance company, trust company, commercial credit
corporation, pension plan, pension fund or pension advisory firm, mutual fund,
government entity or plan that satisfies the Eligibility Requirements;
 
(ii) an investment company, money management firm or "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act of 1933, as
amended, or an institutional "accredited investor" within the meaning of
Regulation D under the Securities Act of 1933, as amended, that satisfies the
Eligibility Requirements;
 
(iii) an institution substantially similar to any of the foregoing entities
described in clauses (i) or (ii) that satisfies the Eligibility Requirements;
 

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(iv) any entity Controlled (and only so long as such entity continues at all
times to be Controlled) by any of the entities described in clauses (i) or (iii)
above;
 
(vi) an investment fund, limited liability company, limited partnership or
general partnership where a Permitted Fund Manager or an entity that is
otherwise a Qualified Transferee under clauses (i), (ii), (iii) or (iv) of this
definition acts as the general partner, managing member or fund manager and at
least 50% of the equity interests in such investment vehicle are owned, directly
or indirectly, by one or more entities that are otherwise Qualified Transferees
under clauses (i), (ii), (iii) or (iv) of this definition.
 
Rate Cap Collateral (Senior Mezzanine) shall have the meaning set forth in
Section 9.2.
 
Rating Agencies shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Rating Agency Confirmation shall have the meaning set forth in the Loan
Agreement (Mortgage).
 
Recourse Guaranty (Mortgage) shall mean that certain Guaranty of Recourse
Obligations, dated as of the date hereof, by Guarantor in favor of Mortgage
Lender, as the same may be amended, supplemented, restated or otherwise modified
from time to time.
 
Recourse Guaranty (Senior Mezzanine) shall mean that certain Guaranty of
Recourse Obligations of Mezzanine Borrower, dated as of the date hereof, by
Guarantor in favor of Mezzanine Lender, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
 
Register shall have the meaning set forth in Section 15.4.
 
Regulatory Change shall mean any change after the date of this Agreement in
federal, state or foreign laws or regulations or the adoption or the making,
after such date, of any interpretations, directives or requests applying to
Mezzanine Lender, or any Person Controlling Mezzanine Lender or to a class of
banks or companies Controlling banks of or under any federal, state or foreign
laws or regulations (whether or not having the force of law) by any court or
Governmental Authority or monetary authority charged with the interpretation or
administration thereof.
 
Replacement Interest Rate Cap Agreement (Senior Mezzanine) shall mean, in
connection with a replacement of an Interest Rate Cap Agreement following a
Downgrade of the Counterparty thereto, an interest rate cap agreement (together
with the confirmation and schedules relating thereto) from an Acceptable
Counterparty and satisfying the requirements set forth on Exhibit I hereto;
provided that to the extent any such interest rate cap agreement does not meet
the foregoing requirements a "Replacement Interest Cap Agreement (Senior
Mezzanine)" shall be such interest rate cap agreement approved in writing by
Mezzanine Lender.
 

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Revolving Credit Borrower shall mean CNL KSL Partners, LP, a Delaware limited
partnership.
 
Revolving Credit Lender shall mean Deutsche Bank Trust Company Americas, its
successors and assigns.
 
Revolving Credit Loan shall mean the $10,000,000 revolving credit loan from
Revolving Credit Lender to the Revolving Credit Borrower that is evidenced and
secured by the Revolving Credit Loan Documents.
 
Revolving Credit Loan Documents shall mean, collectively, the Revolving Credit
Agreement, the Revolving Credit Note and any and all other agreements,
instruments or documents executed by Revolving Credit Borrower evidencing,
securing or delivered in connection with the Revolving Credit Loan and the
transactions contemplated thereby, including, without limitation, officer's
certificates.
 
Revolving Credit Note shall mean that certain Note, dated the date hereof, made
by Revolving Credit Borrower, as maker, in favor of Revolving Credit Lender, as
payee, in the principal amount of $10,000,000.
 
S&P shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc.
 
Securitization shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
Senior Mezzanine Account shall have the meaning set forth in Section 3.1.1.
 
Servicer shall mean such Person designated in writing with an address for such
Person by Mezzanine Lender, in its sole discretion, to act as Mezzanine Lender's
agent hereunder with such powers as are specifically delegated to the Servicer
by Mezzanine Lender, whether pursuant to the terms of this Agreement, the
Account Agreement (Senior Mezzanine) or otherwise, together with such other
powers as are reasonably incidental thereto.
 
Single Purpose Entity shall mean a Person, other than an individual, which (i)
is formed or organized solely for the purpose of owning, holding, developing,
using, operating and financing the Property, (ii) does not engage in any
business unrelated to the Property and the ownership, development, use,
operation and financing thereof, (iii) does not have any assets other than those
related to its interest in the Property or the operation, management and
financing thereof or any indebtedness other than the Permitted Debt, (iv)
maintains its own separate books and records and its own accounts, in each case
which are separate and apart from the books and records and accounts of any
other Person, (v) holds itself out as being a Person, separate and apart from
any other Person, (vi) does not and will not commingle its funds or assets with
those of any other Person, (vii) conducts its own business in its own name;
(viii) maintains separate financial statements, (ix) pays its own liabilities
out of its own funds, (x)
 

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observes all partnership, corporate or limited liability company formalities, as
applicable, (xi) pays the salaries of its own employees, if any, and maintains a
sufficient number of employees, if any, in light of its contemplated business
operations, (xii) does not guarantee or otherwise obligate itself with respect
to the debts of any other Person or hold out its credit as being available to
satisfy the obligations of any other Person, (xiii) does not acquire obligations
or securities of its partners, members or shareholders, (xiv) allocates fairly
and reasonably shared expenses, including, without limitation, any overhead for
shared office space, if any, (xv) uses separate stationary, invoices, and
checks, (xvi) maintains an arms-length relationship with its Affiliates, (xvii)
does not pledge its assets for the benefit of any other Person (other than as
permitted under clauses (a) and (d) of the definition of Permitted Encumbrances)
or make any cash loans or advances to any other Person, (xviii) uses
commercially reasonable efforts to correct any known misunderstanding regarding
its separate identity, and (xix) maintains adequate capital in light of its
contemplated business operations. In addition, if such Person is a partnership,
(1) all general partners of such Person shall be Single Purpose Entities; and
(2) if such Person has more than one general partner, then the organizational
documents shall provide that such Person shall continue (and not dissolve) for
so long as a solvent general partner exists. In addition, if such Person is a
corporation, then, at all times: (a) such Person shall have at least two (2)
Independent Directors and (b) the board of directors of such Person may not take
any action requiring the unanimous affirmative vote of 100% of the members of
the board of directors unless all of the directors, including the Independent
Directors, shall have participated in such vote. In addition, if such Person is
a limited liability company, (a) such Person shall have at least two (2)
Independent Managers or Independent Members, (b) if such Person is managed by a
board of managers, the board of managers of such Person may not take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
managers unless all of the managers, including the Independent Managers, shall
have participated in such vote, (c) if such Person is not managed by a board of
managers, the members of such Person may not take any action requiring the
affirmative vote of 100% of the members of such Person unless all of the
members, including the Independent Members, shall have participated in such
vote, (d) each managing member shall be a Single Purpose Entity and (e) its
articles of organization, certificate of formation and/or operating agreement,
as applicable, shall provide that until all of the Indebtedness and Obligations
are paid in full such entity will not dissolve. In addition, the organizational
documents of such Person shall provide that such Person (1) without the
unanimous consent of all of the partners, directors or members, as applicable,
shall not with respect to itself or to any other Person in which it has a direct
or indirect legal or beneficial interest (a) seek or consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator, custodian or other
similar official for the benefit of the creditors of such Person or all or any
portion of such Person's properties, or (b) take any action that might cause
such Person to become insolvent, petition or otherwise institute insolvency
proceedings or otherwise seek any relief under any laws relating to the relief
from debts or the protection of debtors generally, (2) will maintain its books,
records, resolutions and agreements as official records, (3) will hold its
assets in its own name, (4) will maintain its financial statements, accounting
records and other organizational documents, books and records separate and apart
from any other Person, (5) will not identify its partners,
 

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members or shareholders, or any Affiliates of any of them as a division or part
of it, (6) will maintain an arms-length relationship with its Affiliates, and
(7) will not enter into or be a party to any transaction with its partners,
members, shareholders, or its Affiliates except in the ordinary course of
business and on terms which are intrinsically fair and are no less favorable to
it than would be obtained in a comparable arms-length transaction with a third
party. Notwithstanding the foregoing, Mezzanine Lender hereby consents to
General Partner, CNL Hotel Del Intermediate Mezz Partners GP, LLC, and CNL Hotel
Del Junior Mezz Partners GP, LLC, having only one (1) Independent Director on
its board of directors, and CNL KSL Partners GP, LLC having no Independent
Directors on its board of directors.
 
SPE Entity shall mean Mezzanine Borrower, General Partner, Mortgage Borrower,
Intermediate Mezzanine Borrower, Junior Mezzanine Borrower, Revolving Credit
Borrower, Mortgage Borrower General Partner, CNL Hotel Del Intermediate Mezz
Partners GP, LLC, CNL Hotel Del Junior Mezz Partners GP, LLC, CNL Hotel Del
Tenant Corp., and Operating Lessee which are each required to be a Single
Purpose Entity.
 
Special Taxes shall mean any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, or any liabilities with respect thereto,
including those arising after the date hereof as result of the adoption of or
any change in law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or application
thereof by a Governmental Authority but excluding, in the case of Mezzanine
Lender, such taxes (including income taxes, franchise taxes and branch profit
taxes) as are imposed on or measured by Mezzanine Lender's net income by the
United States of America or any Governmental Authority of the jurisdiction under
the laws under which Mezzanine Lender is organized or maintains a lending
office.
 
State shall mean the State in which the Property or any part thereof is located.
 
Sub-Account(s) shall have the meaning set forth in Section 3.1.1.
 
Taking shall have the meaning set forth in Loan Agreement (Mortgage).
 
Tenant shall have the meaning set forth in the Loan Agreement (Mortgage).
 
Title Company shall have the meaning set forth in the Loan Agreement (Mortgage).
 
Title Policy (Mortgage) shall have the meaning ascribed to "Title Policy" in the
Loan Agreement (Mortgage).
 
Transfer shall mean to, directly or indirectly, sell, assign, convey, mortgage,
transfer, pledge, hypothecate, encumber, grant a security interest in, exchange
or otherwise dispose of any beneficial interest or grant any option or warrant
with respect
 

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to, or where used as a noun, a direct or indirect sale, assignment, conveyance,
transfer, pledge or other disposition of any beneficial interest by any means
whatsoever whether voluntary, involuntary, by operation of law or otherwise.
 
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code as in
effect in the State.
 
Uniform System shall have the meaning set forth in the Loan Agreement
(Mortgage).
 
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 accounting terms not specifically
defined herein shall be construed in accordance with GAAP as modified by the
Uniform System. When used herein, the term "financial statements" shall include
the notes and schedules thereto. Unless otherwise specified herein or therein,
all terms defined in this Agreement shall have the definitions given them in
this Agreement when used in any other Loan Document (Senior Mezzanine) or in any
certificate or other document made or delivered pursuant thereto. 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.
 

II.  
GENERAL TERMS

 
Section 2.1  Loan; Disbursement to Mezzanine Borrower
 
2.1.1  The Loan. Subject to and upon the terms and conditions set forth herein,
Mezzanine Lender hereby agrees to make and Mezzanine Borrower hereby agrees to
accept the Loan on the Closing Date.
 
2.1.2  Disbursement to Borrower. Mezzanine Borrower may request and receive only
one borrowing hereunder in respect of the Loan and any amount borrowed and
repaid hereunder in respect of the Loan may not be reborrowed. Mezzanine
Borrower acknowledges and agrees that the full proceeds of the Loan have been
disbursed by Mezzanine Lender to Mezzanine Borrower on the Closing Date.
 
2.1.3  The Mezzanine Note, Pledge and Loan Documents. The Loan shall be
evidenced by the Mezzanine Note and secured by the Pledge, this Agreement and
the other Loan Documents (Senior Mezzanine).
 
2.1.4  Use of Proceeds. Mezzanine Borrower shall use the proceeds of the Loan as
an equity contribution to Mortgage Borrower to repay and discharge any existing
mezzanine loans and mortgage loans secured by the Property, to make cash
distributions to its partners, and as may be otherwise set forth on the closing
statement executed by Mezzanine Borrower at closing.
 
Section 2.2  Interest; Loan Payments; Late Payment Charge
 
2.2.1  Payment of Principal and Interest.
 
(i)  Except as set forth in Section 2.2.1(ii), interest shall accrue on the
Principal Amount as set forth in the Mezzanine Note.
 
(ii)  Upon the occurrence and during the continuance of an Event of Default and
from and after the Maturity Date if the entire Principal Amount is not repaid on
the Maturity Date, interest on the outstanding principal balance of the Loan
and, to the extent permitted by law, overdue interest and other amounts due in
respect of the Loan shall accrue at the Default Rate calculated from the date
such payment was due without regard to any grace or cure periods contained
herein. Interest at the Default Rate shall be computed from the occurrence of
the Event of Default until the actual receipt and collection of the Indebtedness
(or that portion thereof that is then due). To the extent permitted by
applicable law, interest at the Default Rate shall be added to the Indebtedness,
shall itself accrue interest at the same rate as the Loan and shall be secured
by this Agreement and the Pledge. This paragraph shall not be construed as an
agreement or privilege to extend the date of the payment of the Indebtedness,
nor as a waiver of any other right or remedy accruing to Mezzanine Lender by
reason of the occurrence of any Event of Default, and Mezzanine Lender retains
its rights under the Mezzanine Note to accelerate and to continue to demand
payment of the Indebtedness upon the happening of any Event of Default.
 
2.2.2  Method and Place of Payment.
 
(a)  On each Payment Date, Mezzanine Borrower shall pay or cause to be paid to
Mezzanine Lender interest accruing pursuant to the Mezzanine Note for the entire
Interest Period during which said Payment Date shall occur.
 
(b)  All amounts advanced by Mezzanine Lender pursuant to the applicable
provisions of the Loan Documents (Senior Mezzanine), other than the Principal
Amount, together with any interest at the Default Rate or other charges as
provided therein, shall be due and payable hereunder as provided in the Loan
Documents (Senior Mezzanine). In the event any such advance or charge is not so
repaid by Mezzanine Borrower, Mezzanine Lender may, at its option and upon
notice to Mezzanine Borrower, first apply any payments received under the
Mezzanine Note to repay such advances, together with any interest thereon, or
other charges as provided in the Loan Documents (Senior Mezzanine), and the
balance, if any, shall be applied in payment of any installment of interest or
principal then due and payable.
 
(c)  The Maturity Date Payment shall be due and payable in full on the Maturity
Date.
 

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2.2.3  Late Payment Charge. If any interest payment due under the Loan Documents
(Senior Mezzanine) is not paid by Mezzanine Borrower within five (5) days after
the date on which it is due (or, if such fifth (5th) day is not a Business Day,
then the Business Day immediately preceding such day) on or prior to the date on
which it is due, Mezzanine Borrower shall pay to Mezzanine Lender upon demand an
amount equal to the lesser of three percent (3%) of such unpaid sum or the
Maximum Legal Rate (the Late Payment Charge) in order to defray the expense
incurred by Mezzanine Lender in handling and processing such delinquent payment
and to compensate Mezzanine Lender for the loss of the use of such delinquent
payment. Any such amount shall be secured by this Agreement, the Pledge and the
other Loan Documents (Senior Mezzanine) to the extent permitted by applicable
law. Mezzanine Borrower acknowledges and agrees that the five day grace period
with respect to the applicability of the Late Payment Charge (i) shall only
apply to Mezzanine Borrower's first failure to make a monthly interest payment
in any calendar year and (ii) shall not constitute a payment grace period and
shall in no way limit Mezzanine Lender's rights under Article XVII.
 
2.2.4  Usury Savings. This Agreement and the Mezzanine Note are subject to the
express condition that at no time shall Mezzanine Borrower be obligated or
required to pay interest on the Principal Amount of the Loan at a rate which
could subject Mezzanine 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 (Senior Mezzanine), Mezzanine Borrower is at any
time required or obligated to pay interest on the Principal Amount due under the
Mezzanine Note at a rate in excess of the Maximum Legal Rate, then the LIBOR
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 under the Mezzanine Note. All
sums paid or agreed to be paid to Mezzanine Lender for the use, forbearance, or
detention of the sums due under the Loan, shall, to the extent permitted by
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  Prepayments
 
No prepayments of the Indebtedness shall be permitted except as set forth in
Section 2.3.1 hereof and Section 4 of the Mezzanine Note.
 
2.3.1  Mandatory Prepayment.
 
(a)  Except as described in Section 2.3.1(b) below and subject to Article VIII,
Mezzanine Borrower shall repay the Mezzanine Note, in full, together with
 

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the Prepayment Fee (if applicable), in accordance with Section 4(b) and Section
4(d) (if applicable) of the Mezzanine Note upon the occurrence of any of the
following events:
 
(i)  if the Property is Transferred;
 
(ii)  if all or any portion of the Mortgage Borrower’s interest in the Property
is Transferred;
 
(iii)  if all or any portion of the Mezzanine Borrower’s interest in the
Mortgage Borrower is Transferred;
 
(iv)  if a Transfer or series of Transfers of any direct or indirect ownership
interests in the Mezzanine Borrower or any SPE Entity shall occur which either
individually or in the aggregate with all such Transfers violates the
requirements of Article VIII; or
 
(v)  if the Loan (Mortgage) is repaid or refinanced.
 
(b)  If there shall occur a casualty or Taking in respect of the Property and as
a result thereof the Loan (Mortgage) is prepaid in whole or in part, then, to
the extent that there shall be excess proceeds or awards available following the
application of the proceeds or awards to reconstruct or repair the Property or
to the payment of all or any portion of the Loan (Mortgage) pursuant to the
terms of the Loan Documents (Mortgage) (Excess Proceeds), Mezzanine Borrower
shall repay the Mezzanine Note, or a portion thereof, in the amount of such
available Excess Proceeds. All Excess Proceeds shall be deposited directly into
the Senior Mezzanine Account.
 
2.3.2  Prepayments After Event of Default. If, following an Event of Default,
Mezzanine Lender shall accelerate the Indebtedness and Mezzanine Borrower
thereafter tenders payment of all or any part of the Indebtedness, or if all or
any portion of the Indebtedness is recovered by Mezzanine Lender after such
Event of Default, (a) such payment may be made only on the next occurring
Payment Date together with all unpaid interest thereon as calculated through the
end of the Interest Period during which such Payment Date occurs (even if such
period extends beyond such Payment Date and calculated as if such payment had
not been made on such Payment Date), and all other fees and sums payable
hereunder or under the Loan Documents (Senior Mezzanine), including without
limitation, interest that has accrued at the Default Rate and any Late Payment
Charges), (b) such payment shall be deemed a voluntary prepayment by Mezzanine
Borrower, and (c) Mezzanine Borrower shall pay, in addition to the Indebtedness,
an amount equal to the Prepayment Fee, if applicable.
 
2.3.3  Release of Collateral. Mezzanine Lender shall, upon the written request
and at the reasonable expense of Mezzanine Borrower, upon payment in full of the
Principal Amount and interest on the Loan and all other amounts due and payable
under the Loan Documents (Senior Mezzanine) in accordance with the terms and
provisions of the Mezzanine Note and this Agreement, release the Lien of (i)
this Agreement upon the Account Collateral (Senior Mezzanine) and the Rate Cap
Collateral (Senior Mezzanine) and (ii) the Pledge on the Collateral or assign
it, in whole or in part,
 

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to a new lender. In such event, Mezzanine Borrower shall submit to Mezzanine
Lender, on a date prior to the date of such release or assignment sufficient to
provide a reasonable period for review thereof, a release of lien or assignment
of lien, as applicable, for such Collateral for execution by Lender. Such
release or assignment, as applicable, shall be in a form satisfactory to
Mezzanine Lender in its reasonable discretion. In addition, Mezzanine Borrower
shall provide all other documentation Mezzanine Lender reasonably requires to be
delivered by Mezzanine Borrower in connection with such release or assignment,
as applicable.
 
Section 2.4  Regulatory Change; Taxes
 
2.4.1  Increased Costs. If, as a result of any Regulatory Change or compliance
of Mezzanine Lender therewith, the basis of taxation of payments to Mezzanine
Lender or any company Controlling Mezzanine Lender of the principal of or
interest on the Loan is changed or Mezzanine Lender or the company Controlling
Mezzanine Lender shall be subject to (i) any tax, duty, charge or withholding of
any kind with respect to this Agreement (excluding federal taxation of the
overall net income of Mezzanine Lender or the company Controlling Mezzanine
Lender); or (ii) any reserve, special deposit or similar requirements relating
to any extensions of credit or other assets of, or any deposits with or other
liabilities, of Mezzanine Lender or any company Controlling Mezzanine Lender is
imposed, modified or deemed applicable; or (iii) any other condition affecting
loans to borrowers subject to LIBOR-based interest rates is imposed on Mezzanine
Lender or any company Controlling Mezzanine Lender and Mezzanine Lender
determines that, by reason thereof, the cost to Mezzanine Lender or any company
Controlling Mezzanine Lender of making, maintaining or extending the Loan to
Mezzanine Borrower is increased, or any amount receivable by Mezzanine Lender or
any company Controlling Mezzanine Lender hereunder in respect of any portion of
the Loan to Mezzanine Borrower is reduced, in each case by an amount deemed by
Mezzanine Lender in good faith to be material (such increases in cost and
reductions in amounts receivable being herein called Increased Costs), then
Mezzanine Lender shall provide notice thereof to Mezzanine Borrower and
Mezzanine Borrower agrees that it will pay to Mezzanine Lender upon Mezzanine
Lender's written request such additional amount or amounts as will compensate
Mezzanine Lender or any company Controlling Mezzanine Lender for such Increased
Costs to the extent Mezzanine Lender determines that such Increased Costs are
allocable to the Loan and provided that Mezzanine Lender is generally exercising
rights similar to those set forth in this Section 2.4.1 against other borrowers
similarly situated to Mezzanine Borrower. Mezzanine Lender will notify Mezzanine
Borrower of any event occurring after the date hereof which will entitle
Mezzanine Lender to compensation pursuant to this Section 2.4.1 as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation; provided, however, that, if Mezzanine Lender fails to deliver a
notice within 90 days after the date on which an officer of Mezzanine Lender
responsible for overseeing this Agreement knows or has reason to know of its
right to additional compensation under this Section 2.4.1, Mezzanine Lender
shall only be entitled to additional compensation for any such Increased Costs
incurred from and after the date that is 90 days prior to the date Mezzanine
Borrower received such notice. If Mezzanine Lender requests compensation under
this Section 2.4.1, Mezzanine Borrower
 

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may, by notice to Mezzanine Lender, require that Mezzanine Lender furnish to
Mezzanine Borrower a statement setting forth the basis for requesting such
compensation and the method for determining the amount thereof, and a
description as to why Section 2.4.1 is not applicable.
 
2.4.2  Special Taxes. Mezzanine Borrower shall make all payments hereunder free
and clear of and without deduction for Special Taxes. If Mezzanine Borrower
shall be required by law to deduct any Special Taxes from or in respect of any
sum payable hereunder or under any other Loan Document (Senior Mezzanine) to
Mezzanine Lender, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.4.2) Mezzanine Lender receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) Mezzanine Borrower shall make such deductions, and (iii) Mezzanine Borrower
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
 
2.4.3  Other Taxes. In addition, Mezzanine Borrower agrees to pay any present or
future stamp or documentary taxes or other excise or property taxes, charges, or
similar levies which arise from any payment made hereunder, or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the other Loan Documents (Senior Mezzanine), or the Loan (hereinafter
referred to as Other Taxes).
 
2.4.4  Indemnity. Mezzanine Borrower shall indemnify Mezzanine Lender for the
full amount of Special Taxes and Other Taxes (including any Special Taxes or
Other Taxes imposed by any Governmental Authority on amounts payable under this
Section 2.4.4) paid by Mezzanine Lender and any liability (including penalties,
interest, and expenses) arising therefrom or with respect thereto, whether or
not such Special Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date Mezzanine
Lender makes written demand therefor.
 
2.4.5  Change of Office. To the extent that changing the jurisdiction of
Mezzanine Lender's applicable office would have the effect of minimizing Special
Taxes, Other Taxes or Increased Costs, Mezzanine Lender shall use reasonable
efforts to make such a change, provided that same would not otherwise be
disadvantageous to Mezzanine Lender.
 
2.4.6  Survival. Without prejudice to the survival of any other agreement of
Mezzanine Borrower hereunder, the agreements and obligations of Mezzanine
Borrower contained in this Section 2.4 shall survive the payment in full of
principal and interest hereunder, and the termination of this Agreement.
 
Section 2.5  Conditions Precedent to Closing
 

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The obligation of Mezzanine Lender to make the Loan hereunder is subject to the
fulfillment by, or on behalf of, Mezzanine Borrower or waiver by Mezzanine
Lender of the following conditions precedent no later than the Closing Date;
provided, however, that unless a condition precedent shall expressly survive the
Closing Date pursuant to a separate agreement, by funding the Loan, Mezzanine
Lender shall be deemed to have waived any such conditions not theretofore
fulfilled or satisfied:
 
2.5.1  Representations and Warranties; Compliance with Conditions.
 
(a)  The representations and warranties of Mezzanine Borrower contained in this
Agreement and the other Loan Documents (Senior Mezzanine) shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of such date, and no Default or Event of Default
shall have occurred and be continuing; and Mezzanine Borrower shall be in
compliance in all material respects with all terms and conditions set forth in
this Agreement and in each other Loan Document (Senior Mezzanine) on its part to
be observed or performed; and
 
(b)  The representations and warranties of Mortgage Borrower contained in the
Loan Agreement (Mortgage) and the other Loan Documents (Mortgage) shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of such date, and no Mortgage Default or Mortgage
Event of Default shall have occurred and be continuing; and Mortgage Borrower
and Guarantor shall be in compliance in all material respects with all terms and
conditions set forth in the Loan Agreement (Mortgage) and in each other Loan
Document (Mortgage) on its part to be observed or performed.
 
2.5.2  Delivery of Loan Documents (Senior Mezzanine); Title Policy; Reports;
Leases.
 
(a)  Loan Documents (Senior Mezzanine). Mezzanine Lender shall have received an
original copy of this Agreement, the Mezzanine Note and all of the other Loan
Documents (Senior Mezzanine), in each case, duly executed (and to the extent
required, acknowledged) and delivered on behalf of Mezzanine Borrower and any
other parties thereto.
 
(b)  Certificates. Mezzanine Lender shall have received originals of the
Certificates together with a partnership and membership power (as applicable)
endorsed in blank.
 
(c)  UCC Financing Statements. Mezzanine Lender shall have received evidence
that the UCC financing statements relating to the Pledge and this Agreement have
been delivered for filing in the applicable jurisdictions.
 
(d)  Interest Rate Cap Agreement (Senior Mezzanine). Mezzanine Lender shall have
received the original Interest Rate Cap Agreement (Senior Mezzanine) which shall
be in form and substance satisfactory to Mezzanine Lender and a counterpart of
the Acknowledgment executed and delivered by the Counterparty.
 
(e)  Account Agreement (Senior Mezzanine). Mezzanine Lender shall have received
the original of the Account Agreement (Senior Mezzanine) executed by each of
Cash Management Bank (Senior Mezzanine) and Mezzanine Borrower.
 
(f)  Title Insurance.
 
(i)  Mezzanine Lender shall have received a copy of the Title Policy (Mortgage)
or a marked-up and signed commitment having the force and effect of a title
policy, marked "paid" by an authorized representatives of the Title Company)
issued by the Title Company with respect to the Loan (Mortgage) and dated as of
the Closing Date, together with a copy of the mezzanine loan endorsement to the
owner's title insurance policy obtained by Mortgage Borrower, in favor of
Mezzanine Lender, its sessors and assigns, dated as of the Closing Date, and
reinsurance and direct access agreements in form and substance acceptable to
Mezzanine Lender. Mezzanine Lender shall also have received evidence that all
premiums in respect of the Title Policy (Mortgage) have been paid; and
 
(ii)  Mezzanine Lender shall have received an "Eagle 9" title policy in favor of
Mezzanine Lender, its successors and assigns, dated as of the Closing Date.
Mezzanine Lender also shall have received evidence that all premiums in respect
of the "Eagle 9" title policy have been paid.
 
(g)  Survey. Mezzanine Lender shall have received a current Survey for the
Property, containing the survey certification required by the Loan Agreement
(Mortgage).
 
(h)  Insurance. Mezzanine Lender shall have received valid certificates of
insurance for the policies of insurance required by the Loan Agreement
(Mortgage) naming Mezzanine Lender as an additional insured and containing a
cross liability/severability endorsement, satisfactory to Mezzanine Lender in
its reasonable discretion, and evidence of the payment of all insurance premiums
currently due and payable for the existing policy period.
 
(i)  Environmental Reports. Mezzanine Lender shall have received an
Environmental Report in respect of the Property satisfactory to Mezzanine
Lender.
 
(j)  Zoning. Mezzanine Lender shall have received an ALTA 3.1 zoning endorsement
for the Title Policy (Mortgage).
 
(k)  Certificate of Occupancy. Mezzanine Lender shall have received a copy of
the valid certificates of occupancy for the Property or evidence acceptable to
Mezzanine Lender that a certificate of occupancy is not required by applicable
law.
 
(l)  Encumbrances. Mezzanine Borrower shall have taken or caused to be taken
such actions in such a manner so that Mezzanine Lender has a valid and perfected
first Lien as of the Closing Date on the Collateral and Mezzanine Lender shall
have received satisfactory evidence thereof.
 
(m)  Intentionally Omitted.
 
(n)  Assignment of Management Agreement. Mezzanine Lender shall have received
the original of the Assignment of Management Agreement (Senior Mezzanine)
executed by each of Mezzanine Borrower and Manager;
 
(o)  Pledgor Acknowledgments. Mezzanine Lender shall have received an original
of the Acknowledgment in the form of Exhibit B executed by each Mezzanine
Borrower, Mortgage Borrower, and Mortgage Borrower General Partner, and dated as
of the Closing Date.
 
2.5.3  Related Documents. Each additional document not specifically referenced
herein, but relating to the transactions contemplated herein, shall have been
duly authorized, executed and delivered by all parties thereto and Mezzanine
Lender shall have received and approved certified copies thereof.
 
2.5.4  Delivery of Organizational Documents. On or before the Closing Date,
Mezzanine Borrower shall deliver, or cause to be delivered, to Mezzanine Lender
copies certified by an Officer's Certificate, of all organizational
documentation related to Mortgage Borrower, Operating Lessee, Mezzanine
Borrower, Guarantor, General Partner, each SPE Entity, Manager and certain of
its Affiliates as have been requested by Mezzanine Lender and/or the formation,
structure, existence, good standing and/or qualification to do business of
Mortgage Borrower, Operating Lessee, Mezzanine Borrower, Guarantor, General
Partner, each SPE Entity and such Affiliates, as Mezzanine Lender may request in
its sole discretion, including, without limitation, good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loan and incumbency certificates as may be
requested by Mezzanine Lender. Each of the organizational documents of any SPE
Entity shall contain provisions having a substantive effect materially similar
to that of the language set forth in Exhibit C or such other language as
approved by Lender. Mezzanine Lender hereby approves the organizational
documents delivered to Mezzanine Borrower pursuant to this Section 2.5.4.
 
2.5.5  Opinions of Mezzanine Borrower's Counsel.
 
(a)  Mezzanine Lender shall have received a Non-Consolidation Opinion
substantially in compliance with the requirements set forth in Exhibit E or in
such other form approved by the Mezzanine Lender (the Non-Consolidation
Opinion).
 
(b)  Mezzanine Lender shall have received the Opinion of Counsel substantially
in compliance with the requirements set forth in Exhibit D or in such other form
approved by the Mezzanine Lender.
 
(c)  Mezzanine Lender shall have received from Counterparty the Counterparty
Opinion substantially in compliance with the requirements set forth in Exhibit F
or in such other form approved by the Mezzanine Lender.
 

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2.5.6  Budgets. Mezzanine Borrower shall have delivered the Budget for the
current Fiscal Year, which Budget shall be certified by an Officer's
Certificate.
 
2.5.7  Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated by this Agreement
and other Loan Documents (Senior Mezzanine) and all documents incidental thereto
shall be satisfactory in form and substance to Mezzanine Lender, and Mezzanine
Lender shall have received all such counterpart originals or certified copies of
such documents as Mezzanine Lender may reasonably request.
 
2.5.8  Independent Director Certificate. Mezzanine Lender shall have received an
executed Independent Director certificate substantially in the form attached as
Exhibit O.
 
2.5.9  Material Adverse Effect. No event or condition shall have occurred since
the date of Mortgage Borrower's and Mezzanine Borrower's most recent financial
statements previously delivered to Mezzanine Lender which has or could
reasonably be expected to have a Material Adverse Effect. The Operating Income
and Operating Expenses of the Property, and all other features of the
transaction shall be as represented to Mezzanine Lender without material adverse
change. None of Mezzanine Borrower, Intermediate Mezzanine Borrower, Junior
Mezzanine Borrower, Mortgage Borrower, Guarantor nor any of their constituent
Persons shall be the subject of any bankruptcy, reorganization, or insolvency
proceeding.
 
2.5.10  Leases and Rent Roll. Mezzanine Lender shall have received copies of all
Leases, certified as requested by Mezzanine Lender. Mezzanine Lender shall have
received a certified rent roll of the Property dated within thirty (30) days
prior to the Closing Date.
 
2.5.11  Reserved.
 
2.5.12  Tax Lot. Mezzanine Lender shall have received evidence that the Property
constitutes one (1) or more separate tax lots, which evidence shall be
reasonably satisfactory in form and substance to Mezzanine Lender.
 
2.5.13  Physical Conditions Report. Mezzanine Lender shall have received a
Physical Conditions Report (or re-certified Physical Conditions Report) with
respect to the Property, which report shall be satisfactory in form and
substance to Mezzanine Lender.
 
2.5.14  Management Agreement. Mezzanine Lender shall have received a certified
copy of the Management Agreement which shall be satisfactory in form and
substance to Mezzanine Lender.
 
2.5.15  Appraisal. Mezzanine Lender shall have received an appraisal of the
Property, which shall be satisfactory in form and substance to Mezzanine Lender.
 
2.5.16  Financial Statements. Mezzanine Lender shall have received certified
copies of financial statements with respect to the Property for the three most
recent Fiscal Years, each in form and substance satisfactory to Mezzanine
Lender.
 
2.5.17  Transaction Costs. Mezzanine Borrower shall have paid or reimbursed
Mezzanine Lender for all title insurance (or "Eagle 9") premiums, filing fees,
costs of reports, appraisals, reasonable fees and costs of Mezzanine Lender's
counsel, and all other third party out-of-pocket expenses incurred in connection
with the origination of the Loan.
 
2.5.18  Further Documents. Mezzanine Lender or its counsel shall have received
such other and further approvals, opinions, documents and information as
Mezzanine Lender or its counsel may have reasonably requested including the Loan
Documents (Senior Mezzanine) in form and substance satisfactory to Mezzanine
Lender and its counsel.
 
Section 2.6  Filing of Financing Statements Authorized
 
Mezzanine Borrower hereby authorizes the filing of a form UCC-1 financing
statement naming the Mezzanine Borrower as debtor and the Mezzanine Lender as
secured party in any office (including the office of the Secretary of State of
the State of Delaware) covering all property of the Mezzanine Borrower
(including, but not limited to, the Account Collateral (Senior Mezzanine) and
the Rate Cap Collateral (Senior Mezzanine)).
 

III.  
CASH MANAGEMENT

 
Section 3.1  Cash Management
 
3.1.1  Establishment of Account. Mezzanine Borrower hereby confirms that,
simultaneously with the execution of this Agreement, pursuant to the Account
Agreement (Senior Mezzanine), it has established with Cash Management Bank
(Senior Mezzanine), in the name of Mezzanine Borrower for the benefit of
Mezzanine Lender, as secured party, one (1) segregated account (the Senior
Mezzanine Account), which has been established as a securities account. The
Senior Mezzanine Account and the funds deposited therein and securities and
other assets credited thereto shall serve as additional security for the Loan.
Pursuant to the Account Agreement (Senior Mezzanine), Mezzanine Borrower shall
irrevocably instruct and authorize Cash Management Bank (Senior Mezzanine) to
disregard any and all orders for withdrawal from the Senior Mezzanine Account
made by, or at the direction of, Mezzanine Borrower. Mezzanine Borrower agrees
that, prior to the payment in full of the Indebtedness, the terms and conditions
of the Account Agreement (Senior Mezzanine) shall not be amended or modified
without the prior written consent of Mezzanine Lender (which consent Mezzanine
Lender may grant or withhold in its sole discretion). In
 

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recognition of Mezzanine Lender's security interest in the funds deposited into
the Senior Mezzanine Account, Mezzanine Borrower shall identify the Senior
Mezzanine Account with the name of Mezzanine Lender, as secured party. The
Senior Mezzanine Account shall be named as follows: "CNL Hotel Del Senior Mezz
Partners, LP f/b/o German American Capital Corporation, as secured party, Senior
Mezzanine Account" (Account Number 722385.1). Mezzanine Borrower confirms that
it has established with Cash Management Bank (Senior Mezzanine) a sub-account
for the retention of Account Collateral (Senior Mezzanine) in respect of Debt
Service (Senior Mezzanine) on the Loan with the account number 722385.1-1 (the
Mezzanine Debt Service Reserve Account) (the Sub-Account and, together with the
Senior Mezzanine Account, the Collateral Accounts (Senior Mezzanine)), which (i)
may be a ledger or book entry sub-account and need not be an actual sub-account,
(ii) shall be linked to the Senior Mezzanine Account, (iii) shall be a
"Securities Account" pursuant to Article 8 of the UCC, and (iv) shall be an
Eligible Account to which certain funds shall be allocated and from which
disbursements shall be made pursuant to the terms of this Agreement.
 
3.1.2  Pledge of Account Collateral (Senior Mezzanine). To secure the full and
punctual payment and performance of the Obligations (Senior Mezzanine),
Mezzanine Borrower hereby collaterally assigns, grants a security interest in
and pledges to Mezzanine Lender, to the extent not prohibited by applicable law,
a first priority continuing security interest in and to the following property
of Mezzanine Borrower, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all of the same, collectively, the
Account Collateral (Senior Mezzanine)):
 
(a)  any and all Excess Cash Flow from time to time available in the Holding
Account and required, by the terms of the Loan Agreement (Mortgage) as now in
effect or amended with the consent of Mezzanine Lender, to be deposited by the
Mortgage Lender or the Cash Management Bank (Mortgage) into the Senior Mezzanine
Account;
 
(b)  the Collateral Accounts (Senior Mezzanine) and all cash, checks, drafts,
securities entitlements, certificates, instruments and other property,
including, without limitation, all deposits and/or wire transfers from time to
time deposited or held in, credited to or made to Collateral Accounts (Senior
Mezzanine);
 
(c)  any and all amounts invested in Permitted Investments;
 
(d)  all interest, dividends, cash, instruments, securities entitlements and
other property from time to time received, receivable or otherwise payable in
respect of, or in exchange for, any or all of the foregoing or purchased with
funds from the Collateral Accounts (Senior Mezzanine); and
 
(e)  to the extent not covered by clauses (a), (b), (c) or (d) above, all
proceeds (as defined under the UCC) of any or all of the foregoing.
 

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In addition to the rights and remedies herein set forth, Mezzanine Lender shall
have all of the rights and remedies with respect to the Account Collateral
(Senior Mezzanine) available to a secured party at law or in equity, including,
without limitation, the rights of a secured party under the UCC, as if such
rights and remedies were fully set forth herein.
 
This Agreement shall constitute a security agreement for purposes of the Uniform
Commercial Code and other applicable law.
 
3.1.3  Maintenance of Collateral Accounts. Mezzanine Borrower agrees that the
Senior Mezzanine Account and the Sub-Accounts are and shall each be maintained
(i) as a "securities account" (as such term is defined in Section 8-501(a) of
the UCC), (ii) in such a manner that Mezzanine Lender shall have control (within
the meaning of Section 8-106(d)(2) of the UCC) over the Senior Mezzanine Account
and any Sub-Account thereof, (iii) such that Mezzanine Borrower, and Manager
shall have no right of withdrawal from the Senior Mezzanine Account or the
Sub-Accounts and, except as provided herein, no Account Collateral (Senior
Mezzanine) shall be released to Mezzanine Borrower or Manager from the Senior
Mezzanine Account or the Sub-Accounts. Without limiting the Mezzanine Borrower's
obligations under the immediately preceding sentence, Mezzanine Borrower shall
only establish and maintain the Senior Mezzanine Account with a financial
institution that has executed an agreement substantially in the form of the
Account Agreement (Senior Mezzanine) or in such other form acceptable to
Mezzanine Lender in its sole discretion.
 
3.1.4  Eligible Accounts. The Collateral Accounts (Senior Mezzanine) shall be
Eligible Accounts. The Collateral Accounts (Senior Mezzanine) shall be subject
to such applicable laws, and such applicable regulations of the Board of
Governors of the Federal Reserve System and of any other banking or governmental
authority, as may now or hereafter be in effect. Income and interest accruing on
the Collateral Accounts (Senior Mezzanine) or any investments held in such
accounts shall be periodically added to the principal amount of such account and
shall be held, disbursed and applied in accordance with the provisions of this
Agreement and the Account Agreement (Senior Mezzanine). Mezzanine Borrower shall
be the beneficial owner of the Collateral Accounts (Senior Mezzanine) for
federal income tax purposes and shall report all income on the Collateral
Accounts (Senior Mezzanine).
 
3.1.5  Deposits into Sub-Accounts. On the date hereof, Mezzanine Borrower has
deposited the following amounts into the Sub-Accounts:
 
(i)  $0.00 into the Mezzanine Debt Service Reserve Account.
 
3.1.6  Monthly Funding.
 
(a)  Mezzanine Borrower hereby instructs Mezzanine Lender to transfer (and
pursuant to the Account Agreement (Senior Mezzanine) shall irrevocably authorize
Cash Management Bank (Senior Mezzanine) to execute any corresponding
instructions of Mezzanine Lender), and Mezzanine Lender shall transfer (or cause
Cash
 

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Management Bank to transfer pursuant to disbursement instructions from Mezzanine
Lender) to the Mezzanine Debt Service Reserve Account, from the Senior Mezzanine
Account by 11:00 am New York time on the first (1st) calendar day of each
calendar month (and if such day is not a Business Day then on the immediately
preceding Business Day) or as soon thereafter as there shall be sufficient
collected funds on deposit in the Senior Mezzanine Account, and from time to
time (but no less frequently than weekly thereafter) funds in an amount equal to
the sum of any Protective Advances which may have been advanced by (and not
previously reimbursed to) the Mezzanine Lender pursuant to the terms of the Loan
Documents (Senior Mezzanine) to cure any Default or Event of Default, any
Mortgage Default or Mortgage Event of Default, or to protect the Collateral
together with any interest payable on such amounts pursuant to the Loan
Documents (Senior Mezzanine), plus (x) the unpaid Debt Service (Senior
Mezzanine) for the next occurring Payment Date, plus (y) an amount equal to such
payments for any prior month(s), to the extent not previously paid, plus (z) an
amount equal to the amount, if any, deducted from the Senior Mezzanine Account
in any preceding month to pay any other amounts then due under the Loan
Documents (Senior Mezzanine) (other than any Debt Service (Senior Mezzanine)).
Mezzanine Borrower acknowledges that Mezzanine Lender shall not be required to
make such withdrawal and deposit until such time as Mezzanine Lender is able to
calculate the amount of the Debt Service (Senior Mezzanine) for the next
occurring Payment Date. As used herein, the term Net Excess Cash Flow means the
amount available in the Senior Mezzanine Account after the transfers to the
Mezzanine Debt Service Reserve Account required under this Section 3.1.6 have
been made and the term Net Excess Cash Flow Commencement Date shall mean the
date such amounts have been fully funded or reserved within the Senior Mezzanine
Account in any given calendar month.
 
(b)  If for any reason there will be insufficient amounts in the Mezzanine Debt
Service Reserve Account on any Payment Date to pay the Debt Service (Senior
Mezzanine) due on such Payment Date, Mezzanine Borrower shall immediately
deposit into the Senior Mezzanine Account an amount equal to the shortfall of
available funds in the Mezzanine Debt Service Reserve Account. Any failure by
Mezzanine Borrower to deposit the full amount required by the preceding sentence
shall constitute an Event of Default hereunder. If Mezzanine Lender shall
reasonably determine that there will be insufficient amounts in the Senior
Mezzanine Account to pay any Protective Advances as and when the same are due
and payable, Mezzanine Lender shall provide written notice of same to Mezzanine
Borrower setting forth the basis for such determination. Within five (5)
Business Days of receipt of said notice, Mezzanine Borrower shall deposit into
the Senior Mezzanine Account an amount equal to the shortfall of available funds
in the Senior Mezzanine Account. Any failure by Mezzanine Borrower to deposit
the full amount required by the preceding sentence within said five (5) Business
Day period shall constitute an Event of Default hereunder.
 
(c)  Provided that (i) no Event of Default shall have occurred and be continuing
hereunder or under any of the other Loan Documents (Senior Mezzanine), (ii) no
Mortgage Event of Default shall have occurred and be continuing, (iii) Mezzanine
Borrower shall have delivered to Mezzanine Lender an Officer's Certificate
(which Mezzanine Borrower shall not be obligated to deliver more frequently than
once per
 

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calendar month) certifying that the signatories know of no Event of Default or
Mortgage Event of Default (as applicable) that has occurred and is then
outstanding hereunder or under any of the other Loan Documents (Senior
Mezzanine) or under any of the Loan Documents (Mortgage), and (iv) Mezzanine
Borrower shall have deposited into the Senior Mezzanine Account all funds then
required to have been so deposited, then Mezzanine Lender shall transfer the Net
Excess Cash Flow from the Senior Mezzanine Account to (A) the Intermediate
Mezzanine Account, or (B) following the repayment of the Intermediate Mezzanine
Loan, to the Junior Mezzanine Account, or (C) following the repayment of the
Intermediate Mezzanine Loan and the Junior Mezzanine Loan, to the Mezzanine
Borrower's Account.
 
(d)  In the event that an Event of Default shall have occurred and is then
continuing, then, without notice from Mezzanine Lender, all Net Excess Cash Flow
shall be applied to reduce the outstanding Principal Amount of the Mezzanine
Note. At such time that the Event of Default shall no longer be continuing and
provided no other Event of Default shall have occurred and be continuing under
the Mortgage Loan or Mezzanine Loan, then all Net Excess Cash Flow shall be
distributed in accordance with the provision of subsection (c) above.
 
(e)  Mezzanine Lender (so long as Mezzanine Lender is not the same entity as
Mortgage Lender) agrees to deliver to Mortgage Lender a monthly notice letter
(the Mezzanine Lender Monthly Debt Service Notice Letter) at least five (5)
Business Days prior to each Payment Date setting forth the Debt Service (Senior
Mezzanine) payable by Mezzanine Borrower on the first Payment Date occurring
after the date such notice is delivered.
 
(f)  Mezzanine Borrower hereby acknowledges that, pursuant to Section 3.1.5 of
the Loan Agreement (Mortgage), (i) to the extent the Mortgage Lender has
received notice from Mezzanine Lender that an Event of Default has occurred and
is continuing under the Loan Documents (Mezzanine) (a Mezzanine Loan Default
Notice) and until such time as Mortgage Lender receives a notice from Mezzanine
Lender that such Event of Default is no longer continuing (a Mezzanine Loan
Default Revocation Notice), the Mortgage Borrower has irrevocably directed that
Excess Cash Flow is to be deposited directly into the Mezzanine Account for
application as provided in this Agreement (in lieu of transferring such funds to
such accounts of the Mortgage Borrower as the Mortgage Borrower may have so
directed if the Mortgage Lender had not received such notice from Mezzanine
Lender), (ii) to the extent Mortgage Lender has not received a Mezzanine Loan
default notice but has received an Intermediate Mezzanine Loan Default Notice
and until such time as Mortgage Lender receives an Intermediate Mezzanine Loan
Default Revocation Notice, Mortgage Borrower irrevocably directed that all
Excess Cash Flow be deposited directly into the Intermediate Mezzanine Account
for application as provided in the Intermediate Mezzanine Loan Agreement (in
lieu of transferring such funds to such accounts of Mortgage Borrower as
Mortgage Borrower may have so directed if Mortgage Lender had not received such
notice from Intermediate Mezzanine Lender), (iii) to the extent Mortgage Lender
has not received a Mezzanine Loan default notice but has received an Junior
Mezzanine Loan Default Notice and until such time as Mortgage Lender receives an
Junior Mezzanine Loan Default Revocation
 

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Notice, Mortgage Borrower irrevocably directed that all Excess Cash Flow be
deposited directly into the Junior Mezzanine Account for application as provided
in the Junior Mezzanine Loan Agreement (in lieu of transferring such funds to
such accounts of Mortgage Borrower as Mortgage Borrower may have so directed if
Mortgage Lender had not received such notice from Junior Mezzanine Lender), and
(iv) the directions described in the preceding clauses (i), (ii), or (iii) shall
not be changed or terminated without the written consent of the Mezzanine
Lender. Notwithstanding any provision herein to the contrary, provided no Event
of Default has occurred or is continuing, there shall be disbursed to Mezzanine
Borrower the Proceeds of a Condemnation or Casualty remaining after payment of
all amounts to which Mortgage Lender, Intermediate Mezzanine Lender and
Mezzanine Lender are entitled. Mezzanine Borrower agrees that Mezzanine Lender
shall not be required to deliver to Mortgage Lender a Mezzanine Loan Default
Notice prior to the deposit of Proceeds into the Mezzanine Account.
 
3.1.7  Cash Management Bank.
 
(a)  For the purposes of this Agreement, the Cash Management Bank (Senior
Mezzanine) named herein shall be deemed to be an Approved Bank; provided,
however, that the term "Approved Bank" shall be applicable for all other
purposes and shall be applicable to any successor or assign of Cash Management
Bank (Senior Mezzanine). Mezzanine Lender shall have the right at Mezzanine
Borrower's sold cost and expense to replace the Cash Management Bank (Senior
Mezzanine) with a financial institution reasonably satisfactory to Mezzanine
Borrower in the event that (i) the Cash Management Bank (Senior Mezzanine)
fails, in any material respect, to comply with the Account Agreement (Senior
Mezzanine), (ii) the Cash Management Bank (Senior Mezzanine) named herein is no
longer the Cash Management Bank (Senior Mezzanine) or (iii) the Cash Management
Bank (Senior Mezzanine) is no longer an Approved Bank.
 
(b)  During the term of the Loan, so long as no Event of Default shall have
occurred and is continuing, Mezzanine Borrower, at its sole cost and expense,
shall have the right to replace the Cash Management Bank (Senior Mezzanine) with
a financial institution that is an Approved Bank provided such institution shall
execute and deliver to Mezzanine Lender (with a copy to Mortgage Lender) the
Account Agreement (Senior Mezzanine) (and Mezzanine Lender shall reasonably
cooperate with Mezzanine Borrower in connection with such transfer). Upon the
occurrence and during the continuance of an Event of Default, Mezzanine Lender
shall have the right at Mezzanine Borrower's sole cost and expense to replace
Cash Management Bank at any time, without notice to Mezzanine Borrower.
Mezzanine Borrower shall cooperate with Mezzanine Lender in connection with the
appointment of any replacement Cash Management Bank and the execution by the
Cash Management Bank and the Mezzanine Borrower of an Account Agreement and
delivery of same to Mezzanine Lender.
 
(c)  So long as no Event of Default shall have occurred and be continuing,
Mezzanine Borrower shall have the right at its sole cost and expense to replace
the Cash Management Bank (Senior Mezzanine) with a financial institution that is
an Approved Bank provided that such financial institution and Mezzanine Borrower
 

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shall execute and deliver to Mezzanine Lender an Account Agreement substantially
similar to the Account Agreement (Senior Mezzanine) executed as of the Closing
Date.
 
3.1.8  Mezzanine Borrower's Account Representations, Warranties and Covenants.
Mezzanine Borrower represents, warrants and covenants that:
 
(a)  Pursuant to the Loan Agreement (Mortgage), Mortgage Borrower has directed
that, after Mortgage Lender receives notice of a Default hereunder (and provided
no Mortgage Event of Default exists), all Excess Cash Flow is to be deposited
into the Senior Mezzanine Account;
 
(b)  Neither Mortgage Borrower nor Mezzanine Borrower nor any other Person will
have any right, title or interest in or to any Excess Cash Flow from and after
the time at which the Mortgage Lender becomes obligated under the Loan Agreement
(Mortgage) to transfer such Excess Cash Flow to the Senior Mezzanine Account,
except any rights Mezzanine Borrower shall have to allocations of such funds
following the disbursement to Mezzanine Borrower of any Net Excess Cash Flow as
provided in Section 3.1.5(a);
 
(c)  There are no accounts other than the Collateral Accounts, Collateral
Accounts (Senior Mezzanine), Collateral Accounts (Intermediate Mezzanine), and
Collateral Accounts (Junior Mezzanine), maintained by Mortgage Borrower,
Mezzanine Borrower or any other Person with respect to the collection of rents,
revenues, proceeds or other income from the Property or for the collection of
Receipts, except for the Collection Account (as defined in the Loan Agreement
(Mortgage)), the Holding Account (as defined in the Loan Agreement (Mortgage))
the Manager Accounts, and the Senior Mezzanine Account and any accounts held by
Mezzanine Borrower, Intermediate Mezzanine Borrower, or Junior Mezzanine
Borrower in which they are permitted to receive transfers of Net Excess Cash
Flow as provided in Section 3.1.5(c);
 
(d)  Mezzanine Borrower shall cause Mortgage Borrower to deposit or cause to be
deposited all Distributions into the Senior Mezzanine Account as required by the
Pledge and this Agreement or any other Loan Document (Senior Mezzanine); and
 
(e)  so long as the Loan shall be outstanding, neither Mortgage Borrower,
Operating Lessee, Manager, Mezzanine Borrower, nor any of their Affiliates shall
open any other operating accounts with respect to the collection of rents,
revenues, proceeds or other income from the Property or for the collection of
Receipts.
 
3.1.9  Account Collateral (Senior Mezzanine) and Remedies.
 
(a)  Upon the occurrence and during the continuance of an Event of Default,
without additional notice from Mezzanine Lender to Mezzanine Borrower, (i)
Mezzanine Lender may, in addition to and not in limitation of Mezzanine Lender's
other rights, make any and all withdrawals from, and transfers between and
among, the Collateral Accounts (Senior Mezzanine) as Mezzanine Lender shall
determine in its sole and absolute discretion to pay any Obligations (Senior
Mezzanine), Operating Expenses
 

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and/or Capital Expenditures for the Property; (ii) all Excess Cash Flow shall be
retained in the Senior Mezzanine Account or applicable Sub-Accounts, (iii) all
payments to the Mezzanine Borrower's Account pursuant to Section 3.1.5 shall
immediately cease and (iv) Mezzanine Lender may liquidate and transfer any
amounts then invested in Permitted Investments to the Collateral Accounts
(Senior Mezzanine) to which they relate or reinvest such amounts in other
Permitted Investments as Mezzanine Lender may reasonably determine is necessary
to perfect or protect any security interest granted or purported to be granted
hereby or to enable Mezzanine Lender to exercise and enforce Mezzanine Lender's
rights and remedies hereunder with respect to any Account Collateral (Senior
Mezzanine) or to preserve the value of the Account Collateral (Senior
Mezzanine).
 
(b)  Upon the occurrence and during the continuance of an Event of Default,
Mezzanine Borrower hereby irrevocably constitutes and appoints Mezzanine Lender
as Mezzanine Borrower's true and lawful attorney-in-fact, with full power of
substitution, to execute, acknowledge and deliver any instruments and to
exercise and enforce every right, power, remedy, option and privilege of
Mezzanine Borrower with respect to the Account Collateral (Senior Mezzanine),
and do in the name, place and stead of Mezzanine Borrower, all such acts, things
and deeds for and on behalf of and in the name of Mezzanine Borrower, which
Mezzanine Borrower could or might do or which Mezzanine Lender may deem
necessary or desirable to more fully vest in Mezzanine Lender the rights and
remedies provided for herein and to accomplish the purposes of this Agreement.
The foregoing powers of attorney are irrevocable and coupled with an interest.
Upon the occurrence and during the continuance of an Event of Default, Mezzanine
Lender may perform or cause performance of any such agreement, and any
reasonable expenses of Mezzanine Lender incurred in connection therewith shall
be paid by Mezzanine Borrower as provided in Section 5.1.12.
 
(c)  Mezzanine Borrower hereby expressly waives, to the fullest extent permitted
by law, presentment, demand, protest or any notice of any kind (except as
expressly required under the Loan Documents (Senior Mezzanine)) in connection
with this Agreement or the Account Collateral (Senior Mezzanine). Mezzanine
Borrower acknowledges and agrees that ten (10) Business Days' prior written
notice of the time and place of any public sale of the Account Collateral
(Senior Mezzanine) or any other intended disposition thereof shall be reasonable
and sufficient notice to Mezzanine Borrower within the meaning of the UCC.
 
3.1.10  Transfers and Other Liens. Mezzanine Borrower agrees that it will not
(i) sell or otherwise dispose of any of the Account Collateral (Senior
Mezzanine) except as may be expressly permitted under the Loan Documents (Senior
Mezzanine), or (ii) create or permit to exist any Lien upon or with respect to
all or any of the Account Collateral (Senior Mezzanine), except for the Lien
granted to Mezzanine Lender under this Agreement.
 
3.1.11  Reasonable Care. Beyond the exercise of reasonable care in the custody
thereof, Mezzanine Lender shall have no duty as to any Account Collateral
(Senior Mezzanine) in its possession or control as agent therefor or bailee
thereof or any
 

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income thereon or the preservation of rights against any person or otherwise
with respect thereto. Mezzanine Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Account Collateral
(Senior Mezzanine) in its possession if the Account Collateral (Senior
Mezzanine) is accorded treatment substantially equal to that which Mezzanine
Lender accords its own property, it being understood that Mezzanine Lender shall
not be liable or responsible for any loss or damage to any of the Account
Collateral (Senior Mezzanine), or for any diminution in value thereof, by reason
of the act or omission of Mezzanine Lender, its Affiliates, agents, employees or
bailees, except to the extent that such loss or damage results from Mezzanine
Lender's gross negligence or willful misconduct. In no event shall Mezzanine
Lender be liable either directly or indirectly for losses or delays resulting
from any event which may be the basis of an Excusable Delay, computer
malfunctions, interruption of communication facilities, labor difficulties or
other causes beyond Mezzanine Lender's reasonable control or for indirect,
special or consequential damages except to the extent of Mezzanine Lender's
gross negligence or willful misconduct. Notwithstanding the foregoing, Mezzanine
Borrower acknowledges and agrees that (i) Mezzanine Lender does not have custody
of the Account Collateral (Senior Mezzanine), (ii) Cash Management Bank (Senior
Mezzanine) has custody of the Account Collateral (Senior Mezzanine), (iii) the
initial Cash Management Bank (Senior Mezzanine) was chosen by Mezzanine
Borrower, and (iv) Mezzanine Lender has no obligation or duty to supervise Cash
Management Bank (Senior Mezzanine) or to see to the safe custody of the Account
Collateral (Senior Mezzanine).
 
3.1.12  Mezzanine Lender's Liability.
 
(a)  Mezzanine Lender shall be responsible for the performance only of such
duties with respect to the Account Collateral (Senior Mezzanine) as are
specifically set forth in this Section 3.1 or elsewhere in the Loan Documents
(Senior Mezzanine), and no other duty shall be implied from any provision
hereof. Mezzanine Lender shall not be under any obligation or duty to perform
any act with respect to the Account Collateral (Senior Mezzanine) which would
cause it to incur any expense or liability or to institute or defend any suit in
respect hereof, or to advance any of its own monies. Mezzanine Borrower shall
indemnify and hold Mezzanine Lender, its employees and officers harmless from
and against any loss, cost or damage (including, without limitation, reasonable
attorneys' fees and disbursements) incurred by Mezzanine Lender in connection
with the transactions contemplated hereby with respect to the Account Collateral
(Senior Mezzanine) (excluding losses on Permitted Investments) except as such
may be caused by the gross negligence or willful misconduct of Mezzanine Lender,
its employees, officers or agents.
 
(b)  Mezzanine Lender shall be protected in acting upon any notice, resolution,
request, consent, order, certificate, report, opinion, bond or other paper,
document or signature believed by it in good faith to be genuine, and, in so
acting, it may be assumed that any person purporting to give any of the
foregoing in connection with the provisions hereof has been duly authorized to
do so. Mezzanine Lender may consult with counsel, and the opinion of such
counsel shall be full and complete authorization
 

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and protection in respect of any action taken or suffered by it hereunder and in
good faith in accordance therewith.
 
3.1.13  Continuing Security Interest. This Agreement shall create a continuing
security interest in the Account Collateral (Senior Mezzanine) and shall remain
in full force and effect until payment in full of the Indebtedness; provided,
however, such security interest shall automatically terminate with respect to
funds which were duly deposited into Mezzanine Borrower’s Account in accordance
with the terms hereof. Upon payment in full of the Indebtedness, this security
interest shall automatically terminate without further notice from any party and
Mezzanine Borrower shall be entitled to the return, upon its request, of such of
the Account Collateral (Senior Mezzanine) as shall not have been sold or
otherwise applied pursuant to the terms hereof and Mezzanine Lender shall
execute such instruments and documents as may be reasonably requested by
Mezzanine Borrower to evidence such termination and the release of the Account
Collateral (Senior Mezzanine).
 

IV.  
REPRESENTATIONS AND WARRANTIES

 
Section 4.1  Mezzanine Borrower Representations
 
Mezzanine Borrower represents and warrants as of the Closing Date that:
 
4.1.1  Organization. Each of Mezzanine Borrower and CNL Hospitality Partners, LP
is a limited partnership that has been duly organized and is validly existing
and in good standing pursuant to the laws of the State of Delaware with
requisite power and authority to own its properties and to transact the
businesses in which it is now engaged. Each of KSL DC Operating LLC, Operating
Lessee, and Manager is a limited liability company that has been duly organized
and is validly existing and in good standing pursuant to the laws of the State
of Delaware with requisite power and authority to own its properties and to
transact the businesses in which it is now engaged. Each of Mezzanine Borrower,
Mortgage Borrower, Guarantor, Operating Lessee, and Manager has 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.
Each of Mezzanine Borrower, Mortgage Borrower, Guarantor, Operating Lessee, and
Manager 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, (provided, however, with respect to
Guarantor only, those rights, licenses, permits and authorizations that would
cause a Material Adverse Effect), and the sole business of Mezzanine Borrower is
the ownership of the Property. The organizational structure of Mortgage
Borrower, Mezzanine Borrower, and their Affiliates is accurately depicted by the
schematic diagram attached hereto as Exhibit H. Mezzanine Borrower shall not
itself, and shall not permit Mortgage Borrower or any SPE Entity, Operating
Lessee, or Manager to, change its name, identity, corporate structure or
jurisdiction of organization unless it shall have given Mezzanine Lender thirty
(30) days prior written notice of any such change and shall have taken all steps
reasonably requested by Mezzanine Lender to grant, perfect, protect and/or
preserve the security interest granted hereunder to Mezzanine Lender.
 

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4.1.2  Proceedings. Each of Mezzanine Borrower, Guarantor, Operating Lessee, and
Manager has full power to and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents (Senior Mezzanine). This Agreement and the other Loan Documents
(Senior Mezzanine) have been duly executed and delivered by, or on behalf of,
Mezzanine Borrower, Guarantor, Operating Lessee, and Manager, as applicable, and
constitute legal, valid and binding obligations of Mezzanine Borrower,
Guarantor, Operating Lessee, and Manager, as applicable, enforceable against
Mezzanine Borrower, Guarantor, Operating Lessee, and Manager, as applicable, 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 (Senior Mezzanine) by Mezzanine Borrower,
Guarantor, Operating Lessee, and Manager, as applicable, 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 (Senior Mezzanine)) upon
any of the property or assets of Mezzanine Borrower, Guarantor, Operating
Lessee, and Manager pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, partnership agreement or other agreement or instrument to
which Mezzanine Borrower, Guarantor, Operating Lessee, and Manager is a party or
by which any of Mezzanine Borrower's, Guarantor's, Operating Lessee's, and
Manager's property or assets is subject (unless consents from all applicable
parties thereto have been obtained), nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority, and any consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority required for
the execution, delivery and performance by Mezzanine Borrower, Guarantor,
Operating Lessee, and Manager of this Agreement or any other Loan Documents
(Senior Mezzanine) has been obtained and is in full force and effect.
 
4.1.4  Litigation. There are no lawsuits, administrative proceedings,
arbitration proceedings, or other such legal proceedings that have been filed
and served upon Mezzanine Borrower (or with respect to which Mezzanine Borrower
has otherwise received proper notice) or, to the Best of Mezzanine Borrower's
Knowledge, otherwise pending or threatened against or affecting Mortgage
Borrower, Mezzanine Borrower, Operating Lessee, Manager, or the Property whose
outcome, if determined against Mortgage Borrower, Mezzanine Borrower, Manager,
Operating Lessee, or the Property, would have a Material Adverse Effect. To the
Best of Mezzanine Borrower's Knowledge, Schedule I includes each pending action
against Mortgage Borrower, Mezzanine Borrower, Operating Lessee, Manager or
otherwise affecting the Property that involves a claim or claims for either (a)
monetary damages exceeding $25,000, or (b) injunctive relief or other equitable
remedy that could have a Material Adverse Effect, excluding: (i) actions for
monetary damages only that have been tendered to, and accepted without
reservation of rights by, the liability insurance carrier for the Property, (ii)
worker's compensation claims, and (iii) any proceedings by employees working at
the Property where the amount claimed in such proceeding is less than $25,000;
to the Best of Mezzanine Borrower's Knowledge, the aggregate amount of such
claims described in subclause (iii) of this sentence is less than $200,000.
There are no arbitration proceedings, governmental investigations, actions,
suits or proceedings at law or in equity by or before any Governmental Authority
now pending or, to the Best of Mezzanine Borrower's Knowledge, threatened
against or affecting Guarantor which, if determined against Guarantor would have
a Material Adverse Effect.
 
4.1.5  Agreements. Mezzanine Borrower is not a party to any agreement or
instrument or subject to any restriction which is reasonably likely to have a
Material Adverse Effect. Mezzanine Borrower is not in default in any respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party or
by which Mezzanine Borrower or the Property is bound, which default is
reasonably likely to have a Material Adverse Effect. Mezzanine Borrower has no
material financial obligation (contingent or otherwise) under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which Mezzanine Borrower is a party or by which Mezzanine Borrower or the
Property is otherwise bound, other than (a) obligations incurred in the ordinary
course of the operation of the Property, including membership programs disclosed
in writing to Mezzanine Lender on or prior to the date hereof, and (b)
obligations under the Loan Documents (Senior Mezzanine).
 
4.1.6  Title. Mezzanine Borrower owns all of the assets reflected in the
proforma balance sheet of Mezzanine Borrower as of the date of such proforma
balance sheet, subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances, except for the Permitted Encumbrances.
 
4.1.7  No Bankruptcy Filing. None of Mezzanine Borrower, Intermediate Mezzanine
Borrower, Junior Mezzanine Borrower, Guarantor, Mortgage Borrower, General
Partner, any SPE Entity, Operating Lessee, or Manager is 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 such entity's
assets or property, and Mezzanine Borrower has no knowledge of any Person
contemplating the filing of any such petition against it or against Mezzanine
Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower, Guarantor,
Mortgage Borrower, General Partner, any SPE Entity, Operating Lessee, or
Manager.
 
4.1.8  Full and Accurate Disclosure. To the Best of Mezzanine Borrower's
Knowledge, no statement of fact made by Mezzanine Borrower in this Agreement or
in any of the other Loan Documents (Senior Mezzanine) 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 fact
presently known to Mezzanine Borrower which has not been disclosed which has a
Material Adverse
 

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Effect, or to the Best of Mezzanine Borrower's Knowledge could reasonably be
expected to have a Material Adverse Effect.
 
4.1.9  ERISA.
 
(a)  Mezzanine Borrower does not maintain or contribute to and is not required
to contribute to, an "employee benefit plan" as defined by Section 3(3) of
ERISA, which is subject to Title IV of ERISA (other than a "multiemployer plan"
as defined by Section 3(37) of ERISA), and Mezzanine Borrower (i) has no
knowledge of any material liability which has been incurred or is expected to be
incurred by Mezzanine Borrower which is reasonably likely to result in a
Material Adverse Effect and is or remains unsatisfied for any taxes or penalties
or unfunded contributions with respect to any "employee benefit plan" or any
"plan," within the meaning of Section 4975(e)(1) of the Internal Revenue Code or
any other benefit plan (other than a "multiemployer plan") maintained,
contributed to, or required to be contributed to by Mezzanine Borrower or by any
entity that is under common control with Mezzanine Borrower within the meaning
Section 4001(a)(14) of ERISA (each, an ERISA Affiliate) (each, a Plan) or any
plan that would be a Plan but for the fact that it is a multiemployer plan
within the meaning of ERISA Section 3(37); and (ii) has made and shall continue
to make when due all required contributions to all such Plans (other than Plans
relating to ERISA Affiliates), if any, where the failure to so contribute is
reasonably likely to result in a Material Adverse Effect. Each such Plan (other
than Plans relating to ERISA Affiliates), if any, has been and will be
administered in material compliance with its terms and the applicable provisions
of ERISA, the Internal Revenue Code, and any other applicable federal or state
law; and no action shall be taken or fail to be taken that would result in the
disqualification or loss of tax-exempt status of any such Plan intended to be
qualified and/or tax exempt; and
 
(b)  With respect to any "multiemployer plan," (i) Mezzanine Borrower has not,
since September 26, 1980, made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203 and 4205 of
ERISA, (ii) Mezzanine Borrower has made and shall continue to make when due all
required contributions to all such "multiemployer plans" and (iii) no ERISA
Affiliate has, since September 26, 1980, made or suffered a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively defined in
Sections 4203 and 4205 of ERISA which withdrawal is reasonably expected to have
a Material Adverse Effect.
 
(c)  Mezzanine Borrower is not an employee benefit plan, as defined in Section
3(3) of ERISA, whether or not subject to Title I of ERISA, none of the assets of
Mezzanine Borrower, Guarantor or Mortgage Borrower constitutes or will
constitute plan assets of one or more such plans within the meaning of 29 C.F.R.
Section 2510.3-101 and transactions by or with any of Mezzanine Borrower,
Guarantor, and Mortgage Borrower are not subject to similar laws regulating
investment of, and fiduciary obligations with respect to, plans similar to the
provisions of Section 406 of ERISA or Section 4975 of the Code currently in
effect which prohibit or otherwise restrict the transactions contemplated by
this Agreement.
 

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4.1.10  Compliance. Mezzanine Borrower, Guarantor, Mortgage Borrower, General
Partner and the Property and the use thereof comply in all material respects
with all applicable Legal Requirements, including, without limitation, building
and zoning ordinances and codes except where the failure to so comply is not
reasonably expected to result in a Material Adverse Effect. To the Best of
Mezzanine Borrower's Knowledge, none of Mezzanine Borrower, Guarantor, Mortgage
Borrower, or General Partner is in default or in violation of any order, writ,
injunction, decree or demand of any Governmental Authority. To the Best of
Mezzanine Borrower's Knowledge, there has not been committed by Mezzanine
Borrower, Guarantor, Mortgage Borrower or General Partner any act or omission
affording the federal government or any other Governmental Authority the right
of forfeiture as against the Property, the Collateral or any part thereof or any
monies paid in performance of Mezzanine Borrower's obligations under any of the
Loan Documents (Senior Mezzanine).
 
4.1.11  Financial Information. To the Best of Mezzanine Borrower's Knowledge,
all financial data of Mezzanine Borrower, Guarantor and Mortgage Borrower,
including, without limitation, the statements of cash flow and income and
operating expense, that have been delivered by or on behalf of Mezzanine
Borrower or Mortgage Borrower to Mezzanine Lender in respect of the Property (i)
are true, complete and correct in all material respects, (ii) fairly represent
the financial condition of the Property, the Mezzanine Borrower, Guarantor and
Mortgage Borrower as of the date of such reports, 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. None of Mezzanine Borrower, Guarantor, Mortgage Borrower, or
General Partner has any material contingent liabilities, liabilities for
delinquent taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to Mezzanine
Borrower and could reasonably be expected to have a Material Adverse Effect,
except as referred to or reflected in said financial statements and operating
statements. Since the date of such financial statements, there has been no
material adverse change in the financial condition, operations or business of
Mezzanine Borrower, Guarantor, Mortgage Borrower or General Partner from that
set forth in said financial statements.
 
4.1.12  Absence of UCC Financing Statements, Etc. Except with respect to the
Permitted Encumbrances, the Loan Documents (Mortgage), the Intermediate
Mezzanine Loan Documents, the Junior Mezzanine Loan Documents, the Revolving
Credit Loan Documents, and the Loan Documents (Senior Mezzanine), there is no
financing statement, security agreement, chattel mortgage, real estate mortgage
or other document filed or recorded with any filing records, registry, or other
public office, that purports to cover, affect or give notice of any present or
possible future lien on, or security interest or security title in the interest
in the Property or any of the Collateral.
 
4.1.13  Federal Reserve Regulations. None of the proceeds of the Loan will be
used for the purpose of purchasing or carrying any "margin stock" as
 

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defined in Regulation U, Regulation X or Regulation T or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry "margin stock" or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of Regulation U or Regulation
X. As of the Closing Date, Mezzanine Borrower does not own any "margin stock."
 
4.1.14  Setoff, Etc. The Collateral and the rights of Mezzanine Lender with
respect to the Collateral are not subject to any setoff, claims, withholdings or
other defenses.
 
4.1.15  Not a Foreign Person. None of Mezzanine Borrower, Guarantor or Mortgage
Borrower is a foreign person within the meaning of § 1445(f)(3) of the Code.
 
4.1.16  Enforceability. The Loan Documents (Senior Mezzanine) are not subject to
any existing right of rescission, set-off, counterclaim or defense by Mezzanine
Borrower or Guarantor, as applicable, including the defense of usury, nor would
the operation of any of the terms of the Loan Documents (Senior Mezzanine), or
the exercise of any right thereunder, render the Loan Documents (Senior
Mezzanine) unenforceable (subject 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)), and neither
Mezzanine Borrower nor Mortgage Borrower has asserted any right of rescission,
set-off, counterclaim or defense with respect thereto.
 
4.1.17  Insurance. Mezzanine Borrower has obtained and has delivered to
Mezzanine Lender certified copies or original certificates of all insurance
policies required under this Agreement, reflecting the insurance coverages,
amounts and other requirements set forth in this Agreement. Mezzanine Borrower
has not, and to the Best of Mezzanine Borrower's Knowledge no Person has, done
by act or omission anything which would impair the coverage of any such policy.
 
4.1.18  Physical Condition. To the Best of Mezzanine Borrower's Knowledge and
except as expressly disclosed in the Physical Conditions Report, 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; to the Best of
Mezzanine Borrower's Knowledge and except as disclosed in the Physical
Conditions Report, there exists no structural or other material defects or
damages in or to the Property, whether latent or otherwise, and Mezzanine
Borrower has not received any written 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.
 

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4.1.19  Leases. The Property is not subject to any Leases other than the Leases
described in the certified rent roll delivered in connection with the
origination of the Loan. Such certified rent roll is true, complete and correct
in all material respects as of the date set forth therein. No Person has any
possessory interest in the Property or right to occupy the same (other than
typical short-term occupancy rights of hotel guests which are not the subject of
a written agreement) except under and pursuant to the provisions of the Leases.
The current Leases are in full force and effect and to the Best of Mezzanine
Borrower's Knowledge, there are no material defaults thereunder by either party
(other than as expressly disclosed on the certified rent roll delivered to
Mezzanine Lender or the Tenant estoppel certificates delivered to Mezzanine
Lender in connection with the closing of the Loan) and there are no conditions
that, with the passage of time or the giving of notice, or both, would
constitute material defaults thereunder. No Rent has been paid more than one (1)
month in advance of its due date, except as disclosed in the Tenant estoppel
certificates delivered to Mezzanine Lender in connection with the closing of the
Loan. There has been no prior sale, transfer or assignment, hypothecation or
pledge by Mortgage Borrower of Mortgage Borrower's interest in any Lease or of
the Rents received therein, which will be outstanding following the funding of
the Loan, other than those being assigned to Mortgage Lender concurrently
herewith. No Tenant under any Lease has a right or option pursuant to such Lease
or otherwise to purchase all or any part of the property of which the leased
premises are a part.
 
4.1.20  Single Purpose Entity/Separateness.
 
(a)  Mezzanine Borrower hereby represents, warrants and covenants that each of
Mezzanine Borrower, Mortgage Borrower and each SPE Entity is, and has been since
the date of its respective formation, a Single Purpose Entity, except that (i)
other than the general partners of Mortgage Borrower and Operating Lessee (each
of which have two Independent Directors) and (ii) other than CNL KSL Partners
GP, LLC (which does not have an Independent Director), each of Mezzanine
Borrower GP, CNL Hotel Del Intermediate Mezz Partners GP, LLC, CNL Hotel Del
Junior Mezz Partners GP, LLC, and Revolving Credit Borrower has a single
Independent Director.
 
(b)  All of the assumptions made in the Non-Consolidation Opinion, including,
but not limited to, any exhibits attached thereto and any certificates delivered
by Mezzanine Borrower in connection with the issuance of the Non-Consolidation
Opinion, are true and correct in all respects and any assumptions made in any
subsequent non-consolidation opinion delivered in connection with the Loan
Documents (Senior Mezzanine) (an Additional Non-Consolidation Opinion),
including, but not limited to, any exhibits attached thereto, are true and
correct in all material respects. Mezzanine Borrower, Mortgage Borrower and each
SPE Entity have complied with all of the assumptions made with respect to it in
the Non-Consolidation Opinion. To the Best of Mezzanine Borrower's Knowledge,
each entity other than Mezzanine Borrower with respect to which an assumption
shall be made in any Additional Non-Consolidation Opinion will have complied and
will comply with all of the assumptions made with respect to it in any
Additional Non-Consolidation Opinion.
 
4.1.21  Management Agreement. The Management Agreement is in full force and
effect and there is no default thereunder by any party thereto and no event has
occurred that, with the passage of time and/or the giving of notice would
constitute a default thereunder. The Manager is not an Affiliate of Mezzanine
Borrower.
 
4.1.22  Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws.
(i) None of Mezzanine Borrower, Guarantor or any Person who owns any equity
interest in or Controls Mezzanine Borrower or, to the Best of Borrower's
Knowledge, Guarantor, currently is identified on the OFAC List or otherwise
qualifies as a Prohibited Person, and Mezzanine Borrower has implemented
procedures to ensure that no Person who now or hereafter owns any equity
interest in Mezzanine Borrower or Guarantor is a Prohibited Person or Controlled
by a Prohibited Person, and (ii) none of Mezzanine Borrower or Guarantor is in
violation of any Legal Requirements relating to anti-money laundering or
anti-terrorism, including, without limitation, Legal Requirements related to
transacting business with Prohibited Persons or the requirements of the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related
regulations issued thereunder, including temporary regulations, all as amended
from time to time.
 
4.1.23  Tax Filings. Mezzanine Borrower has filed (or has obtained effective
extensions for filing) all federal, state and local tax returns required to be
filed and has paid or made adequate provision for the payment of all federal,
state and local taxes, charges and assessments payable by Mezzanine Borrower.
 
4.1.24  Solvency/Fraudulent Conveyance. Mezzanine Borrower (a) has not entered
into the transaction contemplated by this Agreement or any Loan Document (Senior
Mezzanine) with the actual intent to hinder, delay, or defraud any creditor and
(b) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents (Senior Mezzanine). After giving effect to the Loan,
the fair saleable value of Mezzanine Borrower's assets exceeds and will,
immediately following the making of the Loan, exceed Mezzanine Borrower's total
liabilities, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities. The fair saleable value of Mezzanine Borrower's
assets is and will, immediately following the making of the Loan, be greater
than Mezzanine Borrower's probable liabilities, including the maximum amount of
its contingent liabilities on its Debts as such Debts become absolute and
matured. Mezzanine 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. Mezzanine 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 Mezzanine Borrower and the amounts
to be payable on or in respect of obligations of Mezzanine Borrower).
 

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4.1.25  Investment Company Act. Mezzanine 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 mean 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.
 
4.1.26  Interest Rate Cap Agreement. The Interest Rate Cap Agreement (Senior
Mezzanine) is in full force and effect and enforceable against Mezzanine
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency or similar laws generally affecting the enforcement of creditors'
rights and subject as to enforceability to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
 
4.1.27  Brokers. Neither Mezzanine Borrower nor, to the Best of Mezzanine
Borrower's Knowledge, Mezzanine Lender has dealt with any broker or finder with
respect to the transactions contemplated by the Loan Documents (Senior
Mezzanine) and neither party has done any acts, had any negotiations or
conversations, or made any agreements or promises which will in any way create
or give rise to any obligation or liability for the payment by either party of
any brokerage fee, charge, commission or other compensation to any Person with
respect to the transactions contemplated by the Loan Documents (Senior
Mezzanine). Mezzanine Borrower covenants and agrees that it shall pay as and
when due any and all brokerage fees, charges, commissions or other compensation
or reimbursement due to any broker of Mezzanine Borrower with respect to the
transactions contemplated by the Loan Documents (Senior Mezzanine). Mezzanine
Borrower and Mezzanine Lender shall each indemnify and hold harmless the other
from and against any loss, liability, cost or expense, including any judgments,
attorneys' fees, or costs of appeal, incurred by the other party and arising out
of or relating to any claim for brokerage commissions or finder's fees alleged
to be due as a result of the indemnifying party's agreements or actions. The
provisions of this Section 4.1.27 shall survive the expiration and termination
of this Agreement and the payment of the Indebtedness.
 
4.1.28  No Other Debt. Neither Mezzanine Borrower nor General Partner has
borrowed or received debt financing that has not been heretofore repaid in full,
other than the Permitted Debt.
 
4.1.29  Taxpayer Identification Number. Mezzanine Borrower's Federal taxpayer
identification number is 20-0494073.
 
4.1.30  Knowledge Qualifications. Mezzanine Borrower represents that Eric
Resnick, Peter McDermott, John Barry and/or Barry Bloom are in a position to
have meaningful knowledge with respect to the matters set forth in the Loan
 

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Documents (Senior Mezzanine) which have been qualified to the knowledge of such
Persons.
 
4.1.31  Representations and Warranties. Mezzanine Borrower represents and
warrants that each of the representations and warranties contained in the Loan
Documents (Mortgage) (which are hereby incorporated by reference as if fully set
forth herein) is true and correct in all material respects, as of the Closing
Date and to the best of its knowledge, after reasonable inquiry, there is no
Mortgage Event of Default thereunder.
 
Section 4.2  Survival of Representations
 
Mezzanine Borrower agrees that all of the representations and warranties of
Mezzanine Borrower set forth in Section 4.1 and elsewhere in this Agreement and
in the other Loan Documents (Senior Mezzanine) shall be deemed given and made as
of the date of the funding of the Loan and survive for so long as any amount
remains owing to Mezzanine Lender under this Agreement or any of the other Loan
Documents (Senior Mezzanine) by Mezzanine Borrower or Guarantor unless a longer
survival period is expressly stated in a Loan Document (Senior Mezzanine) with
respect to a specific representation or warranty, in which case, for such longer
period. All representations, warranties, covenants and agreements made in this
Agreement or in the other Loan Documents (Senior Mezzanine) by Mezzanine
Borrower shall be deemed to have been relied upon by Mezzanine Lender
notwithstanding any investigation heretofore or hereafter made by Mezzanine
Lender or on its behalf.
 

V.  
MEZZANINE BORROWER COVENANTS

 
Section 5.1  Affirmative Covenants
 
From the Closing Date and until payment and performance in full of all
obligations of Mezzanine Borrower under the Loan Documents (Senior Mezzanine),
Mezzanine Borrower hereby covenants and agrees with Mezzanine Lender that:
 
5.1.1  Performance by Mezzanine Borrower.
 
(a)  Mezzanine Borrower shall in a timely manner observe, perform and fulfill
each and every covenant, term and provision of each Loan Document (Senior
Mezzanine) executed and delivered by, or applicable to, Mezzanine Borrower and
shall not enter into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan Document (Senior
Mezzanine) executed and delivered by, or applicable to, Mezzanine Borrower
without the prior written consent of Mezzanine Lender.
 
(b)  Mezzanine Borrower shall cause Mortgage Borrower in a timely manner to
observe, perform and fulfill each and every covenant, term and provision of each
Loan Document (Mortgage) executed and delivered by, or applicable to, Mortgage
Borrower.
 

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5.1.2  Existence; Compliance with Legal Requirements; Insurance. Subject to
Mortgage Borrower's right of contest pursuant to Section 7.3, of the Loan
Agreement (Mortgage), Mezzanine Borrower shall comply and cause the Mortgage
Borrower, any SPE Entity and the Property to be in compliance with all Legal
Requirements applicable to the Mezzanine Borrower, Mortgage Borrower, any SPE
Entity and Manager and the Property and the uses permitted upon the Property.
Mezzanine 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 necessary to comply with all Legal Requirements
applicable to it and the Property. There shall never be committed by Mezzanine
Borrower, and Mezzanine Borrower shall not knowingly permit Mortgage Borrower or
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 as against the Property or any
part thereof or any monies paid in performance of Mezzanine Borrower's
obligations under any of the Loan Documents (Senior Mezzanine). Mezzanine
Borrower hereby covenants and agrees not to commit, knowingly permit or suffer
to exist any act or omission affording such right of forfeiture. Mezzanine
Borrower shall at all times maintain, preserve and protect (and shall cause
Mortgage Borrower to at all times maintain, preserve and protect) all franchises
and trade names and preserve all the remainder of its property used in the
conduct of its business and shall keep 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,
as required by the Loan Agreement (Mortgage). Mezzanine Borrower shall keep or
shall cause Mortgage Borrower to keep the Property insured at all times to such
extent and against such risks, and maintain liability and such other insurance,
as is more fully set forth in this Agreement and the Loan Agreement (Mortgage).
 
5.1.3  Litigation. Mezzanine Borrower shall give prompt written notice to
Mezzanine Lender of any litigation or governmental proceedings pending or
threatened in writing against Mezzanine Borrower, Mortgage Borrower, the
Collateral or the Property which, if determined adversely to Mezzanine Borrower,
Mortgage Borrower, the Collateral or the Property would have a Material Adverse
Effect.
 
5.1.4  Single Purpose Entity.
 
(a)  Each of Mezzanine Borrower, General Partner, Mortgage Borrower, and each
SPE Entity has been since the date of its respective formation and shall remain
a Single Purpose Entity.
 
(b)  Each of Mezzanine Borrower, Mortgage Borrower and each SPE Entity shall
continue to maintain its own account or accounts, separate from those of any
Affiliate, with commercial banking institutions. None of the funds of Mezzanine
Borrower, will be commingled with the funds of any other Affiliate.
 

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(c)  To the extent that Mezzanine Borrower, Mortgage Borrower or any SPE Entity
shares the same officers or other employees as any of their Affiliates, the
salaries of and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and each such
entity shall bear its fair share of the salary and benefit costs associated with
all such common officers and employees.
 
(d)  To the extent that Mezzanine Borrower, Mortgage Borrower or any SPE Entity
jointly contracts with any of Mezzanine Borrower, Mortgage Borrower, any SPE
Entity or any of their Affiliates, as applicable, to do business with vendors or
service providers or to share overhead expenses, the costs incurred in so doing
shall be allocated fairly among such entities, and each such entity shall bear
its fair share of such costs. To the extent that Mezzanine Borrower, Mortgage
Borrower or any SPE Entity contracts or does business with vendors or service
providers where the goods and services provided are partially for the benefit of
any other Person, the costs incurred in so doing shall be fairly allocated to or
among such entities for whose benefit the goods and services are provided, and
each such entity shall bear its fair share of such costs. All material
transactions between (or among) Mezzanine Borrower, Mortgage Borrower or each
SPE Entity and any of their respective Affiliates shall be conducted on
substantially the same terms (or on more favorable terms for Mezzanine Borrower,
Mortgage Borrower or any SPE Entity, as applicable) as would be conducted with
third parties.
 
(e)  To the extent that Mezzanine Borrower, Mortgage Borrower, any SPE Entity or
any of their Affiliates have offices in the same location, there shall be a fair
and appropriate allocation of overhead costs among them, and each such entity
shall bear its fair share of such expenses.
 
(f)  Mezzanine Borrower, Mortgage Borrower and each SPE Entity shall conduct its
affairs strictly in accordance with its organizational documents, and observe
all necessary, appropriate and customary corporate, limited liability company or
partnership formalities, as applicable, including, but not limited to, obtaining
any and all members' consents necessary to authorize actions taken or to be
taken, and maintaining accurate and separate books, records and accounts,
including, without limitation, payroll and intercompany transaction accounts.
 
(g)  In addition, Mezzanine Borrower, Mortgage Borrower and each SPE Entity
shall each: (i) maintain books and records separate from those of any other
Person; (ii) maintain its assets in such a manner that it is not more costly or
difficult to segregate, identify or ascertain such assets; (iii) hold regular
meetings of its board of directors, shareholders, partners or members, as the
case may be, and observe all other corporate, partnership or limited liability
company, as the case may be, formalities; (iv) hold itself out to creditors and
the public as a legal entity separate and distinct from any other entity; (v)
prepare separate tax returns and financial statements, or if part of a
consolidated group, then it will be shown as a separate member of such group;
(vi) transact all business with its Affiliates on an arm's-length basis and
pursuant to
 

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enforceable agreements; (vii) conduct business in its name and use separate
stationery, invoices and checks; (viii) not commingle its assets or funds with
those of any other Person; and (ix) not assume, guarantee or pay the debts or
obligations of any other Person.
 
5.1.5  Consents. If Mezzanine Borrower, Mortgage Borrower or any SPE Entity is a
corporation, the board of directors of such Person may not take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
directors unless all of the directors, including the Independent Directors,
shall have participated in such vote. If Mezzanine Borrower, Mortgage Borrower
or any SPE Entity is a limited liability company, (a) if such Person is managed
by a board of managers, the board of managers of such Person may not take any
action requiring the unanimous affirmative vote of 100% of the members of the
board of managers unless all of the managers, including the Independent
Managers, shall have participated in such vote, (b) if such Person is not
managed by a board of managers, the members of such Person may not take any
action requiring the affirmative vote of 100% of the members of such Person
unless all of the members, including the Independent Members, shall have
participated in such vote. An affirmative vote of 100% of the directors, board
of managers or members, as applicable, of Mezzanine Borrower, Mortgage Borrower
and any SPE Entity shall be required to (i) file a bankruptcy or insolvency
petition or otherwise institute insolvency proceedings or to authorize Mezzanine
Borrower, Mortgage Borrower or any SPE Entity to do so or (ii) file an
involuntary bankruptcy petition against any Close Affiliate, Manager, or any
Close Affiliate of Manager. Furthermore, Mezzanine Borrower's, Mortgage
Borrower's or each SPE Entity's formation documents shall expressly state that
for so long as the Loan is outstanding, none of Mezzanine Borrower, Mortgage
Borrower nor any SPE Entity shall be permitted to (i) dissolve, liquidate,
consolidate, merge or sell all or substantially all of Mezzanine Borrower's,
Mortgage Borrower's or any SPE Entity's assets other than in connection with the
repayment of the Loan or (ii) engage in any other business activity and such
restrictions shall not be modified or violated for so long as the Loan is
outstanding.
 
5.1.6  Notice of Default. Mezzanine Borrower shall promptly advise Mezzanine
Lender (a) of any event or condition that has or is likely to have a Material
Adverse Effect and (b) of the occurrence of any Default, Event of Default,
Mortgage Default or Mortgage Event of Default of which Mezzanine Borrower has
knowledge.
 
5.1.7  Cooperate in Legal Proceedings. Mezzanine Borrower shall cooperate (and
shall cause Mortgage Borrower to cooperate) fully with Mezzanine Lender with
respect to any proceedings before any court, board or other Governmental
Authority which would reasonably be expected to affect in any material adverse
way the rights of Mezzanine Lender hereunder or under any of the other Loan
Documents (Senior Mezzanine) and, in connection therewith, permit Mezzanine
Lender, at its election, to participate in any such proceedings which may have a
Material Adverse Effect.
 
5.1.8  Perform Loan Documents (Senior Mezzanine). Mezzanine Borrower shall
observe, perform and satisfy all the terms, provisions,
 

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covenants and conditions of, and shall pay when due all costs, fees and expenses
to the extent required, under the Loan Documents (Senior Mezzanine) executed and
delivered by, or applicable to, Mezzanine Borrower.
 
5.1.9  Further Assurances; Separate Notes.
 
(a)  Mezzanine Borrower shall execute and acknowledge (or cause to be executed
and acknowledged) and deliver to Mezzanine Lender all documents, and take all
actions, reasonably required by Mezzanine Lender from time to time to confirm
the rights created or now or hereafter intended to be created under this
Agreement and the other Loan Documents (Senior Mezzanine) and any security
interest created or purported to be created thereunder, to protect and further
the validity, priority and enforceability of this Agreement and the other Loan
Documents (Senior Mezzanine), to subject to the Loan Documents (Senior
Mezzanine) any property of Mezzanine Borrower intended by the terms of any one
or more of the Loan Documents (Senior Mezzanine) to be encumbered by the Loan
Documents (Senior Mezzanine), or otherwise carry out the purposes of the Loan
Documents (Senior Mezzanine) and the transactions contemplated thereunder.
Mezzanine Borrower agrees that it shall, upon request, reasonably cooperate with
Mezzanine Lender in connection with any request by Mezzanine Lender to sever the
Mezzanine Note into two (2) or more separate substitute or component notes in an
aggregate principal amount equal to the Principal Amount and to reapportion the
Loan among such separate substitute notes, including, without limitation, by
executing and delivering to Mezzanine Lender new substitute or component notes
to replace the Mezzanine Note, amendments to or replacements of existing Loan
Documents (Senior Mezzanine) to reflect such severance and/or Opinions of
Counsel with respect to such substitute or component notes, amendments and/or
replacements, provided that Mezzanine Borrower shall bear no costs or expenses
in connection therewith (other than administrative costs and expenses of
Mezzanine Borrower), and the holders of such substitute or component notes shall
designate a lead lender or agent for such holders to whom Mezzanine Borrower may
direct all communications with respect to the Loan. Any such substitute or
component notes may have varying principal amounts and economic terms, provided,
however, that (i) the maturity date of any such substitute or component notes
shall be the same as the scheduled Maturity Date of the Mezzanine Note
immediately prior to the issuance of such substitute notes, (ii) the substitute
notes shall provide for amortization of the Principal Amount on a weighted
average basis over a period not less than the amortization period provided under
the Mezzanine Note, if any, immediately prior to the issuance of the substitute
notes, (iii) the weighted average LIBOR Margin for the term of the substitute
notes shall not exceed the LIBOR Margin under the Mezzanine Note immediately
prior to the issuance of such substitute notes; and (iv) the economics of the
Loan, taken as a whole, shall not change in a manner which is adverse to
Mezzanine Borrower. Upon the occurrence and during the continuance of an Event
of Default, Mezzanine Lender may apply payment of all sums due under such
substitute notes in such order and priority as Mezzanine Lender shall elect in
its sole and absolute discretion.
 
(b)  Mezzanine Borrower further agrees that if, in connection with the
Securitization, it is determined by the Rating Agencies that a portion of the
Securitization
 

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would not receive an "investment grade" rating unless the principal amount of
the Mortgage Loan were to be decreased and, as a result, the principal amount of
the Mortgage Loan is decreased, then (i) the Mezzanine Borrower shall take all
actions as are necessary to effect the "resizing" of the Loan and the Mortgage
Loan, (ii) the Mezzanine Borrower shall cause the Mortgage Borrower to comply
with its agreements to effect a "resizing", and (iii) Mezzanine Lender shall on
the date of the "resizing" of the Loan lend to the Mezzanine Borrower (by way of
a reallocation of the principal amount of the Mortgage Loan and the Loan) such
additional amount equal to the amount of the principal reduction of the Loan
provided that Mortgage Borrower and Mezzanine Borrower execute and deliver any
and all necessary amendments or modifications to the Loan Documents (Mortgage)
and the Loan Documents (Senior Mezzanine). In addition, Mezzanine Borrower and
Mezzanine Lender agree that if, in connection with the Securitization, it is
determined by the Rating Agencies that, if the principal amount of the Loan were
to be decreased and, as a result the principal amount of the Mortgage Loan were
increased, more "investment grade" rated securities could be issued, then (i) if
"resizing" to increase the size of the Mortgage Loan and decrease the size of
the Loan is provided for in the Loan Documents (Mortgage), each of them shall
take all actions provided for in the documentation for the Loan as are necessary
to effect the "resizing" of the Loan and the Mortgage Loan, (ii) Mezzanine
Borrower shall cause the Mortgage Borrower to comply with its agreements to
effect a "resizing" and (iii) Mortgage Lender shall on the date of the
"resizing" of the Loan lend to the Mortgage Borrower (by way of a reallocation
of the principal amount of the Mortgage Loan and the Loan) an additional amount
equal to the amount of principal reduction of the Loan, provided that Mortgage
Borrower and Mezzanine Borrower execute and deliver any and all necessary
modifications to the Loan Documents (Mortgage) and Loan Documents (Senior
Mezzanine). In connection with the foregoing, Mezzanine Borrower agrees, at
Mezzanine Borrower's sole cost and expense, to execute and deliver such
documents and other agreements reasonably required by Mortgage Lender and/or
Mezzanine Lender to "re-size" the Loan and the Mortgage Loan, including, without
limitation, an amendment to this Agreement, the Mezzanine Note, the Pledge and
the other Loan Documents (Mortgage) and, if the principal amount of the Mortgage
Loan is increased, an endorsement to the Title Policy reflecting an increase in
the insured amount thereunder. Mezzanine Borrower agrees to reimburse Mezzanine
Lender for all costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by Mezzanine Lender in connection with
any "resizing" of the Loan and to pay for any additional "Eagle 9" or other UCC
insurance coverage reasonably required by Mezzanine Lender in connection with
any increase in the principal amount of any Mezzanine Loan, and shall deliver
opinions of counsel similar to those delivered on the date hereof with respect
to Mezzanine Borrower and the Mezzanine Loans. Notwithstanding the foregoing,
Mezzanine Lender agrees that any "resizing" of the Mortgage Loan and the Loan
shall not change the economics of the Mortgage Loan, Intermediate Mezzanine
Loan, Junior Mezzanine Loan, and the Loan taken as a whole in a manner which is
adverse to Mezzanine Borrower.
 
(c)  In addition, Mezzanine Borrower shall, at Mezzanine Borrower's sole cost
and expense:
 

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(i)  furnish to Mezzanine Lender, to the extent not otherwise already furnished
to Mezzanine Lender and reasonably acceptable to Mezzanine 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 Mortgage Borrower pursuant
to the terms of the Loan Documents (Mortgage);
 
(ii)  execute and deliver, from time to time, such further instruments
(including, without limitation, delivery of any financing statements under the
UCC) as may be reasonably requested by Mezzanine Lender to confirm the lien of
the Pledge and this Agreement or any Collateral;
 
(iii)  execute and deliver to Mezzanine Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
to evidence, preserve and/or protect the collateral at any time securing or
intended to secure the obligations of Mezzanine Borrower under the Loan
Documents (Senior Mezzanine), as Mezzanine Lender may reasonably require;
 
(iv)  do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the carrying out of the terms and conditions of
this Agreement and the other Loan Documents (Senior Mezzanine), as Mezzanine
Lender shall reasonably require from time to time; and
 
(v)  cause its New York counsel to re-issue the New York opinion delivered on
the date hereof (in identical form and without updating) in favor of any
purchaser of the Loan or an interest therein.
 
5.1.10  Business and Operations. Mortgage Borrower, Mezzanine Borrower, and
Operating Lessee shall continue to engage in the businesses presently conducted
by it as and to the extent the same are necessary for the ownership,
maintenance, management and operation of the Property and the Collateral, as
applicable. Mezzanine Borrower shall and shall cause Mortgage Borrower to,
qualify to do business and shall remain in good standing under the laws of all
applicable jurisdictions and to the extent required for the ownership,
maintenance, management and operation of the Property and, as applicable, the
ownership of the Collateral.
 
5.1.11  Title to the Collateral. Mezzanine Borrower shall warrant and defend (a)
its title to the Collateral and every part thereof, subject only to Liens
permitted hereunder (including Permitted Encumbrances) and (b) the validity and
priority of the Lien of the Pledge and this Agreement on the Collateral, subject
only to Liens permitted hereunder (including Permitted Encumbrances), in each
case against the claims of all Persons whomsoever. Mezzanine Borrower shall
reimburse Mezzanine Lender for any losses, costs, damages or expenses (including
reasonable attorneys' fees and court
 

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costs) incurred by Mezzanine Lender if an interest in the Collateral, other than
as permitted hereunder, is claimed by another Person.
 
5.1.12  Costs of Enforcement. In the event (a) that this Agreement or the Pledge
is foreclosed upon in whole or in part or that this Agreement or the Pledge is
put into the hands of an attorney for collection, suit, action or foreclosure,
(b) of the foreclosure of any security agreement prior to or subsequent to this
Agreement or the Pledge in which proceeding Mezzanine Lender is made a party, or
a Pledge prior to or subsequent to the Pledge in which proceeding Mezzanine
Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or
other similar proceeding in respect of Mezzanine Borrower or any of its
constituent Persons or an assignment by Mezzanine Borrower or any of its
constituent Persons for the benefit of its creditors, Mezzanine Borrower, its
successors or assigns, shall be chargeable with and agrees to pay all costs of
collection and defense, including reasonable attorneys' fees and costs, incurred
by Mezzanine Lender or Mezzanine 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.
 
5.1.13  Estoppel Statement.
 
(a)  Mezzanine Borrower shall, from time to time, upon thirty (30) days' prior
written request from Mezzanine Lender, execute, acknowledge and deliver to the
Mezzanine Lender (and shall cause Mortgage Borrower to execute, acknowledge and
deliver to Mezzanine Lender), an Officer's Certificate, stating that this
Agreement and the other Loan Documents (Senior Mezzanine) (or as applicable, the
Loan Documents (Mortgage)) are unmodified and in full force and effect (or, if
there have been modifications, that this Agreement and the other Loan Documents
(Senior Mezzanine) or, as applicable, Loan Documents (Mortgage) are in full
force and effect as modified and setting forth such modifications), stating the
amount of accrued and unpaid interest and the outstanding principal amount of
the Mezzanine Note (or, as applicable, the Mortgage Note) and containing such
other information, qualified to the Best of Mezzanine Borrower's Knowledge, with
respect to the Mezzanine Borrower, Guarantor, Mortgage Borrower, the Property,
the Loan and the Mortgage Loan as Mezzanine Lender shall reasonably request. The
estoppel certificate shall also state either that no Event of Default or
Mortgage Event of Default exists hereunder or thereunder or, if any Event of
Default or Mortgage Event of Default shall exist hereunder or thereunder,
specify such Event of Default or Mortgage Event of Default and the steps being
taken to cure such Event of Default or Mortgage Event of Default.
 
(b)  Mezzanine Borrower shall use commercially reasonable efforts to deliver to
Mezzanine Lender, within thirty (30) days of Mezzanine Lender's request, tenant
estoppel certificates from each Tenant under Leases entered into after the
Closing Date in substantially the form and substance of the estoppel certificate
set forth in Exhibit G provided that Mezzanine Borrower shall not be required to
deliver such certificates more frequently than one time in any calendar year;
provided, however, that there shall be no limit on the number of times Mezzanine
Borrower may be required to
 

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obtain such certificates if a Default hereunder or under any of the Loan
Documents (Senior Mezzanine) has occurred and is continuing.
 
5.1.14  Loan Proceeds. Mezzanine 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.
 
5.1.15   No Joint Assessment. Mezzanine 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.
 
5.1.16  No Further Encumbrances. Mezzanine Borrower shall do, or cause to be
done, all things necessary to keep and protect the Property and the Collateral
and all portions thereof unencumbered from any Liens, easements or agreements
granting rights in or restricting the use or development of the Property, except
for (a) with respect to the Property, Permitted Encumbrances, (b) Liens
permitted pursuant to the Loan Documents (Senior Mezzanine), or the Loan
Documents (Mortgage), (c) Liens for Impositions prior to the imposition of any
interest, charges or expenses for the non-payment thereof and (d) any Liens
permitted pursuant to Leases.
 
5.1.17  Leases and REAs. Mezzanine Borrower shall cause Mortgage Borrower,
promptly after receipt thereof, to deliver to Mezzanine Lender a copy of any
notice received with respect to the REAs and the Leases claiming that Mortgage
Borrower is in default in the performance or observance of any of the material
terms, covenants or conditions of any of the REAs or the Leases.
 
5.1.18  Loan (Mortgage) Covenants.
 
(a)  Mezzanine Borrower hereby covenants that it shall cause Mortgage Borrower
to fully keep, perform and comply with (or cause to be kept, performed and
complied with) each of the covenants set forth in the Loan Agreement (Mortgage)
and the Security Instrument, which are hereby incorporated by reference as if
fully set forth herein, notwithstanding any waiver or future amendment of such
covenants by Mortgage Lender (other than a Permitted Loan Amendment). Mezzanine
Borrower acknowledges that the obligation to comply with such covenants is
separate from, and may be enforced independently from, the obligations of the
Mortgage Borrower under the Loan Documents (Mortgage).
 
(b)  Mezzanine Borrower shall not, and shall cause Mortgage Borrower not to, (i)
amend or modify (by agreement on the part of the Mortgage Borrower or Mezzanine
Borrower) or (ii) affirmatively permit the modification or amendment of (by
operation of law or otherwise) the Loan Documents (Mortgage) in effect as of the
Closing Date that would be a Prohibited Loan Amendment (as hereinafter defined)
except
 

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for those amendments or modifications (Permitted Loan Amendments) that are (i)
required under the Loan Documents (Mortgage) or that Mortgage Borrower is
required to consent to thereunder pursuant to the express terms of the Loan
Documents (Mortgage), (ii) which do not constitute a Prohibited Loan Amendment,
or (iii) are otherwise consented to by Mezzanine Lender. As used herein, a
Prohibited Loan Amendment shall mean an amendment or modification to the Loan
Documents (Mortgage) that (A) is reasonably likely to have a Material Adverse
Effect, or (B) which (1) increases the principal amount of the Loan (Mortgage)
(exclusive of protective advances), (2) increases the interest rate payable
under the Loan (Mortgage), (3) provides for the payment of any additional
interest, additional fees, increases the amount of or adds additional reserve
payments or increases the amount of or adds additional escrows, or otherwise
increases the amount payable under the Loan (Mortgage), (4) increases the
frequency or payment amount of the periodic principal installments under the
Loan (Mortgage), (5) modifies the recourse carveout obligations under the Loan
Documents (Mortgage) in a manner which increases or expands recourse liability,
(6) modifies the due-on-sale, due-on-encumbrance, or collateral release
provisions of the Loan Documents (Mortgage), (7) modifies the provisions
governing requirements with respect to the Independent Managers under the Loan
Documents (Mortgage) in a manner materially adverse to Mortgage Lender, (8) adds
material additional obligations, liabilities or indemnities on the part of
Mortgage Borrower, Guarantor, General Partner or Mezzanine Borrower, (9)
shortens any default cure periods or adds any additional defaults under the Loan
Documents (Mortgage), (10) extends the maturity date of the Loan (Mortgage)
beyond the initially scheduled maturity date (except in connection with any
work-out or other surrender, compromise, release, renewal, or indulgence
relating to the Loan (Mortgage), (11) modifies any provisions related to the
Management Agreement, (12) waives or modifies any provisions related to the use
of proceeds under the Loan Documents (Mortgage), (13) modifies any provisions of
the Loan Documents (Mortgage) related to the funding of escrows or cash
management or any provision of the Account Agreement (Mortgage) or (14)
decreases or materially modifies any insurance requirements under the Loan
Documents (Mortgage). Any amendment or modification to the Loan Documents
(Mortgage) in violation of this Section shall be ineffective as between
Mezzanine Borrower and Mezzanine Lender, and, if not cured by Mezzanine Borrower
within thirty (30) days after written notice from Mezzanine Lender shall
constitute an Event of Default hereunder, unless Mezzanine Lender consents
thereto in writing in its sole discretion.
 
(c)  In the event the Loan (Mortgage) shall at any time be repaid, or the Liens
securing the Loan (Mortgage) at any time be released in full, then unless and
until the Mezzanine Note shall have been repaid in full and all obligations of
Mezzanine Borrower to Mezzanine Lender hereunder and under the other Loan
Documents (Senior Mezzanine) shall have been satisfied, then Mezzanine Borrower
and Manager shall nevertheless comply or cause the Mortgage Borrower to comply
with each of the terms and provisions of the Loan Documents (Mortgage) (other
than payment of principal, interest and premium (if any)) and the Loan Documents
(Mortgage) shall nevertheless be deemed to remain in full force and effect as
between Mezzanine Borrower and Mezzanine Lender with Mezzanine Lender being
deemed in such context to possess exclusively all of the rights and remedies of
the Mortgage Lender thereunder including
 

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without limitation, all rights of consent and approval, rights to receive and
control the disposition of casualty insurance proceeds and condemnation awards,
and the right to collect rents through a lockbox and make waterfall
distributions (but expressly excluding any rights and remedies relating to
payment of the indebtedness under the Loan Documents (Mortgage) and evidenced by
the Mortgage Note and Mezzanine Borrower shall nevertheless comply or cause the
Mortgage Borrower to comply with each of the terms and provisions of the Loan
Documents (Mortgage) (and any Permitted Loan Amendments or amendment or
modification consented to in writing by Mezzanine Lender) (other than the
payment of principal, interest and premium, if any). Mezzanine Borrower shall,
and shall cause Mortgage Borrower to, execute any and all documents reasonably
requested by Mezzanine Lender for the implementation or furtherance of the
foregoing provided that the same shall be at Mezzanine Lender’s sole cost and
expense. Mezzanine Borrower shall deliver to Mezzanine Lender copies of any and
all modifications to the Loan Documents (Mortgage) within five (5) Business Days
after execution thereof.
 
(d)  Mezzanine Borrower covenants and agrees to cause Mortgage Borrower to
deliver any and all financial information delivered or required to be delivered
to Mortgage Lender pursuant to the terms of the Loan Documents (Mortgage) to be
delivered simultaneously to Mezzanine Lender.
 
5.1.19  Impositions. Mezzanine Borrower shall cause Mortgage Borrower to pay all
Impositions, to timely pay all claims for labor, material or supplies that if
unpaid or unbonded might by law become a lien or charge upon any of its property
(including the Property), and to keep the Property free from any Lien (other
than the lien of the Loan Documents (Mortgage) and the Permitted Encumbrances),
and shall in any event cause the prompt, full and unconditional discharge of all
Liens imposed upon the Property or any portion thereof within thirty (30) days
after receiving written notice (whether from Mezzanine Lender, the lienholder or
any other Person) of the filing thereof; subject in each case to Mortgage
Borrower's right to contest the same as permitted in but subject to the
conditions set forth in the Loan Agreement (Mortgage) so long as no Event of
Default has occurred. In the event that Mortgage Borrower elects to commence any
contest or similar proceeding with respect to any such Imposition, Lien or other
claim described herein, Mezzanine Borrower shall provide prompt written notice
thereof to Mezzanine Lender together with such evidence as Mezzanine Lender may
reasonably require showing Mortgage Borrower’s satisfaction of the requirements
set forth in Section 7.3 of the Loan Agreement (Mortgage) to Mortgage Borrower
conducting such contest. Notwithstanding the foregoing, Mezzanine Borrower shall
cause Mortgage Borrower promptly to pay any contested Imposition, Lien or claim
and the payment thereof shall not be deferred, if Mezzanine Lender or Mortgage
Borrower may be subject to civil or criminal damages as a result thereof. If
such action or proceeding is terminated or discontinued adversely to Mortgage
Borrower, then Mezzanine Borrower shall cause Mortgage Borrower to deliver to
Mezzanine Lender reasonable evidence of payment of such contested Imposition or
Lien.
 
5.1.20  Leases. Mezzanine Borrower shall promptly after receipt thereof (or
receipt by Mortgage Borrower) deliver to Mezzanine Lender a copy of any
 

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notice received with respect to the Leases claiming that Mortgage Borrower is in
default in the performance or observance of any of the material terms, covenants
or conditions of any of the Leases, if such default is reasonably likely to have
a Material Adverse Effect.
 
5.1.21  Membership Programs. Mezzanine Borrower shall receive Mezzanine Lender's
prior written consent to make any material modifications to (or permit Mortgage
Borrower to make any material modifications to) any existing membership program
or similar program at the Property or enter into any new membership or similar
program at the Property to the extent such modification or new program (i) would
allow any member to redeem a membership deposit prior to Mortgage Borrower
obtaining at least one new membership deposit in an amount at least equal to the
existing deposit to be redeemed (i.e., a 1:1 redemption program), or (ii) could
adversely affect the value of Mezzanine Lender's security for the Loan.
Mezzanine Borrower shall cause Mortgage Borrower to cause any membership
deposits which are not subject to a minimum of 1:1 redemption program to be held
in a separate interest bearing account and if requested by Lender, shall, at its
sole cost and expense promptly cause any such deposits to be held in an account
under the control of Lender. If Lener consents to any membership or similar
program that does not have a minimum 1:1 redemption method, Borrower agrees at
its sole cost and expense to promptly establish any reserves with Lender and
make any corresponding modifications to the Loan Documents as are requested by
the Rating Agencies.
 
5.1.22  Article 8 "Opt In" Language. Each organizational document of Mezzanine
Borrower, General Partner, each SPE Entity and Mortgage Borrower shall be
modified to include the language set forth on Exhibit R and such language shall
remain in each such organizational document for so long as the Obligations are
outstanding.
 
Section 5.2  Negative Covenants
 
From the Closing Date until payment and performance in full of all Obligations
of Mezzanine Borrower under the Loan Documents (Senior Mezzanine) or the earlier
release of the Lien of this Agreement or the Pledge in accordance with the terms
of this Agreement and the other Loan Documents (Senior Mezzanine), Mezzanine
Borrower covenants and agrees with Mezzanine Lender that it will not do (and
will not permit Operating Lessee to do), or permit to be done, directly or
indirectly, any of the following (and in such connection, references in this
Article V to Mortgage Borrower shall alternatively mean Operating Lessee, as the
context may require):
 
5.2.1  Incur Debt. Incur, create or assume any Debt other than Permitted Debt
(Senior Mezzanine) or Transfer all or any part of the Collateral or any interest
therein, except as permitted in the Loan Documents (Senior Mezzanine);
 
5.2.2  Encumbrances. Other than in connection with the Loan Documents (Senior
Mezzanine), the Loan Documents (Mortgage), the Loan Documents (Intermediate
Mezzanine), the Loan Documents (Junior Mezzanine), and the Revolving Credit Loan
Documents, incur, create or assume or permit the incurrence, creation or
 

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assumption of any Debt secured by an interest in Mortgage Borrower, Mezzanine
Borrower, Operating Lessee, CNL Hotel Del Tenant Corp., or Manager, and shall
not Transfer or permit the Transfer of any interest in Mortgage Borrower,
Mezzanine Borrower, Operating Lessee, or Manager, except as permitted pursuant
to Article VIII;
 
5.2.3  Engage in Different Business. Engage, directly or indirectly, in any
business other than that of entering into this Agreement and the other Loan
Documents (Senior Mezzanine) to which Mezzanine Borrower is a party and
ownership of interests in the Mortgage Borrower and activities related thereto;
 
5.2.4  Make Advances. Make advances or make loans to any Person, or hold any
investments, except as expressly permitted pursuant to the terms of this
Agreement or any other Loan Document (Senior Mezzanine);
 
5.2.5  Partition. Permit Mortgage Borrower to partition the Property;
 
5.2.6  Commingle. Commingle its assets with the assets of any of its Affiliates;
 
5.2.7  Guarantee Obligations. Guarantee any obligations of any Person;
 
5.2.8  Transfer Assets. Transfer any asset other than in the ordinary course of
business or Transfer any interest in the Property except as may be permitted
hereby or in the other Loan Documents (Senior Mezzanine);
 
5.2.9  Amend Organizational Documents. Amend or modify any of its organizational
documents without Mezzanine Lender's consent, other than in connection with any
Transfer permitted pursuant to Article VIII or to reflect any change in capital
accounts, contributions, distributions, allocations or other provisions that do
not and could not reasonably be expected to have a Material Adverse Effect and
provided that Mezzanine Borrower and each SPE Entity each remain a Single
Purpose Entity;
 
5.2.10  Dissolve. Dissolve, wind-up, terminate, liquidate, merge with or
consolidate into another Person, except following or simultaneously with a
repayment of the Loan in full or as expressly permitted pursuant to this
Agreement;
 
5.2.11  Bankruptcy. (i) File a bankruptcy or insolvency petition or otherwise
institute insolvency proceedings, (ii) dissolve, liquidate, consolidate, merge
or sell all or substantially all of Mezzanine Borrower's assets other than in
connection with the repayment of the Loan, (iii) engage in any other business
activity or (iv) file or solicit the filing of an involuntary bankruptcy
petition against Mezzanine Borrower, Mortgage Borrower, Manager or any Close
Affiliate of Mezzanine Borrower or Manager, without obtaining the prior consent
of all of the directors of Mezzanine Borrower, including, without limitation,
the Independent Directors;
 

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5.2.12  ERISA. Engage in any activity that would subject it to regulation under
ERISA or qualify it as an "employee benefit plan" (within the meaning of Section
3(3) of ERISA) to which ERISA applies and Mezzanine Borrower's assets do not and
will not constitute plan assets within the meaning of 29 C.F.R. Section
2510.3-101;
 
5.2.13  Distributions. From and after the occurrence and during the continuance
of an Event of Default, make any distributions to or for the benefit of any of
its shareholders, partners or members, as the case may be, or its or their
Affiliates;
 
5.2.14  Manager.
 
(a)  Except as provided in this Section 5.2.14, Mezzanine Borrower shall not,
without the prior written consent of Mezzanine Lender, which consent shall not
be unreasonably withheld or delayed, permit Mortgage Borrower to: amend, modify,
supplement, alter or waive any right under the Management Agreement without
Mezzanine Lender's prior written consent, not to unreasonably withheld. Without
the receipt of Mezzanine Lender's prior written consent, Mezzanine Borrower may
permit Mortgage Borrower to make any nonmaterial modification, change,
supplement, alteration or amendment to the Management Agreement and to waive any
nonmaterial rights thereunder, provided that no such modification, change,
supplement, alteration, amendment or waiver shall affect the cash management
procedures set forth in the Management Agreement or the Loan Documents
(Mortgage) or Loan Documents (Senior Mezzanine), decrease the cash flow of the
Property, adversely affect the marketability of the Property or the Collateral,
change the definitions of "default" or "event of default," change the
definitions of "operating expense" or words of similar meaning to add additional
items to such definitions, change any definitions or provisions so as to reduce
the payments due the Mortgage Borrower thereunder, change the timing of
remittances to the Mortgage Borrower thereunder, increase or decrease reserve
requirements, change the term of the Management Agreement or increase any
Management Fees payable under the Management Agreement; provided, however, the
Group Services Fee may include amounts in addition to the existing Sales and
Marketing Group Services Expense if and to the extent such amounts are
attributable to services that would otherwise constitute an Operating Expense or
fee and such services qualify under the provisions of the Management Agreement;
 
(b)  Mezzanine Borrower may permit Mortgage Borrower to enter into a new
Management Agreement with an Acceptable Manager upon receipt of a Rating Agency
Confirmation (or, if such manager is a Pre-approved Manager, upon receipt of
Mezzanine Lender's prior written consent) with respect to the Property
Management Agreement and delivery of an acceptable Non-Consolidation Opinion
covering such replacement Manager if such Person (i) is not covered by the
Non-Consolidation Opinion or an Additional Non-Consolidation Opinion, and (ii)
is an Affiliate of Mortgage Borrower;
 

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(c)  Mezzanine Borrower hereby agrees that, subject to the provisions of the
Assignment of Management Agreement (Senior Mezzanine), Mezzanine Lender shall
have the right to terminate the Manager subsequent to (i) an Event of Default
under this Agreement and (ii) an acceleration of the Loan.
 
5.2.15  Franchise Fee and Management Fee. Mezzanine Borrower may not, without
the prior written consent of Mezzanine Lender (which may be withheld in its sole
and absolute discretion) take or permit Mortgage Borrower to take any action
that would increase the percentage amount of the Management Fee, or add a new
type of fee (other than a "Group Services Expense" as permitted by Section
5.2.14 above) payable to Manager relating to the Property, including, without
limitation, the Franchise Fee and Management Fee;
 
5.2.16  Reserved.
 
5.2.17  REAs. Without the prior consent of Mezzanine Lender, which shall not be
unreasonably withheld, delayed or conditioned, Mezzanine Borrower shall not
permit Mortgage Borrower to execute modifications to the REAs;
 
5.2.18  Modify Account Agreement (Senior Mezzanine). Without the prior consent
of Mezzanine Lender, which shall not be unreasonably withheld, delayed or
conditioned, Mezzanine Borrower shall not execute any modification to the
Account Agreement (Senior Mezzanine);
 
5.2.19  Zoning Reclassification. Except as contemplated by Section 2.3.4 of the
Loan Agreement (Mortgage), without the prior written consent of Mezzanine
Lender, which consent shall not be unreasonably withheld, permit Mortgage
Borrower to (a) initiate or consent to any zoning reclassification of any
portion of the Property, (b) seek any variance under any existing zoning
ordinance that could result in the use of the Property becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, or (c) allow any portion of the Property to be used in any manner
that could result in the use of the Property becoming a non-conforming use under
any zoning ordinance or any other applicable land use law, rule or regulation;
 
5.2.20  Change of Principal Place of Business. Change its principal place of
business and chief executive office set forth on the first page of this
Agreement without first giving Mezzanine Lender thirty (30) days' prior written
notice (but in any event, within the period required pursuant to the UCC) and
there shall have been taken such action, reasonably satisfactory to Mezzanine
Lender, as may be necessary to maintain fully the effect, perfection and
priority of the security interest of Mezzanine Lender hereunder in the Account
Collateral (Senior Mezzanine) and the Rate Cap Collateral (Senior Mezzanine) at
all times;
 
5.2.21  Reserved.
 

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5.2.22  Debt Cancellation. Cancel or otherwise forgive or release any material
claim or debt owed to it by any Person, except for adequate consideration or in
the ordinary course of its business;
 
5.2.23  Misapplication of Funds. Distribute any revenue from the Property or any
Proceeds in violation of the provisions of this Agreement, fail to remit amounts
to the Senior Mezzanine Account, as required by Section 3.1, or the Pledge,
misappropriate any security deposit or portion thereof or apply the proceeds of
the Loan in violation of Section 2.1.4; or
 
5.2.24  Single-Purpose Entity. Fail to be a Single-Purpose Entity or take or
suffer any action or inaction the result of which would be to cause it or any
SPE Entity to cease to be a Single-Purpose Entity.
 

VI.  
INSURANCE; CASUALTY;

 
CONDEMNATION; RESTORATION
 
Section 6.1  Insurance Coverage Requirements
 
(a)  Mezzanine Borrower will cause Mortgage Borrower, at its expense, to procure
and maintain the insurance policies required by the Loan Documents (Mortgage).
Each commercial general liability or umbrella liability policy with respect to
the Property shall name Mezzanine Lender as an additional insured and shall
contain a cross liability/severability endorsement in form and substance
acceptable to Mezzanine Lender.
 
(b)  In the event of any loss or damage to the Property, Mezzanine Borrower
shall give prompt written notice to the insurance carrier and Mezzanine Lender.
Mezzanine Lender acknowledges that Mortgage Borrower’s rights to any insurance
proceeds are subject to the terms of the Loan Agreement (Mortgage). Mezzanine
Borrower may not and shall not permit Mortgage Borrower to settle, adjust or
compromise any claim under such insurance policies without the prior written
consent of Mezzanine Lender which shall not be unreasonably withheld, delayed or
denied; provided, further, that Mortgage Borrower may make proof of loss and
adjust and compromise any claim under casualty insurance policies which is of an
amount less than $500,000 so long as no Event of Default has occurred. Any
proceeds of such claim which are not used to reconstruct or repair the Property,
or applied to the balance of the loan evidenced by the Loan Documents
(Mortgage), shall be deposited into the accounts established pursuant to the
Loan Agreement (Mortgage) to the extent required thereby, or if such deposit is
not required thereunder, then such proceeds shall be paid to Mezzanine Lender
and applied to the payment of the Obligations (Senior Mezzanine) whether or not
then due.
 
(c)  In the event that Mortgage Borrower is permitted pursuant to the terms of
the Loan Agreement (Mortgage) to reconstruct, restore or repair the Property
following a casualty to any portion of the Property, Mezzanine Borrower shall
cause
 

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Mortgage Borrower to promptly and diligently repair and restore the Property in
the manner and within the time periods required by the Loan Agreement
(Mortgage), the Leases and any other agreements affecting the Property. In the
event that Mortgage Borrower is permitted pursuant to terms of the Loan
Agreement (Mortgage) to elect to not reconstruct, restore or repair the Property
following a casualty to any portion of the Property, Mezzanine Borrower shall
not permit Mortgage Borrower to elect not to reconstruct, restore or repair the
Property without the prior written consent of Mezzanine Lender.
 
(d)  Mezzanine Borrower shall comply with all Insurance Requirements and shall
not bring or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by any Insurance Requirement, or would invalidate insurance coverage
required to be maintained by Mortgage Borrower on or with respect to any part of
the Property pursuant to Section 6.1 of the Loan Agreement (Mortgage).  
 
Section 6.2  Condemnation and Insurance Proceeds
 
In the event that all or any portion of the Property shall be damaged or taken
through condemnation (which term shall include any damage or taking by any
governmental authority, quasi-governmental authority, any party having the power
of condemnation, or any transfer by private sale in lieu thereof), or any such
condemnation shall be threatened, Mezzanine Borrower shall give prompt written
notice to Mezzanine Lender. Mezzanine Lender acknowledges that Mortgage
Borrower’s rights to any condemnation award is subject to the terms of the Loan
Agreement (Mortgage). Mezzanine Borrower may not and shall not permit Mortgage
Borrower to settle or compromise any claim, action or proceeding relating to
such damage or condemnation without the prior written consent of Mezzanine
Lender, which shall not be unreasonably withheld, delayed or denied; provided,
further, that Mortgage Borrower may settle, adjust and compromise any such
claim, action or proceeding which is of an amount less than $5,000,000 so long
as no Default or Event of Default has occurred. Any Excess Proceeds shall be
paid to Mezzanine Lender and applied to the payment of the Obligations (Senior
Mezzanine) whether or not then due pursuant to Section 2.3.1(b). In the event
that Mortgage Borrower is permitted pursuant to the terms of the Loan Agreement
(Mortgage) to reconstruct, restore or repair the Property following a
condemnation of any portion of the Property, Mezzanine Borrower shall cause
Mortgage Borrower to promptly and diligently repair and restore the Property in
the manner and within the time periods required by the Loan Agreement
(Mortgage), the Leases and any other agreements affecting the Property. In the
event that Mortgage Borrower is permitted pursuant to the terms of the Loan
Agreement (Mortgage) to elect not to reconstruct, restore or repair the Property
following a condemnation of any portion of the Property, Mezzanine Borrower
shall not permit Mortgage Borrower to elect not to reconstruct, restore or
repair the Property without the prior written consent of Mezzanine Lender.
 
Section 6.3  Certificates
 

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Mezzanine Borrower shall deliver (or cause Mortgage Borrower to deliver) to
Mezzanine Lender annually, concurrently with the renewal of the insurance
policies required hereunder, a certificate from Mezzanine Borrower's and
Mortgage Borrower's insurance agent stating that the insurance policies required
to be delivered to Mezzanine Lender pursuant to Section 6.1 and Section 2.5.2(h)
are maintained with insurers who comply with the terms of Section 6.1.9 of the
Loan Agreement (Mortgage), setting forth a schedule describing all premiums
required to be paid by Mezzanine Borrower or Mortgage Borrower, as applicable,
to maintain the policies of insurance required under Section 6.1 and Section
2.5.2(h), and stating that either Mezzanine Borrower or Mortgage Borrower, as
applicable, has paid such premiums. Certificates of insurance with respect to
all replacement policies shall be delivered to Mezzanine Lender not less than
fifteen (15) Business Days prior to the expiration date of any of the insurance
policies required to be maintained hereunder which certificates shall bear
notations evidencing payment of applicable premiums. Originals (or certified
copies) of such replacement insurance policies shall be delivered to Mezzanine
Lender promptly after Mezzanine Borrower's receipt thereof but in any case
within thirty (30) days after the effective date thereof (including the
insurance certificates delivered pursuant to Section 2.5.2(h)). If Mezzanine
Borrower fails to (i) maintain or to deliver to Mezzanine Lender the
certificates of insurance required by this Agreement or (ii) maintain and
deliver originals (or certificated copies) of such insurance policies within
thirty (30) days after the effective date thereof, upon five (5) Business Days'
prior notice to Mezzanine Borrower, Mezzanine Lender may procure such insurance,
and all costs thereof (and interest thereon at the Default Rate) shall be added
to the Indebtedness. Mezzanine Lender shall not, by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment or defense of lawsuits, and Mezzanine Borrower
hereby expressly assumes full responsibility therefor and all liability, if any,
with respect thereto. Mezzanine Borrower agrees that any replacement insurance
policy required hereunder shall not include any so called "terrorist exclusion"
or similar exclusion or exception to insurance coverage relating to the acts of
terrorist groups or individuals.
 

VII.  
INTENTIONALLY OMITTED

 

VIII.  
TRANSFERS, INDEBTEDNESS AND SUBORDINATE LIENS

 
Section 8.1  Restrictions on Transfers and Indebtedness
 
(a)  Unless such action is a Permitted Mezzanine Transfer, or is otherwise
permitted by the subsequent provisions of this Article VIII, Mezzanine Borrower
shall not, and shall not permit Mortgage Borrower or any other Person to,
without Mezzanine Lender's prior written consent, (a) Transfer legal, Beneficial
or direct or indirect equitable interests in all or any part of the Property,
the Mezzanine Borrower, Mortgage Borrower, Operating Lessee, General Partner, or
Mortgage Borrower General
 

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Partner, (B) permit or suffer any owner, directly or indirectly, of a legal,
Beneficial, or equitable interest in the Property, the Mezzanine Borrower,
Mortgage Borrower, Operating Lessee, General Partner, or Mortgage Borrower
General Partner, to Transfer such interest, whether by Transfer of stock or
other legal, Beneficial or equitable interest in any entity or otherwise, (C)
mortgage, hypothecate or otherwise encumber or grant a security interest in all
or any part of the legal, Beneficial or equitable interests in all or any part
of the Collateral, the Property, the Mezzanine Borrower, Mortgage Borrower, the
Operating Lessee, General Partner, or Mortgage Borrower General Partner, or (D)
file a declaration of condominium with respect to the Property.
 
Notwithstanding any provision herein to the contrary, nothing contained herein
shall be deemed to restrict or otherwise interfere with the ability of the
holders of direct or indirect legal, Beneficial or equitable interests in CNL
Hospitality Partners, LP and/or KSL DC Operating, LLC to Transfer such
interests, whether in connection with an initial public offering of shares in
CNL Hospitality Partners, LP and/or KSL DC Operating, LLC or otherwise.
 
(b)  Mezzanine Borrower shall not incur, create or assume any Debt or incur any
liabilities without the consent of Mezzanine Lender; provided, however,
Mezzanine Borrower may, without the consent of Mezzanine Lender, incur, create
or assume Permitted Debt (Senior Mezzanine).
 
Section 8.2  Sale of Building Equipment and Immaterial Transfers and Easements
by Mortgage Borrower
 
Mezzanine Borrower may permit Mortgage Borrower to effect any Transfer permitted
pursuant to Section 8.2 and 8.3 of the Loan Agreement (Mortgage) without
Mezzanine Lender's prior written consent.
 
Section 8.3  Intentionally Omitted
 
Section 8.4  Transfers of Interests in Mezzanine Borrower
 
Each holder of any direct or indirect interest in Mezzanine Borrower shall have
the right to transfer (but not pledge, hypothecate or encumber) its equity
interest in the Mezzanine Borrower to any Person who is not a Disqualified
Transferee without Mezzanine Lender's consent or a Rating Agency Confirmation if
Section 8.6 is complied with and, after giving effect to such transfer:
 
(a)  Mezzanine Borrower and the Property will be directly owned by a Single
Purpose Entity in compliance with the representations, warranties and covenants
in Section 4.1.20 hereof (as if the Mezzanine Borrower shall have remade all of
such representations, warranties and covenants as of, and after giving effect
to, the transfer), and which shall have executed and delivered to Mezzanine
Lender an assumption agreement in form and substance acceptable to Mezzanine
Lender, evidencing the continuing agreement of the Mezzanine Borrower to abide
and be bound by all the terms, covenants and conditions set forth in this
Agreement, the Mezzanine Note, the Pledge and the other Senior Mezzanine Loan
Documents and all other outstanding obligations
 

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under the Loan, together with such legal opinions and title insurance
endorsements as may be reasonably requested by Mortgage Lender and Mezzanine
Lender;
 
(b)  an Acceptable Manager shall continue to act as Manager for the Property
pursuant to the existing Management Agreement or an Acceptable Management
Agreement;
 
(c)  KSL DC Operating, LLC, CNL Hospitality Partners, LP or a Close Affiliate of
either such entity owns directly or indirectly at least fifty-one percent (51%)
of the equity interests in the Mezzanine Borrower and Mortgage Borrower and the
Person that is the proposed transferee is not a Disqualified Transferee;
provided that, after giving effect to any such transfer, in no event shall any
Person other than CNL Hospitality Partners, LP, KSL DC Operating, LLC or a Close
Affiliate of CNL Hospitality Partners, LP or KSL DC Operating, LLC exercise
Management Control over the Mezzanine Borrower and/or Mortgage Borrower. In the
event that Management Control shall be exercisable jointly by CNL Hospitality
Partners, LP, KSL DC Operating, LLC or a Close Affiliate of CNL Hospitality
Partners, LP or KSL DC Operating, LLC with any other Person or Persons, then CNL
Hospitality Partners, LP, KSL DC Operating, LLC or such Close Affiliate shall be
deemed to have Management Control only if CNL Hospitality Partners, LP, KSL DC
Operating, LLC or such Close Affiliate retains the ultimate right as between the
CNL Hospitality Partners, LP, KSL DC Operating, LLC or such Close Affiliate and
the transferee to unilaterally make all material decisions with respect to the
operation, management, financing and disposition of the Property;
 
(d)  if there has been a Transfer of forty-nine percent (49%) or more of the
direct membership interests, stock or other direct equity ownership interests in
Mezzanine Borrower, Mortgage Borrower, General Partner, Mortgage Borrower
General Partner, Mezzanine Borrower shall have first delivered to Mezzanine
Lender an Officer's Certificate and legal opinion of the types described in
Section 8.6 below; and
 
(e)  Mezzanine Borrower shall cause the transferee, if Mezzanine Lender so
requests and if such transferee is required to be a Single Purpose Entity
pursuant to this Agreement, to deliver to Mezzanine Lender its organizational
documents solely for the purpose of Mezzanine Lender confirming that such
organizational documents comply with the single purpose bankruptcy remote entity
requirements set forth herein.
 
Section 8.5  Loan Assumption
 
Without limiting the foregoing, Mezzanine Borrower and Operating Lessee shall
have the right to sell, assign, convey or transfer (but not mortgage,
hypothecate or otherwise encumber or grant a security interest in) legal or
equitable title to all (but not less than all) of the Collateral only if
Mortgage Borrower and Operating Lessee simultaneously exercise their right to
transfer the Property pursuant to Section 8.5 of the Loan Agreement (Mortgage)
and:
 
(a)  after giving effect to the proposed transaction:
 

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(i)  Mezzanine Borrower will be owned by a Single Purpose Entity wholly owned
(directly or indirectly) by a Permitted Borrower Transferee, Pre-approved
Transferee or such other entity (specifically approved in writing by Mezzanine
Lender) which will be in compliance with the representations, warranties and
covenants contained in Section 4.1.20 hereof (as if such transferee shall have
remade all of such representations, warranties and covenants as of, and after
giving effect to, the proposed transaction), and which shall have executed and
delivered to Mezzanine Lender an assumption agreement and such other agreements
as Mezzanine Lender may reasonably request (collectively, the Assumption
Agreement) in form and substance acceptable to Mezzanine Lender, evidencing the
proposed transferee's agreement to abide and be bound by all the terms,
covenants and conditions set forth in this Agreement, the Mezzanine Note and the
other Loan Documents (Senior Mezzanine) and all other outstanding obligations
under the Loan; the Permitted Borrower Transferee, Pre-Approved Transferee or
such other approved entity shall assume the obligations of Guarantor under the
Loan Documents (Mezzanine) (and such Single Purpose Entity and the applicable
Permitted Borrower Transferee, Pre-approved Transferee or other approved entity
shall thereafter be subject to the provisions of this Article VIII), and the
transferee shall cause to be delivered to Mezzanine Lender such legal opinions
and title insurance endorsements as may be reasonably requested by Mezzanine
Lender;
 
(ii)  an Acceptable Manager shall continue to act as Manager for the Property
pursuant to the existing Management Agreement or an Acceptable Management
Agreement;
 
(iii)  no Event of Default shall have occurred and be continuing; and
 
(iv)  Mezzanine Borrower shall have caused (i) the transferee to execute and
deliver to Mezzanine Lender a fully executed counterpart to the Pledge, pledging
all of such transferee's direct equity interests in Mortgage Borrower to
Mezzanine Lender as additional collateral for the Loan and (ii) the ultimate
parent(s) of such transferee to execute and deliver to Mezzanine Lender a fully
executed counterpart to the Recourse Guaranty (Senior Mezzanine) and
Environmental Indemnity (Senior Mezzanine), together with a legal opinion from
such transferee's counsel reasonably satisfactory to Mezzanine Lender with
respect to the due execution, delivery, authority, enforceability and perfection
(solely with respect to the Pledge) of the Pledge, Recourse Guaranty (Senior
Mezzanine) and Environmental Indemnity (Senior Mezzanine).
 
(b)  the Assumption Agreement shall state the applicable transferee's agreement
to abide by and be bound by the terms in the Mezzanine Note (or such other
promissory notes to be executed by the transferee, such other promissory note or
notes to be on the same terms as the Mezzanine Note), this Agreement (or such
other loan agreement to be executed by such transferee, which shall contain
terms substantially identical to the terms hereof) and such other Loan Documents
(Senior Mezzanine) (or other loan documents to be delivered by such transferee,
which shall contain terms
 

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substantially identical to the terms of the applicable Loan Documents (Senior
Mezzanine)) whenever arising, and Mezzanine Borrower, and/or such transferee
shall deliver such legal opinions and title insurance endorsements as may
reasonably be requested by Mezzanine Lender;
 
(c)  following execution of a contract for the sale of the Property and not less
than thirty (30) days prior to the expected date of such proposed sale,
Mezzanine Borrower shall submit notice of such sale to Mezzanine Lender.
Mezzanine Borrower shall submit to Mezzanine Lender, not less than ten (10) days
prior to the expected date of such sale, the Assumption Agreement for execution
by Mezzanine Lender. Such documents shall be in a form appropriate for the
jurisdiction in which the Collateral is located and shall be reasonably
satisfactory to Mezzanine Lender. In addition, Mezzanine Borrower shall provide
all other documentation Mezzanine Lender reasonably requires to be delivered by
Mezzanine Borrower in connection with such assumption, together with an
Officer's Certificate certifying that (i) the assumption to be effected will be
effected in compliance with the terms of this Agreement and (ii) will not impair
or otherwise adversely affect the validity or priority of the Lien of the Pledge
(or replacement pledge agreements, as applicable);
 
(d)  prior to any such transaction, the proposed transferee shall deliver to
Mezzanine Lender an Officer's Certificate stating that (x) such transferee is
not an "employee benefit plan" within the meaning of Section 3(3) of ERISA that
is subject Title I of ERISA or any other Similar Law and (y) the underlying
assets of the proposed transferee do not constitute assets of any such employee
benefit plan for purposes of ERISA or any Similar Law;
 
(e)  if the transfer is to (i) an entity other than a Pre-approved Transferee or
a Permitted Borrower Transferee, such transfer shall be subject to Mezzanine
Lender's consent in its sole discretion, and (ii) a Permitted Borrower
Transferee, such transfer shall be subject to Mezzanine Lender's prior written
consent in its reasonable discretion;
 
(f)  the terms of Section 8.6 shall be complied with and Mezzanine Borrower
shall cause the transferee to deliver to Mezzanine Lender its organizational
documents solely for the purpose of Mezzanine Lender confirming that such
organizational documents comply with the single purpose bankruptcy remote entity
requirements set forth herein; and
 
(g)  Mezzanine Lender shall have received the payment of, or reimbursement for,
all reasonable costs and expenses incurred by Mezzanine Lender (and any
Servicer) in connection therewith (including, without limitation, reasonable
attorneys' fees and disbursements).
 
(h)  Each of the Intermediate Mezzanine Borrower and Junior Mezzanine Borrower
shall simultaneously exercise its right to transfer the "Collateral" (as defined
in the Mezzanine Loan) pursuant to and in accordance with Section 8.5 of each
Mezzanine the Loan Agreement).
 

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Section 8.6  Notice Required; Legal Opinions
 
Not less than five (5) Business Days prior to the closing of any transaction
permitted under the provisions of Sections 8.2 through 8.5, Mezzanine Borrower
shall deliver or cause to be delivered to Mezzanine Lender (A) an Officer's
Certificate describing the proposed transaction and stating that such
transaction is permitted hereunder and under the other Loan Documents (Senior
Mezzanine), together with any documents upon which such Officer's Certificate is
based, and (B) a legal opinion of counsel to Mezzanine Borrower or the
transferee selected by either of them (to the extent approved by Mezzanine
Lender), in form and substance consistent with similar opinions then being
required by the Mezzanine Lender and acceptable to the Mezzanine Lender,
confirming, among other things, that the assets of the Mezzanine Borrower, and
of its managing general partner or managing member, as applicable, will not be
substantively consolidated with the assets of such owners or Controlling Persons
of the Mezzanine Borrower as Mezzanine Lender may specify, in the event of a
bankruptcy or similar proceeding involving such owners or Controlling Persons.
 
Section 8.7  Leases
 
8.7.1  New Leases and Lease Modifications. Except as otherwise provided in this
Section 8.7, Mezzanine Borrower shall not permit Operating Lessee to (x) enter
into any Lease on terms other than “market” and rental rates (in Mezzanine
Borrower’s or Operating Lessee's good faith judgment), or enter into any
Material Lease (a New Lease) or (y) consent to the assignment of any Material
Lease (unless required to do so by the terms of such Material Lease) that
releases the original Tenant from its obligations under the Material Lease, or
(z) modify any Material Lease (including, without limitation, accept a surrender
of any portion of the Property subject to a Material Lease (unless otherwise
permitted or required by law), allow a reduction in the term of any Material
Lease or a reduction in the Rent payable under any Material Lease, change any
renewal provisions of any Material Lease, materially increase the obligations of
the landlord or materially decrease the obligations of any Tenant) or terminate
any Material Lease (any such action referred to in clauses (y) and (z) being
referred to herein as a Lease Modification) without the prior written consent of
Mezzanine Lender which consent shall not be unreasonably withheld or delayed.
Any New Lease or Lease Modification that requires Mezzanine Lender's consent
shall be delivered to Mezzanine Lender for approval not less than ten (10)
Business Days prior to the effective date of such New Lease or Lease
Modification. Lender agrees that non material changes to the Operating Lease (as
determined by Mezzanine Lender in its sole but reasonable discretion) may be
permitted without requiring Mezzanine Lender's consent.
 
8.7.2  Leasing Conditions. Subject to terms of this Section 8.7, provided no
Event of Default shall have occurred and be continuing, Mortgage Borrower may
enter into a New Lease or Lease Modification, without Mezzanine Lender's prior
written consent, that satisfies each of the following conditions (as evidenced
by an
 

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Officer's Certificate delivered to Mezzanine Lender prior to Mortgage Borrower’s
entry into such New Lease or Lease Modification):
 
(a)  with respect to a New Lease or Lease Modification, the premises demised
thereunder is not more than 10,000 net rentable square feet of the Property;
 
(b)  the term of such New Lease or Lease Modification, as applicable, does not
exceed 120 months, plus up to two (2) 60-month option terms (or equivalent
combination of renewals);
 
(c)  the New Lease or Lease Modification provides for "market" rental rates
other terms and does not contain any terms which would adversely affect
Mezzanine Lender's rights under the Loan Documents (Senior Mezzanine) or that
would have a Material Adverse Effect;
 
(d)  the New Lease or Lease Modification, as applicable, provides that the
premises demised thereby cannot be used for any of the following uses; any
pornographic or obscene purposes, any commercial sex establishment, any
pornographic, obscene, nude or semi-nude performances, modeling, materials,
activities or sexual conduct or any other use that has or could reasonably be
expected to have a Material Adverse Effect;
 
(e)  the Tenant under such New Lease or Lease Modification, as applicable, is
not an Affiliate of Mortgage Borrower;
 
(f)  the New Lease or Lease Modification, as applicable, does not prevent
Proceeds from being held and disbursed by Mezzanine Lender in accordance with
the terms of the Loan Documents (Mortgage) and does not entitle any Tenant to
receive and retain Proceeds except those that may be specifically awarded to it
in condemnation proceedings because of the Condemnation of its trade fixtures
and its leasehold improvements which have not become part of the Property and
such business loss as Tenant may specifically and separately establish; and
 
(g)  the New Lease or Lease Modification, as applicable satisfies the
requirements of Section 8.7.7 and Section 8.7.8 of the Loan Agreement
(Mortgage).
 
8.7.3  Delivery of New Lease or Lease Modification. Upon the execution of any
New Lease or Lease Modification, as applicable, Mezzanine Borrower shall cause
Mortgage Borrower to deliver to Mezzanine Lender an executed copy of the Lease.
 
8.7.4  Lease Amendments. Mezzanine Borrower shall cause Mortgage Borrower to
agree that it shall not have the right or power, as against Mezzanine Lender
without its consent, to cancel, abridge, amend or otherwise modify any Lease
unless such modification complies with this Section 8.7.
 
8.7.5  Security Deposits. All security or other deposits of Tenants of the
Property shall be treated as trust funds and shall, if required by law or the
 

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applicable Lease, not be commingled with any other funds of Mortgage Borrower,
and such deposits shall be deposited, upon receipt of the same by Mortgage
Borrower in a separate trust account maintained by Mortgage Borrower expressly
for such purpose. Within ten (10) Business Days after written request by
Mezzanine Lender, Mezzanine Borrower shall cause Mortgage Borrower to furnish to
Mezzanine Lender reasonably satisfactory evidence of compliance with this
Section 8.7.5, together with a statement of all lease securities deposited with
Mortgage Borrower by the Tenants and the location and account number of the
account in which such security deposits are held.
 
8.7.6  No Default Under Leases. Mezzanine Borrower shall cause Mortgage Borrower
to (i) promptly perform and observe all of the material terms, covenants and
conditions required to be performed and observed by Mortgage Borrower under the
Leases and the REAs, if the failure to perform or observe the same would have a
Material Adverse Effect; (ii) exercise, within ten (10) Business Days after a
written request by Mezzanine Lender, any right to request from the Tenant under
any Lease, or the party to any REAs, a certificate with respect to the status
thereof and (iii) not collect any of the Rents, more than one (1) month in
advance (except that Mortgage Borrower may collect such security deposits and
last month's Rents as are permitted by Legal Requirements and are commercially
reasonable in the prevailing market and collect other charges in accordance with
the terms of each Lease).
 

IX.  
INTEREST RATE CAP AGREEMENT

 
Section 9.1  Interest Rate Cap Agreement
 
Mezzanine Borrower shall maintain the Interest Rate Cap Agreement with an
Acceptable Counterparty in effect and having a term extending through the last
day of the accrual period in which the applicable Maturity Date occurs, and an
initial notional amount equal to the Loan Amount. The Interest Rate Cap
Agreement shall have a strike rate equal to the Maximum Pay Rate. The notional
amount of the Interest Rate Cap Agreement may be reduced from time to time in
amounts equal to any prepayment of the principal of the Loan made in accordance
with the Loan Documents (Senior Mezzanine), provided that the strike rate shall
be equal to the Maximum Pay Rate.
 
Section 9.2  Pledge and Collateral Assignment
 
Mezzanine Borrower hereby pledges, assigns, transfers, delivers and grants a
continuing first priority lien to Mezzanine Lender, as security for payment of
all sums due in respect of the Loan and the performance of all other terms,
conditions and covenants of this Agreement and any other Loan Documents (Senior
Mezzanine) on Mezzanine Borrower's part to be paid and performed, in, to and
under all of Mezzanine Borrower's right, title and interest whether now owned or
hereafter acquired and whether now existing or hereafter arising (collectively,
the Rate Cap Collateral (Senior Mezzanine)): (i) in the Interest Rate Cap
Agreement (as soon as such agreement is effective or when and if any replacement
agreement becomes effective, any Replacement Interest Rate Cap Agreement (Senior
Mezzanine) or Extension Interest Rate Cap Agreement); (ii) to receive any and
all payments under the Interest Rate Cap Agreement
 

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(or, when and if any such agreement becomes effective, any Replacement Interest
Rate Cap Agreement (Senior Mezzanine) or Extension Interest Rate Cap Agreement),
whether as contractual obligations, damages or otherwise; and (iii) to all
claims, rights, powers, privileges, authority, options, security interests,
liens and remedies, if any, under or arising out of the Interest Rate Cap
Agreement (as soon as such agreement is effective or when and if any such
agreement becomes effective, any Replacement Interest Rate Cap Agreement (Senior
Mezzanine) or Extension Interest Rate Cap Agreement), in each case including all
accessions and additions to, substitutions for and replacements, products and
proceeds of any of the foregoing. Mezzanine Borrower shall deliver to Mezzanine
Lender an executed counterpart of such Interest Rate Cap Agreement, Replacement
Interest Rate Cap Agreement (Senior Mezzanine) or Extension Interest Rate Cap
Agreement (Senior Mezzanine) (which shall, by its terms, authorize the
assignment to Mezzanine Lender and require that payments be made directly to
Mezzanine Lender) and notify the Counterparty of such assignment (either in such
Interest Rate Cap Agreement (Senior Mezzanine), Replacement Interest Rate Cap
Agreement (Senior Mezzanine) or Extension Interest Rate Cap Agreement or by
separate instrument). Mezzanine Borrower shall not, without obtaining the prior
written consent of Mezzanine Lender, further pledge, transfer, deliver, assign
or grant any security interest in the Interest Rate Cap Agreement (Senior
Mezzanine)(or, when and if any such agreement becomes effective, any Replacement
Interest Rate Cap Agreement (Senior Mezzanine) or Extension Interest Rate Cap
Agreement), or permit any Lien or encumbrance to attach thereto, or any levy to
be made thereon, or any UCC-1 Financing Statements or any other notice or
instrument as may be required under the UCC, as appropriate, except those naming
Mezzanine Lender as the secured party, to be filed with respect thereto.
 
Section 9.3  Covenants
 
(a)  Mezzanine Borrower shall comply with all of its obligations under the terms
and provisions of the Interest Rate Cap Agreement (Senior Mezzanine). All
amounts paid by the Counterparty under the Interest Rate Cap Agreement to
Mezzanine Borrower or Mezzanine Lender shall be deposited immediately into the
Senior Mezzanine Account pursuant to Section 3.1. Mezzanine Borrower shall take
all actions reasonably requested by Mezzanine Lender to enforce Mezzanine
Borrower's rights under the Interest Rate Cap Agreement (Senior Mezzanine) in
the event of a default by the Counterparty thereunder and shall not waive, amend
or otherwise modify any of its rights thereunder.
 
(b)  Mezzanine Borrower shall defend Mezzanine Lender's right, title and
interest in and to the Rate Cap Collateral (Senior Mezzanine) pledged by
Mezzanine Borrower pursuant hereto or in which it has granted a security
interest pursuant hereto against the claims and demands of all other Persons.
 
(c)  In the event of (x) any downgrade, withdrawal or qualification (each, a
Downgrade) of the rating of the Counterparty such that, thereafter, the
Counterparty shall cease to be an Acceptable Counterparty and (y) the
Counterparty shall fail to comply with the requirements contained in the
Interest Rate Cap Agreement (Senior Mezzanine) which are described in Exhibit I
upon such occurrence, the
 

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Mezzanine Borrower shall either (i) obtain Lender's prior written consent to
retain such Counterparty or (ii) replace the Interest Rate Cap Agreement (Senior
Mezzanine) with a Replacement Interest Cap Agreement, (x) having a term
extending through the end of the Interest Period in which the Maturity Date
occurs, (y) in a notional amount at least equal to the Principal Amount of the
Loan then outstanding, and (z) having a strike rate equal to the Maximum Pay
Rate.
 
(d)  In the event that Mezzanine Borrower fails to purchase and deliver to
Mezzanine Lender the Interest Rate Cap Agreement (Senior Mezzanine) as and when
required hereunder, Mezzanine Lender may purchase the Interest Rate Cap
Agreement (Senior Mezzanine) and the cost incurred by Mezzanine Lender in
purchasing the Interest Rate Cap Agreement (Senior Mezzanine) shall be paid by
Mezzanine Borrower to Mezzanine Lender with interest thereon at the Default Rate
from the date such cost was incurred by Mezzanine Lender until such cost is paid
by Mezzanine Borrower to Mezzanine Lender.
 
(e)  Mezzanine Borrower shall not (i) without the prior written consent of
Mezzanine Lender, modify, amend or supplement the terms of the Interest Rate Cap
Agreement (Senior Mezzanine), (ii) without the prior written consent of
Mezzanine Lender, except in accordance with the terms of the Interest Rate Cap
Agreement (Senior Mezzanine), cause the termination of the Interest Rate Cap
Agreement (Senior Mezzanine) prior to its stated maturity date, (iii) without
the prior written consent of Mezzanine Lender, except as aforesaid, waive or
release any obligation of the Counterparty (or any successor or substitute party
to the Interest Rate Cap Agreement (Senior Mezzanine)) under the Interest Rate
Cap Agreement (Senior Mezzanine), (iv) without the prior written consent of
Mezzanine Lender, consent or agree to any act or omission to act on the part of
the Counterparty (or any successor or substitute party to the Interest Rate Cap
Agreement (Senior Mezzanine)) which, without such consent or agreement, would
constitute a default under the Interest Rate Cap Agreement (Senior Mezzanine),
(v) fail to exercise promptly and diligently each and every material right which
it may have under the Interest Rate Cap Agreement (Senior Mezzanine), (vi) take
or intentionally omit to take any action or intentionally suffer or permit any
action to be omitted or taken, the taking or omission of which would result in
any right of offset against sums payable under the Interest Rate Cap Agreement
(Senior Mezzanine) or any defense by the Counterparty (or any successor or
substitute party to the Interest Rate Cap Agreement (Senior Mezzanine)) to
payment or (vii) fail to give prompt notice to Mezzanine Lender of any notice of
default given by or to Mezzanine Borrower under or with respect to the Interest
Rate Cap Agreement (Senior Mezzanine), together with a complete copy of such
notice.
 
(f)  In connection with an Interest Rate Cap Agreement (Senior Mezzanine),
Mezzanine Borrower shall obtain and deliver to Mezzanine Lender an Opinion of
Counsel from counsel (which counsel may be in-house counsel for the
Counterparty) for the Counterparty upon which Mezzanine Lender and its
successors and assigns may rely (the Counterparty Opinion), under New York law
and, if the Counterparty is a non-U.S. entity, the applicable foreign law,
substantially in compliance
 

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with the requirements set forth in Exhibit F or in such other form approved by
the Mezzanine Lender.
 
Section 9.4  Representations and Warranties
 
Mezzanine Borrower hereby covenants with, and represents and warrants to,
Mezzanine Lender as follows:
 
(a)  The Interest Rate Cap Agreement (Senior Mezzanine) constitutes the legal,
valid and binding obligation of Mezzanine Borrower, enforceable against
Mezzanine Borrower in accordance with its 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).
 
(b)  The Rate Cap Collateral (Senior Mezzanine) is free and clear of all claims
or security interests of every nature whatsoever, except such as are created
pursuant to this Agreement and the other Loan Documents (Senior Mezzanine), and
Mezzanine Borrower has the right to pledge and grant a security interest in the
same as herein provided without the consent of any other Person other than any
such consent that has been obtained and is in full force and effect.
 
(c)  The Rate Cap Collateral (Senior Mezzanine) has been duly and validly
pledged hereunder. All consents and approvals required to be obtained by
Mezzanine Borrower for the consummation of the transactions contemplated by this
Agreement have been obtained.
 
(d)  Giving effect to the aforesaid grant and assignment to Mezzanine Lender,
Mezzanine Lender has, as of the date of this Agreement, and as to Rate Cap
Collateral (Senior Mezzanine) acquired from time to time after such date, shall
have, a valid, and upon proper filing, perfected and continuing first priority
lien upon and security interest in the Rate Cap Collateral (Senior Mezzanine);
provided that no representation or warranty is made with respect to the
perfected status of the security interest of Mezzanine Lender in the proceeds of
Rate Cap Collateral (Senior Mezzanine) consisting of "cash proceeds" or
"non-cash proceeds" as defined in the UCC except if, and to the extent, the
provisions of Section 9-306 of the UCC shall be complied with.
 
(e)  Except for financing statements filed or to be filed in favor of Mezzanine
Lender as secured party, there are no financing statements under the UCC
covering any or all of the Rate Cap Collateral (Senior Mezzanine) and Mezzanine
Borrower shall not, without the prior written consent of Mezzanine Lender, until
payment in full of all of the Obligations (Senior Mezzanine), execute and file
in any public office, any enforceable financing statement or statements covering
any or all of the Rate Cap Collateral (Senior Mezzanine), except financing
statements filed or to be filed in favor of Mezzanine Lender as secured party.
 
Section 9.5  Payments
 

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If Mezzanine Borrower at any time shall be entitled to receive any payments with
respect to the Interest Rate Cap Agreement (Senior Mezzanine), such amounts
shall, immediately upon becoming payable to Mezzanine Borrower, be deposited by
Counterparty into the Senior Mezzanine Account.
 
Section 9.6  Remedies
 
. Subject to the provisions of the Interest Rate Cap Agreement (Senior
Mezzanine), if an Event of Default shall occur and then be continuing:
 
(a)  Mezzanine Lender, without obligation to resort to any other security, right
or remedy granted under any other agreement or instrument, shall have the right
to, in addition to all rights, powers and remedies of a secured party pursuant
to the UCC, at any time and from time to time, sell, resell, assign and deliver,
in its sole discretion, any or all of the Rate Cap Collateral (Senior Mezzanine)
(in one or more parcels and at the same or different times) and all right, title
and interest, claim and demand therein and right of redemption thereof, at
public or private sale, for cash, upon credit or for future delivery, and in
connection therewith Mezzanine Lender may grant options and may impose
reasonable conditions such as requiring any purchaser to represent that any
"securities" constituting any part of the Rate Cap Collateral (Senior Mezzanine)
are being purchased for investment only, Mezzanine Borrower hereby waiving and
releasing any and all equity or right of redemption to the fullest extent
permitted by the UCC or applicable law. If all or any of the Rate Cap Collateral
(Senior Mezzanine) is sold by Mezzanine Lender upon credit or for future
delivery, Mezzanine Lender shall not be liable for the failure of the purchaser
to purchase or pay for the same and, in the event of any such failure, Mezzanine
Lender may resell such Rate Cap Collateral (Senior Mezzanine). It is expressly
agreed that Mezzanine Lender may exercise its rights with respect to less than
all of the Rate Cap Collateral (Senior Mezzanine), leaving unexercised its
rights with respect to the remainder of the Rate Cap Collateral (Senior
Mezzanine), provided, however, that such partial exercise shall in no way
restrict or jeopardize Mezzanine Lender's right to exercise its rights with
respect to all or any other portion of the Rate Cap Collateral (Senior
Mezzanine) at a later time or times.
 
(b)  Mezzanine Lender may exercise, either by itself or by its nominee or
designee, in the name of Mezzanine Borrower, all of Mezzanine Lender's rights,
powers and remedies in respect of the Rate Cap Collateral (Senior Mezzanine),
hereunder and under law.
 
(c)  Mezzanine Borrower hereby irrevocably, in the name of Mezzanine Borrower or
otherwise, authorizes and empowers Mezzanine Lender and assigns and transfers
unto Mezzanine Lender, and constitutes and appoints Mezzanine Lender its true
and lawful attorney-in-fact, and as its agent, irrevocably, with full power of
substitution for Mezzanine Borrower and in the name of Mezzanine Borrower, upon
the occurrence and during the continuance of an Event of Default, (i) to
exercise and enforce every right, power, remedy, authority, option and privilege
of Mezzanine Borrower under the Interest Rate Cap Agreement (Senior Mezzanine),
including any
 

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power to subordinate or modify the Interest Rate Cap Agreement (Senior
Mezzanine) (but not, unless an Event of Default exists and is continuing, the
right to terminate or cancel the Interest Rate Cap Agreement (Senior
Mezzanine)), or to give any notices, or to take any action resulting in such
subordination, termination, cancellation or modification and (ii) in order to
more fully vest in Mezzanine Lender the rights and remedies provided for herein,
to exercise all of the rights, remedies and powers granted to Mezzanine Lender
in this Agreement, and Mezzanine Borrower further authorizes and empowers
Mezzanine Lender, as Mezzanine Borrower's attorney-in-fact, and as its agent,
irrevocably, with full power of substitution for Mezzanine Borrower and in the
name of Mezzanine Borrower, upon the occurrence and during the continuance of an
Event of Default, to give any authorization, to furnish any information, to make
any demands, to execute any instruments and to take any and all other action on
behalf of and in the name of Mezzanine Borrower which in the opinion of
Mezzanine Lender may be necessary or appropriate to be given, furnished, made,
exercised or taken under the Interest Rate Cap Agreement (Senior Mezzanine), in
order to comply therewith, to perform the conditions thereof or to prevent or
remedy any default by Mezzanine Borrower thereunder or to enforce any of the
rights of Mezzanine Borrower thereunder. These powers-of-attorney are
irrevocable and coupled with an interest, and any similar or dissimilar powers
heretofore given by Mezzanine Borrower in respect of the Rate Cap Collateral
(Senior Mezzanine) to any other Person are hereby revoked.
 
(d)  Upon the occurrence and during the continuance of an Event of Default,
Mezzanine Lender may, without notice to, or assent by, Mezzanine Borrower or any
other Person (to the extent permitted by law), but without affecting any of the
Obligations (Senior Mezzanine), in the name of Mezzanine Borrower or in the name
of Mezzanine Lender, notify the Counterparty, or if applicable, any other
counterparty to the Interest Rate Cap Agreement (Senior Mezzanine), to make
payment and performance directly to Mezzanine Lender; extend the time of payment
and performance of, compromise or settle for cash, credit or otherwise, and upon
any terms and conditions, any obligations owing to Mezzanine Borrower, or claims
of Mezzanine Borrower, under the Interest Rate Cap Agreement (Senior Mezzanine);
file any claims, commence, maintain or discontinue any actions, suits or other
proceedings deemed by Mezzanine Lender necessary or advisable for the purpose of
collecting upon or enforcing the Interest Rate Cap Agreement (Senior Mezzanine);
and execute any instrument and do all other things deemed necessary and proper
by Mezzanine Lender to protect and preserve and realize upon the Rate Cap
Collateral (Senior Mezzanine) and the other rights contemplated hereby.
 
(e)  Pursuant to the powers-of-attorney provided for above, Mezzanine Lender may
take any action and exercise and execute any instrument which it may deem
necessary or advisable to accomplish the purposes hereof; provided, however,
that Mezzanine Lender shall not be permitted to take any action pursuant to said
power-of-attorney that would conflict with any limitation on Mezzanine Lender's
rights with respect to the Rate Cap Collateral (Senior Mezzanine). Without
limiting the generality of the foregoing, Mezzanine Lender, after the occurrence
of an Event of Default, shall have the right and power to receive, endorse and
collect all checks and other orders for the payment of money made payable to
Mezzanine Borrower representing: (i) any payment
 

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of obligations owed pursuant to the Interest Rate Cap Agreement (Senior
Mezzanine), (ii) interest accruing on any of the Rate Cap Collateral (Senior
Mezzanine) or (iii) any other payment or distribution payable in respect of the
Rate Cap Collateral (Senior Mezzanine) or any part thereof, and for and in the
name, place and stead of Mezzanine Borrower, to execute endorsements,
assignments or other instruments of conveyance or transfer in respect of any
property which is or may become a part of the Rate Cap Collateral (Senior
Mezzanine) hereunder.
 
(f)  Mezzanine Lender may exercise all of the rights and remedies of a secured
party under the UCC.
 
(g)  Without limiting any other provision of this Agreement or any of Mezzanine
Borrower's rights hereunder, and without waiving or releasing Mezzanine Borrower
from any obligation or default hereunder, Mezzanine Lender shall have the right,
but not the obligation, to perform any act or take any appropriate action, as
it, in its reasonable judgment, may deem necessary to protect the security of
this Agreement, to cure such Event of Default or to cause any term, covenant,
condition or obligation required under this Agreement or the Interest Rate Cap
Agreement (Senior Mezzanine) to be performed or observed by Mezzanine Borrower
to be promptly performed or observed on behalf of Mezzanine Borrower. All
amounts advanced by, or on behalf of, Mezzanine Lender in exercising its rights
under this Section 9.7(g) (including, but not limited to, reasonable legal
expenses and disbursements incurred in connection therewith), together with
interest thereon at the Default Rate from the date of each such advance, shall
be payable by Mezzanine Borrower to Mezzanine Lender upon demand and shall be
secured by this Agreement.
 
Section 9.7  Sales of Rate Cap Collateral (Senior Mezzanine)
 
No demand, advertisement or notice, all of which are, to the fullest extent
permitted by law, hereby expressly waived by Mezzanine Borrower, shall be
required in connection with any sale or other disposition of all or any part of
the Rate Cap Collateral (Senior Mezzanine), except that Mezzanine Lender shall
give Mezzanine Borrower at least thirty (30) Business Days' prior written notice
of the time and place of any public sale or of the time when and the place where
any private sale or other disposition is to be made, which notice Mezzanine
Borrower hereby agrees is reasonable, all other demands, advertisements and
notices being hereby waived. To the extent permitted by law, Mezzanine Lender
shall not be obligated to make any sale of the Rate Cap Collateral (Senior
Mezzanine) if it shall determine not to do so, regardless of the fact that
notice of sale may have been given, and Mezzanine Lender may without notice or
publication adjourn any public or private sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. Upon each private sale of the Rate Cap Collateral (Senior Mezzanine)
of a type customarily sold in a recognized market and upon each public sale,
unless prohibited by any applicable statute which cannot be waived, Mezzanine
Lender (or its nominee or designee) may purchase any or all of the Rate Cap
Collateral (Senior Mezzanine) being sold, free and discharged from any trusts,
claims, equity or right of redemption of Mezzanine Borrower, all of which are
hereby waived and released to the extent permitted by law, and may make payment
 

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therefor by credit against any of the Obligations (Senior Mezzanine) in lieu of
cash or any other obligations. In the case of all sales of the Rate Cap
Collateral (Senior Mezzanine), public or private, Mezzanine Borrower shall pay
all reasonable costs and expenses of every kind for sale or delivery, including
brokers' and attorneys' fees and disbursements and any tax imposed thereon.
However, the proceeds of sale of Rate Cap Collateral (Senior Mezzanine) shall be
available to cover such costs and expenses, and, after deducting such costs and
expenses from the proceeds of sale, Mezzanine Lender shall apply any residue to
the payment of the Obligations (Senior Mezzanine) in the order of priority as
set forth in Section 17.5.
 
Section 9.8  Public Sales Not Possible
 
Mezzanine Borrower acknowledges that the terms of the Interest Rate Cap
Agreement (Senior Mezzanine) may prohibit public sales, that the Rate Cap
Collateral (Senior Mezzanine) may not be of the type appropriately sold at
public sales, and that such sales may be prohibited by law. In light of these
considerations, Mezzanine Borrower agrees that private sales of the Rate Cap
Collateral (Senior Mezzanine) shall not be deemed to have been made in a
commercially unreasonably manner by mere virtue of having been made privately.
 
Section 9.9  Receipt of Sale Proceeds
 
Upon any sale of the Rate Cap Collateral (Senior Mezzanine) by Mezzanine Lender
hereunder (whether by virtue of the power of sale herein granted, pursuant to
judicial process or otherwise), the receipt by Mezzanine Lender or the officer
making the sale or the proceeds of such sale shall be a sufficient discharge to
the purchaser or purchasers of the Rate Cap Collateral (Senior Mezzanine) so
sold, and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to Mezzanine Lender or
such officer or be answerable in any way for the misapplication or
non-application thereof.
 
Section 9.10  Extension Interest Rate Cap Agreement (Senior Mezzanine)
 
If Mezzanine Borrower exercises any of its options to extend the Maturity Date
pursuant to Section 5 of the Note, then, on or prior to the Maturity Date being
extended, the Mezzanine Borrower shall obtain or have in place an Extension
Interest Rate Cap Agreement (i) having a term through the end of the Interest
Period in which the extended Maturity Date occurs, (ii) in a notional amount at
least equal to the Principal Amount of the Loan as of the Maturity Date being
extended, and (iii) having a strike rate equal to an amount such that the
maximum interest rate paid by the Mezzanine Borrower after giving effect to
payments made under such Extension Interest Rate Cap Agreement shall equal no
more than the Maximum LIBOR Pay Rate.
 
Section 9.11  Filing of Financing Statements Authorized
 
Mezzanine Borrower hereby authorizes the filing of a form UCC-1 financing
statement naming Mezzanine Borrower as debtor and Mezzanine Lender as secured
party in any
 
office (including the office of the Secretary of State of the State of Delaware)
covering all property of Mezzanine Borrower (including, but not limited to, the
Account Collateral (Senior Mezzanine) and the Rate Cap Collateral (Senior
Mezzanine), but excluding Net Excess Cash Flow).
 

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X.  
RESERVED

 

XI.  
BOOKS AND RECORDS, FINANCIAL

 
STATEMENTS, REPORTS AND OTHER INFORMATION
 
Section 11.1  Books and Records
 
Mezzanine Borrower shall cause Mortgage Borrower to keep and maintain on a
fiscal year basis proper books and records separate from any other Person, in
which accurate and complete entries shall be made of all dealings or
transactions of or in relation to the Mortgage Note, the Mezzanine Note, the
Property and the business and affairs of Mortgage Borrower and Mezzanine
Borrower relating to the Property which shall reflect all items of income and
expense in connection with the operation on an individual basis of the Property
and in connection with any services, equipment or furnishings provided in
connection with the operation of the Property, in accordance with GAAP.
Mezzanine Lender and its authorized representatives shall have the right at
reasonable times and upon reasonable notice to examine the books and records of
Mortgage Borrower and Mezzanine Borrower relating to the operation of the
Property and to make such copies or extracts thereof as Mezzanine Lender may
reasonably require. Mezzanine Borrower shall simultaneously furnish (or cause
Mortgage Borrower to furnish) to Mezzanine Lender copies of all financial
statements, reports and information required to be submitted by Mortgage
Borrower to Mortgage Lender pursuant to the Loan Agreement (Mortgage).
 
Section 11.2  Financial Statements
 
11.2.1  Budget.
 
(a)  Not later than March 1st of each Fiscal Year hereafter, Mezzanine Borrower
shall prepare or cause to be prepared and deliver to Mezzanine Lender, for
informational purposes only, a Budget in respect of the Property for the Fiscal
Year in which such delivery date falls. If Mezzanine Borrower or Mortgage
Borrower subsequently amends the Budget, Mezzanine Borrower shall promptly
deliver the amended Budget to Mezzanine Lender.
 
(b)  Notwithstanding the foregoing clause, any Budgets submitted during a Low
DSCR Period, and in each case any material amendment therefrom, shall be subject
to Mezzanine Lender's prior written approval, which approval shall not be
unreasonably withheld or delayed.
 
(c)  Within thirty (30) days after its receipt of notice of the commencement of
any Low DSCR Period, Mezzanine Borrower shall (unless the then current Budget
has been approved in writing by Mezzanine Lender) prepare or cause to
 

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be prepared and deliver to Mezzanine Lender for Mezzanine Lender's approval
(which shall not be unreasonably withheld or delayed), a proposed Budget for the
Fiscal Year in which such Low DSCR Period commences. Mezzanine Borrower shall
consult with Mezzanine Lender and shall afford Mezzanine Lender a reasonable
opportunity to meet and confer with Mezzanine Borrower to discuss in reasonable
detail such proposed revised Budget and general hotel operations, and Borrower
(as distinguished from its constituent partners) shall use its best efforts to
obtain Manager's approval of the resulting budget revisions as requested by
Lender in its reasonable discretion.
 
11.2.2  Other Information. Mezzanine Borrower shall, promptly after written
request by Mezzanine Lender, furnish or cause to be furnished to Mezzanine
Lender, in such manner and in such detail as may be reasonably requested by
Mezzanine Lender, such reasonable additional information as may be reasonably
requested with respect to the Property and/or the Collateral. The information
required to be furnished by Mezzanine Borrower to Mezzanine Lender under this
Section 11.2 shall be provided in both hard copy format and electronic format;
provided that Mezzanine Borrower shall only be required to provide the
information required under this Section 11.2.7 in electronic format if such
information is so available in the ordinary course of the operations of the
Mezzanine Borrower and Manager, and without significant expense.
 

XII.  
ENVIRONMENTAL MATTERS

 
Section 12.1  Representations
 
Mezzanine Borrower hereby represents and warrants that except as set forth in
the environmental reports and studies delivered to Mezzanine Lender (the
Environmental Reports), (i) neither Mezzanine Borrower nor Mortgage Borrower has
engaged in or knowingly permitted any operations or activities upon, or any use
or occupancy of the Property, or any portion thereof, for the purpose of or in
any way involving the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal of any Hazardous
Materials on, under, in or about the Property, or transported any Hazardous
Materials to, from or across the Property, except in all cases in material
compliance with Environmental Laws and only in the course of legitimate business
operations at the Property; (ii) to the Best of Mezzanine Borrower's Knowledge,
no tenant, occupant or user of the Property, or any other Person, has engaged in
or permitted any operations or activities upon, or any use or occupancy of the
Property, or any portion thereof, for the purpose of or in any material way
involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal of any Hazardous Materials on,
in or about the Property, or transported any Hazardous Materials to, from or
across the Property, except in all cases in material compliance with
Environmental Laws and only in the course of legitimate business operations at
the Property; (iii) to the Best of Mezzanine Borrower's Knowledge, no Hazardous
Materials are presently constructed, deposited, stored, or otherwise located on,
under, in or about the Property except in material compliance with Environmental
Laws; (iv) to the Best of Mezzanine Borrower's Knowledge, no Hazardous Materials
have migrated from the Property upon or beneath other properties which would
reasonably be expected to result in material liability for Mezzanine Borrower or
 

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Mortgage Borrower; and (v) to the Best of Mezzanine Borrower's Knowledge, no
Hazardous Materials have migrated or threaten to migrate from other properties
upon, about or beneath the Property which would reasonably be expected to result
in material liability for Mezzanine Borrower or Mortgage Borrower.
 
Section 12.2  Covenants
 
12.2.1  Compliance with Environmental Laws. Subject to Mortgage Borrower's right
to contest under Section 7.3 of the Loan Agreement (Mortgage), Mezzanine
Borrower covenants and agrees with Mezzanine Lender that it shall comply and
shall cause Mortgage Borrower to comply in all material respects with all
Environmental Laws. If at any time during the continuance of the Lien of the
Security Instrument and/or Pledge, a Governmental Authority having jurisdiction
over the Property requires remedial action to correct the presence of Hazardous
Materials in, around, or under the Property (an Environmental Event), Mezzanine
Borrower shall deliver prompt notice of the occurrence of such Environmental
Event to Mezzanine Lender. Within thirty (30) days after Mezzanine Borrower has
knowledge of the occurrence of an Environmental Event, Mezzanine Borrower shall
deliver to Mezzanine Lender an Officer's Certificate (an Environmental
Certificate) explaining the Environmental Event in reasonable detail and setting
forth the proposed remedial action, if any. Mezzanine Borrower shall promptly
provide Mezzanine Lender with copies of all notices which allege or identify any
actual or potential violation or noncompliance received by or prepared by or for
Mezzanine Borrower in connection with any Environmental Law. For purposes of
this paragraph, the term "notice" shall mean any summons, citation, directive,
order, claim, pleading, letter, application, filing, report, findings,
declarations or other materials pertinent to compliance of the Property and
Mezzanine Borrower with such Environmental Laws.
 
12.2.2  Reserved.
 
Section 12.3  Environmental Reports
 
Upon the occurrence and during the continuance of an Environmental Event with
respect to the Property or an Event of Default, Mezzanine Lender shall have the
right to have its consultants perform a comprehensive environmental audit of the
Property. Such audit shall be conducted by an environmental consultant chosen by
Mezzanine Lender and may include a visual survey, a record review, an area
reconnaissance assessing the presence of hazardous or toxic waste or substances,
PCBs or storage tanks at the Property, an asbestos survey of the Property, which
may include random sampling of the Improvements and air quality testing, and
such further site assessments as Mezzanine Lender may reasonably require due to
the results obtained from the foregoing. Mezzanine Borrower grants (and shall
cause Mortgage Borrower to grant) to Mezzanine Lender, its agents, consultants
and contractors the right to enter the Property as reasonable or appropriate for
the circumstances for the purposes of performing such studies and the reasonable
cost of such studies shall be due and payable by Mezzanine Borrower to Mezzanine
Lender upon demand and shall be secured by the Lien of this Agreement and the
Pledge. Mezzanine Lender shall not unreasonably
 

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interfere with (and shall cause Mortgage Borrower not to unreasonably interfere
with), and Mezzanine Lender shall direct the environmental consultant to use its
commercially reasonable efforts not to hinder, Mortgage Borrower's or any
Tenant's, other occupant's or Manager's operations upon the Property when
conducting such audit, sampling or inspections. By undertaking any of the
measures identified in and pursuant to this Section 12.3, Mezzanine Lender shall
not be deemed to be exercising any control over the operations of Mezzanine
Borrower or Mortgage Borrower or the handling of any environmental matter or
hazardous wastes or substances of Mezzanine Borrower or Mortgage Borrower for
purposes of incurring or being subject to liability therefor.
 
Section 12.4  Environmental Indemnification
 
Mezzanine Borrower shall protect, indemnify, save, defend, and hold harmless the
Indemnified Parties from and against any and all liability, loss, damage,
actions, causes of action, costs or expenses whatsoever (including reasonable
attorneys' fees and expenses) and any and all claims, suits and judgments which
any Indemnified Party may suffer, as a result of or with respect to: (a) any
Environmental Claim relating to or arising from the Property; (b) the violation
of any Environmental Law in connection with the Property; (c) any release,
spill, or the presence of any Hazardous Materials affecting the Property; and
(d) the presence at, in, on or under, or the release, escape, seepage, leakage,
discharge or migration at or from, the Property of any Hazardous Materials,
whether or not such condition was known or unknown to Mezzanine Borrower;
provided that, in each case, Mezzanine Borrower shall be relieved of its
obligation under this subsection if any of the matters referred to in clauses
(a) through (d) above did not occur (but need not have been discovered) prior to
the foreclosure of the Pledge. If any such action or other proceeding shall be
brought against Mezzanine Lender, upon written notice from Mezzanine Borrower to
Mezzanine Lender (given reasonably promptly following Mezzanine Lender's notice
to Mezzanine Borrower of such action or proceeding), Mezzanine Borrower shall be
entitled to assume the defense thereof, at Mezzanine Borrower's expense, with
counsel reasonably acceptable to Mezzanine Lender; provided, however, Mezzanine
Lender may, at its own expense, retain separate counsel to participate in such
defense, but such participation shall not be deemed to give Mezzanine Lender a
right to control such defense, which right Mezzanine Borrower expressly retains.
Notwithstanding the foregoing, each Indemnified Party shall have the right to
employ separate counsel at Mezzanine Borrower's expense if, in the reasonable
opinion of legal counsel, a conflict or potential conflict exists between the
Indemnified Party and Mezzanine Borrower that would make such separate
representation advisable. Mezzanine Borrower shall have no obligation to
indemnify an Indemnified Party for damage or loss resulting from such
Indemnified Party's gross negligence or willful misconduct.
 
Section 12.5  Recourse Nature of Certain Indemnifications
 
Notwithstanding anything to the contrary provided in this Agreement or in any
other Loan Document (Senior Mezzanine), the indemnification provided in Section
12.4 shall be fully recourse to Mezzanine Borrower and shall be independent of,
and shall survive, the discharge of the Indebtedness, the release of the Lien
created by the Pledge,
 

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and/or the conveyance of title to the Collateral to Mezzanine Lender or any
purchaser or designee in connection with a foreclosure of the Pledge or
conveyance in lieu of foreclosure.
 

XIII.  
RESERVED

 

XIV.  
RESERVED

 

XV.  
ASSIGNMENTS AND PARTICIPATIONS

 
Section 15.1  Assignment and Acceptance
 
At no incremental cost or liability to Mezzanine Borrower, Mezzanine Lender may
assign to one or more Persons all or a portion of its rights and obligations
under this Agreement and the other Loan Documents (Senior Mezzanine) (including,
without limitation, all or a portion of the Mezzanine Note); provided that the
parties to each such assignment shall execute and deliver to Mezzanine Lender,
for its acceptance and recording in the Register (as hereinafter defined), an
Assignment and Acceptance. In addition, at no incremental cost to Mezzanine
Borrower, Mezzanine Lender may participate to one or more Persons all or any
portion of its rights and obligations under this Agreement and the other Loan
Documents (Senior Mezzanine) (including without limitation, all or a portion of
the Mezzanine Note) utilizing such documentation to evidence such participation
and the parties' respective rights thereunder as Mezzanine Lender, in its sole
discretion, shall elect.
 
Section 15.2  Effect of Assignment and Acceptance
 
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in such Assignment and Acceptance, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of Mezzanine Lender, as the case may
be, hereunder and such assignee shall be deemed to have assumed such rights and
obligations, and (ii) Mezzanine Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement and the other Loan Documents (Senior Mezzanine) (and, in the case
of an Assignment and Acceptance covering all or the remaining portion of
Mezzanine Lender's rights and obligations under this Agreement and the other
Loan Documents (Senior Mezzanine), Mezzanine Lender shall cease to be a party
hereto) accruing from and after the effective date of the Assignment and
Acceptance, except with respect to (A) any payments made by Mezzanine Borrower
to Mezzanine Lender pursuant to the terms of the Loan Documents (Senior
Mezzanine) after the effective date of the Assignment and Acceptance and (B) any
letter of credit, cash deposit or other deposits or security (other than the
Liens of this Agreement and the Pledge and the other Loan Documents (Senior
Mezzanine)) delivered to or for the benefit of or deposited with German American
Capital Corporation, as Mezzanine Lender, for which German American Capital
Corporation shall remain responsible for the proper disposition thereof until
such items are delivered to a party who is qualified as an Approved Bank and
agrees to hold the same in accordance with the terms and provisions of the
agreement pursuant to which such items were deposited.
 

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Section 15.3  Content
 
By executing and delivering an Assignment and Acceptance, Mezzanine Lender and
the assignee thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such Assignment and
Acceptance, Mezzanine Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Documents (Senior
Mezzanine) or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, this
Agreement or any other Loan Documents (Senior Mezzanine) or any other instrument
or document furnished pursuant hereto or thereto; (ii) Mezzanine Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Mezzanine Borrower or the performance or observance by
Mezzanine Borrower of any of its obligations under any Loan Documents (Senior
Mezzanine) or any other instrument or document furnished pursuant thereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon
Mezzanine Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents (Senior
Mezzanine); (v) such assignee appoints and authorizes Mezzanine Lender to take
such action as agent on its behalf and to exercise such powers and discretion
under the Loan Documents (Senior Mezzanine) as are delegated to Mezzanine Lender
by the terms hereof together with such powers and discretion as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform, in
accordance with their terms, all of the obligations which by the terms of this
Agreement and the other Loan Documents (Senior Mezzanine) are required to be
performed by Mezzanine Lender.
 
Section 15.4  Register
 
Mezzanine Lender shall maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of Mezzanine Lender and each assignee pursuant to this Article XV
and the Principal Amount of the Loan owing to each such assignee from time to
time (the Register). The entries in the Register shall, with respect to such
assignees, be conclusive and binding for all purposes, absent manifest error.
The Register shall be available for inspection by Mezzanine Borrower or any
assignee pursuant to this Article XV at any reasonable time and from time to
time upon reasonable prior written notice.
 
Section 15.5  Substitute Notes
 

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Upon its receipt of an Assignment and Acceptance executed by an assignee,
together with any Mezzanine Note or Mezzanine Notes subject to such assignment,
Mezzanine Lender shall, if such Assignment and Acceptance has been completed and
is in substantially the form of Exhibit J hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register, and
(iii) give prompt written notice thereof to Mezzanine Borrower. Within five (5)
Business Days after its receipt of such notice, Mezzanine Borrower, at Mezzanine
Lender's own expense, shall execute and deliver to Mezzanine Lender in exchange
and substitution for the surrendered Mezzanine Note or Mezzanine Notes a new
Mezzanine Note to the order of such assignee in an amount equal to the portion
of the Loan assigned to it and a new Mezzanine Note to the order of Mezzanine
Lender in an amount equal to the portion of the Loan retained by it hereunder.
Such new Mezzanine Note or Mezzanine Notes shall be in an aggregate Principal
Amount equal to the aggregate then outstanding principal amount of such
surrendered Mezzanine Note or Mezzanine Notes, shall be dated the effective date
of such Assignment and Acceptance and shall otherwise be in substantially the
form of the Mezzanine Note (modified, however, to the extent necessary so as not
to impose duplicative or increased obligations on Mezzanine Borrower and to
delete obligations previously satisfied by Mezzanine Borrower). Notwithstanding
the provisions of this Article XV, Mezzanine Borrower shall not be responsible
or liable for any additional taxes, reserves, adjustments or other costs and
expenses that are related to, or arise as a result of, any transfer of the Loan
or any interest or participation therein that arise solely and exclusively from
the transfer of the Loan or any interest or participation therein or from the
execution of the new Mezzanine Note contemplated by this Section 15.5,
including, without limitation, any mortgage tax. Mezzanine Lender and/or the
assignees, as the case may be, shall from time to time designate one agent
through which Mezzanine Borrower shall request all approvals and consents
required or contemplated by this Agreement and on whose statements Mezzanine
Borrower may rely.
 
Section 15.6  Participations
 
Each assignee pursuant to this Article XV may sell participations to one or more
Persons (other than Mezzanine Borrower or any of its Affiliates) in or to all or
a portion of its rights and obligations under this Agreement and the other Loan
Documents (Senior Mezzanine) (including, without limitation, all or a portion of
the Mezzanine Note held by it); provided, however, that (i) such assignee's
obligations under this Agreement and the other Loan Documents (Senior Mezzanine)
shall remain unchanged, (ii) such assignee shall remain solely responsible to
the other parties hereto for the performance of such obligations, (iii) such
assignee shall remain the holder of any such Mezzanine Note for all purposes of
this Agreement and the other Loan Documents (Senior Mezzanine), and (iv)
Mezzanine Borrower, Mezzanine Lender and the assignees pursuant to this Article
XV shall continue to deal solely and directly with such assignee in connection
with such assignee's rights and obligations under this Agreement and the other
Loan Documents (Senior Mezzanine). In the event that more than one (1) party
comprises Mezzanine Lender, Mezzanine Lender shall designate one party to act on
the behalf of all parties comprising Mezzanine Lender in providing approvals and
all other necessary
 

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consents under the Loan Documents (Senior Mezzanine) and on whose statements
Mezzanine Borrower may rely.
 
Section 15.7  Disclosure of Information
 
Any assignee pursuant to this Article XV may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Article XV, disclose to the assignee or participant or proposed assignee or
participant, any information relating to Mezzanine Borrower furnished to such
assignee by or on behalf of Mezzanine Borrower; provided, however, that, prior
to any such disclosure, the assignee or participant or proposed assignee or
participant shall agree in writing for the benefit of Mezzanine Borrower to
preserve the confidentiality of any confidential information received by it.
 
Section 15.8  Security Interest in Favor of Federal Reserve Bank
 
Notwithstanding any other provision set forth in this Agreement or any other
Loan Document (Senior Mezzanine), any assignee pursuant to this Article XV may
at any time create a security interest in all or any portion of its rights under
this Agreement or the other Loan Documents (Senior Mezzanine) (including,
without limitation, the amounts owing to it and the Mezzanine Note or Mezzanine
Notes held by it) in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.
 

XVI.  
RESERVED

 

XVII.  
DEFAULTS

 
Section 17.1  Event of Default
 
(a)  Each of the following events shall constitute an event of default hereunder
(an Event of Default):
 
(i)  if (A) the Indebtedness is not paid in full on the Maturity Date, (B) any
Debt Service is not paid in full on the applicable Payment Date, (C) any
prepayment of principal due under this Agreement or the Mezzanine Note is not
paid when due, (D) the Prepayment Fee is not paid when due, (E) any deposit to
the Senior Mezzanine Account or any of the other Collateral Accounts is not made
on the required deposit date therefor; or (F) except as to any amount included
in (A), (B), (C), (D), and/or (E) of this clause (i), any other amount payable
pursuant to this Agreement, the Mezzanine Note or any other Loan Document
(Senior Mezzanine) is not paid in full when due and payable in accordance with
the provisions of the applicable Loan Document (Senior Mezzanine), with such
failure as described in subclauses (A), (B), (C), (D), and (E) continuing for
ten (10) Business Days after Mezzanine Lender delivers written notice thereof to
Mezzanine Borrower;
 
(ii)  subject to Mortgage Borrower's right to contest as set forth in Section
7.3 of the Loan Agreement (Mortgage), if any of the Impositions or Other
 

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Charges are not paid prior to the imposition of any interest, penalty, charge or
expense for the non-payment thereof;
 
(iii)  if the insurance policies required by Section 6.1 are not kept in full
force and effect, or if certificates of any of such insurance policies are not
delivered to Mezzanine Lender within ten (10) Business Days following Mezzanine
Lender's request therefor;
 
(iv)  if, except as permitted pursuant to Article VIII, (a) any Transfer of any
direct or indirect legal, beneficial or equitable interest in all or any portion
of the Collateral, (b) any Transfer of any direct or indirect interest in
Mortgage Borrower, Mezzanine Borrower, Guarantor, General Partner, or other
Person restricted by the terms of Article VIII, (c) any Lien or encumbrance on
all or any portion of the Collateral, (d) any pledge, hypothecation, creation of
a security interest in or other encumbrance of any direct or indirect interests
in Mezzanine Borrower, Mortgage Borrower, General Partner or other Person
restricted by the terms of Article VIII, or (e) the filing of a declaration of
condominium with respect to the Property;
 
(v)  if (i) any representation or warranty made by Mezzanine Borrower in Section
4.1.23 shall have been false or misleading in any material respect as of the
date the representation or warranty was made which incorrect, false or
misleading statement is not cured within thirty (30) days after receipt by
Mezzanine Borrower of notice from Mezzanine Lender in writing of such breach or
(ii) if any other representation or warranty made by Mezzanine Borrower herein
by Mezzanine Borrower, Guarantor, General Partner or any Affiliate of Mezzanine
Borrower in any other Loan Document (Senior Mezzanine), or in any report,
certificate (including, but not limited to, any certificate by Mezzanine
Borrower delivered in connection with the issuance of the Non-Consolidation
Opinion), financial statement or other instrument, agreement or document
furnished to Mezzanine Lender shall have been false or misleading in any
material respect as of the date the representation or warranty was made;
provided, however, that if such representation or warranty which was false or
misleading in any material respect is, by its nature, curable and is not
reasonably likely to have a Material Adverse Effect, and such representation or
warranty was not, to the Best of Mezzanine Borrower's Knowledge, false or
misleading in any material respect which made, then same shall not constitute an
Event of Default unless Mezzanine Borrower has not cured same within five (5)
Business Days after receipt by Mezzanine Borrower of notice from Mezzanine
Lender in writing of such breach;
 
(vi)  if Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE Entity,
or any Guarantor shall make an assignment for the benefit of creditors;
 
(vii)  if a receiver, liquidator or trustee shall be appointed for Mezzanine
Borrower, Mortgage Borrower, General Partner, any SPE Entity, or any Guarantor
or if Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE Entity, or
any Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition
for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy
law, or any
 

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similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Mezzanine Borrower, Mortgage Borrower, General Partner, any
SPE Entity, or any Guarantor, or if any proceeding for the dissolution or
liquidation of Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE
Entity, or any Guarantor shall be instituted; provided, however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE
Entity, or any Guarantor upon the same not being discharged, stayed or dismissed
within ninety (90) days;
 
(viii)  if Mezzanine Borrower, General Partner, any SPE Entity, or any
Guarantor, as applicable, Transfers its rights under this Agreement or any of
the other Loan Documents (Senior Mezzanine) or any interest herein or therein in
contravention of the Loan Documents (Senior Mezzanine);
 
(ix)  the occurrence of a Mortgage Default or Mortgage Event of Default;
 
(x)  with respect to any term, covenant or provision set forth herein (other
than the other subsections of this Section 17.l) which specifically contains a
notice requirement or grace period, if Mezzanine Borrower, General Partner, any
SPE Entity, or any Guarantor shall be in default under such term, covenant or
condition after the giving of such notice or the expiration of such grace
period;
 
(xi)  if Mezzanine Borrower, having notified Mezzanine Lender of its election to
extend the Maturity Date as set forth in Section 5 of the Mezzanine Note, fails
to deliver the Replacement Interest Rate Cap Agreement (Senior Mezzanine) to
Mezzanine Lender prior to the first day of the extended term of the Loan and
Mezzanine Borrower has not prepaid the Loan pursuant to the terms of the
Mezzanine Note prior to such first day of the extended term;
 
(xii)  if Mezzanine Borrower shall fail to comply with any covenants set forth
in Article V or Section XI with such failure continuing for ten (10) Business
Days after Mezzanine Lender delivers written notice thereof to Mezzanine
Borrower;
 
(xiii)  if Mortgage Borrower shall fail to comply with any covenants set forth
in Section 4 or Section 3(d) or Section 8 of the Security Instrument (Mortgage)
with such failure continuing for ten (10) Business Days after Mortgage Lender
delivers written notice thereof to Mortgage Borrower;
 
(xiv)  Mezzanine Borrower shall fail to deposit any sums required to be
deposited in the Senior Mezzanine Account or any Sub-Account thereof pursuant to
Article III when due;
 
(xv)  if this Agreement or any other Loan Document (Senior Mezzanine) or any
Lien granted hereunder or thereunder, in whole or in part, shall terminate or
shall cease to be effective or shall cease to be a legally valid, binding and
enforceable obligation of Mezzanine Borrower or any Guarantor, or any Lien
securing the Indebtedness shall, in whole or in part, cease to be a perfected
first priority Lien, subject to the Permitted Encumbrances (except in any of the
foregoing cases in accordance with the terms hereof or under any other Loan
Document (Senior Mezzanine) or by reason of any affirmative act of Mezzanine
Lender);
 
(xvi)  Intentionally Omitted;
 
(xvii)  Intentionally Omitted;
 
(xviii)  Intentionally Omitted;
 
(xix)  if Mezzanine Borrower, General Partner, any SPE Entity or Guarantor shall
continue to be in Default under any of the other terms, covenants or conditions
of this Agreement or of any Loan Document (Senior Mezzanine) not specified in
subsections (i) to (xvii) above, for thirty (30) days after notice from
Mezzanine Lender; provided, however, that if such Default is susceptible of cure
but cannot reasonably be cured within such thirty (30) day period and provided
further that Mezzanine Borrower, General Partner, any SPE Entity or Guarantor
shall have commenced to cure such Default within such thirty (30) day period and
thereafter diligently proceeds to cure the same, such thirty (30) day period
shall be extended for such time as is reasonably necessary for Mezzanine
Borrower in the exercise of due diligence to cure such Default, such additional
period not to exceed ninety (90) days.
 
(b)  Unless waived in writing by Mezzanine Lender, upon the occurrence and
during the continuance of an Event of Default (other than an Event of Default
described in clauses (a)(vi), (vii) or (viii) above) Mezzanine Lender may,
without notice or demand, in addition to any other rights or remedies available
to it pursuant to this Agreement and the other Loan Documents (Senior Mezzanine)
or at law or in equity, take such action that Mezzanine Lender deems advisable
to protect and enforce its rights against Mezzanine Borrower and in the
Collateral, including, without limitation, (i) declaring immediately due and
payable the entire Principal Amount together with interest thereon and all other
sums due by Mezzanine Borrower under the Loan Documents (Senior Mezzanine), (ii)
collecting interest on the Principal Amount at the Default Rate whether or not
Mezzanine Lender elects to accelerate the Mezzanine Note and (iii) enforcing or
availing itself of any or all rights or remedies set forth in the Loan Documents
(Senior Mezzanine) against Mezzanine Borrower and the Collateral, including,
without limitation, all rights or remedies available at law or in equity; and
upon any Event of Default described in subsections (a)(vi) or (a)(vii) above,
the Indebtedness and all other obligations of Mezzanine Borrower hereunder and
under the other Loan Documents (Senior Mezzanine) shall immediately and
automatically become due and payable, without notice or demand, and Mezzanine
Borrower hereby expressly waives any such notice or demand, anything contained
herein or in any other Loan Document (Senior Mezzanine) to the contrary
notwithstanding. The foregoing provisions shall not be construed as a waiver by
Mezzanine Lender of its right to pursue any other remedies available to it under
this Agreement, the Pledge or any other Loan Document (Senior Mezzanine). Any
payment hereunder may be enforced and recovered in whole or in part at such time
by one or more of the remedies provided to Mezzanine Lender in the Loan
Documents (Senior Mezzanine).
 
(c)  Upon the occurrence of an Event of Default pursuant to Section 17.1(a)(ix),
Mezzanine Borrower shall cause Mortgage Borrower to deliver to Mezzanine Lender
within five (5) Business Days after the first to occur of (a) receipt by
Mortgage Borrower of notice of such Mortgage Default or Mortgage Event of
Default from Mortgage Lender or (b) the date Mortgage Borrower obtains actual
knowledge of the occurrence of such Mortgage Default or Mortgage Event of
Default, a detailed description of the actions to be taken by Mortgage Borrower
to cure such Mortgage Default or Mortgage Event of Default and the dates by
which each such action shall occur. Such schedule shall be subject to the
approval of Mezzanine Lender. Mezzanine Borrower shall cause Mortgage Borrower
to take all such actions as are necessary to cure such Mortgage Default or
Mortgage Event of Default by the date approved by Mezzanine Lender and shall
deliver to Mezzanine Lender not less frequently than weekly thereafter written
updates concerning the status of Mortgage Borrower's efforts to cure such
Mortgage Default or Mortgage Event of Default. Mezzanine Lender shall have the
right, but not the obligation, to pay any sums or to take any action which
Mezzanine Lender deems necessary or advisable to cure any default or alleged
default under the Loan Documents (Mortgage) (whether or not Mortgage Borrower is
undertaking efforts to cure such default), and such payment or such action is
hereby authorized by Mezzanine Borrower, and any sum so paid and any expense
incurred by Mezzanine Lender in taking any such action shall be evidenced by
this Agreement and secured by this Agreement and the Pledge and shall be
immediately due and payable by Mezzanine Borrower to Mezzanine Lender with
interest at the Default Rate until paid. Mezzanine Borrower shall cause Mortgage
Borrower to permit Mezzanine Lender to enter upon the Collateral for the purpose
of curing any default or alleged default under the Loan Documents (Mortgage) or
hereunder. Mezzanine Borrower hereby transfers and assigns any excess proceeds
arising from any foreclosure or sale under power pursuant to the Loan Documents
(Mortgage) or any instrument evidencing the indebtedness secured thereby, and
Mezzanine Borrower hereby authorizes and directs the holder or holders of the
Loan Documents (Mortgage) to pay such excess proceeds directly to Mezzanine
Lender up to the amount of the Obligations (Senior Mezzanine).
 
Section 17.2  Remedies
 
(a)  Unless waived in writing by Mezzanine Lender, 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 Mezzanine Lender
against Mezzanine Borrower and Guarantor under this Agreement or any of the
other Loan Documents (Senior Mezzanine) executed and delivered by, or applicable
to, Mezzanine Borrower or at law or in equity may be exercised by Mezzanine
Lender at any time and from time to time, whether or not all or any of the
Indebtedness shall be declared due and payable, and whether or not Mezzanine
Lender shall have commenced any foreclosure proceeding or other action for the
enforcement of its rights and remedies under any of the Loan Documents (Senior
Mezzanine) with respect to the Collateral. Any such actions taken by Mezzanine
Lender shall be cumulative and concurrent and may be pursued
 

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independently, singly, successively, together or otherwise, at such time and in
such order as Mezzanine 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 Mezzanine Lender permitted by law, equity or
contract or as set forth herein or in the other Loan Documents (Senior
Mezzanine). Without limiting the generality of the foregoing, Mezzanine Borrower
agrees that if an Event of Default is continuing (i) Mezzanine Lender shall not
be subject to any one action or election of remedies law or rule and (ii) all
liens and other rights, remedies or privileges provided to Mezzanine Lender
shall remain in full force and effect until Mezzanine Lender has exhausted all
of its remedies against the Collateral and this Agreement and the Pledge have
been foreclosed, sold and/or otherwise realized upon in satisfaction of the
Indebtedness or the Indebtedness has been paid in full.
 
(b)  Upon the occurrence of any Event of Default, Mezzanine Lender may, but
without any obligation to do so and without notice to or demand on Mezzanine
Borrower and without releasing Mezzanine Borrower from any obligation hereunder,
take any action to cure such Event of Default. Mezzanine Lender may appear in,
defend, or bring any action or proceeding to protect its interests in the
Collateral or to foreclose its security interest under this Agreement and the
Pledge or under any of the other Loan Documents (Senior Mezzanine) or collect
the Indebtedness.
 
(c)  Upon the occurrence and during the continuance of an Event of Default, with
respect to the Account Collateral (Senior Mezzanine), the Mezzanine Lender may:
 
(i)  without notice to Mezzanine Borrower, except as required by law, and at any
time or from time to time, charge, set-off and otherwise apply all or any part
of the Account Collateral (Senior Mezzanine) against the Obligations (Senior
Mezzanine) or any part thereof;
 
(ii)  in Mezzanine Lender's sole discretion, at any time and from time to time,
exercise any and all rights and remedies available to it under this Agreement,
and/or as a secured party under the UCC;
 
(iii)  demand, collect, take possession of or receipt for, settle, compromise,
adjust, sue for, foreclose or realize upon the Account Collateral (Senior
Mezzanine) (or any portion thereof) as Mezzanine Lender may determine in its
sole discretion; and
 
(iv)  take all other actions provided in, or contemplated by, this Agreement.
 
(d)  With respect to Mezzanine Borrower, the Account Collateral (Senior
Mezzanine), the Rate Cap Collateral (Senior Mezzanine) and the Collateral,
nothing contained herein or in any other Loan Document (Senior Mezzanine) shall
be construed as requiring Mezzanine Lender to resort to the Collateral for the
satisfaction of any of the Indebtedness, and Mezzanine Lender may seek
satisfaction out of the
 

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Collateral or any part thereof, in its absolute discretion in respect of the
Indebtedness. In addition, Mezzanine Lender shall have the right from time to
time to partially foreclose this Agreement and the Pledge in any manner and for
any amounts secured by this Agreement or the Pledge then due and payable as
determined by Mezzanine Lender in its sole discretion including, without
limitation, the following circumstances: (i) in the event Mezzanine Borrower
defaults beyond any applicable grace period in the payment of one or more
scheduled payments of principal or interest, Mezzanine Lender may foreclose this
Agreement and the Pledge to recover such delinquent payments, or (ii) in the
event Mezzanine Lender elects to accelerate less than the entire outstanding
principal balance of the Loan, Mezzanine Lender may foreclose this Agreement and
the Pledge to recover so much of the principal balance of the Loan as Mezzanine
Lender may accelerate and such other sums secured by this Agreement or the
Pledge as Mezzanine Lender may elect. Notwithstanding one or more partial
foreclosures, the Collateral shall remain subject to this Agreement and the
Pledge to secure payment of sums secured by this Agreement and the Pledge and
not previously recovered.
 
Section 17.3  Remedies Cumulative; Waivers
 
The rights, powers and remedies of Mezzanine Lender under this Agreement and the
Loan Documents (Senior Mezzanine) shall be cumulative and not exclusive of any
other right, power or remedy which Mezzanine Lender may have against Mezzanine
Borrower pursuant to this Agreement or the other Loan Documents (Senior
Mezzanine), or existing at law or in equity or otherwise. Mezzanine Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Mezzanine Lender may determine in Mezzanine
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 Mezzanine
Borrower or any Guarantor shall not be construed to be a waiver of any
subsequent Default or Event of Default by Mezzanine Borrower or any Guarantor or
to impair any remedy, right or power consequent thereon.
 
Section 17.4  Costs of Collection
 
In the event that after an Event of Default: (i) the Mezzanine Note or any of
the Loan Documents (Senior Mezzanine) is placed in the hands of an attorney for
collection or enforcement or is collected or enforced through any legal
proceeding; (ii) an attorney is retained to represent Mezzanine Lender in any
bankruptcy, reorganization, receivership, or other proceedings affecting
creditors' rights and involving a claim under this Agreement, the Mezzanine Note
or any of the Loan Documents (Senior Mezzanine); or (iii) an attorney is
retained to protect or enforce the lien or any of the terms of this Agreement,
the Pledge or any of the Loan Documents (Senior Mezzanine); then Mezzanine
Borrower shall pay to Mezzanine Lender all reasonable attorney's fees, costs and
expenses actually incurred in connection therewith, including costs of appeal,
together with interest on any judgment obtained by Mezzanine Lender at the
Default Rate.
 

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Section 17.5  Distribution of Collateral Proceeds
 
In the event that, following the occurrence and during the continuance of any
Event of Default, any monies are received in connection with the enforcement of
any of the Loan Documents (Senior Mezzanine), or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:
 
(a)  First, to the payment of, or (as the case may be) the reimbursement of,
Mezzanine Lender for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by
Mezzanine Lender to protect or preserve the Collateral or in connection with the
collection of such monies by Mezzanine Lender (including without limitation,
enforcement costs), for the exercise, protection or enforcement by Mezzanine
Lender of all or any of the rights, remedies, powers and privileges of Mezzanine
Lender under this Agreement or any of the other Loan Documents (Senior
Mezzanine) or in respect of the Collateral or in support of any provision of
adequate indemnity to Mezzanine Lender against any taxes or liens which by law
shall have, or may have, priority over the rights of Mezzanine Lender to such
monies;
 
(b)  Second, to all other Obligations (Senior Mezzanine) in such order or
preference as Mezzanine Lender shall determine in its sole and absolute
discretion;
 
(c)  Third, the excess, if any, shall be deposited in the Intermediate Mezzanine
Account for application under the Intermediate Mezzanine Loan Documents.
 

XVIII.  
SPECIAL PROVISIONS

 
Section 18.1  Exculpation
 
18.1.1  Exculpated Parties. Except as set forth in this Section 18.1, the
Recourse Guaranty and the Environmental Indemnity, no personal liability shall
be asserted, sought or obtained by Mezzanine Lender or enforceable against (i)
Mezzanine Borrower, (ii) any Affiliate of Mezzanine Borrower, (iii) any Person
owning, directly or indirectly, any legal or beneficial interest in Mezzanine
Borrower or any Affiliate of Mezzanine Borrower or (iv) any direct or indirect
partner, member, principal, officer, Controlling Person, beneficiary, trustee,
advisor, shareholder, employee, agent, Affiliate or director of any Persons
described in clauses (i) through (iii) above (collectively, the Exculpated
Parties) and none of the Exculpated Parties shall have any personal liability
(whether by suit, deficiency, judgment or otherwise) in respect of the
Obligations (Senior Mezzanine), this Agreement, the Pledge, the Mezzanine Note,
the Collateral or any other Loan Document (Senior Mezzanine), or the making,
issuance or transfer thereof, all such liability, if any, being expressly waived
by Mezzanine Lender. The foregoing limitation shall not in any way limit or
affect Mezzanine Lender's right to any of the following and Mezzanine Lender
shall not be deemed to have waived any of the following:
 

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(a)  Foreclosure of the lien of this Agreement and the Pledge in accordance with
the terms and provisions set forth herein and in the Pledge;
 
(b)  Action against any other security at any time given to secure the payment
of the Mezzanine Note and the other Obligations (Senior Mezzanine);
 
(c)  Exercise of any other remedy set forth in this Agreement or in any other
Loan Document (Senior Mezzanine) which is not inconsistent with the terms of
this Section 18.1;
 
(d)  Any right which Mezzanine Lender may have under Sections 506(a), 506(b),
1111(b) or any other provisions of the Bankruptcy Code to file a claim for the
full amount of the Indebtedness secured by this Agreement and the Pledge or to
require that all collateral shall continue to secure all of the Indebtedness
owing to Mezzanine Lender in accordance with the Loan Documents (Senior
Mezzanine); or
 
(e)  The liability of any given Exculpated Party with respect to any separate
written guaranty or agreement given by any such Exculpated Party in connection
with the Loan (including, without limitation, the Recourse Guaranty and the
Environmental Indemnity).
 
18.1.2  Carveouts From Non-Recourse Limitations. Notwithstanding the foregoing
or anything in this Agreement or any of the Loan Documents (Senior Mezzanine) to
the contrary, there shall at no time be any limitation on Mezzanine Borrower's
or any Guarantor's liability (except each Guarantor's liability may be several
in accordance with the terms of the Recourse Guaranty) for the payment, in
accordance with the terms of this Agreement, the Mezzanine Note, the Pledge and
the other Loan Documents (Senior Mezzanine), to Mezzanine Lender of:
 
(a)  any loss, damage, cost or expense incurred by or on behalf of Mezzanine
Lender by reason of (i) the fraudulent acts of Mezzanine Borrower or intentional
misrepresentations by Mezzanine Borrower or any Affiliate of Mezzanine Borrower
and/or (ii) the failure of Mortgage Borrower and/or Operating Lessee (as
applicable) to have a valid and subsisting certificate of occupancy(s) for all
or any portion of the Property if and to the extent such certificate of
occupancy(s) is required to comply with all Legal Requirements;
 
(b)  Proceeds which Mortgage Borrower, any Affiliate of Mortgage Borrower,
Mezzanine Borrower or any Affiliate of Mezzanine Borrower has received and to
which Mezzanine Lender is entitled pursuant to the terms of this Agreement or
any of the Loan Documents (Senior Mezzanine) to the extent the same have not
been applied toward payment of the Indebtedness, or used for the repair or
replacement of the Property in accordance with the Loan Agreement (Mortgage);
 
(c)  any membership deposits and any security deposits and advance deposits
which are not delivered to Mortgage Lender upon a foreclosure of the Property
 

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or action in lieu thereof, except to the extent any such deposits were applied
or refunded in accordance with the terms and conditions of any of the Leases or
membership agreement, as applicable, prior to the occurrence of the Event of
Default that gave rise to such foreclosure or action in lieu thereof;
 
(d)  any loss, damage, cost or expense incurred by or on behalf of Mezzanine
Lender by reason of all or any part of the Collateral, the Account Collateral
(Senior Mezzanine) or the Rate Cap Collateral (Senior Mezzanine) being
encumbered by a Lien (other than this Agreement and the Pledge) in violation of
the Loan Documents (Senior Mezzanine);
 
(e)  after the occurrence and during the continuance of an Event of Default, any
Rents, issues, profits and/or income collected by Mortgage Borrower, Operating
Lessee, Mezzanine Borrower or any Affiliate of Mortgage Borrower, Mezzanine
Borrower, or Operating Lessee (other than Rents and credit card receivables sent
to the Collection Account pursuant to the Loan Agreement (Mortgage) or paid
directly to Mortgage Lender pursuant to any notice of direction delivered to
tenants of the Property or credit card companies) and not applied to payment of
the Obligations or used to pay normal and verifiable Operating Expenses of the
Property or otherwise applied in a manner permitted under the Loan Documents
(Mortgage) and Loan Documents (Senior Mezzanine);
 
(f)  any loss, damage, cost or expense incurred by or on behalf of Mezzanine
Lender by reason of physical damage to the Property from intentional waste
committed by Mortgage Borrower, any Affiliate of Mortgage Borrower, Mezzanine
Borrower or any Affiliate of Mezzanine Borrower;
 
(g)  any loss, damage, cost or expense incurred by or on behalf of Mezzanine
Lender by reason of the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnity (Senior Mezzanine)
concerning environmental laws, hazardous substances and asbestos and any
indemnification of Mezzanine Lender with respect thereto;
 
(h)  Intentionally Omitted;
 
(i)  if Mezzanine Borrower fails to obtain Mezzanine Lender's prior written
consent to any Transfer, as required by this Agreement or the Pledge;
 
(j)  any and all liabilities, obligations, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees, causes of action,
suits, claims, demands and adjustments of any nature or description whatsoever)
which may at any time be imposed upon, incurred by or awarded against Mezzanine
Lender, in the event (and arising out of such circumstances) that (x) Mezzanine
Borrower should raise any defense, counterclaim and/or allegation in any
foreclosure action by Mezzanine Lender relative to the Property, the Account
Collateral (Senior Mezzanine) or the Rate Cap Collateral (Senior Mezzanine) or
any part thereof which is found by a court to have been raised by Mezzanine
Borrower in bad faith or to be without basis in fact or law, or (y) an
involuntary case is commenced against Mezzanine Borrower under the Bankruptcy
Code with the collusion of Mezzanine Borrower or any of its Affiliates or (z) an
order for relief is entered with respect to the Mezzanine Borrower under the
Bankruptcy Code through the actions of the Mezzanine Borrower or any of its
Affiliates at a time when the Mezzanine Borrower is able to pay its debts as
they become due unless Mezzanine Borrower and Guarantor shall have received an
opinion of independent counsel that the General Partner of Mezzanine Borrower
has a fiduciary duty to seek such an order for relief;
 
(k)  any loss, damage, cost, or expense incurred by or on behalf of Lender by
reason of Mezzanine Borrower or General Partner failing to be since the date of
its formation, a Single Purpose Entity; and
 
(l)  reasonable attorney's fees and expenses incurred by Mezzanine Lender in
connection with any successful suit filed on account of any of the foregoing
clauses (a) through (l).
 

XIX.  
MISCELLANEOUS

 
Section 19.1  Survival
 
This Agreement and all covenants, indemnifications, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Mezzanine Lender of the Loan and the execution and
delivery to Mezzanine Lender of the Mezzanine Note, and shall continue in full
force and effect so long as all or any of the Indebtedness is outstanding and
unpaid unless a longer period is expressly set forth herein or in the other Loan
Documents (Senior Mezzanine). Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party. All covenants, promises and agreements in this
Agreement, by or on behalf of Mezzanine Borrower, shall inure to the benefit of
the successors and assigns of Mezzanine Lender. If Mezzanine Borrower consists
of more than one person, the obligations and liabilities of each such person
hereunder and under the other Loan Documents (Senior Mezzanine) shall be joint
and several.
 
Section 19.2  Mezzanine Lender's Discretion
 
Whenever pursuant to this Agreement, Mezzanine Lender exercises any right given
to it to approve or disapprove, or any arrangement or term is to be satisfactory
to Mezzanine Lender, the decision of Mezzanine Lender to approve or disapprove
or to decide whether arrangements or terms are satisfactory or not satisfactory
shall (except as is otherwise specifically herein provided) be in the sole
discretion of Mezzanine Lender and shall be final and conclusive.
 
Section 19.3  Governing Law
 
(a)  THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE
BY MEZZANINE LENDER AND
 

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ACCEPTED BY MEZZANINE BORROWER IN 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 AGREEMENT AND THE OBLIGATIONS (SENIOR MEZZANINE) ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE
AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT
PERMITTED BY LAW, MEZZANINE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE MEZZANINE NOTE AND THE OTHER LOAN DOCUMENTS (SENIOR
MEZZANINE), AND THIS AGREEMENT 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 MEZZANINE LENDER OR MEZZANINE
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT MEZZANINE LENDER'S
OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK,
COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW AND MEZZANINE BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR
HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND MEZZANINE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MEZZANINE
BORROWER DOES HEREBY DESIGNATE AND APPOINT:
 
CORPORATION SERVICE COMPANY
                80 STATE STREET
                ALBANY, NEW YORK 12207-2543
 
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 MEZZANINE BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON MEZZANINE BORROWER IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. MEZZANINE BORROWER
(I) SHALL GIVE PROMPT NOTICE TO MEZZANINE 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 19.4  Modification, Waiver in Writing
 
No modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, or of the Mezzanine Note, or of any other Loan
Document (Senior Mezzanine), or consent to any departure 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
Mezzanine Borrower shall entitle Mezzanine Borrower to any other or future
notice or demand in the same, similar or other circumstances.
 
Section 19.5  Delay Not a Waiver
 
Neither any failure nor any delay on the part of Mezzanine 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
Mezzanine Note or under any other Loan Document (Senior Mezzanine), 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 Mezzanine Note or any other
Loan Document (Senior Mezzanine), Mezzanine 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 Mezzanine Note or the other Loan Documents (Senior
Mezzanine), or to declare a default for failure to effect prompt payment of any
such other amount.
 
Section 19.6  Notices
 
All notices, consents, approvals and requests required or permitted hereunder or
under any other Loan Document (Senior Mezzanine) 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, (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of
 

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attempted delivery or (c) 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):
 

            If to Mezzanine Lender:
                            
                            German American Capital Corporation
                            60 Wall Street, 10th Floor
                            New York New York 10005
                            Attention: Todd Sammann and General Counsel
                            Telecopy No.: (212) 797-4489
                            Confirmation No.: (212) 250-2748
                            
            With a copy to: 
 
Midland Loan Services, Inc.
10851 Mastin Suite 700
Overland Park, Kansas 66210
Attention: Jan Sternin
Telecopy No.: (913) 253-9001
Confirmation No.: (913) 253-9216
 
            With a copy to: 
 
                            Skadden, Arps, Slate, Meagher & Flom LLP
                            Four Times Square
                            New York, New York 10036
                            Attention: Harvey R. Uris, Esq.
                            Telecopy No.: (917) 777-2212
                            Confirmation No.: (212) 735-3000
 
         If to Mezzanine Borrower: 
 
                            c/o CNL Hotels Resorts, Inc.
                            Center at City Commons
                            450 South Orange Avenue
                            Orlando, Florida 32801
                            Attention Senior Vice President
                            Telefax No.: (407) 650-1085
 
             and
 
                            c/o KSL Resorts
                            50-905 Avenida Bermudas
                            La Quinta, California 92253
                            Attention: Mr. Eric Resnick, Chief Financial Officer
                            Telefax No.: (760) 564-8005
 

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            With a copy to: 
 
                            Gibson Dunn & Crutcher LLP
                            333 South Grand Avenue
                            Los Angeles, CA 90071-3197
                            Attention: Michael F. Sfregola, Esq.
                            Telefax No.: (213) 229-6558
 
 
            and
 
                            Lowndes Drosdick Doster Kantor & Reed, P.A.
                            215 North Eola Avenue
                            Orlando, Florida 32801
                            Attention: Richard J. Fildes, Esq.
                            Telefax No.: (407) 843-4444
 
All notices, elections, requests and demands under this Agreement shall be
effective and deemed received upon the earliest of (i) the actual receipt of the
same by personal delivery or otherwise, (ii) one (1) Business Day after being
deposited with a nationally recognized overnight courier service as required
above, (iii) three (3) Business Days after being deposited in the United States
mail as required above or (iv) on the day sent if sent by facsimile with
confirmation on or before 5:00 p.m. New York time on any Business Day or on the
next Business Day if so delivered after 5:00 p.m. New York time or on any day
other than a Business Day. Rejection or other refusal to accept or the inability
to deliver because of changed address of which no notice was given as herein
required shall be deemed to be receipt of the notice, election, request, or
demand sent.
 
Section 19.7  TRIAL BY JURY
 
MEZZANINE BORROWER AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER IT, HEREBY
EXPRESSLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS
AGREEMENT, THE PLEDGE, THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT (SENIOR
MEZZANINE), INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION
THEREOF OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT,
THE PLEDGE, THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT (SENIOR MEZZANINE) (AS
NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE; AND MEZZANINE BORROWER HEREBY AGREES AND CONSENTS THAT AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT HERETO TO THE WAIVER OF ANY RIGHT TO TRIAL BY JURY.
MEZZANINE BORROWER ACKNOWLEDGES THAT IT HAS CONSULTED WITH LEGAL COUNSEL
REGARDING THE MEANING OF THIS WAIVER AND ACKNOWLEDGES THAT THIS WAIVER IS AN
ESSENTIAL INDUCEMENT FOR THE MAKING OF THE LOAN. THIS WAIVER SHALL SURVIVE THE
REPAYMENT OF THE LOAN.
 
Section 19.8  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 19.9  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.
 
Section 19.10  Preferences
 
To the extent Mezzanine Borrower makes a payment or payments to Mezzanine
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 Mezzanine Lender.
 
Section 19.11  Waiver of Notice
 
Mezzanine Borrower shall not be entitled to any notices of any nature whatsoever
from Mezzanine Lender except with respect to matters for which this Agreement or
the other Loan Documents (Senior Mezzanine) specifically and expressly provide
for the giving of notice by Mezzanine Lender to Mezzanine Borrower and except
with respect to matters for which Mezzanine Borrower is not, pursuant to
applicable Legal Requirements, permitted to waive the giving of notice.
Mezzanine Borrower hereby expressly waives the right to receive any notice from
Mezzanine Lender with respect to any matter for which this Agreement or the
other Loan Documents (Senior Mezzanine) do not specifically and expressly
provide for the giving of notice by Mezzanine Lender to Mezzanine Borrower.
 

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Section 19.12  Expenses; Indemnity
 
(a)  Except as may be otherwise expressly set forth in the Loan Documents
(Senior Mezzanine), Mezzanine Borrower covenants and agrees to pay or, if
Mezzanine Borrower fails to pay, to reimburse, Mezzanine Lender upon receipt of
written notice from Mezzanine Lender for all reasonable costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by Mezzanine
Lender in connection with (i) the preparation, negotiation, execution and
delivery of this Agreement and the other Loan Documents (Senior Mezzanine) and
the consummation of the transactions contemplated hereby and thereby and all the
costs of furnishing all opinions by counsel for Mezzanine Borrower (including
without limitation any opinions requested by Mezzanine Lender pursuant to this
Agreement); (ii) Mezzanine Lender's ongoing performance of and compliance with
all agreements and conditions contained in this Agreement and the other Loan
Documents (Senior Mezzanine) on its part to be performed or complied with after
the Closing Date; (iii) the negotiation, preparation, execution, delivery and
administration of any consents, amendments, waivers or other modifications to
this Agreement and the other Loan Documents (Senior Mezzanine) and any other
documents or matters as required herein or under the other Loan Documents
(Senior Mezzanine); (iv) securing Mezzanine Borrower's compliance with any
requests made pursuant to the provisions of this Agreement; (v) the filing and
recording fees and expenses, mortgage recording taxes, title insurance and
reasonable fees and expenses of counsel for providing to Mezzanine Lender all
required legal opinions, and other similar expenses incurred in creating and
perfecting the Lien in favor of Mezzanine Lender pursuant to this Agreement and
the other Loan Documents (Senior Mezzanine); (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or
affecting Mezzanine Borrower, this Agreement, the other Loan Documents (Senior
Mezzanine), the Property, or any other security given for the Loan; (vii)
enforcing any obligations of or collecting any payments due from Mezzanine
Borrower under this Agreement, the other Loan Documents (Senior Mezzanine) or
with respect to the Collateral 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 and (viii)
procuring insurance policies pursuant to Section 6.1.11; provided, however, that
Mezzanine Borrower shall not be liable for the payment of any such costs and
expenses to the extent the same arise (A) by reason of the gross negligence,
illegal acts, fraud or willful misconduct of Mezzanine Lender or (B) in
connection with any action taken under Article IV, other than the Mezzanine
Borrower's internal administrative costs. Any cost and expenses due and payable
to Mezzanine Lender may be paid from any amounts in the Senior Mezzanine Account
if same are not paid by Mezzanine Borrower within ten (10) Business Days after
receipt of written notice from Mezzanine Lender.
 
(b)  Subject to the non-recourse provisions of Section 18.1, Mezzanine Borrower
shall protect, indemnify and save harmless Mezzanine Lender, and all officers,
directors, stockholders, members, partners, employees, agents, successors and
assigns
 

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thereof (collectively, the Indemnified Parties) from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including all reasonable attorneys' fees and expenses actually
incurred) imposed upon or incurred by or asserted against the Indemnified
Parties, the Collateral or the Property or any part of its interest therein, by
reason of the occurrence or existence of any of the following (to the extent
Proceeds payable on account of the following shall be inadequate; it being
understood that in no event will the Indemnified Parties be required to actually
pay or incur any costs or expenses as a condition to the effectiveness of the
foregoing indemnity) prior to (i) the acceptance by Mezzanine Lender or its
designee of a deed-in-lieu of foreclosure with respect to the Collateral, or
(ii) an Indemnified Party or its designee taking possession or control of the
Collateral or (iii) the foreclosure of the Pledge, except to the extent caused
by the willful misconduct or gross negligence of the Indemnified Parties (other
than such willful misconduct or gross negligence imputed to the Indemnified
Parties because of their interest in the Property): (1) ownership of Mezzanine
Borrower's interest in the Property, or any interest therein, or receipt of any
Rents or other sum therefrom, (2) any accident, injury to or death of any
persons or loss of or damage to Property occurring on or about the Property or
any Appurtenances thereto, (3) any design, construction, operation, repair,
maintenance, use, non-use or condition of the Property or Appurtenances thereto,
including claims or penalties arising from violation of any Legal Requirement or
Insurance Requirement, as well as any claim based on any patent or latent
defect, whether or not discoverable by Mezzanine Lender, any claim the insurance
as to which is inadequate, and any Environmental Claim, (4) any Default under
this Agreement or any of the other Loan Documents (Senior Mezzanine) or any
failure on the part of Mezzanine Borrower to perform or comply or to cause
Mortgage Borrower to perform or comply with any of the terms of any Lease within
the applicable notice or grace periods, (5) any performance of any labor or
services or the furnishing of any materials or other Property in respect of the
Property or any part thereof, (6) any negligence or tortious act or omission on
the part of Mezzanine Borrower or any of its agents, contractors, servants,
employees, sublessees, licensees or invitees, (7) any contest referred to in
Section 7.3 of the Loan Agreement (Mortgage), (8) any obligation or undertaking
relating to the performance or discharge of any of the terms, covenants and
conditions of the landlord contained in the Leases, or (9) except as may be
expressly limited herein, the presence at, in or under the Property or the
Improvements of any Hazardous Materials in violation of any Environmental Law.
Any amounts the Indemnified Parties are legally entitled to receive under this
Section which are not paid within fifteen (15) Business Days after written
demand therefor by the Indemnified Parties or Mezzanine Lender, setting forth in
reasonable detail the amount of such demand and the basis therefor, shall bear
interest from the date of demand at the Default Rate, and shall, together with
such interest, be part of the Indebtedness and secured by this Agreement and the
Pledge. In case any action, suit or proceeding is brought against the
Indemnified Parties by reason of any such occurrence, Mezzanine Borrower shall
at Mezzanine Borrower's expense resist and defend such action, suit or
proceeding or will cause the same to be resisted and defended by counsel at
Mezzanine Borrower's reasonable expense for the insurer of the liability or by
counsel designated by Mezzanine Borrower (unless reasonably disapproved by
Mezzanine Lender promptly after Mezzanine Lender has been notified of such
counsel); provided, however, that nothing
 

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herein shall compromise the right of Mezzanine Lender (or any Indemnified Party)
to appoint its own counsel at Mezzanine Borrower's expense for its defense with
respect to any action which in its reasonable opinion presents a conflict or
potential conflict between Mezzanine Lender and Mezzanine Borrower that would
make such separate representation advisable; provided further that if Mezzanine
Lender shall have appointed separate counsel pursuant to the foregoing,
Mezzanine Borrower shall not be responsible for the expense of additional
separate counsel of any Indemnified Party unless in the reasonable opinion of
Mezzanine Lender a conflict or potential conflict exists between such
Indemnified Party and Mezzanine Lender. So long as Mezzanine Borrower is
resisting and defending such action, suit or proceeding as provided above in a
prudent and commercially reasonable manner, Mezzanine Lender and the Indemnified
Parties shall not be entitled to settle such action, suit or proceeding without
Mezzanine Borrower's consent which shall not be unreasonably withheld or
delayed, and claim the benefit of this Section with respect to such action, suit
or proceeding and Mezzanine Lender agrees that it will not settle any such
action, suit or proceeding without the consent of Mezzanine Borrower; provided,
however, that if Mezzanine Borrower is not diligently defending such action,
suit or proceeding in a prudent and commercially reasonable manner as provided
above, and Mezzanine Lender has provided Mezzanine Borrower with thirty (30)
days' prior written notice, or shorter period if mandated by the requirements of
applicable law, and opportunity to correct such determination, Mezzanine Lender
may settle such action, suit or proceeding and claim the benefit of this Section
19.12 with respect to settlement of such action, suit or proceeding. Any
Indemnified Party will give Mezzanine Borrower prompt notice after such
Indemnified Party obtains actual knowledge of any potential claim by such
Indemnified Party for indemnification hereunder. The Indemnified Parties shall
not settle or compromise any action, proceeding or claim as to which it is
indemnified hereunder without notice to Mezzanine Borrower.
 
Section 19.13  Exhibits and Schedules Incorporated
 
The Exhibits and 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 19.14  Offsets, Counterclaims and Defenses
 
Any assignee of Mezzanine Lender's interest in and to this Agreement, the
Mezzanine Note and the other Loan Documents (Senior Mezzanine) shall take the
same free and clear of all offsets, counterclaims or defenses which are
unrelated to such documents which Mezzanine Borrower may otherwise have against
any assignor of such documents, and no such unrelated counterclaim or defense
shall be interposed or asserted by Mezzanine 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 Mezzanine Borrower.
 
Section 19.15  Liability of Assignees of Mezzanine Lender
 

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No assignee of Mezzanine Lender shall have any personal liability, directly or
indirectly, under or in connection with this Agreement or any other Loan
Document (Senior Mezzanine) or any amendment or amendments hereto made at any
time or times, heretofore or hereafter, any different than the liability of
Mezzanine Lender hereunder. In addition, no assignee shall have at any time or
times hereafter any personal liability, directly or indirectly, under or in
connection with or secured by any agreement, lease, instrument, encumbrance,
claim or right affecting or relating to the Property or to which the Property is
now or hereafter subject any different than the liability of Mezzanine Lender
hereunder. The limitation of liability provided in this Section 19.15 is (i) in
addition to, and not in limitation of, any limitation of liability applicable to
the assignee provided by law or by any other contract, agreement or instrument,
and (ii) shall not apply to any assignee's gross negligence or willful
misconduct.
 
Section 19.16  No Joint Venture or Partnership; No Third Party Beneficiaries
 
(a)  Mezzanine Borrower and Mezzanine Lender intend that the relationships
created hereunder and under the other Loan Documents (Senior Mezzanine) 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 Mezzanine Borrower and Mezzanine Lender nor to grant
Mezzanine Lender any interest in the Collateral other than that of Mezzanine
Lender.
 
(b)  This Agreement and the other Loan Documents (Senior Mezzanine) are solely
for the benefit of Mezzanine Lender and Mezzanine Borrower and nothing contained
in this Agreement or the other Loan Documents (Senior Mezzanine) shall be deemed
to confer upon anyone other than Mezzanine Lender and Mezzanine 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
Mezzanine Lender to make the Loan hereunder are imposed solely and exclusively
for the benefit of Mezzanine 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 Mezzanine 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 Mezzanine Lender if, in
Mezzanine Lender's sole discretion, Mezzanine Lender deems it advisable or
desirable to do so.
 
Section 19.17  Publicity
 
All news releases, publicity or advertising by Mezzanine Borrower or its
Affiliates through any media intended to reach the general public which refers
to the Loan Documents (Senior Mezzanine) or the financing evidenced by the Loan
Documents (Senior Mezzanine), to Mezzanine Lender, or any of its Affiliates
shall be subject to the prior written approval of Mezzanine Lender.
 

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Section 19.18  Waiver of Marshalling of Assets
 
To the fullest extent permitted by law, Mezzanine Borrower, for itself and its
successors and assigns, waives all rights to a marshalling of the assets of
Mezzanine Borrower, Mezzanine Borrower's shareholders and others with interests
in Mezzanine Borrower and of the Collateral, 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 Mezzanine Lender under the Loan Documents (Senior Mezzanine) to a sale of the
Collateral for the collection of the Indebtedness without any prior or different
resort for collection or of the right of Mezzanine Lender to the payment of the
Indebtedness out of the net proceeds of the Collateral in preference to every
other claimant whatsoever.
 
Section 19.19  Waiver of Counterclaim and other Actions
 
Mezzanine Borrower hereby expressly and unconditionally waives, in connection
with any suit, action or proceeding brought by Mezzanine Lender on this
Agreement, the Mezzanine Note, the Pledge or any Loan Document (Senior
Mezzanine), any and every right it may have to (i) interpose any counterclaim
therein (other than a counterclaim which can only be asserted in the suit,
action or proceeding brought by Mezzanine Lender on this Agreement, the
Mezzanine Note, the Pledge or any Loan Document (Senior Mezzanine) and cannot be
maintained in a separate action) and (ii) have any such suit, action or
proceeding consolidated with any other or separate suit, action or proceeding.
 
Section 19.20  Conflict; Construction of Documents; Reliance
 
In the event of any conflict between the provisions of this Agreement and any of
the other Loan Documents (Senior Mezzanine), 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 (Senior Mezzanine) and that such Loan Documents (Senior
Mezzanine) shall not be subject to the principle of construing their meaning
against the party which drafted same. Mezzanine Borrower acknowledges that, with
respect to the Loan, Mezzanine 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 Mezzanine Lender or any
parent, subsidiary or Affiliate of Mezzanine Lender. Mezzanine 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 (Senior Mezzanine) or
any other agreements or instruments which govern the Loan by virtue of the
ownership by it or any parent, subsidiary or Affiliate of Mezzanine Lender of
any equity interest any of them may acquire in Mezzanine Borrower, and Mezzanine
Borrower hereby irrevocably waives the right to raise any defense or take any
action on the basis of the foregoing with respect to Mezzanine Lender's exercise
of any such rights or remedies.
 

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Mezzanine Borrower acknowledges that Mezzanine 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 Mezzanine
Borrower or its Affiliates.
 
Section 19.21  Prior Agreements
 
This Agreement and the other Loan Documents (Senior Mezzanine) 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, are superseded by the terms of
this Agreement and the other Loan Documents (Senior Mezzanine) and unless
specifically set forth in a writing contemporaneous herewith the terms,
conditions and provisions of any and all such prior agreements do not survive
execution of this Agreement.
 
Section 19.22  Counterparts
 
This Agreement may be executed in multiple counterparts, each of which shall
constitute an original, but all of which shall constitute one document.
 
Section 19.23  Disclosure
 
Notwithstanding anything to the contrary contained in Sections 15.1 and 15.6, in
connection with the transactions contemplated by such Sections, in no event
shall Mezzanine Lender deliver financial information with respect to the
Collateral, the Property or the Guarantor to the Persons listed in Schedule III,
without first obtaining Mezzanine Borrower's prior written consent; provided
however, Mezzanine Borrower's consent shall not be required with respect to
Morgan Stanley, Lehman Brothers, The Equitable Life Assurance Society of the
United States, Teachers Insurance and Annuity Association and the state of Ohio
Pension Fund if Mezzanine Lender delivers a confidentiality agreement from any
of such Persons reasonably acceptable to Mezzanine Borrower.
 

 

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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.
 
MEZZANINE BORROWER:
 
CNL HOTEL DEL SENIOR MEZZ PARTNERS, LP, a Delaware limited partnership
                                By:    CNL Hotel Del Senior Mezz Partners
                    GP, LLC, a Delaware limited liability
                                company, its General Partner
 

                                By:  /s/ John X. Brady, Jr.     
                                Name:  John X. Brady
                                Title:   Vice President
 

By signing below, General Partner agrees that in consideration of the
substantial benefit that it will receive from Lender making the Loan to
Borrower, General Partner agrees to comply (or permit Mezzanine Borrower to take
such action necessary to comply) with all of the terms, conditions, obligations
and restrictions affecting General Partner set forth herein:
 
GENERAL PARTNER:
 
CNL HOTEL DEL SENIOR MEZZ PARTNERS GP, LLC, a Delaware limited liability company
 
 
By:  /s/ John X. Brady, Jr.
                                Name:  John X. Brady, Jr.
                                Title:  Vice President
 
[Mezzanine Lender's signature appears on following page]
 

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MEZZANINE LENDER:
 
GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation
 
By:  /s/ Todd O. Sammon      
Name:   Todd O. Sammon
Title:     Vice President

By:  /s/ Eric M. Schwartz    
Name:   Eric M. Schwartz
Title:     Vice President