Exhibit 10.2

 

PROMISSORY NOTE

 

Dated as of January 5, 2007

$15,600,000.00

Scottsdale, Arizona

 

SUPERTEL LIMITED PARTNERSHIP, a Virginia limited partnership (“Borrower”), for
value received, hereby promises to pay to GENERAL ELECTRIC CAPITAL CORPORATION,
a Delaware corporation (“Lender”), whose address is 8377 East Hartford Drive,
Suite 200, Scottsdale, Arizona 85255, or order, on or before February 1, 2017
(the “Maturity Date”), the principal sum of $15,600,000.00 (“Loan Amount”), as
herein provided. Initially capitalized terms which are not otherwise defined in
this Note shall have the meanings set forth in that certain Loan Agreement dated
as of the date of this Note between Borrower and Lender, as such agreement may
be amended, restated and/or supplemented from time to time (the “Loan
Agreement”).

In addition, the following terms shall have the following meanings for all
purposes of this Note.

“Adjustable Rate” means an annual interest rate equal to the sum of the
Adjustable Rate Basis plus 1.70%.

“Adjustable Rate Basis” means, for any Interest Period, the annual interest rate
(rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to
the three month London Interbank Offered Rate (“LIBOR”) on the Adjustable Rate
Reset Date as published in The Wall Street Journal. If for any reason such rate
is no longer published in The Wall Street Journal, Lender shall select such
replacement index as Lender in its sole discretion determines most closely
approximates such rate.

“Adjustable Rate Reset Date” means the last Business Day of each calendar month,
prior to the next Interest Period.

“Amortization Period” means two hundred forty months.

“First Payment Date” means March 1, 2007.

“Interest Period” means (a) initially, the period beginning on the date of this
Note and ending on the last day of the calendar month in which such date occurs,
and (b) thereafter, the period beginning on the first day of the calendar month
and ending on the last day of such calendar month.

“Payment Period” means (a) initially, the twelve-month period beginning on the
First Payment Date and ending on the day immediately prior to the first Payment
Reset Date, and (b) thereafter, the twelve-month period beginning on each
Payment Reset Date and ending on the day immediately prior to the next Payment
Reset Date.

“Payment Reset Calculation” means the level monthly payment calculated by the
full amortization of the outstanding principal amount of this Note on the
Payment Reset Date at the Adjustable Rate (with the definition of “Adjustable
Rate Reset Date” defined to mean the last Business Day of the calendar month two
months prior to the next Payment Reset Date) over the remaining originally
scheduled term of this Note.

 

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“Payment Reset Date” means each anniversary of the First Payment Date.

Borrower shall pay interest on the outstanding principal amount of this Note at
the Adjustable Rate, determined monthly as described above, on the basis of a
360-day year for the actual number of days elapsed, in arrears, provided, that,
interest on the principal amount of this Note for the period commencing with the
date such principal amount is advanced by Lender through the last day in the
month in which this Note is dated shall be due and payable upon delivery of this
Note.

Commencing on the First Payment Date until and including February 1, 2009,
Borrower shall pay consecutive monthly installments on the first day of each
calendar month of interest only at the Adjustable Rate in lawful money of the
United States. Commencing on March 1, 2009 until and including February 1, 2010,
Borrower shall pay consecutive monthly installments of interest on the Loan
Amount at the Adjustable Rate and principal payments equal to one-twelfth of one
percent (1%) of the Loan Amount. Commencing on March 1, 2010 until the Maturity
Date, Borrower shall pay consecutive monthly installments of principal and
interest at the Adjustable Rate in arrears on the first day of each calendar
month amortized over the Amortization Period. The monthly installments shall be
level during a Payment Period. The monthly payments for the Payment Period shall
be in equal amounts until the Payment Reset Date, at which time, and on each
succeeding Payment Reset Date thereafter, the level monthly payment to be paid
by Borrower shall be adjusted for the next succeeding Payment Period based on
the Payment Reset Calculation. All outstanding principal and unpaid accrued
interest shall be paid on the Maturity Date.

Upon execution of this Note, Borrower shall authorize Lender to establish
arrangements whereby all payments of principal and interest hereunder are
transferred by Automated Clearing House Debit initiated by Lender directly from
an account at a U.S. bank in the name of Borrower to an account designated by
Lender. Each payment of principal and interest hereunder shall be applied first
toward any past due payments under this Note (including payment of all Costs (as
herein defined), then to accrued interest at the Adjustable Rate, and the
balance, after the payment of such accrued interest, if any, shall be applied to
the unpaid principal balance of this Note; provided, however, each payment
hereunder after an Event of Default has occurred under this Note shall be
applied as Lender in its sole discretion may determine. After application of any
monthly payment in the above manner, in the event that the outstanding principal
amount of this Note exceeds 110% of the original principal balance of this Note,
Borrower shall prepay, without premium or penalty, on the first day of the next
succeeding calendar month after each such occurrence, a principal amount equal
to the difference between the outstanding principal balance of this Note and the
original principal balance of this Note (the “Negative Amortization Amount”).
Lender shall notify Borrower in writing on or before the twenty-fifth day of
each calendar month during the term of this Note of Lender’s determination of
the Negative Amortization Amount, if any, payable on the first day of the next
succeeding calendar month. Lender shall also notify Borrower in writing on or
before the twenty-fifth day of the calendar month prior to the next Payment
Reset Date during the term of this Note of Lender’s determination of the level
monthly payment to be paid by Borrower based on the Payment Reset Calculation
for the next Payment Period.

Provided no Event of Default shall have occurred and be continuing, Borrower
shall have an option (the “Conversion Option”), exercisable only once between
the seventh (7th) and thirty-sixth (36th) month following the Closing Date, to
convert the interest rate accruing under this Note (the “Conversion”) from the
Adjustable Rate to a fixed rate of interest (the “Base Interest Rate”). Borrower
shall exercise the Conversion Option by providing Lender written notice of
Borrower’s election (the “Conversion Notice”). The Conversion shall be deemed
effective on the

 

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first day of the second calendar month following delivery of the Conversion
Notice to Lender (the “Conversion Date”), and this Note shall be deemed modified
as of the Conversion Date to reflect the Conversion. Lender shall notify
Borrower ten (10) days following delivery of Conversion Notice of the Base
Interest Rate, which Base Interest Rate shall be equal to the seven (7) year
weekly U.S. Dollar Interest Rate Swap (as published in Federal Reserve
Statistical Release H.15[519] http://www.federalreserve.gov/releases/H15/) plus
1.98%. From and after the Conversion Date, fixed equal monthly payments, based
on the amortization of the outstanding principal amount of this Note as of the
Conversion Date (including any accrued interest at the Adjustable Rate) over the
period from and after the Conversion Date until the Maturity Date at the Base
Interest Rate shall be due and payable commencing on the first day of the
calendar month following the month in which the Conversion Date occurs and
continuing on the first day of each month thereafter until the Maturity Date, at
which time the outstanding principal balance of this Note and unpaid interest
accrued at the Base Interest Rate shall be due and payable. Lender shall provide
Borrower with an amortization schedule setting forth the principal and interest
payments due under this Note from and after the Conversion Date, and such
amortization schedule shall be prima facie evidence of such principal and
interest payments.

Borrower may prepay this Note in full, but not in part (except as otherwise set
forth below), including all accrued but unpaid interest hereunder and all sums
advanced by Lender pursuant to the Loan Documents and any Other Agreements,
provided that (a) no Event of Default has occurred under any of the Loan
Documents or any Other Agreements and is continuing, and (b) any such prepayment
shall only be made on a regularly scheduled payment date upon not less than 30
days prior written notice from Borrower to Lender.

Except as otherwise set forth herein, while the Note is at the Adjustable Rate,
any such prepayment shall be made together with payment of a prepayment premium
equal to:

(a)          2% of the principal amount prepaid if the prepayment is made on or
following the date of this Note but prior to the first anniversary of the date
of this Note; or

(b)          1% of the principal amount prepaid if the prepayment is made on or
following the first anniversary of the date of this Note but prior to the second
anniversary of the date of this Note.

Except as otherwise set forth herein, from and after the Conversion Date, any
such prepayment shall be made together with payment of an amount equal to the
sum of:

 

(a)

a prepayment fee equal to 1% of the principal amount prepaid; and

(b)          a prepayment premium equal to the positive difference (if any)
between (i) the present value of the stream of monthly principal and interest
payments due under this Note from the date of such prepayment through the
scheduled Maturity Date (the “Remaining Scheduled Term”), calculated using the
interpolated yield, at the time of such prepayment, of the two U.S. Dollar
Interest Rate Swaps (as published in Federal Reserve Statistical Release
H.15[519]) whose terms most closely match the Remaining Scheduled Term, and (ii)
the present value of the stream of monthly principal and interest payments due
under this Note from the date of such prepayment through the scheduled Maturity
Date, calculated using the interpolated yield, as of the Conversion Date, of the
two U.S. Dollar Interest Rate Swaps whose terms most closely match the term
commencing on the Conversion Date and ending on the scheduled Maturity Date.

 

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The foregoing prepayment fee and prepayment premium, as applicable, shall be due
and payable regardless of whether such prepayment is the result of a voluntary
prepayment by Borrower or as a result of Lender declaring the unpaid principal
balance of this Note, accrued interest and all other sums due under this Note,
the Mortgage, the other Loan Documents, and any Other Agreements, due and
payable as contemplated below; provided, however, the prohibition on a partial
prepayment and the prepayment fee and the prepayment premium, as applicable,
shall not be applicable with respect to a prepayment of this Note in connection
with an application of condemnation proceeds as contemplated by the Mortgage or
if exception is otherwise made in the Loan Documents.

This Note is secured by the Mortgage and the other Loan Documents. Upon the
occurrence of an Event of Default, Lender may declare the entire unpaid
principal balance of this Note, accrued interest, if any, and all other sums due
under this Note and any Loan Documents or Other Agreements due and payable at
once without notice to Borrower. All past-due principal and/or interest shall
bear interest from the due date to the date of actual payment at a rate (the
“Default Rate”) equal to the lesser of (a) the highest rate for which the
undersigned may legally contract or (b) the greater of 14% and the rate which is
6% per annum above the Adjustable Rate (or 14% per annum in the event the
Conversion Option has been exercised), and such Default Rate shall continue to
apply following a judgment in favor of Lender under this Note. If Borrower fails
to make any payment or installment due under this Note within five days of its
due date, Borrower shall pay to Lender, in addition to any other sum due Lender
under this Note or any other Loan Document, a late charge equal to 5% of such
past-due payment or installment (the “Late Charge”), which Late Charge is a
reasonable estimate of the loss that may be sustained by Lender due to the
failure of Borrower to make timely payments. All payments of principal and
interest due hereunder shall be made (a) without deduction of any present and
future taxes, levies, imposts, deductions, charges or withholdings, which
amounts shall be paid by Borrower, and (b) without any other right of abatement,
reduction, setoff, defense, counterclaim, interruption, deferment or recoupment
for any reason whatsoever. Borrower will pay the amounts necessary such that the
gross amount of the principal and interest received by Lender is not less than
that required by this Note.

No delay or omission on the part of Lender in exercising any remedy, right or
option under this Note shall operate as a waiver of such remedy, right or
option. In any event, a waiver on any one occasion shall not be construed as a
waiver or bar to any such remedy, right or option on a future occasion. Borrower
hereby waives presentment, demand for payment, notice of dishonor, notice of
protest, and protest, notice of intent to accelerate, notice of acceleration and
all other notices or demands in connection with delivery, acceptance,
performance, default or endorsement of this Note. All notices, consents,
approvals or other instruments required or permitted to be given by either party
pursuant to this Note shall be given in accordance with the notice provisions in
the Loan Agreement. Should any indebtedness represented by this Note be
collected at law or in equity, or in bankruptcy or other proceedings, or should
this Note be placed in the hands of attorneys for collection after default,
Borrower shall pay, in addition to the principal and interest due and payable
hereon, all costs of collecting or attempting to collect this Note (the
“Costs”), including reasonable outside attorneys’ fees and expenses of Lender
(including those fees and expenses incurred in connection with any appeal) and
court costs whether or not a judicial action is commenced by Lender. This Note
may not be amended or modified except by a written agreement duly executed by
the party against whom enforcement of this Note is sought. In the event that any
one or more of the provisions contained in this Note shall be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note, and this
Note shall be construed as if such provision had never been contained herein or
therein. Time is of the essence in the performance of each and every obligation
under this Note.

 

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Notwithstanding anything to the contrary contained in any of the Loan Documents,
the obligations of Borrower to Lender under this Note and any other Loan
Documents are subject to the limitation that payments of interest and late
charges to Lender shall not be required to the extent that receipt of any such
payment by Lender would be contrary to provisions of applicable law limiting the
maximum rate of interest that may be charged or collected by Lender. The portion
of any such payment received by Lender that is in excess of the maximum interest
permitted by such provisions of law shall be credited to the principal balance
of this Note or if such excess portion exceeds the outstanding principal balance
of this Note, then such excess portion shall be refunded to Borrower. All
interest paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and/or spread throughout the
full term of this Note (including, without limitation, the period of any renewal
or extension thereof) so that interest for such full term shall not exceed the
maximum amount permitted by applicable law.

This obligation shall bind Borrower and its successors and assigns, and the
benefits hereof shall inure to Lender and its successors and assigns.

IN WITNESS WHEREOF, Borrower has executed and delivered this Note effective as
of the date first set forth above.

 

BORROWER:

 

 

 

 

 

SUPERTEL LIMITED PARTNERSHIP,

 

a Virginia limited partnership

 

 

 

 

 

By SUPERTEL HOSPITALITY REIT TRUST,

 

a Maryland real estate investment trust,

 

Its General Partner

 

 

 

By /s/ Donavon A. Heimes

 

Donavon A. Heimes, Vice President/Treasurer

 

 

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LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”) is made as of January 5, 2007 (the
“Closing Date”), by and between GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation (“Lender”), and SUPERTEL LIMITED PARTNERSHIP, a Virginia limited
partnership (“Borrower”).

AGREEMENT:

In consideration of the mutual covenants and provisions of this Agreement, the
parties agree as follows:

1.           Definitions. The following terms shall have the following meanings
for all purposes of this Agreement:

“ADA” means the Americans with Disabilities Act of 1990, as such act may be
amended from time to time.

“Affiliate” means any Person that directly or indirectly controls, is under
common control with, or is controlled by any other Person. For purposes of this
definition, “controls”, “under common control with” and “controlled by” mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or otherwise.

“Anti-Money Laundering Laws” means all applicable laws, regulations and
government guidance on the prevention and detection of money laundering,
including 18 U.S.C. § § 1956 and 1957, and the BSA.

“Applicable Regulations” means all applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders and approvals of each Governmental
Authority having jurisdiction over the Premises, including, without limitation,
all health, building, fire, safety and other codes, ordinances and requirements,
and all applicable standards of the National Board of Fire Underwriters and the
ADA in each case, as amended, and any judicial or administrative interpretation
thereof, including any judicial order, consent, decree or judgment applicable to
any of the Borrower Parties or any of the Lessee Parties.

“Borrower Parties” means, collectively, Borrower and any guarantors of the Loan
(including, in each case, any predecessors-in-interest).

“BSA” means the Bank Secrecy Act (31 U.S.C. § § 5311 et. seq.), and its
implementing regulations, Title 31 Part 103 of the U.S. Code of Federal
Regulations.

“Business Day” means any day on which Lender is open for business other than a
Saturday, Sunday or a legal holiday, ending at 5:00 P.M. Phoenix, Arizona time.

“Change of Control” means the occurrence of any of the following: (a) any merger
or consolidation by Supertel Hospitality, Inc. with or into any other entity
(other than any Affiliates of Supertel Hospitality, Inc.) where Supertel
Hospitality, Inc. is not the surviving party; (b) any merger or consolidation by
the Borrower with or into any other entity (other than any Affiliates of the
Borrower) where, following consummation of such merger or consolidation,
Supertel Hospitality, Inc. ceases to be the “beneficial owner” (as defined in
Rule 13d-3 under the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”)) of 50% or more of the

 

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combined voting power of the outstanding securities of the surviving party to
such merger or consolidation; or (c) if any “person” (as defined in Section
3(a)(9) of the Exchange Act and as used in Section 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d) of the Exchange Act, but
excluding the Borrower Parties and their Affiliates) becomes, subsequent to the
Closing, the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act)
of securities of any of the Borrower Parties, as applicable, representing 50% or
more of the combined voting power of such Borrower Party’s then outstanding
securities (other than indirectly as a result of the redemption by any of the
Borrower Parties, as applicable, of its securities).

“Closing” means the disbursement of the Loan Amount by Title Company as
contemplated by this Agreement.

“Code” means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et seq., as
amended.

“Default Rate” has the meaning set forth in the Note.

“Entity” means any entity that is not a natural person.

“Environmental Indemnity Agreement” means the environmental indemnity agreement
dated as of the date of this Agreement executed by Borrower for the benefit of
the Indemnified Parties and such other parties as are identified in such
agreement with respect to the Premises, as the same may be amended from time to
time.

“Event of Default” has the meaning set forth in Section 9.

“Fee” means an underwriting, site assessment, valuation, processing and
commitment fee equal to 0% of the Loan Amount.

“ Fixed Charge Coverage Ratio” has the meaning set forth in Section 6.J.

“Franchise Agreement” means the franchise, license or area development
agreements with Franchisor for the conduct of business at the Premises as a
Permitted Concept, together with all amendments, modifications and supplements
thereto.

“Franchisor” means Super 8 Motels, Inc., Choice Hotels International, Inc., or
any other franchisor reasonably acceptable to Lender, and its successors.

“GAAP” means generally accepted accounting principles consistently applied.

“Governmental Authority” means any governmental authority, agency, department,
commission, bureau, board, instrumentality, court or quasi-governmental
authority having jurisdiction or supervisory or regulatory authority over the
Premises or any of the Borrower Parties.

“Indemnified Parties” means Lender, the trustees under the Mortgage, if
applicable, and any person or entity who is or will have been involved in the
origination of the Loan, any person or entity who is or will have been involved
in the servicing of the Loan, any person or entity in whose name the encumbrance
created by the Mortgage is or will have been recorded, persons and entities who
may hold or acquire or will have held a full or partial interest in the Loan
(including, but not limited to, investors or prospective investors in any
Securitization, Participation or Transfer, as well as custodians, trustees and
other fiduciaries who hold or have

 

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held a full or partial interest in the Loan for the benefits of third parties),
as well as the respective directors, officers, shareholders, partners, members,
employees, lenders, agents, servants, representatives, contractors,
subcontractors, affiliates, subsidiaries, participants, successors and assigns
of any and all of the foregoing (including, but not limited to, any other person
or entity who holds or acquires or will have held a participation or other full
or partial interest in the Loan or the Premises, whether during the term of the
Loan or as a part of or following a foreclosure of the Loan and including, but
not limited to, any successors by merger, consolidation or acquisition of all or
a substantial portion of Lender’s assets and business).

“Indemnity Agreements” means all indemnity agreements executed for the benefit
of any of the Borrower Parties, Lessee Parties or any prior owner, lessee or
occupant of the Premises in connection with Hazardous Materials, including,
without limitation, the right to receive payments under such indemnity
agreements.

“Lease” means the lease between Borrower, as lessor, and Lessee, as lessee, with
respect to the Premises together with all amendments, modifications and
supplements thereto.

“Lender Entities” means, collectively, Lender (including any
predecessor-in-interest to Lender) and any Affiliate of Lender (including any
Affiliate of any predecessor-in-interest to Lender).

“Lessee” means TRS Leasing, Inc., a Virginia corporation, and its successors.

“Lessee Parties” means, collectively, Lessee and any guarantors of the Lease
(including, in each case, any predecessors in interest).

“Loan” means the loan for the Premises described in Section 2.

“Loan Amount” means $15,600,000.00.

“Loan Documents” means, collectively, this Agreement, the Note, the Mortgage,
the Environmental Indemnity Agreement, the Subordination Agreement, the
UCC-1 Financing Statements, the Authorization Regarding Information form
previously delivered on behalf of the Borrower Parties to Lender and all other
documents, instruments and agreements executed in connection therewith or
contemplated thereby, as the same may be amended from time to time.

“Loan Pool” means: (a) in the context of a Securitization, any pool or group of
loans that are a part of such Securitization; (b) in the context of a Transfer,
all loans which are sold, transferred or assigned to the same transferee; and
(c) in the context of a Participation, all loans as to which participating
interests are granted to the same participant.

“Management Agreement” means a management agreement relating to the Premises and
reasonably acceptable to Lender between Lessee and Manager.

“Manager” means Royal Host Management, Inc. or any other manager reasonably
acceptable to Lender.

“Material Adverse Effect” means a material adverse effect on (a) the Premises,
including, without limitation, the operation of the Premises as a Permitted
Concept, or (b) Borrower’s ability to perform its obligations under the Loan
Documents.

 

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“Mortgage” means the Mortgages, Deeds of Trust and Deed to Secure Debt dated as
of the date of this Agreement executed by Borrower for the benefit of Lender
with respect to the Premises, as the same may be amended from time to time.

“Note” means the promissory note dated as of the date of this Agreement executed
by Borrower in favor of Lender evidencing the Loan, as the same may be amended,
restated or substituted from time to time.

“Obligations” has the meaning set forth in the Mortgage.

“OFAC Laws and Regulations” means Executive Order 13224 issued by the President
of the United States of America, the Terrorism Sanctions Regulations (Title 31
Part 595 of the U.S. Code of Federal Regulations), the Terrorism List
Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal
Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title
31 Part 597 of the U.S. Code of Federal Regulations), and the Cuban Assets
Control Regulations (Title 31 Part 515 of the U.S. Code of Federal Regulations),
and all other present and future federal, state and local laws, ordinances,
regulations, policies, lists (including, without limitation, the Specially
Designated Nationals and Blocked Persons List) and any other requirements of any
Governmental Authority (including, without limitation, the United States
Department of the Treasury Office of Foreign Assets Control) addressing,
relating to, or attempting to eliminate, terrorist acts and acts of war, each as
hereafter supplemented, amended or modified from time to time, and the present
and future rules, regulations and guidance documents promulgated under any of
the foregoing, or under similar laws, ordinances, regulations, policies or
requirements of other states or localities.

“Other Agreements” means, collectively, all agreements and instruments between
or among (a) any of the Borrower Parties or any Affiliate of any of the Borrower
Parties (including any Affiliate of any predecessor-in-interest to any of the
Borrower Parties)and, (b) any of the Lender Entities, including, without
limitation, promissory notes and guaranties; provided, however, the term “Other
Agreements” shall not include the agreements and instruments defined as the Loan
Documents.

“Participation” means one or more grants by Lender or any of the other Lender
Entities to a third party of a participating interest in notes evidencing
obligations to repay secured or unsecured loans owned by Lender or any of the
other Lender Entities or any or all servicing rights with respect thereto.

“Permitted Concept” means a hotel using the Super 8 or Comfort Inn trade names
or any other trade name reasonably acceptable to Lender and related operations.

“Permitted Exceptions” means (a) the lien for current real property taxes and
assessments, not yet due and payable; (b) liens and security interests in favor
of Lender; (c) those easements, restrictions, liens and encumbrances set forth
as exceptions in the title insurance policy issued by Title Company to Lender
and approved by Lender in its sole discretion; (d) the Lease; (e) purchase money
security interests not to exceed $100,000 in the aggregate on all the Premises,
and (f) any other matters which have been approved in writing by Lender.

“Person” means any individual, corporation, partnership, limited liability
company, trust, unincorporated organization, Governmental Authority or any other
form of entity.

“Personal Property” has the meaning set forth in the Mortgage.

 

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“Premises” means the parcel or parcels of real estate legally described on
Exhibit A attached hereto, together with all rights, privileges and
appurtenances associated therewith and all buildings, fixtures and other
improvements now or hereafter located thereon (whether or not affixed to such
real estate) and the Personal Property.

“Restoration” has the meaning set forth in the Mortgage.

“Securitization” means one or more sales, dispositions, transfers or assignments
by Lender or any of the other Lender Entities to a special purpose corporation,
trust or other entity identified by Lender or any of the other Lender Entities
of notes evidencing obligations to repay secured or unsecured loans owned by
Lender or any of the other Lender Entities (and, to the extent applicable, the
subsequent sale, transfer or assignment of such notes to another special purpose
corporation, trust or other entity identified by Lender or any of the other
Lender Entities), and the issuance of bonds, certificates, notes or other
instruments evidencing interests in pools of such loans, whether in connection
with a permanent asset securitization or a sale of loans in anticipation of a
permanent asset securitization. Each Securitization shall be undertaken in
accordance with all requirements which may be imposed by the investors or the
rating agencies involved in each such sale, disposition, transfer or assignment
or which may be imposed by applicable securities, tax or other laws or
regulations.

“Subordination Agreement” means the subordination and attornment agreement dated
as of the date of this Agreement executed by Borrower, Lessee and Lender with
respect to the Lease as the same may be amended from time to time.

“Substitute Documents” has the meaning set forth in Section 11.

“Substitute Premises” means one or more parcels of real estate substituted for
the Premises in accordance with the requirements of Section 11, together with
all rights, privileges and appurtenances associated therewith and all buildings,
fixtures and other improvements, equipment, trade fixtures, appliances and other
personal property located thereon (whether or not affixed to such real estate).
For purposes of clarity, where two or more parcels of real estate comprise a
Substitute Premises, such parcels or interests shall be aggregated and deemed to
constitute the Substitute Premises for all purposes of this Agreement.

“Title Company” means Lawyers Title Insurance Corporation.

“Transfer” means one or more sales, transfers or assignments by Lender or any of
the other Lender Entities to a third party of notes evidencing obligations to
repay secured or unsecured loans owned by Lender or any of the other Lender
Entities or any or all servicing rights with respect thereto.

“UCC-1 Financing Statements” means such UCC-1 Financing Statements as Lender
shall file with respect to the transactions contemplated by this Agreement.

“UCC” has the meaning set forth in the Mortgage.

“U.S. Publicly-Traded Entity” is an Entity whose securities are listed on a
national securities exchange or quoted on an automated quotation system in the
U.S. or a wholly-owned subsidiary of such an Entity.

2.           Transaction. On the terms and subject to the conditions set forth
in the Loan Documents, Lender shall make the Loan. The Loan will be evidenced by
the Note and secured

 

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by the Mortgage. Borrower shall repay the outstanding principal amount of the
Loan together with interest thereon in the manner and in accordance with the
terms and conditions of the Note and the other Loan Documents. The Premises
shall be leased to the Lessee pursuant to the Lease and, at Closing, Borrower
shall assign the Lease to Lender pursuant to the Mortgage. The Loan shall be
advanced at the Closing in cash or otherwise immediately available funds subject
to any prorations and adjustments required by this Agreement.

3.           Escrow Agent; Closing Costs. Borrower and Lender hereby employ
Title Company to act as escrow agent in connection with the transactions
described in this Agreement. Borrower and Lender will deliver to Title Company
all documents, pay to Title Company all sums and do or cause to be done all
other things necessary or required by this Agreement, in the reasonable judgment
of Title Company, to enable Title Company to comply herewith and to enable any
title insurance policy provided for herein to be issued. Title Company shall not
cause the transaction to close unless and until it has received written
instructions from Lender and Borrower to do so. Title Company is authorized to
pay, from any funds held by it for Lender’s or Borrower’s respective credit all
amounts necessary to procure the delivery of such documents and to pay, on
behalf of Lender and Borrower, all charges and obligations payable by them,
respectively. Borrower will pay all charges payable by it to Title Company.
Title Company is authorized, in the event any conflicting demand is made upon it
concerning these instructions or the escrow, at its election, to hold any
documents or funds deposited hereunder until an action shall be brought in a
court of competent jurisdiction to determine the rights of Borrower and Lender
or to interplead such documents or funds in an action brought in any such court.
Deposit by Title Company of such documents and funds shall relieve Title Company
of all further liability and responsibility for such documents and funds. Title
Company’s receipt of this Agreement and opening of an escrow pursuant to this
Agreement shall be deemed to constitute conclusive evidence of Title Company’s
agreement to be bound by the terms and conditions of this Agreement pertaining
to Title Company. Disbursement of any funds shall be made by check, certified
check or wire transfer, as directed by Borrower and Lender. Title Company shall
be under no obligation to disburse any funds represented by check or draft, and
no check or draft shall be payment to Title Company in compliance with any of
the requirements hereof, until it is advised by the bank in which such check or
draft is deposited that such check or draft has been honored. The employment of
Title Company as escrow agent shall not affect any rights of subrogation under
the terms of any title insurance policy issued pursuant to the provisions
thereof.

4.           Closing Conditions. The obligation of Lender to consummate the
transaction contemplated by this Agreement is subject to the fulfillment or
waiver of each of the following conditions:

A.           Title Insurance Commitments. Lender shall have received for the
Premises a preliminary title report and irrevocable commitment to insure title
in the amount of the Loan, by means of a mortgagee’s, ALTA extended coverage
policy of title insurance (or its equivalent, in the event such form is not
issued in the jurisdiction where the Premises is located) issued by Title
Company showing Borrower vested with good and marketable fee title in the real
property comprising such Premises, committing to insure Lender’s first priority
lien upon and security interest in such real property subject only to Permitted
Exceptions, and containing such endorsements as Lender may require.

B.           Survey. Lender shall have received a current ALTA survey of the
Premises or its equivalent, the form and substance of which shall be
satisfactory to Lender in its reasonable discretion. Lender shall have obtained
a flood certificate indicating that the location of the Premises is not within
the 100-year flood plain or identified as a special flood hazard area as

 

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defined by the Federal Emergency Management Agency, or if the Premises is in
such a flood plain or special flood hazard area, Borrower shall have provided
Lender with evidence of flood insurance maintained on the Premises in an amount
and on terms and conditions reasonably satisfactory to Lender.

C.           Environmental. Lender shall have completed such environmental due
diligence of the Premises as it deems necessary or advisable in its sole
discretion, and Lender shall have approved the environmental condition of the
Premises in its sole discretion.

D.           Compliance With Representations, Warranties and Covenants. All of
the representations and warranties set forth in Section 5 shall be true, correct
and complete in all material respects as of the Closing Date, and Borrower shall
be in compliance in all material respects with each of the covenants set forth
in Section 6 as of the Closing Date. No event shall have occurred or condition
shall exist or information shall have been disclosed by Borrower or discovered
by Lender which has had or would be reasonably likely to have a Material Adverse
Effect on the Premises, any of the Borrower Parties or Lessee Parties or
Lender’s willingness to consummate the transaction contemplated by this
Agreement, as determined by Lender in its sole and absolute discretion.

E.           Proof of Insurance. Borrower shall have delivered to Lender
certificates of insurance and copies of insurance policies showing that all
insurance required by the Loan Documents and providing coverage and limits
satisfactory to Lender are in full force and effect.

F.           Legal Opinions. Borrower shall have delivered to Lender such legal
opinions as Lender may reasonably require all in form and substance reasonably
satisfactory to Lender and its counsel.

G.           Fee and Closing Costs. Borrower shall have paid the Fee to Lender
and shall have paid all costs of the transactions described in this Agreement,
including, without limitation, the cost of title insurance premiums and all
endorsements required by Lender, survey charges, UCC and litigation search
charges, the attorneys’ fees of Borrower, reasonable outside attorneys’ fees and
expenses of Lender, the cost of the environmental due diligence undertaken
pursuant to Section 4.C, Lender’s site inspection costs and fees, stamp taxes,
mortgage taxes, transfer fees, escrow, filing and recording fees and UCC filing
and recording fees (including preparation, filing and recording fees for UCC
continuation statements). Borrower shall have also paid all real and personal
property and other applicable taxes and assessments and other charges relating
to the Premises which are due and payable on or prior to the Closing Date as
well as taxes and assessments due and payable subsequent to the Closing Date but
which Title Company requires to be paid at Closing as a condition to the
issuance of the title insurance policy described in Section 4.A.

H.           Franchise Agreement. Lender shall have received a certificate (the
“Franchisor Certificate”) from Franchisor in form and substance acceptable to
Lender which provides that the Premises has been approved by Franchisor. The
Franchisor Certificate shall also provide that the Franchise Agreement is valid,
binding and in full force and effect, with a term (inclusive of existing annual
renewal options) which will expire after the scheduled maturity date of the
Note, and no events have occurred which could constitute a default under the
Loan Documents, and, to the extent Franchisor has a right of first refusal in
the Franchise Agreement that extends to the sale, transfer or conveyance of the
Premises, Franchisor waives all such rights of first refusal set forth in the
Franchise Agreement as to Lender and its successors and assigns.

 

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I.             Lease and Subordination Agreement. Borrower and Lessee shall have
executed and delivered the Lease and the Subordination Agreement. The Lease and
the Subordination Agreement shall be in form and substance reasonably
satisfactory to Lender.

J.            Management Agreement. The Management Agreement shall be in full
force and effect. Lender shall have approved the Management Agreement in its
reasonable discretion and Manager and Lessee shall have delivered to Lender such
subordination agreements, collateral assignments of management agreement and
consents to collateral assignment of management agreement as Lender may require
in its sole discretion.

K.           Closing Documents. At or prior to the Closing Date, Lender or the
Borrower Parties, as may be appropriate, shall have executed and delivered or
shall have caused to be executed and delivered to Lender, or as Lender may
otherwise direct, the Loan Documents and such other documents, payments,
instruments and certificates, as Lender may require in form acceptable to
Lender.

Upon fulfillment or waiver of all of the above conditions, Lender shall deposit
funds necessary to close this transaction with the Title Company and this
transaction shall close in accordance with the terms and conditions of this
Agreement.

5.           Representations and Warranties of Borrower. The representations and
warranties of Borrower contained in this Section are being made by Borrower as
of the Closing Date to induce Lender to enter into this Agreement and consummate
the transactions contemplated herein and shall survive the Closing. Borrower
represents and warrants to Lender as follows:

A.           Financial Information. Borrower has delivered to Lender certain
financial statements and other information concerning the Borrower Parties in
connection with the transaction described in this Agreement (collectively, the
“Financial Information”). The Financial Information is true, correct and
complete in all material respects; there have been no amendments to the
Financial Information since the date such Financial Information was prepared or
delivered to Lender. Borrower understands that Lender is relying upon the
Financial Information and Borrower represents that such reliance is reasonable.
All financial statements included in the Financial Information were prepared in
accordance with GAAP (except as otherwise noted) and fairly present as of the
date of such financial statements the financial condition of each individual or
entity to which they pertain. No change has occurred with respect to the
financial condition of any of the Borrower Parties or the Premises as reflected
in the Financial Information, which has had, or could reasonably be expected to
result in, a Material Adverse Effect, and has not been disclosed in writing to
Lender.

B.           Organization and Authority. Each of the Borrower Parties (other
than individuals), as applicable, is duly organized or formed, validly existing
and in good standing under the laws of its state of incorporation or formation.
Borrower is qualified as a foreign corporation, partnership or limited liability
company, as applicable, to do business in each state where the Premises are
located, and each of the Borrower Parties is qualified as a foreign corporation,
partnership or limited liability company, as applicable, to do business in any
other jurisdiction where the failure to be qualified would reasonably be
expected to result in a Material Adverse Effect. All necessary action has been
taken to authorize the execution, delivery and performance by the Borrower
Parties of this Agreement and the other Loan Documents. The person(s) who have
executed this Agreement on behalf of Borrower are duly authorized so to do.
Borrower is not a “foreign corporation”, “foreign partnership”, “foreign trust”,
“foreign estate” or “foreign person” (as those terms are defined by the Internal
Revenue Code of 1986, as

 

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amended). Borrower’s U.S. Federal Tax Identification number, Organization
Identification number and principal place of business are correctly set forth on
the signature page of this Agreement. None of the Borrower Parties, and, to the
best of their knowledge, no individual or entity owning directly or indirectly
any interest in any of the Borrower Parties, is an individual or entity whose
property or interests are subject to being blocked under any of the OFAC Laws
and Regulations or is otherwise in violation of any of the OFAC Laws and
Regulations; provided, however, the representation contained in this sentence
shall not apply to any Person to the extent such Person’s interest is in or
through a U.S. Publicly-Traded Entity.

C.           Enforceability of Documents. Upon execution by the Borrower
Parties, this Agreement and the other Loan Documents shall constitute the legal,
valid and binding obligations of the Borrower Parties, respectively, enforceable
against the Borrower Parties in accordance with their respective terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
liquidation, reorganization and other laws affecting the rights of creditors
generally and general principles of equity.

D.           Litigation. There are no suits, actions, proceedings or
investigations pending, or to the best of its knowledge, threatened against or
involving the Borrower Parties or the Premises before any arbitrator or
Governmental Authority, except for such suits, actions, proceedings or
investigations which, individually or in the aggregate, have not had, and would
not reasonably be expected to result in, a Material Adverse Effect.

E.           Absence of Breaches or Defaults. The Borrower Parties are not, and
the authorization, execution, delivery and performance of this Agreement and the
other Loan Documents will not result, in any breach or default under any other
document, instrument or agreement to which any of the Borrower Parties is a
party or by which any of the Borrower Parties, the Premises or any of the
property of any of the Borrower Parties is subject or bound, except for such
breaches or defaults which, individually or in the aggregate, have not had, and
would not reasonably be expected to result in, a Material Adverse Effect. The
authorization, execution, delivery and performance of this Agreement and the
other Loan Documents will not violate any applicable law, statute, regulation,
rule, ordinance, code, rule or order. The Premises is not subject to any right
of first refusal, right of first offer or option to purchase or lease granted to
a third party (other than the Lease and room rentals in the ordinary course of
business).

F.           Utilities. Adequate public utilities are available at the Premises
to permit utilization of the Premises as a Permitted Concept and all utility
connection fees and use charges will have been paid in full prior to
delinquency.

G.           Zoning; Compliance With Laws. The Premises is in compliance with
all applicable zoning requirements, and the use of the Premises as a Permitted
Concept does not constitute a nonconforming use under applicable zoning
requirements. The Borrower Parties and the Premises are in compliance with all
Applicable Regulations except for such noncompliance which has not had, and
would not reasonably be expected to result in, a Material Adverse Effect.

H.           Area Development; Wetlands. No condemnation or eminent domain
proceedings affecting the Premises have been commenced or, to the best of
Borrower’s knowledge, are contemplated. Neither the Premises, nor to the best of
Borrower’s knowledge, the real property bordering the Premises, are designated
by any Governmental Authority as a wetlands.

 

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I.             Licenses and Permits; Access. All required licenses and permits,
both governmental and private, to use and operate the Premises as a Permitted
Concept are in full force and effect, except for such licenses and permits the
failure of which to obtain has not had, and would not reasonably be expected to
result in, a Material Adverse Effect. Adequate rights of access to public roads
and ways are available to the Premises for unrestricted ingress and egress and
otherwise to permit utilization of the Premises for their intended purposes, and
all such public roads and ways have been completed and dedicated to public use.

J.            Condition of Premises. The Premises, including the Personal
Property, is in good condition and repair and well maintained, ordinary wear and
tear excepted, fully equipped and operational, free from structural defects,
safe and properly lighted.

K.           Environmental. The representations and warranties of Borrower set
forth in Section 2 of the Environmental Indemnity Agreement, together with the
corresponding definitions, are incorporated by reference into this Agreement as
if stated in full in this Agreement.

L.           Title to Premises; First Priority Lien. Fee title to the real
property comprising the Premises is vested in Borrower, free and clear of all
liens, encumbrances, charges and security interests of any nature whatsoever,
except the Permitted Exceptions. Borrower is owner of all Personal Property,
free and clear of all liens, encumbrances, charges and security interests of any
nature whatsoever, except the Permitted Exceptions, and no Affiliate of Borrower
owns any of the Personal Property. Upon Closing, Lender shall have a first
priority lien upon and security interest in the Premises pursuant to the
Mortgage and the UCC-1 Financing Statements, subject only to the Permitted
Exceptions.

M.          No Mechanics’ Liens. There are no delinquent accounts payable or
mechanics’ liens in favor of any materialman, laborer, or any other person or
entity in connection with labor or materials furnished to or performed on any
portion of the Premises; and no work has been performed or is in progress nor
have materials been supplied to the Premises or agreements entered into for work
to be performed or materials to be supplied to the Premises prior to the date
hereof, which will be delinquent on or before the Closing Date.

N.           Franchisor Provisions. Borrower has delivered to Lender a true,
correct and complete copy of the Franchise Agreement. The Franchise Agreement is
the only agreement in effect with Franchisor with respect to the Premises. The
Franchise Agreement is in full force and effect and constitutes the legal, valid
and binding obligations of the parties to the Franchise Agreement, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, liquidation, reorganization and other laws
affecting the rights of creditors generally and general principles of equity.
None of the Borrower Parties or Manager has assigned, transferred, mortgaged,
hypothecated or otherwise encumbered the Franchise Agreement or any rights
thereunder or any interest therein, and none of the Borrower Parties or Manager
has received any notice that Franchisor has made any assignment, pledge or
hypothecation of all or any part of its rights or interest in the Franchise
Agreement. No notice of default from Franchisor has been received under the
Franchise Agreement which has not been cured and no notice of default to
Franchisor has been given under the Franchise Agreement which has not been
cured. No event has occurred and no condition exists which, with the giving of
notice or the lapse of time or both, would constitute a default under the
Franchise Agreement.

O.          Lease. Borrower has delivered to Lender a true, correct and complete
copy of the Lease. The Lease is the only lease with respect to the Premises
(except room rentals in the

 

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ordinary course of business), and is in full force and effect, and constitutes
the legal, valid and binding obligation of the parties thereto, enforceable
against such parties in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, liquidation, reorganization
and other laws affecting the rights of creditors generally and general
principles of equity. Except pursuant to the Loan Documents, Borrower has not
assigned, transferred, mortgaged, hypothecated or otherwise encumbered the Lease
or any rights thereunder or any interest therein, and Borrower has not received
any notice that the Lessee has made any assignment, pledge or hypothecation of
all or any part of its rights or interests in the Lease. Borrower has not
received any notice of default from the Lessee which has not been cured or given
any notice of default to the Lessee which has not been cured. No event has
occurred and no condition exists which, with the giving of notice or the lapse
of time or both, would constitute a default by the Lessee or Borrower under the
Lease.

P.           Money Laundering. Borrower is in full compliance with all
Applicable Regulations relating to or attempting to eliminate, prevent, or
detect money laundering, drug trafficking, terrorist acts and activities, and
acts of war (collectively, the “Anti-Money Laundering and Anti-Terrorism Laws”).
Neither Borrower nor any other Borrower Party is (a) listed on the Specially
Designated Nationals and Blocked Person List maintained by the Office of Foreign
Assets Control, Department of the Treasury (“OFAC”) or any other similar lists
maintained by OFAC pursuant to any authorizing statute, Executive Order or
regulation; or (b) a person designated under Section 1(b), (c) or (d) of
Executive Order No. 13224 (September 23, 2001), any related enabling
legislation, or any other similar Executive Orders. All businesses in which
Borrower and the other Borrower Parties are engaged are and will continue to be
legitimate businesses, and all funds of Borrower and the other Borrower Parties
have been and will continue to be derived from legitimate sources.

Q.           Management Agreement. Borrower has delivered to Lender a true,
correct and complete copy of the Management Agreement. The Management Agreement
is in full force and effect and constitutes the legal, valid and binding
obligations of the parties to the Management Agreement, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, liquidation, reorganization and other laws
affecting the rights of creditors generally and general principles of equity.
Except pursuant to the Loan Documents, Borrower has not assigned, transferred,
mortgaged, hypothecated or otherwise encumbered the Management Agreement or any
rights thereunder or any interest therein, and Borrower has not received any
notice that Manager has made any assignment, pledge or hypothecation of all or
any part of its rights or interest in the Management Agreement. No notice of
default from Manager has been received under the Management Agreement that has
not been cured and no notice of default to Manager has been given under the
Management Agreement which has not been cured. No event has occurred and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute a default under the Management Agreement.

6.           Covenants. Borrower covenants to Lender from and after the Closing
Date and until all of the Obligations are satisfied in full, as follows:

A.           Payment of the Note. Borrower shall punctually pay, or cause to be
paid, the principal, interest and all other sums to become due in respect of the
Note and the other Loan Documents in accordance with the Note and the other Loan
Documents. Borrower shall authorize Lender to establish arrangements whereby all
scheduled payments made in respect of the Obligations are transferred by
Automated Clearing House Debit initiated by Lender directly from an account at a
U.S. bank in the name of Borrower to such account as Lender may designate or as
Lender may otherwise designate.

 

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B.           Title. Borrower shall maintain good and marketable fee simple title
to the real property comprising the Premises, and title to the Personal Property
and the remainder of the Premises, free and clear of all liens, encumbrances,
charges and other exceptions to title, except the Permitted Exceptions. Lender
shall have valid first liens upon and security interests in the Premises,
including the Personal Property, pursuant to the Mortgage and the UCC-1
Financing Statements, subject only to the Permitted Exceptions.

C.           Organization and Status of Borrower; Preservation of Existence.
Each of the Borrower Parties (other than individuals), as applicable, shall be
validly existing and in good standing under the laws of its state of
incorporation or formation. Borrower shall be qualified as a foreign
corporation, partnership or limited liability company to do business in each
state where the Premises is located, and each of the Borrower Parties shall be
qualified as a foreign corporation, partnership or limited liability company in
any other jurisdiction where the failure to be qualified would reasonably be
expected to result in a Material Adverse Effect. Borrower shall preserve its
current form of organization and shall not change its legal name, its state of
formation, nor, in one transaction or a series of related transactions, merge
with or into, or consolidate with, any other entity without providing, in each
case, Lender with 30 days’ prior written notice and obtaining Lender’s prior
written consent (to the extent such consent is required under Section 7 of this
Agreement).

D.           Licenses and Permits. All required licenses and permits, both
governmental and private, to use and operate the Premises as a Permitted Concept
shall be maintained in full force and effect.

E.           Compliance With Laws Generally. The use and occupation of the
Premises, and the condition thereof, including, without limitation, any
Restoration, shall comply with all Applicable Regulations now or hereafter in
effect, including, without limitation, the OFAC Laws and Regulations and
Anti-Money Laundering Laws. In addition, the Borrower Parties shall comply with
all Applicable Regulations now or hereafter in effect. Without limiting the
generality of the other provisions of this Section, Borrower shall materially
comply with the ADA, and all regulations promulgated thereunder, as it affects
the Premises.

F.           Compliance With Environmental Provisions. The covenants,
obligations and agreements of Borrower set forth in Sections 3 through 7 of the
Environmental Indemnity Agreement, together with the corresponding definitions,
are incorporated by reference into this Agreement as if stated in full in this
Agreement.

G.           Financial Statements. Within 45 days after the end of each fiscal
quarter and within 120 days after the end of each fiscal year of Borrower,
Borrower shall deliver to Lender (1) complete financial statements of the
Borrower Parties including a balance sheet, profit and loss statement (for the
individual sites as well as the consolidated statement for Borrower), statement
of cash flows and all other related schedules for the fiscal period then ended;
(2) income statements for the business at the Premises; (3) standard hotel data
of rooms rented and rooms available, as well as gross revenue breakdown of room
revenue from other revenue, so that occupancy ADR and RevPar Statistics can be
calculated; and (4) such other financial information as Lender may reasonably
request in order to establish compliance with the financial covenants in the
Loan Documents, including, without limitation, Section 6.J of this Agreement.
The quarterly and annual financial statements submitted by Borrower shall be
both on individual sites financed by Lender, as well as aggregate Borrower level
basis, where the fixed charge coverage ratio calculation in Section J below will
be applied, to allow Lender to track performance of specific sites. All such
financial statements shall be prepared in accordance with GAAP, or as otherwise
allowed by Lender from period to period, and shall be

 

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certified to be accurate and complete in all material respects by Borrower (or
the Treasurer or other appropriate officer of Borrower). In the event the
property and business at the Premises is ordinarily consolidated with other
business for financial statement purposes, such financial statements shall be
prepared on a consolidated basis and Borrower shall show separately the sales,
profits and losses, assets and liabilities pertaining to the Premises with the
basis for allocation of overhead of other charges being clearly set forth. The
financial statements delivered to Lender need not be audited, but Borrower shall
deliver to Lender copies of any audited financial statements of Borrower which
may be prepared, as soon as they are available. Borrower shall also cause to be
delivered to Lender copies of any financial statements required to be delivered
to Borrower by any tenants of the Premises.

H.           Lost Note. Borrower shall, if the Note is mutilated, destroyed,
lost or stolen (a “Lost Note”), promptly deliver to Lender, upon receipt from
Lender of an affidavit and indemnity in a form reasonably acceptable to Lender
and Borrower stipulating that the Note has been mutilated, destroyed, lost or
stolen, in substitution therefor, a new promissory note containing the same
terms and conditions as the Lost Note with a notation thereon of the unpaid
principal and accrued and unpaid interest. Borrower shall provide
fifteen (15) days’ prior notice to Lender before making any payments to third
parties in connection with the Lost Note.

I.            Inspections. Borrower shall, during normal business hours (or at
any time in the event of an emergency), (1) provide Lender and Lender’s
officers, employees, agents, advisors, attorneys, accountants, architects, and
engineers with access to the Premises, all drawings, plans, and specifications
for the Premises in possession of any of the Borrower Parties, all engineering
reports relating to the Premises in the possession of any of the Borrower
Parties, the files, correspondence and documents relating to the Premises, and
the financial books and records, including lists of delinquencies, relating to
the ownership, operation, and maintenance of the Premises (including, without
limitation, any of the foregoing information stored in any computer files),
(2) allow such persons to make such inspections, tests, copies, and
verifications as Lender considers necessary, and (3) if Borrower is in breach of
the Fixed Charge Coverage Ratio requirement set forth in the following
subsection J, pay expenses reasonably incurred by Lender from time to time in
conducting such inspections, tests, copies and verifications upon demand (such
amounts to bear interest at the Default Rate if not paid upon demand until
paid).

J.            Fixed Charge Coverage Ratio. Borrower shall maintain a Fixed
Charge Coverage Ratio that equals or exceeds 1.30 before dividend payouts,
measured on an aggregate of all eleven Lender financed sites, as determined as
of the last day of each fiscal year of Borrower. For purposes of this Section,
the term “Fixed Charge Coverage Ratio” shall mean with respect to the twelve
month period of time immediately preceding the date of determination, the ratio
calculated for such period of time, each as determined in accordance with GAAP
and calculated according to the Uniform System of Accounts for Hotels, of (a)
the sum of net income, interest expense, income taxes, depreciation,
amortization, management fees, replacement reserves, and operating lease expense
with respect to the Premises, minus 4% of total room revenues with respect to
the Premises as an assumed reserve for replacement (or actual reserve for
replacement if greater) and 4% of total room revenues with respect to the
Premises as an assumed management fee (or actual management fee if greater),
plus or minus other non-cash adjustments or non-recurring items with respect to
the Premises (as allowed by Lender), plus or minus dividends or distributions
with respect to the Premises not otherwise expensed on the Borrower’s income
statement, to (b) the sum of operating lease expense with respect to the
Premises, principal payments under the Note, current portion of all capital
leases with respect to the Premises, and interest expense under the Note
(excluding non-cash interest expense and amortization of non-cash financing
expenses). Attached hereto as Exhibit B is the

 

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computation of the Fixed Charge Coverage Ratio as of February 28, 2006 agreed
upon by Borrower and Lender.

K.           Affiliate Transactions. Unless otherwise approved by Lender, all
transactions between Borrower and any of its Affiliates shall be on terms
substantially as advantageous to Borrower as those which could be obtained by
Borrower in a comparable arm’s length transaction with a non-Affiliate of
Borrower.

L.           Compliance Certificates. Within 60 days after the end of each
fiscal year of Borrower, Borrower shall deliver a compliance certificate to
Lender in a form to be provided by Lender in order to establish that Borrower is
in compliance in all material respects with all of its obligations, duties and
covenants under the Loan Documents.

M.          Franchise Agreement. The Franchise Agreement shall be maintained in
full force and effect. No event shall occur nor shall any condition exist which,
with the giving of notice or the lapse of time or both, would constitute a
breach or default under the Franchise Agreement. Borrower shall give prompt
notice to Lender of any claim of default by or to the franchisee under the
Franchise Agreement and shall provide Lender with a copy of any default notice
given or received by the franchisee under the Franchise Agreement and any
information submitted or referenced in support of such claim of default.
Borrower shall also give prompt notice to Lender of any extensions or renewals
of the Franchise Agreement and the expiration or termination of the Franchise
Agreement.

N.           OFAC Laws and Regulations. Borrower will comply and will use its
best efforts to cause each other Borrower Party to comply with the Anti-Money
Laundering and Anti-Terrorism Laws, including ensuring that neither Borrower nor
any other Borrower Party is or shall be (a) listed on the Specially Designated
Nationals and Blocked Person List maintained by OFAC or any other similar lists
maintained by OFAC pursuant to any authorizing statute, Executive Order or
regulation or (b) a person designated under Section 1(b), (c) or (d) of
Executive Order No. 13224 (September 23, 2001), any related enabling legislation
or any other similar Executive Orders.

O.           Management Agreement. The Management Agreement shall be maintained
in full force and effect with regard to the Premises. No event shall occur nor
shall any condition exist which, with the giving of notice or the lapse of time
or both, would constitute a breach or default under the Management Agreement.
Borrower shall give prompt notice to Lender of any claim of default by or to the
Manager under the Management Agreement and shall provide Lender with a copy of
any such default notice given or received by the Manager under the Management
Agreement and any information submitted or referenced in support of such claim
of default. Borrower shall also give prompt notice to Lender of the expiration
or termination of the Management Agreement. Lender acknowledges that the
Management Agreement is expected to be amended in one to three months and
consents to such amendments, as were previously disclosed in writing to Lender.

7.           Prohibition on Change of Control and Pledge. A. Without limiting
the terms and conditions of Section 3.09 of the Mortgage, Borrower agrees that,
from and after the Closing Date and until all of the Obligations are satisfied
in full, without the prior written consent of Lender: (1) no Change of Control
shall occur; and (2) no interest in any of the Borrower Parties shall be
pledged, encumbered, hypothecated or assigned as collateral for any obligation
of any of the Borrower Parties (each, a “Pledge”). Notwithstanding the
foregoing, individual stockholders or limited partners of the Borrower Parties
may pledge their interests in the

 

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Borrower Parties so long as such pledge does not, or could not potentially,
result in a Change of Control or a change in ownership of a majority interest in
the Borrower Parties.

B. Lender’s consent to a Change of Control or Pledge shall be subject to the
satisfaction of such conditions as Lender shall determine in its sole
discretion, including, without limitation, (1) the execution and delivery of
such modifications to the terms of the Loan Documents as Lender shall request,
(2) the proposed Change of Control or Pledge having been approved by each of the
rating agencies which have issued ratings in connection with any Securitization
of the Loan as well as any other rating agency selected by Lender, and (3) the
proposed transferee having agreed to comply with all of the terms and conditions
of the Loan Documents (including any modifications requested by Lender pursuant
to clause (1) above). In addition, any such consent shall be conditioned upon
payment by Borrower to Lender of (a) a fee equal to one percent (1%) of the then
outstanding principal balance of the Note and (b) all out-of-pocket costs and
expenses incurred by Lender in connection with such consent, including, without
limitation, reasonable attorneys’ fees. Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Obligations immediately due and
payable upon a Change of Control or Pledge in violation of this Section. The
provisions of this Section shall apply to every Change of Control or Pledge
regardless of whether voluntary or not, or whether or not Lender has consented
to any previous Change of Control or Pledge.

8.           Transaction Characterization. A. It is the intent of the parties
hereto that this Agreement and the other Loan Documents are a contract to extend
a financial accommodation (as such term is used in the Code) for the benefit of
Borrower and that the Loan Documents evidence one unitary, unseverable
transaction pertaining to the Premises.

B. It is the intent of the parties hereto that the business relationship created
by the Loan Documents is solely that of creditor and debtor and has been entered
into by both parties in reliance upon the economic and legal bargains contained
in the Loan Documents. None of the agreements contained in the Loan Documents is
intended, nor shall the same be deemed or construed, to create a partnership
(either de jure or de facto) between Borrower and Lender, to make them joint
venturers, to make Borrower an agent, legal representative, partner, subsidiary
or employee of Lender, nor to make Lender in any way responsible for the debts,
obligations or losses of Borrower.

9.           Default and Remedies. A. Each of the following shall be deemed an
event of default by Borrower (each, an “Event of Default”):

(1)          If any representation or warranty of any of the Borrower Parties
set forth in any of the Loan Documents is false in any material respect when
made, or if any of the Borrower Parties renders any statement or account which
is false in any material respect.

(2)          If any principal, interest or other monetary sum due under the
Note, the Mortgage or any other Loan Document is not paid within five days after
the date when due; provided, however, notwithstanding the occurrence of such an
Event of Default, Lender shall not be entitled to exercise its rights and
remedies set forth below unless and until Lender shall have given Borrower
notice thereof and a period of five days from the delivery of such notice shall
have elapsed without such Event of Default being cured.

(3)          If Borrower fails to observe or perform any of the other covenants,
conditions, or obligations of this Agreement (except with respect to a breach of
the Fixed Charge Coverage Ratio, which breach is addressed in subitem (7)
below); provided, however, if any such failure

 

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does not involve the payment of any monetary sum, is not willful or intentional,
does not place any rights or interest in collateral of Lender in immediate
jeopardy, and is within the reasonable power of Borrower to promptly cure after
receipt of notice thereof, all as determined by Lender in its reasonable
discretion, then such failure shall not constitute an Event of Default
hereunder, unless otherwise expressly provided herein, unless and until Lender
shall have given Borrower notice thereof and a period of 30 days shall have
elapsed, during which period Borrower may correct or cure such failure, upon
failure of which an Event of Default shall be deemed to have occurred hereunder
without further notice or demand of any kind being required. If such failure
cannot reasonably be cured within such 30-day period, as determined by Lender in
its reasonable discretion, and Borrower is diligently pursuing a cure of such
failure, then Borrower shall have a reasonable period to cure such failure
beyond such 30-day period, which shall not exceed 90 days after receiving notice
of the failure from Lender. If Borrower shall fail to correct or cure such
failure within such 90-day period, an Event of Default shall be deemed to have
occurred hereunder without further notice or demand of any kind being required.

(4)          If any of the Borrower Parties becomes insolvent within the meaning
of the Code, files or notifies Lender that it intends to file a petition under
the Code, initiates a proceeding under any similar law or statute relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts
(collectively, an “Action”), becomes the subject of either a petition under the
Code or an Action, or is not generally paying its debts as the same become due.

(5)          If there is an “Event of Default” or a breach or default, after the
passage of all applicable notice and cure or grace periods, under the Lease, any
of the Other Agreements, or any other Loan Document.

(6)          If a final, nonappealable judgment is rendered by a court against
any of the Borrower Parties which (a) has a Material Adverse Effect on the
operation of the Premises as a Permitted Concept, or (b) is in an amount greater
than $100,000.00 and not covered by insurance, and, in either case, is not
discharged or provision made for such discharge within 60 days from the date of
entry of such judgment.

(7)          If there is a breach of the Fixed Charge Coverage Ratio requirement
and Lender shall have given Borrower notice thereof and Borrower shall have
failed within a period of 30 days from the delivery of such notice to (a) pay to
Lender the FCCR Amount (without premium or penalty), (b) prepay the Note in
whole but not in part (without premium or penalty) or (c) notify Lender of
Borrower’s election to substitute a Substitute Premises for the Premises in
accordance with the terms of Section 11 (the failure of Borrower to complete
such substitution within 60 days after Lender shall have given the notice
discussed above shall be deemed to be an Event of Default without further notice
or demand of any kind being required). For purposes of the preceding sentence,
“FCCR Amount” means that sum of money which, when subtracted from the
outstanding principal amount of the Note , and assuming the resulting principal
balance is reamortized in equal monthly payments over the remaining term of the
Note at the rate of interest set forth therein, will result in an adjusted Fixed
Charge Coverage Ratio for the Premises of at least 1.3:1 prior to dividend
payouts, measured on an aggregate of all eleven Lender financed sites, based on
the prior year’s operations. Promptly after Borrower’s payment of the
FCCR Amount, Borrower and Lender shall execute an amendment to the Note in form
and substance reasonably acceptable to Lender reducing the principal amount
payable to Lender under the Note and reamortizing the principal amount of the
Note in equal monthly payments over the then remaining term of the Note at the
rate of interest set forth therein.

(8)          If there is a breach or default, after the passage of all
applicable notice and cure or grace periods, under the Management Agreement, or
if the Management Agreement

 

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terminates or expires prior to the payment in full of the Note in accordance
with its terms and a substitute agreement for the terminated or expired
agreement is not entered into with Manager prior to such expiration or
termination, which substitute agreement shall be in form and substance
reasonably satisfactory to Lender and shall expire after the scheduled maturity
date of the Note.

(9)          If there is a breach or default, after the passage of all
applicable notice and cure or grace periods, under the Franchise Agreement, or
if the Franchise Agreement terminates or expires prior to the payment in full of
the Note in accordance with its terms and a substitute agreement for the
terminated or expired agreement is not entered into with Franchisor prior to
such expiration or termination, which substitute agreement shall be in form and
substance reasonably satisfactory to Lender and shall expire after the scheduled
maturity date of the Note.

B. Upon the occurrence and during the continuance of an Event of Default,
subject to the limitations set forth in subsection A, Lender may declare all or
any part of the obligations of Borrower under the Note, this Agreement and any
other Loan Document to be due and payable, and the same shall thereupon become
due and payable without any presentment, demand, protest or notice of any kind
except as otherwise expressly provided herein, and Borrower hereby waives notice
of intent to accelerate the obligations secured by the Mortgage and notice of
acceleration. Thereafter, Lender may exercise, at its option, concurrently,
successively or in any combination, all remedies available at law or in equity,
including without limitation any one or more of the remedies available under the
Note, the Mortgage or any other Loan Document. Neither the acceptance of this
Agreement nor its enforcement shall prejudice or in any manner affect Lender’s
right to realize upon or enforce any other security now or hereafter held by
Lender, it being agreed that Lender shall be entitled to enforce this Agreement
and any other security now or hereafter held by Lender in such order and manner
as it may in its absolute discretion determine. No remedy herein conferred upon
or reserved to Lender is intended to be exclusive of any other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Loan Documents to Lender, or to which Lender
may be otherwise entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Lender.

10.         Indemnity; Release. A. Initially capitalized terms in this Section
that are not otherwise defined in this Agreement shall have the meanings set
forth in the Environmental Indemnity Agreement. Borrower shall, at its sole cost
and expense, protect, defend, indemnify, release and hold harmless each of the
Indemnified Parties for, from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement and damages of whatever kind or nature (including, without
limitation, reasonable attorneys’ fees, court costs and other costs of defense)
(collectively, “Losses”) (excluding Losses suffered by an Indemnified Party
directly arising out of such Indemnified Party’s gross negligence or willful
misconduct; provided, however, that the term “gross negligence” shall not
include gross negligence imputed as a matter of law to any of the Indemnified
Parties solely by reason of Borrower’s interest in the Premises or Borrower’s
failure to act in respect of matters which are or were the obligation of
Borrower under the Loan Documents), and costs of Remediation (whether or not
performed voluntarily), engineers’ fees, environmental consultants’ fees, and
costs of investigation (including but not limited to sampling, testing, and
analysis of soil, water, air, building materials and other materials and
substances whether solid, liquid or gas) imposed upon or incurred by or asserted
against any Indemnified Parties, and directly or indirectly arising out of or in
any way relating to any one or more of the following: (1) any presence of any
Hazardous Materials in, on, above, or under the Premises; (2) any past, present
or Threatened Release in, on, above, under

 

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or from the Premises; (3) any activity by Borrower, any person or entity
affiliated with Borrower or any tenant or other user of the Premises in
connection with any actual, proposed or threatened use, treatment, storage,
holding, existence, disposition or other Release, generation, production,
manufacturing, processing, refining, control, management, abatement, removal,
handling, transfer or transportation to or from the Premises of any Hazardous
Materials at any time located in, under, on or above the Premises; (4) any
activity by Borrower, any person or entity affiliated with Borrower or any
tenant or other user of the Premises in connection with any actual or proposed
Remediation of any Hazardous Materials at any time located in, under, on or
above the Premises, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including but not limited to any removal,
remedial or corrective action; (5) any past, present or threatened
non-compliance or violations of any Environmental Laws (or permits issued
pursuant to any Environmental Law) in connection with the Premises or operations
thereon, including but not limited to any failure by Borrower, any person or
entity affiliated with Borrower or any tenant or other user of the Premises to
comply with any order of any Governmental Authority in connection with any
Environmental Laws; (6) the imposition, recording or filing or the threatened
imposition, recording or filing of any Environmental Lien encumbering the
Premises; (7) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in this Agreement;
(8) any past, present or threatened injury to, destruction of or loss of natural
resources in any way connected with the Premises, including but not limited to
costs to investigate and assess such injury, destruction or loss; (9) any acts
of Borrower, any person or entity affiliated with Borrower or any tenant or
other user of the Premises in arranging for disposal or treatment, or arranging
with a transporter for transport for disposal or treatment, of Hazardous
Materials owned or possessed by Borrower, any person or entity affiliated with
Borrower or any tenant or other user, at any facility or incineration vessel
owned or operated by another person or entity and containing such or similar
Hazardous Materials; (10) any acts of Borrower, any person or entity affiliated
with Borrower or any tenant or other user of the Premises, in accepting any
Hazardous Materials for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower, any person or entity
affiliated with Borrower or any tenant or other user of the Premises, from which
there is a Release, or a Threatened Release of any Hazardous Materials which
causes the incurrence of costs for Remediation; (11) any personal injury,
wrongful death, or property damage arising under any statutory or common law or
tort law theory, including but not limited to damages assessed for the
maintenance of a private or public nuisance or for the conducting of an
abnormally dangerous activity on or near the Premises; (12) any disclosures of
information, financial or otherwise, (x) made by Lender or Lender’s employees,
officers, agents and designees to any third party as contemplated by Section
11.R of this Agreement, or (y) obtained from any credit reporting agency with
respect to Borrower, any guarantor of the Loan, any of the other Borrower
Parties or any operator or lessee of the Premises; or (13) any misrepresentation
or inaccuracy in any representation or warranty or material breach or failure to
perform any covenants or other obligations pursuant to this Agreement.

B. Borrower fully and completely releases, waives and covenants not to assert
any claims, liabilities, actions, defenses, challenges, contests or other
opposition against Lender, however characterized, known or unknown, foreseen or
unforeseen, now existing or arising in the future, relating to any Hazardous
Materials, Releases or Remediation on, at or affecting the Premises.

11.         Substitution. Borrower shall have the right to obtain a release of
all liens granted in favor of Lender with respect to the Premises by
substituting a Substitute Premises for the Premises, subject to fulfillment of
the following conditions:

 

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(1)          Borrower shall provide Lender with thirty (30) days notice of its
intention to substitute a Substitute Premises and the closing of the
substitution shall take place within 60 days following the giving of such
notice.

(2)          Borrower must provide for the substitution of a Substitute
Premises, and the proposed Substitute Premises must: (a) be a Permitted Concept,
in good condition and repair, ordinary wear and tear excepted; (b) have for the
twelve month period preceding the date of the closing of such substitution a
Fixed Charge Coverage Ratio (with the definitions of Section 6.J being deemed to
be modified if necessary and as applicable to provide for a calculation of the
Fixed Charge Coverage Ratio for the Premises on an individual basis rather than
on an aggregate basis with other properties) at least equal to the Fixed Charge
Coverage Ratio for the Premises being replaced and the substitution must cure
the breach of the Fixed Charge Coverage Ratio requirement, to the extent that
there is one; (c) be owned in fee simple by Borrower; (d) Borrower’s right,
title and interest in and to the proposed Substitute Premises shall be free and
clear of all liens, restrictions, easements and encumbrances, except such
matters as are acceptable to Lender (the “Substitute Premises Permitted
Exceptions”); (e) have a fair market value no less than the greater of the then
fair market value of the Premises or the fair market value of the Premises as of
the Closing, all as reasonably determined by Lender’s in-house inspectors and
underwriters.

(3)          Lender shall have inspected and approved the Substitute Premises
utilizing such site inspection and underwriting approval criteria that would be
used by a prudent institutional mortgage loan lender. Borrower shall have paid
all costs and expenses resulting from such proposed substitution, including,
without limitation, the cost of title insurance premiums and all endorsements
required by Lender, survey charges, UCC and litigation search charges, the
attorneys’ fees of Borrower, reasonable attorneys’ fees and expenses of Lender,
the cost of the environmental due diligence undertaken pursuant to subsection
(6) below, including, without limitation, Lender’s site inspection costs and
fees, stamp taxes, mortgage taxes, transfer fees, escrow, filing and recording
fees and UCC filing and recording fees (including preparation, filing and
recording fees for UCC continuation statements).

(4)          Lender shall have received a preliminary title report and
irrevocable commitment to insure title in the amount of the then outstanding
principal balance of the Loan relating to the particular property by means of a
mortgagee’s ALTA extended coverage policy of title insurance (or its equivalent,
in the event such form is not issued in the jurisdiction where the proposed
Substitute Premises is located) for the proposed Substitute Premises issued by
Title Company showing Borrower vested with good and marketable title in the real
property comprising the Substitute Premises and committing to insure Lender’s
first priority lien upon and security interest in the proposed Substitute
Premises, subject only to the Substitute Premises Permitted Exceptions and
containing endorsements substantially comparable to those required by Lender at
the Closing.

(5)          Lender shall have received a current ALTA survey of such proposed
Substitute Premises or its equivalent, the form of which shall be comparable to
those received by Lender at the Closing and sufficient to cause the standard
survey exceptions set forth in the title policy referred to in the preceding
subsection to be deleted, and disclosing no matters other than the Substitute
Premises Permitted Exceptions.

(6)          Lender shall have completed such environmental due diligence of the
proposed Substitute Premises as it deems necessary or advisable in its sole
discretion, and Lender shall have approved the environmental condition of the
Substitute Premises based on such environmental due diligence as Lender deems
necessary or advisable in its sole discretion;

 

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provided, however, from and after such time as the Loan is included in a
Securitization, this subitem (6) shall be modified to read as follows: Lender
shall have completed such environmental due diligence of the proposed Substitute
Premises as a prudent institutional mortgage loan lender would deem necessary or
advisable, and Lender shall have approved the environmental due diligence as a
prudent institutional mortgage loan lender would deem necessary or advisable.

(7)          Borrower shall deliver, or cause to be delivered, such legal
opinions as Lender may reasonably require with respect to the proposed
substitution, all in a form and substance which would be satisfactory to a
prudent institutional mortgage loan lender and its counsel. If the Loan is part
of a Securitization, such opinions shall include, without limitation, an opinion
of counsel to the rating agencies which have issued ratings in connection with
such Securitization that the substitution does not constitute a “significant
modification” of such Loan under Section 1001 of the Internal Revenue Code or
otherwise cause a tax to be imposed on a “prohibited transaction” by any REMIC
Trust.

(8)          no Event of Default shall have occurred and be continuing under any
of the Loan Documents.

(9)          The Borrower Parties shall have executed such documents as are
comparable to the security documents executed and delivered at Closing, as
applicable (but with such revisions as may be reasonably required by Lender to
address matters unique to the Substitute Premises) or amendments to such
documents, including, without limitation, a Mortgage, and UCC-1 Financing
Statements (the “Substitute Documents”), to provide Lender with a first priority
lien on the proposed Substitute Premises, subject only to the Substitute
Premises Permitted Exceptions, and all other rights, remedies and benefits with
respect to the proposed Substitute Premises which Lender holds in the Premises
to be replaced, all of which documents shall be in a form and substance which
would be satisfactory to a prudent institutional mortgage loan lender.

(10)        the representations and warranties set forth in the Substitute
Documents and Section 5 of this Agreement applicable to the proposed Substitute
Premises shall be true and correct in all material respects as of the date of
substitution, and Borrower shall have delivered to Lender an officer’s
certificate to that effect.

(11)        Borrower shall have delivered to Lender certificates of insurance
and insurance policies showing that all insurance required by the Substitute
Documents is in full force and effect.

Upon satisfaction of the foregoing conditions with respect to the release of the
Premises: (a) the proposed Substitute Premises shall be deemed substituted for
the Premises; (b) the Loan Amount for the Substitute Premises shall be the same
as for the Premises; (c) the Substitute Premises shall be referred to herein as
a “Premises” and included within the definition of “Premises” and shall secure
the same Obligations as were secured by the Premises; (d) the Substitute
Documents shall be dated as of the date of the substitution; and (e) Lender will
release, or cause to be released, the lien of the Mortgage, UCC-1 Financing
Statements and any other Loan Documents encumbering the replaced Premises.

 

12.

Miscellaneous Provisions.

A.           Notices. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this Agreement or
any of the other Loan

 

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Documents shall be in writing and given by (i) hand delivery, (ii) facsimile,
(iii) express overnight delivery service or (iv) certified or registered mail,
return receipt requested, and shall be deemed to have been delivered upon
(a) receipt, if hand delivered, (b) transmission, if delivered by facsimile,
(c) the next Business Day, if delivered by express overnight delivery service,
or (d) the third Business Day following the day of deposit of such notice with
the United States Postal Service, if sent by certified or registered mail,
return receipt requested. Notices shall be provided to the parties and addresses
(or facsimile numbers, as applicable) specified below. If to Borrower: Supertel
Limited Partnership, 309 North 5th Street, PO Box 1448, Norfolk, Nebraska 68701,
Attention: Donavon Heimes, Telephone: (402) 371-2520, Telecopy: (402) 371-4229;
and if to Lender: General Electric Capital Corporation, 8377 East Hartford
Drive, Suite 200, Scottsdale, AZ 85255, Attention: Collateral Management,
Telephone: 480-585-4500, Telecopy: 480-585-2225.

B.           Real Estate Commission. Lender and Borrower represent and warrant
to each other that they have dealt with no real estate or mortgage broker,
agent, finder or other intermediary in connection with the transactions
contemplated by this Agreement or the other Loan Documents. Lender and Borrower
shall indemnify and hold each other harmless from and against any costs, claims
or expenses, including attorneys’ fees, arising out of the breach of their
respective representations and warranties contained within this Section.

C.           Waiver and Amendment; Document Review. (1) No provisions of this
Agreement or the other Loan Documents shall be deemed waived or amended except
by a written instrument unambiguously setting forth the matter waived or amended
and signed by the party against which enforcement of such waiver or amendment is
sought. Waiver of any matter shall not be deemed a waiver of the same or any
other matter on any future occasion.

(2) In the event Borrower makes any request upon Lender requiring Lender or
Lender’s attorneys to review or prepare (or cause to be reviewed or prepared)
any documents, plans, specifications or other submissions in connection with or
arising out of this Agreement or any of the other Loan Documents, then Borrower
shall (a) reimburse Lender promptly upon Lender’s demand for all out-of-pocket
costs and expenses incurred by Lender in connection with such review or
preparation, including, without limitation, reasonable outside attorneys’ fees,
and (b) pay Lender a reasonable processing and review fee.

D.           Captions. Captions are used throughout this Agreement and the other
Loan Documents for convenience of reference only and shall not be considered in
any manner in the construction or interpretation hereof.

E.           Lender’s Liability. Notwithstanding anything to the contrary
provided in this Agreement or the other Loan Documents, it is specifically
understood and agreed, such agreement being a primary consideration for the
execution of this Agreement and the other Loan Documents by Lender, that
(1) there shall be absolutely no personal liability on the part of any
shareholder, director, officer or employee of Lender, with respect to any of the
terms, covenants and conditions of this Agreement or the other Loan Documents,
(2) Borrower waives all claims, demands and causes of action against Lender’s
officers, directors, employees and agents in the event of any breach by Lender
of any of the terms, covenants and conditions of this Agreement or the other
Loan Documents to be performed by Lender and (3) Borrower shall look solely to
the assets of Lender for the satisfaction of each and every remedy of Borrower
in the event of any breach by Lender of any of the terms, covenants and
conditions of this Agreement or the other Loan Documents to be performed by
Lender, such exculpation of liability to be absolute and without any exception
whatsoever.

 

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F.           Severability. The provisions of this Agreement and the other Loan
Documents shall be deemed severable. If any part of this Agreement or the other
Loan Documents shall be held invalid, illegal or unenforceable, the remainder
shall remain in full force and effect, and such invalid, illegal or
unenforceable provision shall be reformed by such court so as to give maximum
legal effect to the intention of the parties as expressed therein.

G.           Construction Generally. This Agreement and the other Loan Documents
have been entered into by parties who are experienced in sophisticated and
complex matters similar to the transaction contemplated by this Agreement and
the other Loan Documents and are entered into by both parties in reliance upon
the economic and legal bargains contained therein and shall be interpreted and
construed in a fair and impartial manner without regard to such factors as the
party which prepared the instrument, the relative bargaining powers of the
parties or the domicile of any party. Borrower and Lender were each represented
by legal counsel competent in advising them of their obligations and liabilities
hereunder.

H.           Further Assurances. Borrower will, at its sole cost and expense,
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged
and delivered all such further acts, documents, conveyances, notes, mortgages,
deeds of trust, assignments, security agreements, financing statements and
assurances as Lender shall from time to time reasonably require or deem
advisable to carry into effect the purposes of this Agreement and the other Loan
Documents, to perfect any lien or security interest granted in any of the Loan
Documents and for the better assuring and confirming of all of Lender’s rights,
powers and remedies under the Loan Documents.

I.            Attorneys’ Fees. In the event of any judicial or other adversarial
proceeding between the parties concerning this Agreement or the other Loan
Documents, the prevailing party shall be entitled to recover its attorneys’ fees
and other costs in addition to any other relief to which it may be entitled.

J.            Entire Agreement. This Agreement and the other Loan Documents,
together with any other certificates, instruments or agreements to be delivered
in connection therewith, constitute the entire agreement between the parties
with respect to the subject matter hereof, and there are no other
representations, warranties or agreements, written or oral, between Borrower and
Lender with respect to the subject matter of this Agreement and the other Loan
Documents. Notwithstanding anything in this Agreement and the other Loan
Documents to the contrary, with respect to the Premises, upon the execution and
delivery of this Agreement by Borrower and Lender, any bid proposals or loan
commitments with respect to the transactions contemplated by this Agreement
shall be deemed null and void and of no further force and effect and the terms
and conditions of this Agreement shall control notwithstanding that such terms
and conditions may be inconsistent with or vary from those set forth in such bid
proposals or loan commitments.

K.           Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower
acknowledges that this Agreement and the other Loan Documents were substantially
negotiated in the State of Arizona, this Agreement and the other Loan Documents
were executed by Lender in the State of Arizona and delivered by Borrower in the
State of Arizona, all payments under the Note will be delivered in the State of
Arizona and there are substantial contacts between the parties and the
transactions contemplated herein and the State of Arizona. For purposes of any
action or proceeding arising out of this Agreement or any of the other Loan
Documents, the parties hereto hereby expressly submit to the jurisdiction of all
federal and state courts located in the State of Arizona and Borrower consents
that it may be served with any process or paper by registered mail or by
personal service within or without the State of Arizona in accordance with
applicable

 

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law. Furthermore, Borrower waives and agrees not to assert in any such action,
suit or proceeding that it is not personally subject to the jurisdiction of such
courts, that the action, suit or proceeding is brought in an inconvenient forum
or that venue of the action, suit or proceeding is improper. It is the intent of
the parties hereto that all provisions of this Agreement and the Note shall be
governed by and construed under the laws of the State of Arizona, without giving
effect to its principles of conflicts of law. To the extent that a court of
competent jurisdiction finds Arizona law inapplicable with respect to any
provisions of this Agreement or the Note, then, as to those provisions only, the
laws of the state where the Premises is located shall be deemed to apply.
Nothing in this Section shall limit or restrict the right of Lender to commence
any proceeding in the federal or state courts located in the state in which the
Premises is located to the extent Lender deems such proceeding necessary or
advisable to exercise remedies available under this Agreement or the other Loan
Documents.

L.           Counterparts. This Agreement and the other Loan Documents may be
executed in one or more counterparts, each of which shall be deemed an original.

M.          Assignments by Lender; Binding Effect. Lender may assign in whole or
in part its rights under this Agreement, including, without limitation, in
connection with any Transfer, Participation or Securitization, in compliance
with all applicable laws. Upon any unconditional assignment of Lender’s entire
right and interest hereunder, Lender shall automatically be relieved, from and
after the date of such assignment, of liability for the performance of any
obligation of Lender contained herein. This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of Borrower and Lender
and their respective successors and permitted assigns, including, without
limitation, any United States trustee, any debtor in possession or any trustee
appointed from a private panel.

N.           Survival. Except for the conditions of Closing set forth in
Section 4, which shall be satisfied or waived as of the Closing Date, all
representations, warranties, agreements, obligations and indemnities of Borrower
and Lender set forth in this Agreement and the other Loan Documents shall
survive the Closing.

O.           Waiver of Jury Trial and Punitive, Consequential, Special and
Indirect Damages. BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH
RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY
OF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED
HERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
FURTHERMORE, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES FROM THE OTHER AND ANY OF THE OTHER’S AFFILIATES, OFFICERS,
DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY AND ALL
ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY
EITHER PARTY AGAINST THE OTHER OR ANY OF THE OTHER’S AFFILIATES, OFFICERS,
DIRECTORS OR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY
BORROWER AND LENDER OF ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE,

 

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CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES
HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.

P.           Transfers, Participations and Securitizations. (1) A material
inducement to Lender’s willingness to complete the transactions contemplated by
the Loan Documents is Borrower’s agreement that Lender may, at any time,
complete a Transfer, Participation or Securitization with respect to the Note,
Mortgage or any of the other Loan Documents or any or all servicing rights with
respect thereto.

(2) Borrower agrees to cooperate in good faith with Lender in connection with
any such Transfer, Participation or Securitization of the Note, Mortgage or any
of the other Loan Documents, or any or all servicing rights with respect
thereto, including, without limitation (a) providing such documents, financial
and other data, and other information and materials which would typically be
required with respect to the Borrower Parties, the Lessee Parties, and the
Manager by a purchaser, transferee, assignee, servicer, participant, investor or
rating agency involved with respect to such Transfer, Participation or
Securitization, as applicable; provided, however, the Borrower Parties the
Lessee Parties and the Manager shall not be required to make disclosures of any
confidential information or any information which has not previously been made
public unless required by applicable federal or state securities laws (the
“Disclosures”); and (b) amending the terms of the transactions evidenced by the
Loan Documents to the extent necessary so as to satisfy the requirements of
purchasers, transferees, assignees, servicers, participants, investors or
selected rating agencies involved in any such Transfer, Participation or
Securitization, so long as such amendments would not have a Material Adverse
Effect upon the Borrower Parties, the Lessee Parties or the transactions
contemplated hereunder. Lender shall be responsible for preparing at its expense
any documents evidencing the amendments referred to in the preceding subitem (b)
and compliance with any applicable law.

(3) Borrower consents to Lender providing the Disclosures, as well as any other
information which Lender may now have or hereafter acquire with respect to the
Premises or Manager or the financial condition of the Borrower Parties or the
Lessee Parties to each purchaser, transferee, assignee, servicer, participant,
investor or rating agency involved with respect to each Transfer, Participation
or Securitization, as applicable. Lender and Borrower (and their respective
Affiliates) shall each pay their own attorneys’ fees and other out-of-pocket
expenses incurred in connection with the performance of their respective
obligations under this Section.

(4) Notwithstanding anything to the contrary contained in this Agreement or the
other Loan Documents: (a) an Event of Default or a breach or default, after the
passage of all applicable notice and cure or grace periods, under any Loan
Document or Other Agreement which relates to a loan or sale/leaseback
transaction which has not been the subject of a Securitization, Participation or
Transfer shall not constitute an Event of Default or a breach or default, as
applicable, under any Loan Document or Other Agreement which relates to a loan
which has been the subject of a Securitization, Participation or Transfer; (b)
an Event of Default or a breach or default, after the passage of all applicable
notice and cure or grace periods, under any Loan Document or Other Agreement
which relates to a loan which is included in any Loan Pool shall not constitute
an Event of Default or a breach or default, as applicable, under any Loan
Document or Other Agreement which relates to a loan which is included in any
other Loan Pool; (c) the Loan Documents and Other Agreement corresponding to the
loans in any Loan Pool shall not secure the obligations of any of the Borrower
Parties contained in any Loan Document or Other Agreement which does not
correspond to a loan in such Loan Pool; and (d) the Loan Documents and Other
Agreement which do not correspond to a loan in any Loan Pool

 

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shall not secure the obligations of any of the Borrower Parties contained in any
Loan Document or Other Agreement which does correspond to a loan in such Loan
Pool.

Q.           Estoppel Certificate. At any time, and from time to time, each
party agrees, promptly and in no event later than fifteen (15) days after a
request from the other party, to execute, acknowledge and deliver to the other
party a certificate in the form supplied by the other party, certifying: (a) to
its knowledge, whether there are then any existing defaults by it or the other
party in the performance of their respective obligations under this Agreement or
any of the other Loan Documents, and, if there are any such defaults, specifying
the nature and extent thereof; (b) that no notice of default has been given or
received by it under this Agreement or any of the other Loan Documents which has
not been cured, except as to defaults specified in the certificate; (c) the
capacity of the person executing such certificate, and that such person is duly
authorized to execute the same on behalf of it; and (d) any other information
reasonably requested by the other party in connection with this Agreement and
the other Loan Documents.

R.           Borrower authorizes Lender and its employees, officers, agents,
representatives and designees to:

(1)          distribute to, or publish publicly available information for the
use by, any third-parties for statistical analysis purposes the unit-level or
corporate level operating results for the Premises, Borrower, any guarantor of
the Loan, any Affiliate of Borrower, any of the other Borrower Parties or any
operator or lessee of the Premises prepared by Lender from financial statements
obtained from Borrower; and

(2)          obtain personal credit reports, business credit reports or asset
reports, as applicable, with respect to Borrower, any guarantor of the Loan, any
Affiliate of Borrower, any of the other Borrower Parties or any operator or
lessee of the Premises.

 

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IN WITNESS WHEREOF, Borrower and Lender have entered into this Agreement as of
the date first above written.

 

LENDER:

 

GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation

 

By /s/ Kelly A. Hallford

 

Printed Name: Kelly A. Hallford

 

Its: Authorized Signatory

 

 

 

 

 

BORROWER:

 

SUPERTEL LIMITED PARTNERSHIP, a Virginia limited partnership

 

By SUPERTEL HOSPITALITY REIT TRUST,

 

a Maryland real estate investment trust,

 

Its General Partner

 

By /s/ Donavon A. Heimes

 

Donavon A. Heimes, Vice President/Treasurer

 

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MORTGAGE, ASSIGNMENT OF RENTS AND LEASES,

SECURITY AGREEMENT AND FIXTURE FILING

THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTURE
FILING (this “Mortgage”) is made as of January 5, 2007 by SUPERTEL LIMITED
PARTNERSHIP, a Virginia limited partnership, whose address is 309 North 5th
Street, PO Box 1448, Norfolk, Nebraska 68701 (“Borrower”) to and for the benefit
of GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (“Lender”),
whose address is 8377 East Hartford Drive, Suite 200, Scottsdale, Arizona 85255.

PRELIMINARY STATEMENT:

The capitalized terms used in this Mortgage, if not elsewhere defined herein,
are defined as indicated in Article I. Borrower holds a fee simple interest in
the Premises, subject to the Permitted Exceptions. Borrower is executing this
Mortgage for the purpose of granting the interest of Borrower in and to the
Mortgaged Property (as defined in the Granting Clauses below) as security for
the payment of the Obligations. The Maturity Date of the Note and the other
Obligations (as hereinafter defined) secured hereby is February 1, 2017. The
Mortgaged Property shall be and remain subject to the lien of this Mortgage and
shall constitute security for the Obligations so long as the Obligations shall
remain outstanding.

THIS MORTGAGE COVERS EQUIPMENT AND GOODS WHICH ARE OR ARE TO BECOME FIXTURES, IS
EFFECTIVE AS A FINANCING STATEMENT, AS A FIXTURE FILING AND IS TO BE FILED IN
THE REAL ESTATE RECORDS.

GRANTING CLAUSES:

Borrower, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, by
these presents does hereby create a security interest in, mortgage, grant,
bargain, sell, assign, pledge, give, transfer, set over and convey unto Lender
and to its successors and assigns WITH STATUTORY POWER OF SALE WHICH IS
INCORPORATED HEREIN BY REFERENCE AND RIGHT OF ENTRY AND UPON STATUTORY
CONDITION, for the benefit and security of Lender and its successors and
assigns, all of Borrower’s estate, right, title and interest in, to and under
any and all of the following property (the “Mortgaged Property”), whether now
owned or hereafter acquired, subject only to the Permitted Exceptions:

Premises, Rents and Derivative Interests

The Premises, all rents, issues, profits, royalties, income and other benefits
derived from the property comprising the Premises and the Personal Property (as
defined below) or any portion thereof (collectively, the “Rents”); all leases or
subleases covering the Premises and the Personal Property or any portion thereof
now or hereafter existing or entered into, including, without limitation, the
Permitted Lease (collectively, “Leases” and individually, a “Lease”), including,
without limitation, all cash or security deposits, advance rentals and deposits
or payments of similar nature and all guaranties relating to the Leases; all
options to purchase or lease the Premises and the Personal Property or any
portion thereof or interest therein, and any greater estate in the Premises; all
interests, estate or other claims, both in law and in equity, with respect to
the Premises and the Personal Property or any portion thereof; all easements,
rights-of-way and rights used in connection therewith or as a means of access
thereto, and all tenements, hereditaments and appurtenances thereof and thereto,
and all water rights and shares of stock evidencing the same; all land lying
within the right-of-way of any street, open or

 

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proposed, adjoining the Premises and any and all sidewalks, alleys and strips
and gores of land adjacent to or used in connection with the Premises;

Personal Property

All of the following described property, whether now owned or hereafter
acquired, and located on the Premises or used exclusively in connection with the
operation of the business located at the Premises, together with all
replacements and substitutions therefor and all cash and non-cash proceeds
(including insurance proceeds and any title and UCC insurance proceeds) and
products thereof, and, in the case of tangible collateral, together with all
additions, attachments, accessions, parts, equipment and repairs now or
hereafter attached or affixed thereto or used in connection therewith: All of
Borrower’s right, title, and interest in: (a) all types of property included
within the term “equipment” as defined by the UCC (except vehicles, boats and
airplanes), including machinery, furniture, appliances, trade fixtures, tools,
and office and record keeping equipment; (b) all of Borrower’s inventory
(including all goods held for sale, raw materials, work in process and materials
or supplies used or consumed in Borrower’s business); (c) all of Borrower’s
documents; general intangibles; accounts; contract rights; chattel paper and
instruments; money; securities; investment properties; deposit accounts;
supporting obligations; letters of credit and letter of credit rights;
commercial tort claims; and records, software and information contained in
computer media (such as data bases, source and object codes and information
therein), together with any equipment and software to utilize, create, maintain
or process any such records or data on electronic media; and (d) any and all
plans and specifications, designs, drawings and other matters prepared for any
construction on any real property owned by or leased to Borrower at the
location(s) described above or regarding any improvements to any of such real
property; and (e) all goodwill; provided, however, that the security interest in
any franchise, license, or distributorship agreement is subject to the
provisions of Section 9-408 of the UCC (all of the foregoing property being
collectively referred to as the “Personal Property”); and

Claims and Awards

All the claims or demands with respect to the Premises and the Personal Property
or any portion thereof, including, without limitation, claims or demands with
respect to the proceeds of insurance in effect with respect thereto, claims
under any indemnity agreement, including, without limitation, any indemnity
agreement executed for the benefit of the Premises and the Personal Property or
any portion thereof with respect to Hazardous Materials or USTs, and any and all
awards made for the taking by eminent domain, or by any proceeding or purchase
in lieu thereof, of the whole or any part of the Premises and the Personal
Property, including, without limitation, any awards resulting from a change of
grade of streets and awards for severance damages. The foregoing, together with
any other portion of the Mortgaged Property as to which a security interest can
be granted and perfected under the UCC, is also collectively referred to herein
as Personal Property.

The Mortgaged Property shall include all products and proceeds of the foregoing
property.

TO HAVE AND TO HOLD the Mortgaged Property hereby granted or mortgaged or
intended to be granted or mortgaged, unto Lender, and its successors and
assigns, upon the terms, provisions and conditions set forth herein.

THIS MORTGAGE SHALL SECURE THE FOLLOWING INDEBTEDNESS AND OBLIGATIONS (the
“Obligations”):

 

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(i) Payment of indebtedness evidenced by the Note together with all extensions,
renewals, amendments and modifications thereof;

(ii) Payment of all other indebtedness and other sums, with interest thereon,
which may be owed under, and performance of all other obligations and covenants
contained in, any Loan Document (other than the Environmental Indemnity
Agreement), together with any other instrument given to evidence or further
secure the payment and performance of any obligation secured hereby or thereby;
and

(iii) Payment of all indebtedness and other sums, with interest thereon, which
may be owed under, and performance of all other obligations and covenants
contained in any Other Agreement, together with any other instrument given to
evidence or further secure the payment and performance of any obligation secured
thereby.

This Mortgage is an open-end mortgage that secures existing indebtedness,
“future advances, contingent obligations and protective advances” as such terms
are defined in 33 M.R.S.A. § 505. The maximum aggregate amount of all debts or
obligations secured by this Mortgage, including future advances, contingent
obligations but excluding protective advances, shall not at any time exceed the
total amount of $31,200,000. The future advances secured hereby shall be made to
or for the account of Borrower and may be made under the Note, the Additional
Notes or any of the Other Documents, as the same may be amended, or may be made
pursuant to promissory notes, line of credit agreements or other instruments
evidencing such future advances which may be hereafter executed and delivered by
Borrower to Lender.

It is the intention of the parties hereto that the Mortgaged Property shall
secure all of the Obligations presently or hereafter owed, and that the priority
of the security interest created by this Mortgage for all such Obligations shall
be controlled by the time of proper recording of this Mortgage. In addition,
this Mortgage shall also secure unpaid balances of advances made with respect to
the Mortgaged Property for the payment of taxes, assessments, insurance
premiums, costs or any other advances incurred for the protection of the
Mortgaged Property, together with interest thereon until paid at the Default
Rate, all as contemplated in this Mortgage, all of which shall constitute a part
of the Obligations. This paragraph shall serve as notice to all persons who may
seek or obtain a lien on the Mortgaged Property subsequent to the date of
recording of this Mortgage, that until this Mortgage is released, any debt owed
Lender by Borrower, including advances made subsequent to the recording of this
Mortgage, shall be secured with the priority afforded this Mortgage as recorded.

Notwithstanding the foregoing or any other provisions of this Mortgage to the
contrary:

(x) in the event that the Loan becomes the subject of a Securitization,
Participation or Transfer, this Mortgage shall only secure indebtedness and
obligations relating to the Loan and any other loans between any of the Borrower
Parties on the one hand and any of the Lender Entities on the other hand which
are part of the same Loan Pool as the Loan; and

(y) in the event that any loans between any of the Borrower Parties on the one
hand and any of the Lender Entities on the other hand (other than the Loan)
become the subject of a Securitization, Participation or Transfer, this Mortgage
shall not secure any indebtedness and obligations relating to such loans unless
the Loan is part of the same Loan Pool as such loans.

 

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Borrower agrees for itself, its successor and assigns, that the acceptance,
before the expiration of the right of redemption and after the commencement of
foreclosure proceedings of this Mortgage, of insurance proceeds, eminent domain
awards, rents or anything else of value to be applied on or to the Obligations
by Lender or any person or party holding under Lender shall not constitute a
waiver of such foreclosure, and this agreement by Borrower shall be that
agreement referred to in 14 M.R.S.A. § 6204, as amended, as necessary to prevent
such waiver of foreclosure. This agreement by Borrower is intended to apply to
the acceptance and such applications of any such insurance proceeds, eminent
domain awards, rents and other sums or anything else of value, whether the same
shall be accepted from, or for the account of, Borrower or from any other
sources whatsoever by Lender or by any person or party holding under Lender at
any time or times in the future while any portion of the Obligations shall
remain outstanding.

IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Note and the other Loan
Documents are to be executed, delivered and secured and that the Mortgaged
Property is to be held and disposed of by Lender, upon and subject to the
provisions of this Mortgage.

ARTICLE I

DEFINED TERMS

Section 1.01    Incorporation of Definitions. Initially capitalized terms not
otherwise defined in this Mortgage shall have the meanings set forth in that
certain Loan Agreement dated as of the date of this Mortgage between Borrower
and Lender, as the same may be amended from time to time (the “Loan Agreement”).

Section 1.02     Additional Definitions. Unless the context otherwise specifies
or requires, the following terms shall have the meanings specified (such
definitions to be applicable equally to singular and plural nouns and verbs of
any tense):

“Environmental Indemnity Agreement” means that certain Environmental Indemnity
Agreement dated as of the date of this Mortgage executed by Borrower for the
benefit of Lender and such other parties as are identified in such agreement
with respect to the Premises, as the same may be amended from time to time.

“Event of Default” has the meaning set forth in Section 6.01.

“Improvements” means all buildings, fixtures and other improvements now or
hereafter located on the Land (whether or not affixed to the Land).

“Indemnified Parties” means Lender and any person or entity who is or will have
been involved in the origination of the Loan, any person or entity who is or
will have been involved in the servicing of the Loan, any person or entity in
whose name the encumbrance created by this Mortgage is or will have been
recorded, persons and entities who may hold or acquire or will have held a full
or partial interest in the Loan (including, but not limited to, investors or
prospective investors in any Securitization, Participation or Transfer, as well
as custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in the Loan for the benefit of third parties), as well as the
respective directors, officers, shareholders, partners, members, employees,
lenders, agents, servants, representatives, contractors, subcontractors,
affiliates, subsidiaries, participants, successors and assigns of any and all of
the foregoing (including but not limited to any other person or entity who holds
or acquires or will have held a participation or other full or partial interest
in the Loan or the Mortgaged Property, whether during the term of the Loan or as
a part of or following a foreclosure of the Loan and including,

 

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but not limited to, any successors by merger, consolidation or acquisition of
all or a substantial portion of Lender’s assets and business).

“Land” means the parcel or parcels of real estate legally described in Exhibit A
attached hereto, and all rights, privileges and appurtenances therewith.

“Lease” and “Leases” has the meaning set forth in the Granting Clause.

“Lessee” means TRS Leasing, Inc., a Virginia corporation.

“Loan” means the loan made by Lender to Borrower, which is evidenced by the Note
and secured by this Mortgage.

“Loan Agreement” has the meaning set forth in Section 1.01.

“Mortgaged Property” has the meaning set forth in the Granting Clause.

“Net Award” has the meaning set forth in Section 4.01(b)(v).

“Net Insurance Proceeds” has the meaning set forth in Section 4.01(a)(iii).

“Note” means the promissory note dated as of even date herewith in the amount of
$15,600,000.00, executed by Borrower and payable to Lender which is secured by
this Mortgage and any amendments, extensions or modifications thereof.

“Obligations” has the meaning set forth in the Granting Clause.

“Other Agreements” means, collectively, all agreements and instruments between
or among (1) any of the Borrower Parties, and, (2) any of the Lender Entities,
including, without limitation, promissory notes and guaranties; provided,
however, the term “Other Agreements” shall not include the agreements and
instruments defined in the Loan Agreement as the Loan Documents.

“Outstanding Obligations” has the meaning set forth in Section
4.01(b)(iv)(x)(aa).

“Partial Taking” has the meaning set forth in Section 4.01(b)(ii).

“Permitted Lease” means the lease dated as of the date of this Mortgage between
Borrower, as lessor, and Lessee, as lessee, with respect to the Premises as the
same may be amended from time to time.

“Personal Property” has the meaning set forth in the Granting Clause.

“Premises” means the Land and the Improvements.

“Rents” has the meaning set forth in the Granting Clause.

“Restoration” means the restoration, replacement or rebuilding of the Premises,
or any part thereof, as nearly as possible to its value, condition and character
immediately prior to any damage, destruction or Taking.

“State” means the State in which the Premises is located.

“Taking” has the meaning set forth in Section 4.01(b)(i).

“Total Taking” has the meaning set forth in Section 4.01(b)(ii).

 

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“UCC” has the meaning set forth in Section 6.02(iii).

ARTICLE II

INCORPORATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER

The representations, warranties and covenants of Borrower set forth in the Loan
Agreement are incorporated by reference into this Mortgage as if stated in full
in this Mortgage. All representations and warranties as incorporated herein
shall be deemed to have been made as of the date of this Mortgage and all
representations, warranties and covenants incorporated herein shall survive the
execution and delivery of this Mortgage.

ARTICLE III             

COVENANTS OF BORROWER

In addition to any covenants of Borrower set forth in the Loan Agreement or any
other Loan Document, Borrower hereby covenants to Lender and agrees as follows
until the Obligations are satisfied in full:

Section 3.01. Recording. Borrower shall, upon the execution and delivery hereof
and thereafter from time to time, take such actions as Lender may reasonably
request to cause this Mortgage, each supplement and amendment to such instrument
and financing statements with respect thereto and each instrument of further
assurance (collectively, the “Recordable Documents”) to be filed, registered and
recorded as may be required by law to publish notice and maintain the first lien
or security interest, as applicable, hereof upon the Mortgaged Property and to
publish notice of and protect the validity of the Recordable Documents. Borrower
shall, from time to time, perform or cause to be performed any other act and
shall execute or cause to be executed any and all further instruments (including
financing statements, continuation statements and similar statements with
respect to any of said documents) reasonably requested by Lender for carrying
out the intention of, or facilitating the performance of, this Mortgage. Lender
shall be and is hereby irrevocably appointed the agent and attorney-in-fact of
Borrower to comply therewith (including the execution, delivery and filing of
such financing statements and other instruments), which appointment is coupled
with an interest; provided, however, Lender shall not exercise such power of
attorney unless Borrower has first failed to comply with this Section, and
provided, further, that this sentence shall not prevent any default in the
observance of this Section from constituting an Event of Default. To the extent
permitted by law, Borrower shall pay or cause to be paid recording taxes and
fees incident thereto and all expenses, taxes and other governmental charges
incident to or in connection with the preparation, execution, delivery or
acknowledgment of the Recordable Documents, any instruments of further assurance
and the Note.

Section 3.02. Use; Maintenance and Repair; Leases. (a) The Mortgaged Property
shall be used solely for the operation of a Permitted Concept and for no other
purpose. Except as set forth below, and except during periods when the Premises
is untenantable by reason of fire or other casualty or condemnation (provided,
however, during all such periods while the Premises is untenantable, Borrower
shall strictly comply with the terms and conditions of Section 4.01 of this
Mortgage), Borrower shall at all times while this Mortgage is in effect occupy
the Mortgaged Property, or cause Lessee or Manager to occupy the Mortgaged
Property, and diligently operate its business, or cause Lessee or Manager to
diligently operate its business, on the Mortgaged Property. Borrower may cease
(or allow Lessee or Manager to cease) diligent operation of

 

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business at the Mortgaged Property for a period not to exceed 90 days and may do
so only once within any five-year period while this Mortgage is in effect. If
Borrower, Lessee or Manager does discontinue operation as permitted by this
Section, Borrower shall (i) give written notice to Lender within 10 days after
Borrower, Lessee or Manager elects to cease operation, (ii) provide adequate
protection and maintenance of the Mortgaged Property during any period of
vacancy and (iii) pay all costs necessary to restore the Mortgaged Property to
its condition on the day operation of the business ceased at such time as the
Mortgaged Property is reopened for Borrower’s, Lessee’s, or Manager’s business
operations or other substituted use. Notwithstanding anything herein to the
contrary, Borrower shall pay monthly the principal and interest due under the
Note during any period in which Borrower, Lessee or Manager discontinues
operation.

Borrower shall not, and shall not permit any tenant to, by itself or through any
lease or other type of transfer, convert the Premises to an alternative use
while this Mortgage is in effect without Lender’s consent, which consent shall
not be unreasonably withheld. Lender may consider any or all of the following in
determining whether to grant its consent, without being deemed to be
unreasonable: (i) whether the converted use will be consistent with the highest
and best use of the Mortgaged Property, and (ii) whether the converted use will
increase Lender’s risks or decrease the value of the Mortgaged Property.

(b) Borrower shall or shall cause Lessee to, (i) maintain the Mortgaged Property
in good condition and repair, subject to reasonable and ordinary wear and tear,
free from actual or constructive waste, (ii) operate, remodel, update and
modernize the Mortgaged Property in accordance with Borrower’s past practices
for Permitted Concepts, and (iii) pay all operating costs of the Premises in the
ordinary course of business. Borrower shall not do or allow any tenant or other
user of the Premises to do any act that (1) materially increases the dangers to
human health or the environment, (2) poses an unreasonable risk of harm to any
person or entity (whether on or off the Premises), (3) impairs or is reasonably
likely to impair in any material respect the value of the Premises, (4) is
contrary to any requirement of any insurer, or (5) violates in any material
respect any covenant, condition, agreement or easement applicable to the
Premises.

(c) Borrower shall not, and shall not permit Lessee or Manager to, (i) enter
into any Leases (other than the Permitted Lease and room rentals in the ordinary
course of business) without Lender’s prior written consent; (ii) materially
modify or amend the terms of any Lease without Lender’s prior written consent;
(iii) grant any material consents under any Lease, including, without
limitation, any consent to an assignment of any Lease, a mortgaging of the
leasehold estate created by any Lease or a subletting by the tenant under any
Lease (except room rentals in the ordinary course of business), without Lender’s
prior written consent; (iv) terminate, cancel, surrender, or accept the
surrender of, any Lease, or waive or release any person from the observance or
performance of any obligation to be performed under the terms of any Lease or
liability on account of any warranty given thereunder, without Lender’s prior
written consent; or (v) assign, transfer, mortgage, pledge or hypothecate any
Lease or any interest therein to any party other than Lender, without Lender’s
prior written consent. Any lease, modification, amendment, grant, termination,
cancellation, surrender, waiver or release in violation of the foregoing
provision shall be null and void and of no force and effect. Unless Lender
otherwise consents or elects, Borrower’s title to the Mortgaged Property and the
leasehold interest in the Mortgaged Property created by any Lease shall not
merge, but shall always be kept separate and distinct, notwithstanding the union
of such estates in Borrower, Lender or any other person by purchase, operation
of law, foreclosure of this Mortgage, sale of the Mortgaged Property pursuant to
this Mortgage or otherwise.

 

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(d) Borrower shall (i) fulfill, perform and observe in all material respects
each and every condition and covenant of Borrower contained in any Lease;
(ii) give prompt notice to Lender of any claim or event of default under any
Lease given to or by Borrower, together with a complete copy or statement of any
information submitted or referenced in support of such claim or event of
default; (iii) at the sole cost and expense of Borrower, enforce the performance
and observance of each and every covenant and condition of any Lease to be
performed or observed by any other party thereto, unless such enforcement is
waived in writing by Lender; (iv) appear in and defend any action challenging
the validity, enforceability or priority of the lien created hereby or the
validity or enforceability of any Lease; and (v) hold that portion of the Rents
which is sufficient to discharge all current sums due under the Note for use in
the payment of such sums.

Section 3.03. Alterations and Improvements. Borrower shall not alter, or permit
Lessee or Manager to alter, the exterior, structural, plumbing or electrical
elements of the Mortgaged Property in any manner without the consent of Lender,
which consent shall not be unreasonably withheld or conditioned; provided,
however, Borrower or Lessee may undertake nonstructural alterations to the
Mortgaged Property costing less than $100,000 without Lender’s consent. For
purposes of this Mortgage, alterations to the exterior, structural, plumbing or
electrical elements of the Mortgaged Property shall mean:

(a) alterations which affect the foundation or “footprint” of the Improvements;

(b) alterations which involve the structural elements of the Improvements, such
as a load-bearing wall, structural beams, columns, supports or roof; or

(c) alterations which materially affect any of the building systems, including,
without limitation, the electrical systems, plumbing, HVAC and fire and safety
systems.

If Lender’s consent is required hereunder and Lender consents to the making of
any such alterations, the same shall be made by Borrower, Manager or Lessee at
Borrower’s, Manager’s or Lessee’s sole expense by a licensed contractor and
according to plans and specifications approved by Lender and subject to such
other conditions as Lender shall reasonably require. Any work at any time
commenced on the Mortgaged Property shall be prosecuted diligently to
completion, shall be of good workmanship and materials and shall comply fully
with all the terms of this Mortgage. Upon completion of any alterations for
which Lender’s consent is required hereunder or any Restoration, Borrower shall
promptly provide Lender with (i) evidence of full payment to all laborers and
materialmen contributing to the alterations, (ii) an architect’s certificate
certifying the alterations to have been completed in conformity with the plans
and specifications, (iii) a certificate of occupancy (if the alterations are of
such a nature as would require the issuance of a certificate of occupancy), and
(iv) any other documents or information reasonably requested by Lender.

Section 3.04. After-Acquired Property. All right, title and interest of Borrower
in and to all improvements, alterations, substitutions, restorations and
replacements of, and all additions and appurtenances to, the Mortgaged Property,
hereafter acquired by or released to Borrower, immediately upon such acquisition
or release and without any further granting by Borrower, shall become part of
the Mortgaged Property and shall be subject to the lien hereof fully, completely
and with the same effect as though now owned by Borrower and specifically
described in the Granting Clauses hereof. Borrower shall execute and deliver to
Lender any further assurances, mortgages, grants, conveyances or assignments
thereof as the Lender may reasonably require to subject the same to the lien
hereof.

 

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Section 3.05. Taxes, Assessments, Charges and Other Impositions. (a) Borrower
shall do or cause to be done everything necessary to preserve the lien hereof
without expense to Lender, including, without limitation, paying and discharging
or causing to be paid and discharged, whether or not payable directly by
Borrower or subject to withholding at the source, (i) all taxes, assessments,
levies, fees, water and sewer rents and charges and all other governmental
charges, general, special, ordinary or extraordinary, and all charges for
utility or communications services, which may at any time be assessed, levied or
imposed upon Borrower, Lessee, the Mortgaged Property, this Mortgage, the
Obligations or the Rents or which may arise in respect of the occupancy, use,
possession or operation thereof, (ii) all income, excess profits, sales, gross
receipts and other taxes, duties or imposts, whether similar or not in nature,
assessed, levied or imposed by any Governmental Authority on Borrower, Lessee,
the Mortgaged Property or the Rents, and (iii) all lawful claims and demands of
mechanics, laborers, materialmen and others which, if unpaid, might create a
lien on the Mortgaged Property, or on the Rents, unless Borrower shall contest
the amount or validity thereof in accordance with subsection (b).

(b) Borrower may, at its own expense, contest or cause to be contested, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any item
specified in subsection (a) or lien therefor, provided that (i) Borrower shall
provide written notice to Lender of any contest involving more than $10,000.00,
(ii) such proceeding shall suspend the collection thereof from the Mortgaged
Property or any interest therein, (iii) neither the Mortgaged Property nor any
interest therein would be in any danger of being sold, forfeited or lost by
reason of such proceedings, (iv) no Event of Default has occurred and is
continuing, and (v) Borrower shall have deposited with Lender adequate reserves
for the payment of the taxes, together with all interest and penalties thereon,
unless paid in full under protest, or Borrower shall have furnished the security
as may be required in the proceeding or as may be required by Lender to insure
payment of any contested taxes.

Section 3.06. Insurance. (a) Borrower shall maintain, or shall cause Lessee or
Manager to maintain, with respect to the Mortgaged Property, at its sole
expense, the following types and amounts of insurance (which may be included
under a blanket insurance policy if all the other terms hereof are satisfied),
in addition to such other insurance as Lender may reasonably require from time
to time:

(i) Insurance against loss, damage or destruction by fire and other casualty,
including theft, vandalism and malicious mischief, flood (if the Premises is in
a location designated by the Federal Emergency Management Administration as a
Special Flood Hazard Area), boiler explosion (if there is any boiler upon the
Premises), plate glass breakage, sprinkler damage (if the Premises have a
sprinkler system), all matters covered by a standard extended coverage
endorsement, special coverage endorsement commonly known as an “all risk”
endorsement and such other risks as Lender may reasonably require, insuring the
Mortgaged Property for not less than 100% of their full insurable replacement
cost.

(ii) Commercial general liability and property damage insurance, including a
products liability clause, covering Lender and Borrower against bodily injury
liability, property damage liability and automobile bodily injury and property
damage liability, including without limitation any liability arising out of the
ownership, maintenance, repair, condition or operation of the Mortgaged Property
or adjoining ways, streets or sidewalks and, if applicable, insurance covering
Lender, against liability arising from the sale of liquor, beer or wine on the
Premises. Such insurance policy or policies shall contain a

 

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broad form contractual liability endorsement under which the insurer agrees to
insure Borrower’s obligations under Section 7.09 hereof to the extent insurable,
and a “severability of interest” clause or endorsement which precludes the
insurer from denying the claim of either Borrower or Lender because of the
negligence or other acts of the other, shall be in amounts of not less than
$2,000,000.00 per injury and occurrence with respect to any insured liability,
whether for personal injury or property damage, or such higher limits as Lender
may reasonably require from time to time, and shall be of form and substance
reasonably satisfactory to Lender.

(iii) Business income insurance equal to 100% of the principal and interest
payable under the Note for a period of not less than twelve months.

(iv) State Worker’s compensation insurance in the statutorily mandated limits,
employer’s liability insurance with limits not less than $500,000 or such
greater amount as Lender may from time to time require and such other insurance
as may be necessary to comply with applicable laws.

(b) All insurance policies shall:

(i) Provide for a waiver of subrogation by the insurer as to claims against
Lender, its employees and agents and provide that such insurance cannot be
unreasonably cancelled, invalidated or suspended on account of the conduct of
Borrower, its officers, directors, employees or agents;

(ii) Provide that any “no other insurance” clause in the insurance policy shall
exclude any policies of insurance maintained by Lender and that the insurance
policy shall not be brought into contribution with insurance maintained by
Lender;

(iii) Contain a standard without contribution mortgage clause endorsement in
favor of Lender and its successors and assigns as their interests may appear and
any other lender designated by Lender;

(iv) Provide that the policy of insurance shall not be terminated, cancelled or
substantially modified without at least thirty (30) days’ prior written notice
to Lender and to any lender covered by any standard mortgage clause endorsement;

(v) Provide that the insurer shall not have the option to restore the Premises
if Lender elects to terminate this Mortgage in accordance with the terms hereof;

(vi) Be issued by insurance companies licensed to do business in the state in
which the Premises is located and which are rated A:VIII or better by Best’s Key
Rating Guide or otherwise approved by Lender; and

(vii) Provide that the insurer shall not deny a claim because of the negligence
of Borrower, anyone acting for Borrower or any tenant or other occupant of the
Mortgaged Property.

It is expressly understood and agreed that the foregoing minimum limits of
insurance coverage shall not limit the liability of Borrower for its acts or
omissions as provided in this Mortgage. All liability insurance policies (with
the exception of worker’s compensation insurance to the extent not available
under statutory law) shall designate Lender and its successors and assigns as
additional insureds as their interests may appear and shall be payable as set
forth in Article IV hereof. All such policies shall be written as primary
policies, with deductibles not to exceed $10,000. Any other policies, including
any policy now or hereafter carried by Lender,

 

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shall serve as excess coverage. Borrower shall procure, or shall cause Lessee or
Manager to procure, policies for all insurance for periods of not less than one
year and shall provide to Lender certificates of insurance or, upon Lender’s
request, duplicate originals of insurance policies evidencing that insurance
satisfying the requirements of this Mortgage is in effect at all times.

Section 3.07. Impound Account. Upon the occurrence of an Event of Default under
this Mortgage or any other Loan Document, Lender may require Borrower to pay to
Lender sums which will provide an impound account (which shall not be deemed a
trust fund) for paying up to the next one year of taxes, assessments and/or
insurance premiums. Upon such requirement, Lender will estimate the amounts
needed for such purposes and will notify Borrower to pay the same to Lender in
equal monthly installments, as nearly as practicable, in addition to all other
sums due under this Mortgage. Should additional funds be required at any time,
Borrower shall pay the same to Lender on demand. Borrower shall advise Lender of
all taxes and insurance bills which are due and shall cooperate fully with
Lender in assuring that the same are paid. Lender may deposit all impounded
funds in accounts insured by any federal or state agency and may commingle such
funds with other funds and accounts of Lender. Interest or other gains from such
funds, if any, shall be the sole property of Lender. If an Event of Default
shall occur subsequent to Lender requiring the establishment of an impound
account pursuant to this Section, Lender may apply all impounded funds against
any sums due from Borrower to Lender. Lender shall give to Borrower an annual
accounting showing all credits and debits to and from such impounded funds
received from Borrower.

Section 3.08. Advances by Lender. Lender may make advances to perform any of the
covenants contained in this Mortgage on Borrower’s behalf and all sums so
advanced (and all sums advanced pursuant to any other provision hereof) by
Lender shall be secured hereby. Borrower shall repay on demand all sums so
advanced with interest thereon at the Default Rate, such interest to be computed
from and including the date of the making of such advance to and including the
date of such repayment, and at Lender’s election, Lender may add the amount of
such advance to the principal balance of the Loan.

Section 3.09. Negative Covenants. Without limiting the terms and conditions of
Section 7 of the Loan Agreement, Borrower agrees that Borrower shall not,
without the prior written consent of Lender (each, a “Prohibited Transaction”),
sell, convey, mortgage, grant, bargain, encumber, pledge, assign, or otherwise
transfer the Mortgaged Property or any part thereof or permit the Mortgaged
Property or any part thereof to be sold, conveyed, mortgaged, granted,
bargained, encumbered, pledged, assigned, or otherwise transferred, other than
(a) sales/consumption of inventory in the ordinary course of business, (b) the
replacement of obsolete, damaged or worn-out Personal Property, (c) in
accordance with Section 7.01 herein, and (d) Permitted Exceptions.. A sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer within the meaning of this Section shall be deemed to include, but not
limited to, (a) an installment sales agreement wherein Borrower agrees to sell
the Mortgaged Property or any part thereof for a price to be paid in
installments; and (b) an agreement by Borrower leasing all or any part of the
Mortgaged Property (other than the Permitted Lease and room rentals in the
ordinary course of business) or a sale, assignment or other transfer of, or the
grant of a security interest in, Borrower’s right, title and interest in and to
any Lease or any Rents. Notwithstanding the foregoing, individual stockholders
or limited partners of the Borrower Parties may pledge their interests in the
Borrower Parties so long as such pledge does not, or could not potentially,
result in a Change of Control or a change in ownership of a majority interest in
the Borrower Parties.

 

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Lender’s consent to a Prohibited Transaction shall be subject to the
satisfaction of such conditions as Lender shall determine in its sole
discretion, including, without limitation, (i) Borrower having executed and
delivered such modifications to the terms of this Mortgage and the other Loan
Documents as Lender shall request, (ii) the Prohibited Transaction having been
approved by each of the rating agencies which have issued ratings in connection
with any Securitization of the Loan as well as any other rating agency selected
by Lender, and (iii) the proposed transferee having assumed the Note, this
Mortgage and the other Loan Documents (as modified pursuant to clause (i)
above). In addition, any such consent shall be conditioned upon the payment by
Borrower to Lender of (x) a fee equal to one percent (1%) of the then
outstanding principal balance of the Note and (y) all out-of-pocket costs and
expenses incurred by Lender in connection with such consent, including, without
limitation, reasonable attorneys’ fees. Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Obligations immediately due and
payable upon Borrower’s sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment, or transfer of the Mortgaged Property without Lender’s
consent, as required hereunder. The provisions of this Section shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Mortgaged Property regardless of whether
voluntary or not, or whether or not Lender has consented to any previous sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Mortgaged Property.

ARTICLE IV             

POSSESSION, USE AND RELEASE OF THE MORTGAGED PROPERTY

Section 4.01. Casualty or Condemnation. Borrower, immediately upon obtaining
knowledge of any casualty to any portion of the Mortgaged Property or of any
proceeding or negotiation for the taking of all or any portion of the Mortgaged
Property in condemnation or other eminent domain proceedings, shall notify
Lender of such casualty, proceeding or negotiation. Any award, compensation or
other payment resulting from such casualty or condemnation or eminent domain
proceeding, as applicable, shall be applied as set forth below (the “Proceeds”).
Lender may participate in any condemnation or eminent domain proceeding, and
Borrower will deliver or cause to be delivered to Lender all instruments
reasonably requested by Lender to permit such participation.

(a) Casualty. (i)  In the event of any material damage to or destruction of the
Mortgaged Property or any part thereof, Borrower will promptly give written
notice to Lender, generally describing the nature and extent of such damage or
destruction. No damage to or destruction of the Mortgaged Property shall relieve
Borrower of its obligation to pay any monetary sum due under the Loan Documents
at the time and in the manner provided in the Loan Documents.

(ii) In the event of any damage to or destruction of the Mortgaged Property or
any part thereof, Borrower, whether or not the Proceeds, if any, on account of
such damage or destruction shall be sufficient for the purpose, at its expense,
shall within a reasonable time thereafter cause the Restoration to be commenced
and completed.

(iii) Proceeds received by Lender and Borrower on account of any occurrence of
damage to or destruction of the Mortgaged Property or any part thereof, less the
costs, fees and expenses incurred by Lender and Borrower in the collection
thereof, including, without limitation, adjuster’s fees and expenses and
reasonable attorneys’ fees and expenses (the “Net Insurance Proceeds”), shall be
paid to (1) Borrower, if the amount of such Net Insurance Proceeds is less than
$100,000 and applied by Borrower toward the cost of the Restoration, and
(2) Lender, if the

 

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amount of such Net Insurance Proceeds is $100,000 or greater. Net Insurance
Proceeds paid to Lender shall be held and disbursed by Lender, or as Lender may
from time to time direct, as the Restoration progresses, to pay or reimburse
Borrower for the cost of the Restoration, upon written request of Borrower
accompanied by evidence, reasonably satisfactory to Lender, that (aa) the
Restoration is in full compliance with all Applicable Regulations and all
private restrictions and requirements, (bb) the amount requested has been paid
or is then due and payable and is properly a part of such cost, (cc) there are
no mechanics’ or similar liens for labor or materials theretofore supplied in
connection with the Restoration, (dd) if the estimated cost of the Restoration
exceeds the Net Insurance Proceeds (exclusive of Proceeds received from
Borrower’s business income insurance), Borrower has deposited into an escrow
satisfactory to Lender such excess amount, which sum will be disbursed pursuant
to escrow instructions satisfactory to Lender, and (ee) the balance of such Net
Insurance Proceeds, together with the funds deposited into escrow, if any,
pursuant to the preceding subsection (dd), after making the payment requested
will be sufficient to pay the balance of the cost of the Restoration. Upon
receipt by Lender of evidence reasonably satisfactory to it that the Restoration
has been completed and the cost thereof paid in full, and that there are no
mechanics’ or similar liens for labor or materials supplied in connection
therewith, the balance, if any, of such Net Insurance Proceeds shall be paid to
Borrower. If at the time of the damage or destruction to the Mortgaged Property
or at any time thereafter an Event of Default shall have occurred and be
continuing under the Loan Documents, all Net Insurance Proceeds shall be paid to
Lender, and Lender may retain and apply the Net Insurance Proceeds toward the
Obligations whether or not then due and payable, in such order, priority and
proportions as Lender in its discretion shall deem proper, or to cure such Event
of Default, or, in Lender’s discretion, Lender may pay such Net Insurance
Proceeds in whole or in part to Borrower to be applied toward the cost of the
Restoration. If Lender shall receive and retain Net Insurance Proceeds, the lien
of this Mortgage shall be reduced only by the amount received and retained by
Lender and actually applied by Lender in reduction of the Obligations.

(b) Condemnation. (i) In case of a taking of all or any part of the Mortgaged
Property or the commencement of any proceedings or negotiations which might
result in a taking, for any public or quasi-public purpose by any lawful power
or authority by exercise of the right of condemnation or eminent domain or by
agreement between Lender, Borrower and those authorized to exercise such right
(“Taking”), Borrower will promptly give written notice thereof to Lender,
generally describing the nature and extent of such Taking. Lender shall file and
prosecute on behalf of Lender and Borrower any and all claims for Proceeds, and
all Proceeds on account of a Taking shall be paid to Lender.

(ii) In case of a Taking of the whole of the Mortgaged Property, other than for
temporary use (“Total Taking”), or in case of a Taking of less than all of the
Mortgaged Property (“Partial Taking”), the Loan Documents shall remain in full
force and effect. In the case of a Partial Taking, Borrower, whether or not the
Proceeds, if any, on account of such Partial Taking shall be sufficient for the
purpose (but provided they are made available by Lender for such purpose), at
its own cost and expense, will within a reasonable time thereafter commence and
complete the Restoration. In case of a Partial Taking, other than a temporary
use, of such a substantial part of the Mortgaged Property as shall result in the
Mortgaged Property remaining after such Partial Taking being unsuitable for use,
such Taking shall be deemed a Total Taking.

(iii) In case of a temporary use of the whole or any part of the Mortgaged
Property by a Taking, the Loan Documents shall remain in full force and effect
without any reduction of any monetary sum payable under the Loan Documents. In
any proceeding for such Taking, Lender shall have the right to intervene and
participate; provided that, if such intervention shall not be permitted,
Borrower shall consult with Lender, its attorneys and experts, and make all

 

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reasonable efforts to cooperate with Lender in the prosecution or defense of
such proceeding. At the termination of any such use or occupation of the
Mortgaged Property, Borrower will, at its own cost and expense, promptly
commence and complete the Restoration.

(iv) Proceeds on account of a Taking, less the costs, fees and expenses incurred
by Lender and Borrower in connection with the collection thereof, including,
without limitation, reasonable attorneys’ fees and expenses, shall be applied in
the following order:

(x) Proceeds received on account of a Total Taking shall be allocated as
follows:

(aa) There shall be paid to the Lender an amount up to the sum of the
outstanding principal, including all sums advanced by Lender hereunder, and
interest under the Note, all as of the date on which such payment is made, such
amount shall be applied first against all sums advanced by Lender under this
Mortgage, second against the accrued but unpaid interest on the Note, and third
to the remaining unpaid principal amount of the Note. If the Proceeds received
on account of a Total Taking are not sufficient to satisfy the outstanding
principal balance of the Note, all accrued but unpaid interest on the Note, all
other sums due under the Note, all sums advanced by Lender under this Mortgage
and all other sums due and payable under this Mortgage and the other Loan
Documents corresponding to the Premises (collectively, the “Outstanding
Obligations”), Borrower shall pay to Lender simultaneously with the payment of
such Proceeds to Lender the difference between the amount of such Proceeds and
the amount of the Outstanding Obligations.

(bb) Any remaining balance shall be paid to Borrower.

(y) Proceeds received on account of a Partial Taking shall be held and allocated
as follows:

(i) first, toward the cost of the Restoration, such application of net awards
and other payments to be made substantially in the manner provided in
Section 4.01(a)(iii) of this Mortgage; and

(ii) then, all or any portion of the balance of such proceeds shall, in Lender’s
sole discretion, either be paid to:

(1) Lender, as the holder of this Mortgage, and applied toward the Outstanding
Obligations in such order, priority and proportion, and at such time on or prior
to the Maturity Date (as defined in the Note), as Lender shall determine; or

(2) Borrower; provided, however, in Lender’s sole discretion, such proceeds
shall be pledged to Lender to secure the Outstanding Obligations pursuant to a
security agreement reasonably satisfactory to Lender, or, with Lender’s consent,
Borrower shall provide Lender with alternative security satisfactory to Lender
in its sole discretion.

Lender may deposit any funds held by it in accounts insured by any federal or
state agency and may commingle such funds with other funds and accounts of
Lender.

 

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(z) Proceeds received on account of a Taking for temporary use shall be held by
Lender and applied to the payment of the monthly installments of combined
interest and principal becoming due under the Note, until such Taking for
temporary use is terminated and the Restoration, if any, has been completed;
provided, however, that, if any portion of any such award or payment is made by
reason of any damage to or destruction of the Mortgaged Property, such portion
shall be held and applied as provided in Section 4.01(a)(iii) hereof. The
balance, if any, of such awards and payments shall be paid to Borrower.

(v) Notwithstanding the foregoing, if at the time of any Taking or at any time
thereafter an Event of Default shall have occurred and be continuing under the
Loan Documents, Lender is hereby authorized and empowered, in the name and on
behalf of Borrower and otherwise, to file and prosecute Borrower’s claim, if
any, for an award on account of any Taking and to collect such award and apply
the same, after deducting all costs, fees and expenses incident to the
collection thereof (the “Net Award”), toward the Obligations whether or not then
due and payable, in such order, priority and proportions as Lender in its
discretion shall deem proper, or to cure such Event of Default, or, in Lender’s
discretion, Lender may pay the Net Award in whole or in part to Borrower to be
applied toward the cost of the Restoration. If Lender shall receive and retain
the Net Award, the lien of this Mortgage shall be reduced only by the amount
received and retained by Lender and actually applied by Lender in reduction of
the Obligations.

Section 4.02. Conveyance in Anticipation of Condemnation, Granting of Easements,
Etc. If no Event of Default shall have occurred and be continuing, Borrower may,
from time to time with respect to its interest in the Mortgaged Property, and
with Lender’s prior written consent, (a) sell, assign, convey or otherwise
transfer any interest therein to any person legally empowered to take such
interest under the power of eminent domain, (b) grant easements and other rights
in the nature of easements, (c) release existing easements or other rights in
the nature of easements which are for the benefit of the Mortgaged Property,
(d) dedicate or transfer unimproved portions of the Mortgaged Property for road,
highway or other public purposes, (e) execute petitions to have the Mortgaged
Property annexed to any municipal corporation or utility district, and
(f) execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers.

Section 4.03. Lender’s Power. At any time, or from time to time, without
liability therefor, Lender, without affecting the personal liability of any
person for payment of the Obligations or the effect of this Mortgage upon the
remainder of said Mortgaged Property, may from time to time without notice
(a) release any part of said Mortgaged Property, (bii) consent in writing to the
making of any map or plat thereof, (c) join in granting any easement thereon,
(d) join in any extension agreement or any agreement subordinating the lien or
charge hereof, (e) release any person so liable, (f) extend the maturity or
alter any of the terms of any Obligations, (g) grant other indulgences, (h) take
or release any other or additional security for any Obligations, (i) make
compositions or other arrangements with debtors in relation thereto, or
(x) advance additional funds to protect the security hereof or to pay or
discharge the Obligations in the event Borrower fails to do so, and all amounts
so advanced shall be secured hereby and shall be due and payable upon demand by
Lender.

ARTICLE V

SECURITY INTEREST

Section 5.01. Security Agreement. With respect to the Personal Property or any
portion of the Mortgaged Property which constitutes fixtures or other property
governed by the UCC, this

 

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Mortgage shall constitute a security agreement between Borrower, as the debtor,
and Lender, as the secured party, and Borrower hereby grants to Lender a
security interest in such portion of the Mortgaged Property. Cumulative of all
other rights of Lender hereunder, Lender shall have all of the rights conferred
upon secured parties by the UCC. Borrower authorizes Lender to file financing
statements with respect to the security interest of Lender, continuation
statements with respect thereto, and any amendments to such financing statements
which may be necessitated by reason of any of the changes described in Section
6.C of the Loan Agreement. Furthermore, at any time, and from time to time,
Borrower will execute and deliver to Lender all financing statements that may
from time to time be required by Lender to establish and maintain the validity
and priority of the security interest of Lender, or any modification thereof.
Lender may exercise any or all of the remedies of a secured party available to
it under the UCC with respect to such property. If, upon the occurrence and
during the continuance of an Event of Default, Lender proceeds to dispose of
such property in accordance with the provisions of the UCC, 10 days’ notice by
Lender to Borrower shall be deemed to be reasonable notice under any provision
of the UCC requiring such notice; provided, however, that Lender may at its
option dispose of such property in accordance with Lender’s rights and remedies
with respect to the real property pursuant to the provisions of this Mortgage,
in lieu of proceeding under the UCC. Borrower represents that its exact legal
name and state of formation or organization are as set forth in the first
paragraph of this Mortgage. Borrower agrees that, notwithstanding any provision
in the UCC to the contrary, Borrower shall not file a termination statement of
any financing statement filed by Lender in connection with any security interest
granted under this Mortgage if Lender reasonably objects to the filing of such
termination statement.

Section 5.02. Effective as a Financing Statement and Fixture Filing. This
Mortgage shall be effective as a financing statement filed as a fixture filing
with respect to all fixtures included within the Mortgaged Property and is to be
filed for record in the real estate records of each county where any part of the
Mortgaged Property (including said fixtures) is situated. This Mortgage shall
also be effective as a financing statement covering any other portion of the
Mortgaged Property and may be filed in any other appropriate filing or recording
office. The mailing address of Borrower is the address of Borrower set forth in
the introductory paragraph of this Mortgage, and the address of the Lender from
which information concerning the security interests hereunder may be obtained is
the address of Lender as set forth in the introductory paragraph of this
Mortgage. A carbon, photographic or other reproduction of this Mortgage or of
any financing statement relating to this Mortgage shall be sufficient as a
financing statement for any of the purposes referred to in this Section.

ARTICLE VI             

EVENTS OF DEFAULT AND REMEDIES

Section 6.01. Events of Default. Each of the following shall be an event of
default under this Mortgage (each an “Event of Default”):

(a) Subject to the provisions of Section 3.05(b) of this Mortgage, if Borrower
fails to pay, prior to delinquency, any taxes, assessments or other charges the
failure of which to pay will result in the imposition of a lien against the
Mortgaged Property pursuant to Applicable Regulations.

(b) If Borrower shall fail to maintain insurance in accordance with the
requirements of Section 3.06 of this Mortgage.

(c) If Borrower fails to observe or perform any of the covenants, conditions, or
obligations of this Mortgage, provided, however, if any such failure does not
involve the

 

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payment of any principal, interest or other monetary sum due under the Note, is
not willful or intentional, does not place any rights or interest in collateral
of Lender in immediate jeopardy, and is within the reasonable power of Borrower
to promptly cure after receipt of notice thereof, all as determined by Lender in
its reasonable discretion, then such failure shall not constitute an Event of
Default hereunder, unless otherwise expressly provided herein, unless and until
Lender shall have given Borrower notice thereof and a period of 30 days shall
have elapsed, during which period Borrower may correct or cure such failure,
upon failure of which an Event of Default shall be deemed to have occurred
hereunder without further notice or demand of any kind being required. If such
failure cannot reasonably be cured within such 30-day period, as determined by
Lender in its reasonable discretion, and Borrower is diligently pursuing a cure
of such failure, then Borrower shall have a reasonable period to cure such
failure beyond such 30-day period, which shall in no event exceed 90 days after
receiving notice of the failure from Lender. If Borrower shall fail to correct
or cure such failure within such 90-day period, an Event of Default shall be
deemed to have occurred hereunder without further notice or demand of any kind
being required.

(d) If there is an “Event of Default” under the Loan Agreement.

Section 6.02. Remedies. Upon the occurrence and during the continuance of an
Event of Default, Lender may declare all or any part of the Obligations to be
due and payable, and the same shall thereupon become due and payable without any
presentment, demand, protest or notice (including notice of intent to accelerate
and notice of acceleration) of any kind except as otherwise expressly provided
herein. Furthermore, upon the occurrence and during the continuance of an Event
of Default, Lender may:

(a) Either in person or by agent, with or without bringing any action or
proceeding, or by a receiver appointed by a court, and without regard to the
adequacy of its security, enter upon and take possession of the Mortgaged
Property or any part thereof and do any acts which it deems necessary or
desirable to preserve the value, marketability or rentability of the Mortgaged
Property, or part thereof or interest therein, increase the income therefrom or
protect the security hereof and, with or without taking possession of the
Mortgaged Property, take any action described herein, sue for or otherwise
collect the Rents, including those past due and unpaid, and apply the same, less
costs and expenses of operation and collection including reasonable attorneys’
fees, upon any Obligations, all in such order as Lender may determine. The
entering upon and taking possession of the Mortgaged Property, the taking of any
action described herein, the collection of such Rents, and the application
thereof as aforesaid, shall not cure or waive any Event of Default or notice of
default or invalidate any act done in response to such Event of Default or
pursuant to such notice of default and, notwithstanding the continuance in
possession of the Mortgaged Property or the collection, receipt and application
of Rents, Lender shall be entitled to exercise every right provided for in any
of the Loan Documents or by law upon any Event of Default, including the right
to exercise the power of sale herein conferred;

(b) Commence an action to foreclose this Mortgage in a single parcel or in
several parcels, appoint a receiver or specifically enforce any of the covenants
hereof;

(c) Exercise any or all of the remedies available to a secured party under the
Uniform Commercial Code as adopted in the State (“UCC”), including, without
limitation:

(i) Either personally or by means of a court appointed receiver, commissioner or
other officer, take possession of all or any of the Personal

 

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Property and exclude therefrom Borrower and all others claiming under Borrower,
and thereafter hold, store, use, operate, manage, maintain and control, make
repairs, replacements, alterations, additions and improvements to and exercise
all rights and powers of Borrower in respect of the Personal Property or any
part thereof. In the event Lender demands or attempts to take possession of the
Personal Property in the exercise of any rights under any of the Loan Documents,
Borrower promises and agrees to promptly turn over and deliver complete
possession thereof to Lender;

(ii) Without notice to or demand upon Borrower, make such payments and do such
acts as Lender may deem necessary to protect its security interest in the
Personal Property, including, without limitation, paying, purchasing, contesting
or compromising any encumbrance, charge or lien which is prior to or superior to
the security interest granted hereunder and, in exercising any such powers or
authority, to pay all expenses incurred in connection therewith;

(iii) Require Borrower to assemble the Personal Property or any portion thereof,
at the Premises, and promptly to deliver such Personal Property to Lender, or an
agent or representative designated by it. Lender, and its agents and
representatives, shall have the right to enter upon the Mortgaged Property to
exercise Lender’s rights hereunder;

(iv) Sell, lease or otherwise dispose of the Personal Property at public sale,
with or without having the Personal Property at the place of sale, and upon such
terms and in such manner as Lender may determine. Lender may be a purchaser at
any such sale;

(v) Unless the Personal Property is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender shall
give Borrower at least 10 days’ prior written notice of the time and place of
any public sale of the Personal Property or other intended disposition thereof.
Such notice may be delivered to Borrower at the address set forth at the
beginning of this Mortgage and shall be deemed to be given as provided herein;
and

(vi) Any sale made pursuant to the provisions of this subsection shall be deemed
to have been a public sale conducted in a commercially reasonable manner if held
contemporaneously with the sale of all or a portion of the other Mortgaged
Property under power of sale as provided herein upon giving the same notice with
respect to the sale of the Personal Property hereunder as is required for such
sale of the other Mortgaged Property under power of sale, and such sale shall be
deemed to be pursuant to a security agreement covering both real and personal
property under the UCC.

(d) Exercise all of Borrower’s rights and remedies under the Indemnity
Agreements, including, without limitation, making demands and claims and
receiving payments under the Indemnity Agreements. Borrower hereby grants Lender
a power of attorney (which grant shall be deemed irrevocable and coupled with an
interest) to exercise such rights and remedies;

(e) Apply any sums then deposited in the impound account described in
Section 3.07 toward payment of the taxes, assessment and insurance premiums for
the

 

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Mortgaged Property and/or as a credit on the Obligations in such priority and
proportion as Lender may determine in its sole discretion;

(f) If held by Lender, surrender the insurance policies maintained pursuant to
Section 3.06, collect the unearned insurance premiums and apply such sums as a
credit on the Obligations in such priority and proportion as Lender in its sole
discretion shall deem proper, and in connection therewith, Borrower hereby
appoints Lender as agent and attorney-in-fact (which is coupled with an interest
and is therefore irrevocable) for Lender to collect such insurance premiums; and

(g) This Mortgage is given upon the STATUTORY CONDITION, which is incorporated
herein by reference, for breach of which Lender shall have the right to
foreclose this Mortgage under any legal method of foreclosure in existence at
the time or now existing, or under any other applicable law, including, without
limitation, the STATUTORY POWER OF SALE pursuant to the applicable provisions of
Titles 14 and 33 of the Maine Revised Statutes of 1964 as said statutes have
been and shall be amended, which POWER is expressly incorporated herein by
reference, to the extent authorized or allowed by any present or future law of
the State of Maine. In connection therewith, Borrower acknowledges that this
Mortgage secures a loan or loans for business and commercial purposes and that
this Mortgage is given primarily for a business, commercial or agricultural
purpose. In the event of a conflict between the STATUTORY CONDITION and the
terms and provisions of this Mortgage, the terms and provisions of this Mortgage
shall control, to the extent permitted by law.

(h) Sell Borrower’s interest in the Mortgaged Property pursuant to the power of
sale herein conferred. If Lender elects to sell Borrower’s interest in the
Mortgaged Property by exercise of such power of sale, Lender shall cause such
sale to be performed in the manner then required by law.

(i) Lender shall cause to be recorded, published and delivered such notices of
default and notices of sale as may then be required by law and by this Mortgage.
Thereafter, Lender shall sell Borrower’s interest in the Mortgaged Property at
the time and place of sale fixed by it, either as a whole, or in separate lots
or parcels or items as Lender shall deem expedient, and in such order as it may
determine, at public auction to the highest bidder for cash in lawful money of
the United States payable at the time of sale, or as otherwise may then be
required by law. Lender shall deliver to such purchaser or purchasers thereof
its good and sufficient deed or deeds conveying the property so sold, without
any covenant or warranty, express or implied. The recitals in such deed of any
matters or facts shall be conclusive proof of the truthfulness thereof. Any
person, including, without limitation, Borrower or Lender, may purchase at such
sale. Lender may sell not only the real property but also the Personal Property
and other interests which are a part of the Mortgaged Property, or any part
thereof, as a unit and as a part of a single sale, or may sell any part of the
Mortgaged Property separately from the remainder of the Mortgaged Property.
Lender shall not be required to take possession of any part of the Mortgaged
Property or to have any of the Personal Property present at any sale of the
Mortgaged Property. Lender may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Lender, including the posting of notices and the conduct of sale, but in the
name and on behalf of Lender. In the event any sale hereunder is not completed
or is defective in the opinion of Lender, such sale shall not exhaust the power
of sale hereunder, and Lender shall have the right to cause a subsequent sale or
sales to be made hereunder.

 

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(ii) As may be permitted by law, Lender shall apply the proceeds of sale
(i) first, to payment of all costs, fees and expenses, including reasonable
attorneys’ fees and expenses incurred by the Lender in exercising the power of
sale or foreclosing this Mortgage, (ii) second, to the payment of the
Obligations (including, without limitation, the principal, accrued interest and
other sums due and owing under the Note and the amounts due and owing to Lender
under this Mortgage) in such manner and order as Lender may elect, and
(iii) third, the remainder, if any, shall be paid to Borrower, or to Borrower’s
heirs, devisees, representatives, successors or assigns, or such other persons
as may be entitled thereto.

(iii) Lender may in the manner provided by law postpone sale of all or any
portion of the Mortgaged Property.

Section 6.03. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Lender, as a matter of right and without notice to
Borrower or anyone claiming under Borrower, and without regard to the then value
of the Mortgaged Property or the interest of Borrower therein, or the insolvency
of Borrower or the then-owner of the Mortgaged Property, may seek the
appointment of a receiver for the Mortgaged Property upon ex parte application
to any court of competent jurisdiction. Borrower waives any right to any hearing
or notice of hearing prior to the appointment of a receiver. Such receiver shall
be empowered (a) to take possession of the Mortgaged Property and any businesses
conducted by Borrower thereon and any business assets used in connection
therewith, (b) to exclude Borrower and Borrower’s agents, servants and employees
from the Mortgaged Property, or, at the option of the receiver, in lieu of such
exclusion, to collect a fair market rental from any such persons occupying any
part of the Mortgaged Property, (c) to collect the Rents, (d) to complete any
construction that may be in progress, (e) to continue the development, marketing
and sale of the Mortgaged Property, (f) to do such maintenance and make such
repairs and alterations as the receiver deems necessary, (g) to use all stores
of materials, supplies and maintenance equipment on the Mortgaged Property and
replace such items at the expense of the receivership estate, (h) to pay all
taxes and assessments against the Mortgaged Property, all premiums for insurance
thereon, all utility and other operating expenses, and all sums due under any
prior or subsequent encumbrance, (i) to request that Lender advance such funds
as may reasonably be necessary to the effective exercise of the receiver’s
powers, on such terms as may be agreed upon by the receiver and Lender, but not
in excess of the Default Rate, and (j) generally to do anything that Borrower
could legally do if Borrower were in possession of the Mortgaged Property. All
expenses incurred by the receiver or his agents, including obligations to repay
funds borrowed by the receiver, shall constitute a part of the Obligations. Any
revenues collected by the receiver shall be applied first to the expenses of the
receivership, including reasonable attorneys’ fees incurred by the receiver and
by Lender, together with interest thereon at the highest rate of interest
applicable in the Note from the date incurred until repaid, and the balance
shall be applied toward the Obligations or in such other manner as the court may
direct.

Section 6.04. Remedies Not Exclusive. Lender shall be entitled to enforce
payment and performance of any Obligations and to exercise all rights and powers
under this Mortgage or under any Loan Documents or Other Agreements or any laws
now or hereafter in force, notwithstanding some or all of the Obligations may
now or hereafter be otherwise secured, whether by mortgage, deed of trust,
pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgage
nor its enforcement, whether by court action or pursuant to the power of sale or
other powers herein contained, shall prejudice or in any manner affect Lender’s
right to realize upon or enforce any other security now or hereafter held by
Lender, it being agreed that Lender shall be entitled to enforce this Mortgage
and any other security now or hereafter held by Lender in such order and manner
as it may in its absolute discretion

 

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determine. No remedy herein conferred upon or reserved to Lender is intended to
be exclusive of any other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Loan
Documents to Lender, or to which Lender may be otherwise entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Lender. Lender may pursue inconsistent remedies.

The acceptance by Lender of any sum after the same is due shall not constitute a
waiver of the right either to require prompt payment, when due, of all other
sums hereby secured or to declare a subsequent Event of Default as herein
provided. The acceptance by Lender of any sum in an amount less than the sum
then due shall be deemed an acceptance on account only and upon condition that
it shall not constitute a waiver of the obligation of Borrower to pay the entire
sum then due, and failure of Borrower to pay such entire sum then due shall be
an Event of Default, notwithstanding such acceptance of such amount on account,
as aforesaid. Lender shall be, at all times thereafter and until the entire sum
then due as contemplated by the Loan Documents shall have been paid, and
notwithstanding the acceptance by Lender thereafter of further sums on account,
or otherwise, entitled to exercise all rights in this instrument conferred upon
them or either of them, and the right to proceed with a sale under any notice of
default, or an election to sell, or the right to exercise any other rights or
remedies hereunder, shall in no way be impaired, whether any of such amounts are
received prior or subsequent to such proceeding, election or exercise. Consent
by Lender to any action or inaction of Borrower which is subject to consent or
approval of Lender hereunder shall not be deemed a waiver of the right to
require such consent or approval to future or successive actions or inactions.

Section 6.05. Possession of Mortgaged Property. In the event of a trustee’s sale
or foreclosure sale hereunder and after the time of such sale, Borrower occupies
the portion of the Mortgaged Property so sold, or any part thereof, Borrower
shall immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of either tenant or
landlord, at a reasonable rental per day based upon the value of the portion of
the Mortgaged Property so occupied, such rental to be due and payable daily to
the purchaser. An action of unlawful detainer shall lie if the tenant holds over
after a demand in writing for possession of such Mortgaged Property; and this
Mortgage and a trustee’s or sheriff’s deed shall constitute a lease and
agreement under which the tenant’s possession arose and continued. Nothing
contained in this Mortgage shall be construed to constitute Lender as a
“mortgagee in possession” in the absence of its taking actual possession of the
Mortgaged Property pursuant to the powers granted herein.

Section 6.06. Waiver of Rights. Borrower waives the benefit of all laws now
existing or that hereafter may be enacted (a) providing for any appraisement
before sale of any portion of the Mortgaged Property, or (b) in any way
extending the time for the enforcement of the collection of the Obligations or
creating or extending a period of redemption from any sale made in collecting
the Obligations. Borrower agrees that Borrower will not at any time insist upon,
plea, claim or take the benefit or advantage of any law now or hereafter in
force providing for any appraisement, valuation, stay, extension, redemption or
homestead exemption, and Borrower, for Borrower, Borrower’s representatives,
successors and assigns, and for any and all persons ever claiming any interest
in the Mortgaged Property, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, homestead exemption, notice of
election to mature or declare due the whole of the Obligations and marshaling in
the event of foreclosure of the liens hereby created. If any law referred to in
this Section and now in force, of which Borrower, Borrower’s heirs, devisees,
representatives, successors and assigns or other person might take advantage
despite this Section, shall hereafter be repealed or cease to be in force, such
law shall not thereafter be deemed to preclude the application of this Section.

 

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Borrower expressly waives and relinquishes any and all rights, remedies and
defenses that Borrower may have or be able to assert by reason of the laws of
the State pertaining to the rights, remedies and defenses of sureties.

Section 6.07. Relief From Stay. In the event that Borrower commences a case
under the Code or is the subject of an involuntary case that results in an order
for relief under the Code, subject to court approval, Lender shall thereupon be
entitled and Borrower irrevocably consents to relief from any stay imposed by
Section 362 of the Code on or against the exercise of the rights and remedies
otherwise available to Lender as provided in the Loan Documents and Borrower
hereby irrevocably waives its rights to object to such relief. In the event
Borrower shall commence a case under the Code or is the subject of an
involuntary case that results in an order for relief under the Code, Borrower
hereby agrees that no injunctive relief against Lender shall be sought under
Section 105 or other provisions of the Code by Borrower or other person or
entity claiming through Borrower, nor shall any extension be sought of the stay
provided by Section 362 of the Code.

Section 6.08. Cash Collateral. Borrower hereby acknowledges and agrees that in
the event that Borrower commences a case under the Code or is the subject of an
involuntary case that results in an order for relief under the Code: (a) that
all of the Rents are, and shall for purposes be deemed to be, “proceeds,
product, offspring, rents, or profits” of the Premises covered by the lien of
this Mortgage, as such quoted terms are used in Section 552(b) of the Code;
(b) that in no event shall Borrower assert, claim or contend that any portion of
the Rents are, or should be deemed to be, “accounts” or “accounts receivable”
within the meaning of the Code and/or applicable state law; (c) that the Rents
are and shall be deemed to be in any such bankruptcy proceeding “cash
collateral” of Lender as that term is defined in Section 363 of the Code; and
(d) that Lender has valid, effective, perfected, enforceable and “choate” rights
in and to the Rents without any further action required on the part of Lender to
enforce or perfect its rights in and to such cash collateral, including, without
limitation, providing notice to Borrower under Section 546(b) of the Code.

Section 6.09. Assignment of Rents and Leases. (a) Borrower hereby assigns,
transfers, conveys and sets over to Lender all of Borrower’s estate, right,
title and interest in, to and under the Leases, whether existing on the date
hereof or hereafter entered into, together with any changes, extensions,
revisions or modifications thereof and all rights, powers, privileges, options
and other benefits of Borrower as the lessor under the Leases regarding the
current tenants and any future tenants, and all the Rents from the Leases,
including those now due, past due or to become due. Borrower irrevocably
appoints Lender its true and lawful attorney-in-fact, at the option of Lender,
at any time and from time to time upon the occurrence and during the continuance
of an Event of Default, to take possession and control of the Premises, pursuant
to Borrower’s rights under the Leases, to exercise any of Borrower’s rights
under the Leases, and to demand, receive and enforce payment, to give receipts,
releases and satisfaction and to sue, in the name of Borrower or Lender, for all
of the Rents. The power of attorney granted hereby shall be irrevocable and
coupled with an interest and shall terminate only upon the payment of all sums
due Lender for all losses, costs, damages, fees and expenses whatsoever
associated with the exercise of this power of attorney, and Borrower hereby
releases Lender from all liability (other than as a result of the gross
negligence or willful misconduct of Lender) whatsoever for the exercise of the
foregoing power of attorney and all actions taken pursuant thereto. The
consideration received by Borrower to execute and deliver this assignment and
the liens and security interests created herein is legally sufficient and will
provide a direct economic benefit to Borrower. It is intended by Borrower and
Lender that the assignment set forth herein constitutes an absolute assignment
and not merely an assignment for additional security. Notwithstanding the
foregoing, this assignment shall not be construed to bind Lender to the
performance of any

 

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of the covenants, conditions or provisions of Borrower contained in the Leases
or otherwise to impose any obligation upon Lender, and, so long as no Event of
Default shall have occurred and be continuing, Borrower shall have a license,
revocable upon an Event of Default, to possess and control the Premises and
collect and receive all Rents. Upon an Event of Default, such license shall be
automatically revoked.

(b) Upon the occurrence and during the continuance of an Event of Default,
Lender may, at any time without notice (except if required by applicable law),
either in person, by agent or by a court-appointed receiver, regardless of the
adequacy of Lender’s security, and at its sole election (without any obligation
to do so), enter upon and take possession and control of the Premises, or any
part thereof, to perform all acts necessary and appropriate to operate and
maintain the Premises, including, but not limited to, execute, cancel or modify
the Leases, make repairs to the Premises, execute or terminate contracts
providing for the management or maintenance of the Premises, all on such terms
as are deemed best to protect the security of this assignment, and in Lender’s
or Borrower’s name, sue for or otherwise collect such Rents as specified in this
Mortgage as the same become due and payable, including, but not limited to,
Rents then due and unpaid. Lender may so sue for or otherwise collect such Rents
with or without taking possession of the Premises. Borrower agrees that upon the
occurrence and during the continuance of an Event of Default, each tenant of the
Premises shall make its rent payable to and pay such rent to Lender (or Lender’s
agents) on Lender’s written demand therefor, delivered to such tenant
personally, by mail, or by delivering such demand to each rental unit, without
any liability on the part of said tenant to inquire further as to the existence
of an Event of Default by Borrower.

(c) Rents collected subsequent to any Event of Default shall be applied at the
direction of, and in such order as determined by, Lender to the costs, if any,
of taking possession and control of and managing the Premises and collecting
such amounts, including, but not limited to, reasonable attorney’s fees,
receiver’s fees, premiums on receiver’s bonds, costs of repairs to the Premises,
premiums on insurance policies, taxes, assessments and other charges on the
Premises, and the costs of discharging any obligation or liability of Borrower
with respect to the Leases and to the sums secured by this Mortgage. Lender or
the receiver shall have access to the books and records used in the operation
and maintenance of the Premises and shall be liable to account only for those
Rents actually received.

(d) Lender shall not be liable to Borrower, anyone claiming under or through
Borrower or anyone having an interest in the Premises by reason of anything done
or left undone by Lender hereunder, except to the extent of Lender’s gross
negligence or willful misconduct.

(e) Any entering upon and taking possession and control of the Premises by
Lender or the receiver and any application of Rents as provided herein shall not
cure or waive any Event of Default hereunder or invalidate any other right or
remedy of Lender under applicable law or provided therein.

ARTICLE VII           

MISCELLANEOUS

Section 7.01. Satisfaction/Partial Release. If and when the Obligations shall
have become due and payable (whether by lapse of time or by acceleration or by
the exercise of the privilege of prepayment), and Borrower shall pay or cause to
be paid (provided such payment is permitted or required by the Note the full
amount thereof and shall also pay or cause to be paid all other sums payable by
the Borrower Parties to the Lender Entities with respect to the Obligations,
then this Mortgage shall be void (otherwise it shall remain in full force and
effect in

 

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law and equity forever) and Lender agrees to execute an instrument evidencing
the satisfaction of all obligations under this Mortgage and releasing this
Mortgage which shall be prepared and recorded at Borrower’s sole expense. In
addition and notwithstanding the foregoing, Borrower may request release of a
single property (the “Release Site”) securing the Obligations (“Partial
Release”) provided that (i) no Event of Default has occurred or is continuing
under the Loan Documents with Lender or any of its Affiliates, (ii) the Fixed
Charge Coverage Ratio (as defined in the Loan Documents) on all remaining
properties securing the Obligations exceeds 1.3:1 on an aggregate and individual
basis, (iii) the Release Site is being sold by the Borrower in an arms-length
transaction, (iv) proceeds from the sale of the Release Site are being used to
repay the Obligations assigned to the Release Site, and such payment shall be
subject to any applicable prepayment premiums or penalties, (v) Borrower gives
at least 30-days prior notice to Lender, (vi) a minimum of nine (9) hotel real
property sites remain in the portfolio (in other words, continue to secure the
Obligations),  (vii) more than nine (9) months have passed since the date of
this Mortgage, and (viii) the remaining unexpired term of the Loan exceeds six
(6) months.

Section 7.02. Limitation of Rights of Others. Nothing in this Mortgage is
intended or shall be construed to give to any person, other than Borrower and
the holder of the Note, any legal or equitable right, remedy or claim under or
in respect of this Mortgage or any covenant, condition or provision herein
contained.

Section 7.03. Severability. In case any one or more of the provisions contained
herein or in the Note shall be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof, and this Mortgage shall be construed as if such
provision had never been contained herein or therein.

Section 7.04. Notices; Amendments; Waiver. All notices, demands, designations,
certificates, requests, offers, consents, approvals, appointments and other
instruments given pursuant to this Mortgage (collectively called “Notices”)
shall be in writing and given by (a) hand delivery, (b) facsimile, (c) express
overnight delivery service or (d) certified or registered mail, return receipt
requested and shall be deemed to have been delivered upon (i) receipt, if hand
delivered, (ii) transmission, if delivered by facsimile, (iii) the next Business
Day, if delivered by express overnight delivery service, or (iv) the third
Business Day following the day of deposit of such notice with the United States
Postal Service, if sent by certified or registered mail, return receipt
requested. Notices shall be provided to the parties and addresses (or facsimile
numbers, as applicable) specified below:

If to Borrower:

Supertel Limited Partnership

309 North 5th Street, PO Box 1448

Norfolk, Nebraska 68701

Attn: Donavon Heimes

Telephone: (402) 371-2520

Telecopy: (402) 371-4229

If to Lender:

General Electric Capital Corporation

8377 East Hartford Drive, Suite 200

Scottsdale, Arizona 85255

Attention: Collateral Management

Telephone: 480-585-4500

Telecopy: 480-585-2225

 

 

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or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above. Whenever in this Mortgage the giving of Notice is required, the
giving thereof may be waived in writing at any time by the person or persons
entitled to receive such Notice. Except as in this Mortgage otherwise expressly
provided, (i) this Mortgage may not be modified except by an instrument in
writing executed by Borrower and Lender and (ii) no requirement hereof may be
waived at any time except by a writing signed by the party against whom such
waiver is sought to be enforced, nor shall any waiver be deemed a waiver of any
subsequent breach or default.

Section 7.05. Successors and Assigns. All of the provisions herein contained
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto, to the same extent as if each such successor and
assign were in each case named as a party to this Mortgage. Wherever used, the
singular shall include the plural, the plural shall include the singular and the
use of any gender shall include all genders.

Section 7.06. Headings. The headings appearing in this Mortgage have been
inserted for convenient reference only and shall not modify, define, limit or
expand the express provisions of this Mortgage.

Section 7.07. Time of the Essence. Time is of the essence in the performance of
each and every obligation under this Mortgage.

Section 7.08. Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower
acknowledges that this Mortgage was substantially negotiated in the State of
Arizona, this Mortgage was delivered in the State of Arizona, all payments under
the Loan Documents will be delivered in the State of Arizona and there are
substantial contacts between the parties and the transactions contemplated
herein and the State of Arizona. For purposes of any action or proceeding
arising out of this Mortgage, the parties hereto expressly submit to the
jurisdiction of all federal and state courts located in the State of Arizona.
Borrower consents that it may be served with any process or paper by registered
mail or by personal service within or without the State of Arizona in accordance
with applicable law. Furthermore, Borrower waives and agrees not to assert in
any such action, suit or proceeding that it is not personally subject to the
jurisdiction of such courts, that the action, suit or proceeding is brought in
an inconvenient forum or that venue of the action, suit or proceeding is
improper. The creation of this Mortgage and the rights and remedies of Lender
with respect to the Mortgaged Property, as provided herein and by the laws of
the State, shall be governed by and construed in accordance with the internal
laws of the State without regard to its principles of conflicts of law. With
respect to other provisions of this Mortgage, this Mortgage shall be governed by
the internal laws of the State of Arizona, without regard to its principles of
conflicts of law. Nothing in this Section shall limit or restrict the right of
Lender to commence any proceeding in the federal or state courts located in the
State to the extent Lender deems such proceeding necessary or advisable to
exercise remedies available under the Mortgage or the other Loan Documents.

Section 7.09. Indemnification. Borrower shall indemnify and hold harmless each
of the Indemnified Parties for, from and against any and all claims, suits,
liabilities (including, without limitation, strict liabilities), actions,
proceedings, obligations, debts, damages, losses, costs, expenses, diminutions
in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts
paid in settlement and damages of whatever kind or nature (including, without
limitation, reasonable attorneys’ fees, court costs and other costs of defense)
(collectively, “Losses”) (excluding Losses suffered by an Indemnified Party
arising out of such Indemnified Party’s gross negligence or willful misconduct;
provided, however, that the term “gross negligence” shall not include gross
negligence imputed as a matter of law to any of the Indemnified Parties solely
by reason of Borrower’s interest in the Mortgaged Property or

 

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Borrower’s failure to act in respect of matters which are or were the obligation
of Borrower under the Loan Documents) caused by, incurred or resulting from
Borrower’s or Lessee’s operations of, or relating in any manner to, the
Mortgaged Property, whether relating to its original design or construction,
latent defects, alteration, maintenance, use by Borrower, Lessee or any person
thereon, supervision or otherwise, or from any breach of, default under or
failure to perform any term or provision of this Mortgage by Borrower, its
officers, employees, agents or other persons. It is expressly understood and
agreed that Borrower’s obligations under this Section shall survive the
expiration or earlier termination of this Mortgage for any reason.

Section 7.10. Waiver of Jury Trial and Punitive, Consequential, Special and
Indirect Damages. LENDER, BY ACCEPTING THIS MORTGAGE, AND BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR
IN CONNECTION WITH THIS MORTGAGE, THE RELATIONSHIP OF LENDER AND BORROWER,
BORROWER’S USE OR OCCUPANCY OF THE MORTGAGED PROPERTY, AND/OR ANY CLAIM FOR
INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY THE
PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN
NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, BORROWER
AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT
EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES
FROM THE OTHER AND ANY OF THE OTHER’S AFFILIATES, OFFICERS, DIRECTORS OR
EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES
PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER
PARTY AGAINST THE OTHER OR ANY OF THE OTHER’S AFFILIATES, OFFICERS, DIRECTORS OR
EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF
OR IN CONNECTION WITH THIS MORTGAGE OR ANY DOCUMENT CONTEMPLATED HEREIN OR
RELATED HERETO. THE WAIVER BY BORROWER AND LENDER OF ANY RIGHT THEY MAY HAVE TO
SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED
BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.

IN WITNESS WHEREOF, this mortgage has been duly executed under seal by the
Borrower as of the date and year first above written.

 

BORROWER:

 

 

 

 

 

SUPERTEL LIMITED PARTNERSHIP,

 

a Virginia limited partnership

 

 

 

By SUPERTEL HOSPITALITY REIT TRUST,

 

a Maryland real estate investment trust,

 

Its General Partner

 

 

 

By /s/ Donavon A. Heimes

 

Donavon A. Heimes, Vice President/Treasurer