Exhibit 10.13.6

LOAN NO. 20059246021 (POOL 7)

AMENDED AND RESTATED LOAN AGREEMENT

Dated as of October 13, 2005

by and among

ASHFORD FALLS CHURCH LIMITED PARTNERSHIP,

ASHFORD GAITHERSBURG LIMITED PARTNERSHIP,

ASHFORD MIRA MESA SAN DIEGO LIMITED PARTNERSHIP,

ASHFORD IRVINE SPECTRUM FOOTHILL RANCH LIMITED PARTNERSHIP and

ASHFORD RALEIGH LIMITED PARTNERSHIP

(collectively, as Original Borrower)

ASHFORD IRVINE SPECTRUM FOOTHILL RANCH LIMITED PARTNERSHIP,

ASHFORD MIRA MESA SAN DIEGO LIMITED PARTNERSHIP,

ASHFORD FALLS CHURCH LIMITED PARTNERSHIP,

ASHFORD ALPHARETTA LIMITED PARTNERSHIP and

NEW HOUSTON HOTEL LIMITED PARTNERSHIP

(collectively, as Borrower)

and

MERRILL LYNCH MORTGAGE LENDING, INC.

(as Lender)

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TABLE OF CONTENTS

 

     Page  

ARTICLE 1 CERTAIN DEFINITIONS

     2   

Section 1.1. Definitions

     2   

ARTICLE 2 GENERAL TERMS

     28   

Section 2.1. Amount of the Loan

     28   

Section 2.2. Use of Proceeds

     28   

Section 2.3. Security for the Loan

     29   

Section 2.4. Borrowers’ Notes

     29   

Section 2.5. Principal, Interest and Other Payments

     29   

Section 2.6. Prepayment

     30   

Section 2.7. Application of Payments

     31   

Section 2.8. Payment of Debt Service, Method and Place of Payment

     31   

Section 2.9. Taxes

     31   

Section 2.10. Defeasance.

     32   

Section 2.11. Central Cash Management

     34   

Section 2.12. Security Agreement

     43   

Section 2.13. Secondary Market Transactions

     45   

Section 2.14. Property Substitutions

     47   

Section 2.15. Permitted Mezzanine Financing

     50   

ARTICLE 3 CONDITIONS PRECEDENT

     53   

Section 3.1. Conditions Precedent to the Making of the Loan

     53   

Section 3.2. Form of Loan Documents and Related Matters

     57   

ARTICLE 4 REPRESENTATIONS AND WARRANTIES

     57   

Section 4.1. Representations and Warranties of Borrower and Operating Lessee

     57   

Section 4.2. Survival of Representations and Warranties

     67   

ARTICLE 5 AFFIRMATIVE COVENANTS

     67   

Section 5.1. Borrower Covenants

     67   

ARTICLE 6 NEGATIVE COVENANTS

     86   

Section 6.1. Borrower Negative Covenants

     86   

 

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     Page  

ARTICLE 7 DEFAULTS

     88   

Section 7.1. Event of Default

     88   

Section 7.2. Remedies

     91   

Section 7.3. Remedies Cumulative

     92   

Section 7.4. Lender’s Right to Perform

     92   

ARTICLE 8 MISCELLANEOUS

     92   

Section 8.1. Survival

     92   

Section 8.2. Lender’s Discretion

     93   

Section 8.3. Governing Law

     93   

Section 8.4. Modification, Waiver in Writing

     94   

Section 8.5. Delay Not a Waiver

     94   

Section 8.6. Notices

     95   

Section 8.7. Trial By Jury

     96   

Section 8.8. Headings

     96   

Section 8.9. Assignment

     96   

Section 8.10. Severability

     96   

Section 8.11. Preferences

     96   

Section 8.12. Waiver of Notice

     97   

Section 8.13. Remedies of Borrower

     97   

Section 8.14. Exculpation.

     97   

Section 8.15. Exhibits Incorporated

     99   

Section 8.16. Offsets, Counterclaims and Defenses

     99   

Section 8.17. No Joint Venture or Partnership

     99   

Section 8.18. Waiver of Marshalling of Assets Defense

     100   

Section 8.19. Waiver of Counterclaim

     100   

Section 8.20. Conflict; Construction of Documents

     100   

Section 8.21. Brokers and Financial Advisors

     100   

Section 8.22. Counterparts

     100   

Section 8.23. Estoppel Certificates

     101   

Section 8.24. Payment of Expenses

     101   

Section 8.25. Bankruptcy Waiver

     101   

Section 8.26. Entire Agreement

     102   

Section 8.27. Dissemination of Information

     102   

Section 8.28. Limitation of Interest

     102   

 

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     Page  

Section 8.29. Indemnification

     103   

Section 8.30. Borrower Acknowledgments

     103   

Section 8.31. Publicity

     104   

Section 8.32. Intentionally omitted

     104   

Section 8.33. Cross-Collateralization

     104   

Section 8.34. Time of the Essence

     104   

Section 8.35. FINAL AGREEMENT

     104   

Section 8.36. [Intentionally omitted]

     104   

Section 8.37. Joint and Several Liability

     104   

Section 8.38. Loan Modification

     104   

Section 8.39. Consent Fees

     104   

Section 8.40. Insurance, Casualty and Condemnation Provisions

     105   

 

Exhibit A

  Additional Definitions

Exhibit B

  Deferred Maintenance

Exhibit C

  Individual Properties and Allocated Loan Amounts

Exhibit D

  Franchisors and Managers

Exhibit E

  Operating Budget

Exhibit F

  FF&E Financing

Exhibit G

  Organizational Chart

Exhibit H

  Property Improvement Plans

Exhibit I

  Required Expenditure Amounts for Individual Properties

Exhibit J

  Capital Improvements and PIP Schedule

Exhibit K

  Upfront Remediation

Schedule 1

  Litigation

Schedule 2

  Franchise Defaults

Schedule 3

  Amortization Schedule

 

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AMENDED AND RESTATED LOAN AGREEMENT

THIS AMENDED AND RESTATED LOAN AGREEMENT, made as of October 13, 2005, is by and
between (i) MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (in
such capacity, and together with its successors and assigns “Lender”),
(ii) ASHFORD FALLS CHURCH LIMITED PARTNERSHIP, ASHFORD GAITHERSBURG LIMITED
PARTNERSHIP, ASHFORD MIRA MESA SAN DIEGO LIMITED PARTNERSHIP, ASHFORD IRVINE
SPECTRUM FOOTHILL RANCH LIMITED PARTNERSHIP and ASHFORD RALEIGH LIMITED
PARTNERSHIP, each a Delaware limited partnership (individually and collectively,
as the context may require, “Original Borrower”) and (iii) ASHFORD IRVINE
SPECTRUM FOOTHILL RANCH LIMITED PARTNERSHIP, ASHFORD MIRA MESA SAN DIEGO LIMITED
PARTNERSHIP, ASHFORD FALLS CHURCH LIMITED PARTNERSHIP, ASHFORD ALPHARETTA
LIMITED PARTNERSHIP and NEW HOUSTON HOTEL LIMITED PARTNERSHIP, each a Delaware
limited partnership (individually and collectively, as the context may require,
together with each Borrower’s successors and assigns, “Borrower”).

RECITALS

WHEREAS, Lender and Original Borrower entered into a certain Loan Agreement
dated as of June 17, 2005 (the “Original Loan Agreement”), pursuant to which
Lender agreed to make a loan to Original Borrower in the aggregate principal
amount of $81,560,000 (the “Original Loan”). Capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned to them in
the Original Loan Agreement;

WHEREAS, the Original Loan was secured by, among other things, the interests of
Original Borrower in the Individual Properties described in the Original Loan
Agreement; and

WHEREAS, Lender, Original Borrower and Borrower desire to restructure the
Original Loan such that (a) Original Borrower will be replaced by Borrower,
(b) Lender will advance additional funds to Borrower so that the aggregate
principal amount of the loan from Lender to Borrower (the “Loan”) will be
$83,075,000 (the “Loan Amount”), (c) the Loan will be secured by the interest of
Borrower in the Individual Properties described herein, and (d) other terms and
conditions of the Original Loan are modified to reflect such restructuring in
accordance with the agreements of Lender, Original Borrower and Borrower.

NOW, THEREFORE, in consideration of the restructuring of the Original Loan and
the making of the Loan by Lender, and the covenants, agreements, representations
and warranties set forth in this Agreement, the Original Borrower, Borrower and
Lender hereby agree to amend and restate the Original Loan Agreement in its
entirety as set forth herein, and covenant, agree, represent and warrant as
follows:

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ARTICLE 1

CERTAIN DEFINITIONS

Section 1.1. Definitions.

For all purposes of this Agreement:

(a) the capitalized terms defined in this Article I have the meanings assigned
to them in this Article I, and include the plural as well as the singular;

(b) all accounting terms have the meanings assigned to them in accordance with
GAAP;

(c) the words “herein”, “hereof”, and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section, or other subdivision; and

(d) the following terms have the following meanings:

“Account Collateral” means the Cash Collateral Account (including all
Sub-Accounts), each Manager Account, each Collection Account, each Non-Marriott
Property Operating Account, all amounts deposited or held in such accounts, and
all Proceeds of any or all of the foregoing.

“Adjusted Net Cash Flow” means, with respect to each Individual Property, for
any period, the Net Operating Income for the twelve (12) months trailing such
period (Net Operating Income to be calculated for the purposes of this
definition of “Adjusted Net Cash Flow” without deduction for actual base
management fees or incentive management fees paid pursuant to any Management
Agreement for such period, actual franchise fees paid pursuant to any Franchise
Agreement for such period, or the Capital Reserve Amount for such period)
reduced by (i) annual base management fees, pro rated for the applicable period,
equal to the greater of (a) 3% of Gross Revenues per annum and (b) actual base
management fees paid pursuant to the applicable Management Agreement, (ii) an
annual reserve with respect to leases, purchases and replacements of FF&E, pro
rated for the applicable period, equal to the greater of (a) 4% of Gross
Revenues per annum, and (b) the amount required to be reserved during such
period with respect to leases, purchases and replacements of FF&E pursuant to
the applicable Management Agreement, (iii) actual incentive management fees paid
pursuant to the applicable Management Agreement for the applicable period and
(iv) actual base franchise fees paid pursuant to the applicable Franchise
Agreement for the applicable period (if applicable), all as determined by Lender
in its reasonable discretion.

“Affiliate” of any specified Person means any other Person controlling,
controlled by or under common control with such specified Person. For the
purposes of this Agreement, “control” when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or
other beneficial interests, by contract or otherwise; and the terms “controls”,
“controlling” and “controlled” have the meanings correlative to the foregoing. .
For the avoidance of doubt, with respect to any Borrower or Operating Lessee,
the definition of “Affiliate” shall not include Remington Manager.

 

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“Agreement” means this Loan Agreement, as the same may from time to time
hereafter be modified, supplemented or amended.

“Allocated Loan Amount” means, with respect to each Individual Property, the
Allocated Loan Amount for such Individual Property set forth on Exhibit C
attached hereto, as such amounts shall be adjusted from time to time as
hereinafter set forth. Upon each adjustment in the amount of Indebtedness due to
the making of a prepayment of the Loan in accordance with the terms hereof, each
Allocated Loan Amount shall be decreased by an amount equal to the product of
(i) the amount of such payment and (ii) a fraction, the numerator of which is
the applicable Allocated Loan Amount (prior to the adjustment in question) and
the denominator of which is the total of all Allocated Loan Amounts (prior to
the adjustment in question). Notwithstanding the foregoing sentence to the
contrary, when the Indebtedness is reduced as the result of Lender’s receipt of
proceeds with respect to a Condemnation or Casualty affecting one hundred
percent (100%) of any Individual Property, the Allocated Loan Amount for such
Individual Property with respect to which the Insurance Proceeds or Condemnation
Proceeds were received shall, at Lender’s sole discretion, be reduced to zero
(such Allocated Loan Amount prior to reduction being referred to as the
“Withdrawn Allocated Amount”), and each other Allocated Loan Amount shall, if
the Withdrawn Allocated Amount exceeds such proceeds (such excess being referred
to as the “Proceeds Deficiency”), be increased by an amount equal to the product
of (1) the Proceeds Deficiency and (2) a fraction, the numerator of which is the
applicable Allocated Loan Amount (prior to the adjustment in question) and the
denominator of which is the aggregate of all of the Allocated Loan Amounts
(prior to the adjustment in question) other than the Withdrawn Allocated Amount.
The “Allocated Loan Amount” for any Qualified Substitute Property, following the
occurrence of a Property Substitution, shall be the Allocated Loan Amount, as of
the date of such Property Substitution, for the Individual Property replaced by
such Qualified Substitute Property.

“Appraisal” means an appraisal of any Individual Property prepared in accordance
with the requirements of FIRREA prepared by an independent third party appraiser
holding an MAI designation, who is state licensed or state certified if required
under the laws of the state where such Individual Property is located, who meets
the requirements of FIRREA and who is otherwise reasonably satisfactory to
Lender.

“Approved Budget” has the meaning provided in Section 5.1(Q)(x).

“Appurtenant Rights” means, collectively, “Appurtenant Rights” as defined in
each Mortgage.

“Assignment of Agreements” shall mean, with respect to each Individual Property,
a first priority Assignment of Management Agreement and Agreements Affecting
Real Estate or Amended and Restated Assignment of Management Agreement and
Agreements Affecting Real Estate, as applicable, in form and substance
satisfactory to Lender, dated as of the Closing Date, from each applicable
Borrower, as assignor, to Lender, as assignee, as the same may thereafter from
time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.

 

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“Assignment of Leases” shall mean, with respect to each Individual Property, a
first priority Assignment of Leases and Rents, in form and substance
satisfactory to Lender, either (a) dated as of the Closing Date, or (b) dated as
of June 17, 2005 and amended by a certain Amendment to Mortgage, Deed of Trust
or Deed to Secure Debt, Assignment of Rents, Security Agreement and Fixture
Filing and to Assignment of Leases and Rents, or similar document, dated as of
the Closing Date, as applicable, each from the applicable Borrower, as assignor,
to Lender, as assignee, assigning to Lender all of such Borrower’s right, title
and interest in and to the Leases and the Rents, as the same may thereafter from
time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.

“Basic Carrying Costs” means the following costs with respect to each Individual
Property: (i) Impositions applicable to such Property; and (ii) insurance
premiums for policies of insurance required or permitted to be maintained by the
applicable Borrower pursuant to this Agreement or the other Loan Documents.

“Basic Carrying Costs Monthly Installment” means, collectively, with respect to
all Individual Properties, Lender’s reasonable and good faith estimate of
one-twelfth (1/12th) of the annual amount of the aggregate Basic Carrying Costs
for all Individual Properties (provided, that Lender may calculate reasonably
and in good faith the monthly amount to assure that funds are reserved in
sufficient amounts to enable the payment of all Impositions, including, without
limitation, taxes and insurance premiums thirty (30) days prior to their
respective due dates). If the Basic Carrying Costs for any Individual Property
for the then current Fiscal Year or payment period are not ascertainable by
Lender at the time a monthly deposit is required to be made, the Basic Carrying
Costs Monthly Installment with respect to such Individual Property shall be
Lender’s reasonable and good faith estimate based on one-twelfth (1/12th) of the
aggregate Basic Carrying Costs for such Individual Property for the prior Fiscal
Year or payment period, with reasonable adjustments as determined by Lender. As
soon as the Basic Carrying Costs are fixed for the then current Fiscal Year or
period, the next ensuing Basic Carrying Costs Monthly Installment shall be
adjusted to reflect any deficiency or surplus in prior Basic Carrying Costs
Monthly Installments.

“Basic Carrying Costs Sub-Account” means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.11 relating to the
payment of Basic Carrying Costs.

“Borrower” has the meaning provided in the preamble to this Agreement.

“Business Day” means any day other than a Saturday, a Sunday or a legal holiday
on which national banks are not open for general business in (i) the State of
New York, (ii) the state where the corporate trust office of the any trustee in
connection with a Secondary Market Transaction is located, or (iii) the state
where the servicing offices of the any servicer in connection with a Secondary
Market Transactions are located.

 

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“Capital Improvement Costs” means, collectively, with respect to each Individual
Property, the costs incurred by Borrowers in connection with (a) capital
improvements to the Individual Properties (other than capital improvements
referred to in clauses (i) and (ii) of Section 5.1(W)), and (b) the financing of
furniture, fixture and equipment leases or purchases in the ordinary course of
operating the Individual Properties in the manner each is operated as of the
Closing Date.

“Capital Reserve Amount” means, with respect to each Individual Property, an
amount equal to the greater of (i) four percent (4%) of projected annual Gross
Revenue set forth in the then current Approved Budget and (ii) the amount
required to be reserved per annum with respect to Capital Improvement Costs
pursuant to the applicable Management Agreement.

“Capital Reserve True-Up Amount” means an amount as of December 31 of each
calendar year equal to the difference between (i) four percent (4%) of actual
Gross Revenue for such calendar year and (ii) the Capital Reserve Amount for
such calendar year; provided that for the period ending December 31, 2005 such
amount shall be calculated using the prorated period from the Closing Date
through and including December 31, 2005.

“Capital Reserve Monthly Installment” means an amount equal to one twelfth
(1/12th) of the aggregate Capital Reserve Amounts for all Individual Properties.

“Capital Reserve Sub-Account” means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.11 relating to the
payment of Capital Improvement Costs.

“Cash Collateral Account” has the meaning provided in Section 2.11(b).

“Cash Collateral Account Agreement” has the meaning provided in Section 2.12(c).

“Cash Collateral Account Bank” means the bank chosen by Lender to hold the Cash
Collateral Account and the Non-Marriott Property Operating Account, or any
successor bank hereafter selected by Lender in accordance with the terms hereof.

“Cash Management Fee Sub-Account” means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.11 relating to the
payment of fees payable to the Cash Collateral Account Bank.

“Closing Date” means the date of this Agreement.

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

“Collateral” means, collectively, the “Collateral” as defined in each Mortgage.

“Collection Account” has the meaning provided in Section 2.11(a).

 

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“Collection Account Agreement” means, with respect to each Non-Marriott
Property, that certain Collection Account Agreement dated as of the Closing
Date, among the Collection Account Bank, the applicable Borrower, Operating
Lessee and Lender.

“Collection Account Bank” shall mean, with respect to each Non-Marriott
Property, the collection bank for such Individual Property and any successor
bank hereafter selected by each applicable Borrower which owns such Individual
Property and approved by Lender in accordance with each Collection Account
Agreement.

“Combined Debt Service” means, for any period, the sum of (a) Debt Service, and
(b) Mezzanine Debt Service.

“Combined Debt Service Coverage Ratio” means, for any period, the quotient
obtained by dividing (1) the aggregate Adjusted Net Cash Flow for all Individual
Properties for the specified period by (2) the aggregate Combined Debt Service
due for such period, assuming that the Loan is payable in accordance with a
25-year amortization schedule.

“Condemnation Proceeds” has the meaning, with respect to each Individual
Property, provided in the Mortgage for such Individual Property.

“Contingent Obligation” means any obligation of any Borrower guaranteeing any
indebtedness, leases, dividends or other obligations (“primary obligations”) of
any other Person (the “primary obligor”) in any manner, whether directly or
indirectly, including, without limitation, any obligation of any Borrower,
whether or not contingent; (i) to purchase any such primary obligation, or any
property constituting direct or indirect security therefor; (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor;
(iii) to purchase property, securities or services primarily for the purpose of
assuring the owner or obligee under any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation; or
(iv) otherwise to assure or hold harmless the owner or obligee under such
primary obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum anticipated liability in
respect thereof (assuming that the applicable Borrower is required to perform
thereunder) as determined by Lender in good faith.

“Cooperation Agreement” means that certain Amended and Restated
Cross-Collateralization and Cooperation Agreement dated as of even date
herewith, between Borrower, certain other “Borrowers” named therein and Lender,
as the same may be amended, modified or supplemented from time to time.

“Costs of Uncollectible Drafts” means (a) fees or charges regularly and
customarily charged by Morgan Collection Bank to its customers with respect to
any items deposited by or on behalf of the Borrowers or Operating Lessee into a
Collection Account which is returned for insufficient or uncollected funds
(“Uncollectible Drafts”), and (b) the amount represented by such Uncollectible
Draft if such amount has actually been credited by Morgan Collection Bank to the
Cash Collateral Account prior to Morgan Collection Bank effecting final payment
thereof.

 

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“Current Interest Accrual Period” has the meaning provided in Section 2.11(d).

“Debt Service” means, for any period, the aggregate of all principal, interest
payments, Default Rate interest, Late Charges and other amounts that accrue or
are due and payable in accordance with the Loan Documents during such period.

“Debt Service Coverage Ratio” means, for any period, the quotient obtained by
dividing (1) the aggregate Adjusted Net Cash Flow for all Individual Properties
for the specified period by (2) the aggregate Debt Service due for such period,
assuming that the Loan is payable in accordance with a 25-year amortization
schedule.

“Debt Service Payment Sub-Account” means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.11 relating to the
payment of Debt Service.

“Deed of Trust Trustee” means, with respect to each Individual Property, the
trustee, if any, under the Mortgage for such Individual Property.

“Default” means the occurrence of any event which, but for the giving of notice
or the passage of time, or both, would be an Event of Default.

“Default Collateral” has the meaning provided in Section 8.14.

“Default Rate” means a per annum interest rate equal to the lesser of (i) the
Maximum Amount or (ii) the Interest Rate plus five percent (5%).

“Defeasance Collateral” means U.S. Obligations (i) having maturity dates on or
prior to, but as close as possible to, successive scheduled Payment Dates (after
the Defeasance Release Date) upon which Payment Dates interest and principal
payments are required under the Full Defeased Note or the Defeased Note, as the
case may be, through and including the Maturity Date and (ii) in amounts
sufficient to pay all scheduled principal and interest payments on the Full
Defeased Note or the Defeased Note, as the case may be, on each Payment Date
through and including the Maturity Date and any tax payable in respect of any
income earned by Borrower or Successor Obligor from such U.S. Obligations and
(iii) the proceeds of which shall be payable directly to the Cash Collateral
Account.

“Defeasance Deposit” means the amount that will be sufficient to purchase the
Defeasance Collateral.

“Defeasance Release Date” has the meaning provided in Section 2.10.

“Defeased Note” has the meaning provided in Section 2.10.

“Deferred Maintenance” has the meaning provided in Section 5.1(V).

 

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“Deferred Maintenance Sub-Account” means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.11 relating to the
payment of Deferred Maintenance Costs.

“Deferred Maintenance Costs” means costs incurred by Borrower in connection with
any Deferred Maintenance.

“Eligible Account” means (i) an account maintained with a federal or state
chartered depository institution or trust company whose (x) commercial paper,
short-term debt obligations or other short-term deposits are rated at least A-1
by S&P and the equivalent by each other Rating Agency if the deposits in such
account are to be held in such account for thirty (30) days or less or
(y) long-term unsecured debt obligations are rated at least A by S&P and the
equivalent by each other Rating Agency if the deposits in such account are to be
held in such account for more than thirty (30) days; or (ii) a segregated trust
account maintained with the trust department of a federal or state chartered
depository institution or trust company acting in its fiduciary capacity which
institution or trust company is subject to regulations regarding fiduciary funds
on deposit substantially similar to 12 C.F.R. § 9.10(b); or (iii) an account
otherwise acceptable to each Rating Agency, as confirmed in writing that such
account would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any security issued in
connection with a Secondary Market Transaction.

“Embargoed Person” has the meaning provided in Section 4.1(LL).

“Engineer” means any reputable Independent engineer, properly licensed in the
relevant jurisdiction and approved by Lender in Lender’s reasonable discretion.

“Engineering Report(s)” means, with respect to each Individual Property, the
structural engineering report(s) with respect to such Individual Property
(i) prepared by an Engineer, (ii) addressed to or permitted by such preparer to
be relied upon by Lender, (iii) prepared based on a scope of work determined by
Lender in Lender’s discretion, and (iv) in form and content acceptable to Lender
in Lender’s discretion, together with any amendments or supplements thereto.

“Entity” means a (a) corporation, if the applicable Borrower is listed as a
corporation in the preamble to this Agreement, (b) limited partnership, if the
applicable Borrower is listed as a limited partnership in the preamble to this
Agreement or (c) limited liability company, if the applicable Borrower is listed
as a limited liability company in the preamble to this Agreement.

“Environmental Indemnified Parties” includes Lender, any Person who is or will
have been involved with the servicing of the Loan, Persons 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, 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, employees, 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 who holds or acquires or will have held a
participation or other full or partial interest in the Loan or the collateral
therefor, whether during the term of the Loan or as a part of or following a
foreclosure of the collateral for 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).

 

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“Environmental Indemnity” means the Amended and Restated Environmental Indemnity
Agreement in form and substance satisfactory to Lender dated as of the Closing
Date from Borrower to Lender relating to all Individual Properties, as the same
may thereafter be from time to time supplemented, amended, modified or extended
by one or more agreements supplemental thereto.

“Environmental Law” means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations and the like, as well as common law,
relating to protection of human health or the environment, relating to Hazardous
Substances, relating to liability for or costs of other actual or threatened
danger to human health or the environment, including, without limitation, the
following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including but not limited to
Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act;
the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the
Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal
Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide
Act; the Endangered Species Act; the National Environmental Policy Act; and the
River and Harbors Appropriation Act, and including, without limitation, any
present and future federal, state and local laws, statutes ordinances, rules,
regulations and the like, as well as common law: requiring notification or
disclosure of Releases of Hazardous Substances or other environmental condition
of any or all of the Individual Properties to any Governmental Authority or
other Person, whether or not in connection with transfer of title to or interest
in any or all of the Individual Properties.

“Environmental Liens” means, with respect to each Individual Property, all liens
and other encumbrances imposed on any Borrower which owns such Individual
Property pursuant to any Environmental Law, whether due to any act or omission
of any Borrower or any other person.

“Environmental Report(s)” means, with respect to each Individual Property,
environmental audit report(s) (i) prepared by a reputable environmental Engineer
approved by Lender in Lender’s discretion, (ii) addressed to or permitted by
such environmental Engineer to be relied upon by Lender (iii) prepared based on
a scope of work determined by Lender in Lender’s discretion, and (iv) in form
and content acceptable to Lender in Lender’s discretion, together with any
amendments or supplements thereto delivered to Lender.

“Equity Interests” means (i) if the applicable Borrower is a limited
partnership, limited partnership interests in Borrower, or (ii) if the
applicable Borrower is a limited liability company, membership interests in
Borrower; or (iii) if the applicable Borrower is a corporation, the share or
stock interests in the applicable Borrower; provided, however, Equity Interests
shall not include any direct or indirect legal or beneficial ownership interest,
or any other interest of any nature or kind whatsoever, of any SPE Equity Owner
in any Borrower or in any other SPE Equity Owner, as applicable.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder. Section
references to ERISA are to ERISA, as in effect at the date of this Agreement
and, as of the relevant date, any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” means any corporation or trade or business that is a member of
any group of organizations (i) described in Section 414(b) or (c) of the Code,
of which any Borrower is a member, and (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of any ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code, of which any Borrower is a
member.

“Event of Default” has the meaning set forth in Section 7.1.

“Exchange Act” has the meaning set forth in Section 2.13.

“Extra Funds” has the meaning set forth in Section 2.11(f).

“FF&E” means furniture, furnishings, fixtures, soft goods, case goods, signage,
audio-visual equipment, kitchen equipment, carpeting, equipment, including front
desk and back-of-the-house computer equipment, but shall not include (i) items
included within “Property and Equipment” under the Uniform System of Accounts
including, but not limited to, lined, china, glassware, tableware, uniforms and
similar items, whether used in connection with the public space or guest rooms,
or (ii) any computer software or accompanying documentation (including any
future upgrades, enhancements, additions, substitutions or modifications
thereof), other than computer software which is generally commercially
available, which are used by Manager in connection with operating or otherwise
providing services to the hotel at the Property.

“FF&E Financing” shall mean, with respect to an Individual Property, the
personal property leases and personal property financing set forth with respect
to such Individual Property on Exhibit F, attached hereto and incorporated
herein and all renewals, amendments and extensions thereof.

“FIRREA” shall mean the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as the same may be amended from time to time.

“Fiscal Year” means the 12-month period ending on December 31 of each year or
such other fiscal year of Borrowers as Borrowers may select from time to time
with the prior written consent of Lender, such consent not to be unreasonably
withheld or delayed.

“Franchise Agreement” shall mean, individually or collectively, as the context
may require, each franchise or similar agreement entered into by and between a
Borrower and/or Operating Lessee and Franchisor pursuant to which the applicable
Borrower and/or Operating Lessee is permitted to operate the applicable
Individual Property under the “flag” or other trade name that is the subject
thereof, as the same may be amended, restated, replaced, supplemented or
otherwise modified in accordance with the terms hereof.

 

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“Franchisor” shall mean, individually or collectively, as the context may
require, each franchisor under a Franchise Agreement. As of the date hereof,
each Franchisor of each Individual Property is set forth on Exhibit D attached
hereto. No replacement or substitute Franchisor shall be selected, approved or
consented to by any Borrower or Operating Lessee other than in accordance with
the terms hereof.

“Franchisor’s Subordination” means, with respect to each Individual Property
that is subject to a Franchise Agreement, a Franchisor’s Consent and
Subordination Agreement, comfort letter or similar agreement in form and
substance satisfactory to Lender, dated as of the Closing Date, executed by the
relevant Franchisor and others as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.

“Full Defeased Note” has the meaning set forth in Section 2.10.

“GAAP” means generally accepted accounting principles consistently applied in
the United States of America as of the date of the applicable financial report.

“Governmental Authority” means any foreign, national, federal, state, regional
or local government, or any other political subdivision of any of the foregoing,
in each case with jurisdiction over any Borrower, all or any portion of the
Collateral, or any SPE Equity Owner, or any Person with jurisdiction over any
Borrower, any Individual Property or any SPE Equity Owner, exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

“Gross Revenue” means, with respect to each Individual Property, the total
dollar amount of all income and receipts whatsoever received by the Borrower,
Operating Lessee or any Manager or any agent thereof which owns, operates or
manages the applicable Individual Property.

“Hazardous Substance” means, without limitation, any and all substances (whether
solid, liquid or gas) defined, listed, or otherwise classified as pollutants,
toxic or hazardous wastes, toxic or hazardous substances, toxic or hazardous
materials, extremely hazardous wastes, or words of similar meaning or regulatory
effect under any present or future Environmental Laws including but not limited
to petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives, but excluding substances of kinds and in small amounts ordinarily
and customarily used or stored in similar properties for the purposes of
cleaning or other maintenance or operations and otherwise in compliance with all
Environmental Laws.

“Hotel Operations Sub-Account” means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.11 relating to the
payment of Operating Expenses.

 

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“Impositions” means, collectively, “Impositions” as defined in each Mortgage.

“Indebtedness” means, at any given time, the Principal Indebtedness, together
with all accrued and unpaid interest thereon and all other obligations and
liabilities due or to become due to Lender pursuant hereto, under the Notes or
in accordance with any of the other Loan Documents, and all other amounts, sums
and expenses paid by or payable to Lender hereunder or pursuant to the Notes or
any of the other Loan Documents.

“Indemnified Party” shall have the meaning set forth in Section 2.13.

“Independent” means, when used with respect to any Person, a Person who:
(i) does not have any direct financial interest or any material indirect
financial interest in any Borrower or in any Affiliate of any Borrower
(including, without limitation, in any SPE Equity Owner), (ii) is not connected
with any Borrower or any Affiliate of any Borrower (including, without
limitation, any SPE Equity Owner), as an officer, employee, promoter,
underwriter, trustee, partner, member, manager, creditor, director or person
performing similar functions (other than in his or her capacity as Independent
Director), and (iii) is not a member of the immediate family of a Person defined
in (i) or (ii) above.

“Independent Director” means, with respect to each Borrower, a duly appointed
member of the board of directors (or with respect to a Single Member LLC, the
board of managers) of the relevant entity who shall not have been, at the time
of such appointment or at any time while serving as a director or manager of the
relevant entity and may not have been at any time in the preceding five years
(except in a capacity as an “Independent Director” for one or more Affiliates
otherwise satisfying the requirements of this definition), (a) a direct or
indirect legal or beneficial owner in such entity or any of its affiliates or
any Borrower or any of their respective affiliates, (b) a creditor, supplier,
employee, officer, director (other than in its capacity as Independent
Director), family member, manager, or contractor of such entity or any of its
affiliates or any Borrower or any of their respective affiliates, or (c) a
Person who controls (directly, indirectly, or otherwise) such entity or any of
its affiliates or any Borrower or any of their respective affiliates or any
creditor, supplier, employee, officer, director, family member, manager, or
contractor of such Person or any of its affiliates or any Borrower or any of
their respective affiliates.

“Individual Properties” shall mean, collectively, each and every Individual
Property, subject to substitutions and releases of properties in accordance with
the terms of this Agreement.

“Individual Property” shall mean, with respect to each individual property
described on Exhibit C attached hereto, “Property” as defined in the related
Mortgage for such individual property.

“Initial Basic Carrying Cost Amount” means the amount shown as such on Exhibit
A.

“Initial Deferred Maintenance Amount” means the amount shown as such on Exhibit
A.

 

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“Initial Upfront Remediation Amount” means the amount shown as such on Exhibit
A.

“Insurance Proceeds” has the meaning, with respect to each Individual Property,
provided in the Mortgage for such Individual Property.

“Insurance Requirements” has the meaning, with respect to each Individual
Property, provided in the Mortgage for such Individual Property.

“Interest Accrual Period” shall mean, with respect to any Payment Date, a period
commencing on the first (1st) day of the calendar month preceding the month in
which such Payment Date occurs and ending on the day immediately prior to the
first (1st) day of the next calendar month. The first Interest Accrual Period
shall commence on the Closing Date and continue through and including the day
immediately prior to the first (1st) day of the calendar month following the
month in which the Closing Date occurs.

“Interest Rate” means, for any Interest Accrual Period, 5.5306% per annum or the
Default Rate for the applicable Note, as and when applicable pursuant to this
Agreement.

“Investor” has the meaning provided in Section 8.27.

“Land” means, collectively, “Land” as defined in each Mortgage.

“Late Charge” means the lesser of (i) five percent (5%) of any unpaid amount and
(ii) the maximum late charge permitted to be charged under the laws of the State
of New York.

“Leases” means, collectively, “Leases” as defined in each Mortgage.

“Legal Requirements” means all statutes, laws, rules, orders, regulations,
ordinances, judgments, orders, decrees and injunctions of Governmental
Authorities affecting any Borrower, the Loan Documents, the Collateral or any
part thereof, or the ownership, construction, use, alteration or operation
thereof, or any part thereof, enacted or entered and in force as of the relevant
date, and all Permits and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to any Borrower, at any time in force affecting the
Collateral or any part thereof, including, without limitation, any which (i) may
require repairs, modifications, or alterations in or to the Collateral or any
part thereof, or (ii) in any way limit the use and enjoyment thereof, and
further including, without limitation, all Environmental Laws and the Americans
with Disabilities Act, as they may be amended from time to time, together with
all regulations promulgated pursuant thereto or in connection therewith.

“Lender” has the meaning provided in the preamble to this Agreement.

“Liabilities” has the meaning set forth in Section 2.13.

 

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“Lien” means any mortgage, deed of trust, deed to secure debt, lien (statutory
or other), pledge, easement, restrictive covenant, hypothecation, assignment,
preference, priority, security interest, or any other encumbrance or charge on
or affecting any portion of the Collateral or any Borrower, or any interest in
any of the foregoing, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing
statement or similar instrument under the UCC or comparable law of any other
jurisdiction, domestic or foreign, and mechanic’s, materialmen’s and other
similar liens and encumbrances.

“Loan” has the meaning provided in the Recitals hereto.

“Loan Amount” has the meaning provided in the Recitals hereto.

“Loan Documents” means, collectively, this Agreement, the Note, the Mortgages,
the Assignments of Leases, the Assignments of Agreements, the Manager’s
Subordinations, Subordination, Attornment and Security Agreement, the
Environmental Indemnity, the Cash Collateral Account Agreement, the Franchisor’s
Subordinations, the Collection Account Agreements, the PIP Guaranty, the
Cooperation Agreement and all other agreements, instruments, certificates and
documents executed or delivered by or on behalf of Borrower or any Affiliate to
evidence or secure the Loan or otherwise in satisfaction of the requirements of
this Agreement, any Mortgage or the other documents listed above.

“Losses” means any losses, actual damages, costs, fees, expenses, claims, suits,
judgments, awards, liabilities (including but not limited to strict
liabilities), obligations, debts, fines, penalties, charges, costs of
Remediation (whether or not performed voluntarily), amounts paid in settlement,
litigation costs, reasonable attorneys’ fees, engineers’ fees, environmental
consultants’ fees, and investigation costs (including but not limited to costs
for sampling, testing and analysis of soil, water, air, building materials, and
other materials and substances whether solid, liquid or gas), of whatever kind
or nature, and whether or not incurred in connection with any judicial or
administrative proceedings, actions, claims, suits, judgments or awards.

“Management Agreement” means the Management Agreement entered into between
Manager and each Borrower or Operating Lessee pertaining to the management of
each Individual Property in the form attached to the Manager’s Subordinations.

“Manager” means, individually or collectively, as the context may require, each
manager under a Management Agreement. As of the date hereof, the Manager of each
Individual Property is set forth on Exhibit D attached hereto. No replacement or
substitute Manager shall be selected, approved or consented to by any Borrower
or Operating Lessee other than in accordance with the terms hereof.

“Manager Account” means, with respect to each Individual Property, the
“Operating Accounts” (as defined in the applicable Management Agreement)
maintained by the applicable Manager pursuant to the applicable Management
Agreement.

“Manager’s Subordination” means, with respect to each Individual Property, the
Subordination, Non-Disturbance and Attornment Agreement or other similar
agreement in form and substance satisfactory to Lender, dated as of the Closing
Date, executed by the applicable Manager, each applicable Borrower which owns
the Individual Property, Operating Lessee and Lender, as the same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.

 

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“Marriott” means Marriott International, Inc., a Delaware corporation, or any
Affiliate thereof.

“Marriott Property” means each Individual Property that is occupied and operated
by Marriott as a Marriott hotel franchise, and is managed by Marriott.

“Material Adverse Effect” means a material adverse effect upon (i) the business
or the financial position or results of operation of any Borrower, (ii) the
ability of any Borrower to perform, or of Lender to enforce, any of the Loan
Documents or (iii) the value of (x) the Collateral with respect to any
Individual Property taken as a whole or (y) any Individual Property.

“Material Lease” means each Operating Lease.

“Maturity Date” means February 1, 2016 or such earlier date resulting from
acceleration of the Indebtedness by Lender.

“Maximum Amount” means the maximum rate of interest designated by applicable
laws relating to payment of interest and usury.

“Mezzanine Borrower” has the meaning set forth in Section 2.15(a).

“Mezzanine Debt Service” shall mean, with respect to any particular period of
time, scheduled principal and/or interest payments and all other amounts that
accrue or are due and payable under the Mezzanine Loan for such period.

“Mezzanine Debt Service Payment Sub Account” shall have the meaning provided in
Section 2.11(c).

“Mezzanine Deposit Account” means any deposit account established in connection
with a Mezzanine Loan for the deposit of Mezzanine Debt Service.

“Mezzanine Lender” has the meaning set forth in Section 2.15(a).

“Mezzanine Loan” has the meaning set forth in Section 2.15(a).

“Mezzanine Loan Agreement” means a loan agreement governing a Mezzanine Loan.

“Mold” means any mold or fungus in violation of Legal Requirements present at or
in any Individual Property.

“Mortgage” means, with respect to each Individual Property, the first priority
Mortgage, Deed of Trust or Deed to Secure Debt, Assignment of Rents, Security
Agreement and Fixture Filing or such other comparable document which is
customarily used by prudent lenders in the jurisdiction in which such Individual
Property is located, in form and substance satisfactory to Lender in Lender’s
discretion, either (a) dated as of the Closing Date, or (b) dated as of June 17,
2005 and amended by a certain Amendment to Mortgage, Deed of Trust or Deed

 

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to Secure Debt, Assignment of Rents, Security Agreement and Fixture Filing and
to Assignment of Leases and Rents, or similar agreement, dated as of the Closing
Date, as applicable, granted by each applicable Borrower which owns such
Individual Property to Lender (or, in the case of a Deed of Trust, to Deed of
Trust Trustee for the benefit of Lender) with respect to such Individual
Property as security for the Loan, as the same may thereafter from time to time
be supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.

“Mortgaged Property” means, collectively, or individually (as the context
requires), the “Mortgaged Property” or the “Trust Estate” as defined in the
Mortgage for each Individual Property.

“Morgan Collection Bank” means JP Morgan Chase Bank.

“Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been made by Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.

“Net Operating Income” means, with respect to each Individual Property, for any
period the excess, if any, of Operating Income for such period over Operating
Expenses for such period.

“Non-Marriott Operating Expenses Monthly Installment” means, for each Current
Interest Accrual Period, the portion of the operating expenses for such Interest
Accrual Period as set forth on the Approved Budget attributable to the
Non-Marriott Properties, as determined by Lender in its reasonable discretion.

“Non-Marriott Property” means each Individual Property other than a Marriott
Property.

“Non-Marriott Property Operating Account” means an operating account with
respect to the Non-Marriott Properties which shall be an Eligible Account
established by Borrower in Borrower’s name at the Cash Collateral Account Bank
(subject to Lender’s right to change the Cash Collateral Account Bank in
accordance with Section 2.11(b)(ii)) pursuant to the Cash Collateral Account
Agreements.

“Non-Marriott Property Operating Account Cash Trap Period” means any period of
time commencing upon Lender’s delivery to the Cash Collateral Account Bank of
notice of an Event of Default, and terminating upon Lender’s delivery to the
Cash Collateral Account Bank of notice that the existing Non-Marriott Property
Operating Account Cash Trap Period is terminated (which notice shall be given by
Lender upon the cure of all existing Events of Default by Borrower, as
applicable), each such notice to be delivered in accordance with the terms of
the Cash Collateral Account Agreement.

“Note” means that certain Amended and Restated Promissory Note dated as of the
Closing Date, from Borrower to Lender, in the original principal amount of the
Loan, as the same may thereafter from time to time be supplemented, amended,
modified or extended by one or more written agreements supplemental thereto.

 

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“OFAC List” means the list of specially designated nationals and blocked persons
subject to financial sanctions that is maintained by the U.S. Treasury
Department, Office of Foreign Assets Control and any other similar list
maintained by the U.S. Treasury Department, Office of Foreign Assets Control
pursuant to any Legal Requirements (or is such list does not exist, the similar
list then being maintained by the United States, including, without limitation,
trade embargo, economic sanctions, or other prohibitions imposed by Executive
Order of the President of the United States. The OFAC List currently is
accessible through the internet website at www.treas.gov/ofac/t11sdn.pdf.

“Officer’s Certificate” means, with respect to each Borrower, a certificate of
such Borrower which is signed by the managing equity owner of such Borrower.

“Operating Expenses” means, with respect to each Individual Property, for any
period, all expenditures by the Borrower which owns the Individual Property or
the Operating Lessee, as and to the extent required to be expensed under GAAP
during such period in connection with the ownership, operation, maintenance,
repair or leasing of such Individual Property, including, without limitation or
duplication expenses in connection with cleaning, repair, replacement, painting
and maintenance; wages, benefits, payroll taxes, uniforms, insurance costs and
all other related expenses for employees of such Borrower, Operating Lessee or
any Affiliate engaged in repair, operation, maintenance of such Individual
Property or service to tenants, patrons or guests of such Individual Property,
as applicable; any management and franchise fees and expenses; the cost of all
electricity, oil, gas, water, steam, heat, ventilation, air conditioning and any
other energy, utility or similar item and overtime services; the cost of
cleaning supplies; Impositions; business interruption, liability, casualty and
fidelity insurance premiums; legal, accounting and other professional fees and
expenses incurred in connection with the ownership, leasing or operation of any
Individual Property, including, without limitation, collection costs and
expenses; costs and expenses of security and security systems; trash removal and
exterminating costs and expenses; advertising and marketing costs; costs of
environmental audits and monitoring, environmental, investigation, remediation
or other response actions or any other expenses incurred with respect to
compliance with Environmental Laws; and all other ongoing expenses which in
accordance with GAAP are required to be or are included in such Borrower’s or
Operating Lessee’s annual financial statements as operating expenses of such
Individual Property. Operating Expenses shall be calculated in accordance with
GAAP.

Notwithstanding the foregoing, Operating Expenses shall not include (v) Capital
Improvement Costs, (w) any taxes imposed on the applicable Borrower’s or
Operating Lessee’s net income, (x) depreciation or amortization of intangibles
(y) Debt Service and other payments in connection with the Indebtedness, or
(z) any rental or other payments due and payable to Borrower by Operating Lessee
pursuant to the terms of any Operating Lease.

“Operating Income” means, with respect to each Individual Property, for any
period, for Borrower which owns the Individual Property, all revenue derived
from the ownership and operation of each Individual Property from whatever
source, including, without limitation: all amounts payable as Rents and all
other amounts payable under Leases (other than the Operating Lease) or other
third party agreements relating to the ownership and operation of such
Individual Property; business interruption insurance proceeds; and all other
amounts which

 

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in accordance with GAAP are required to be or are included in such Borrower’s or
Operating Lessee’s annual financial statements as operating income of such
Individual Property but excluding any lease termination payments, use and
occupancy or other taxes on receipts required to be accounted for by Borrower to
any Governmental Authority, refunds on uncollectible accounts, sales of
furniture, fixtures and equipment, Insurance Proceeds (other than business
interruption insurance), Condemnation Proceeds, rents, revenues and receipts
received by tenants and concessionaires located at the Individual Properties,
unforfeited security deposits, utility and other similar deposits and any
disbursements to Borrower from the Cash Collateral Account and any Sub-Accounts.
Operating Income shall not include any rental or other payments due and payable
to Borrower by Operating Lessee pursuant to the terms of any Operating Lease.

“Operating Lease” shall mean, individually or collectively, as the context may
require, the operating lease or similar agreement entered into by and between
the applicable Borrower and the Operating Lessee, which governs the operation of
one of more of the Individual Properties as the same may be amended, restated,
replaced, supplemented or modified from time to time, in accordance with the
terms hereof.

“Operating Lessee” shall mean, individually or collectively, as the context may
require, any operating lessee under an Operating Lease, which is an Affiliate of
the Borrowers and which is a Special Purpose Entity, provided that such
operating lessee shall be selected in accordance with the terms hereof. As of
the date hereof, the Operating Lessee is Ashford TRS Lessee IV LLC, a Delaware
limited liability company, the current operating lessee of each Individual
Property, and an Affiliate of the Borrowers.

“Other Borrowings” means, without duplication (but not including the
Indebtedness or any Transaction Costs payable in connection with the
Transactions), (i) all indebtedness of any Borrower for borrowed money or for
the deferred purchase price of property or services, (ii) all indebtedness of
any Borrower evidenced by a note, bond, debenture or similar instrument,
(iii) the face amount of all letters of credit issued for the account of any
Borrower and, without duplication, all unreimbursed amounts drawn thereunder,
(iv) all indebtedness of any Borrower secured by a Lien on any property owned by
any Borrower whether or not such indebtedness has been assumed, (v) all
Contingent Obligations of any Borrower, and (vi) all payment obligations of any
Borrower under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars or similar
agreements) and similar agreements.

“Payment Date” shall mean the first (1st) day of each month commencing on
December 1, 2005, and continuing to and including the Maturity Date; provided,
however, that for purposes of making payments hereunder, but not for purposes of
calculating interest accrual periods, if the first (1st) day of a given month
shall not be a Business Day, then the Payment Date for such month shall be the
preceding Business Day.

“PBGC” means the Pension Benefit Guaranty Corporation established under ERISA,
or any successor thereto.

“Permits” means, collectively, “Permits” as defined in each Mortgage.

 

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“Permitted Encumbrances” means, with respect to each Individual Property,
(i) the Lien created by the Mortgage for such Individual Property or the other
Loan Documents, (ii) all Liens and other matters disclosed in the Title
Insurance Policy concerning the Individual Property, or any part thereof which
have been approved by Lender in Lender’s discretion, (iii) Liens, if any, for
Impositions with respect to imposed by any Governmental Authority not yet due or
delinquent or being contested in good faith and by appropriate proceedings in
accordance with the Mortgage for such Individual Property, (iv) without limiting
the foregoing, any and all governmental, public utility and private
restrictions, covenants, reservations, easements, licenses or other agreements
of an immaterial nature which may hereafter be granted by each applicable
Borrower which owns the Individual Property after the Closing Date and which do
not materially and adversely affect (unless otherwise approved by Lender in
writing) (a) the ability of any Borrower to pay any of its obligations to any
Person as and when due, (b) the marketability of title to such Individual
Property, (c) the fair market value of such Individual Property, or (d) the use
or operation of such Individual Property as of the Closing Date and thereafter,
(v) rights of existing and future tenants, licensees and concessionaries
pursuant to Leases in effect as of the date hereof or entered into in accordance
with the Loan Documents and/or the Management Agreements, (vi) the Operating
Leases, (vii) FF&E Financing applicable to the Individual Property, (viii) liens
in favor of Lender, and (ix) liens securing any Mezzanine Loan permitted under
Section 2.15.

“Permitted Investments” has the meaning provided in the Cash Collateral Account
Agreement.

“Permitted Transfers” shall mean, (A) with respect to each Individual Property
and each Borrower: (i) Permitted Encumbrances; (ii) all transfers of worn out or
obsolete furnishings, fixtures or equipment that are reasonably promptly
replaced with property of equivalent value and functionality in the ordinary
course of operation of each Individual Property; (iii) all Leases which are not
Material Leases; (iv) all Material Leases which have been approved by Lender in
writing pursuant to the terms of this Agreement; (v) provided that no Event of
Default has occurred and is continuing, transfers of Equity Interests which in
the aggregate during the term of the Loan (a) do not exceed forty-nine percent
(49%) of the total interests in any Borrower and (b) do not result in any
partner’s, member’s or other Person’s interest in any Borrower exceeding
forty-nine percent (49%) of the total interests in any Borrower; (vi) provided
that no Event of Default has occurred and is continuing, any other transfer of
Equity Interests provided that (a) Borrower provides thirty (30) days’ prior
written notice of such transfer to Lender, (b) prior to any Secondary Market
Transaction, Lender shall have consented to such transfer, such consent not to
be unreasonably withheld or delayed, (c) after any Secondary Market Transaction,
Borrower shall have delivered (or shall have caused to be delivered) to Lender
Rating Agency Confirmation with respect to such transfer, (d) Borrower shall
have delivered (or shall have caused to be delivered) to Lender and the Rating
Agencies opinion letters of counsel relating to such transfer (including,
without limitation, tax, REMIC and bankruptcy opinions, and a new substantive
non-consolidation opinion substantially identical in form and substance to the
substantive non-consolidation opinion delivered on behalf of Borrower as of the
Closing Date), each in form and substance reasonably satisfactory to Lender (in
Lender’s reasonable discretion) and satisfactory to the Rating Agencies,
(e) following the proposed transfer, Borrower shall satisfy all applicable
Rating Agency criteria with respect to bankruptcy remoteness and special purpose
entities, and (f) Borrower pays all reasonable

 

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out-of-pocket expenses incurred by Lender in connection with such transfer
(provided, that no assumption, transfer or similar fee shall be payable to
Lender in connection with such transfer); (vii) transfers, issuance,
conversions, pledges and redemptions of stock, membership interests and
partnership interests in Ashford Hospitality Trust, Inc., a Maryland
corporation, Ashford OP General Partner LLC, a Delaware limited liability
company, Ashford OP Limited Partner LLC, a Delaware limited liability company,
or Ashford Hospitality Limited Partnership, a Delaware limited partnership (or
their respective successors), (viii) the merger or consolidation of Ashford
Hospitality Trust, Inc., Ashford OP General Partner LLC, Ashford OP Limited
Partner LLC or Ashford Hospitality Limited Partnership (or their respective
successors), (ix) provided that no Event of Default has occurred and is
continuing, the sale of all (but not fewer than all) of the Individual
Properties to another party (collectively, the “Transferee Borrower”), provided
that (a) Borrower provides thirty (30) days’ prior written notice of such sale
to Lender, (b) prior to any Secondary Market Transaction, Lender shall have
consented to such sale, such consent not to be unreasonably withheld or delayed,
(c) after any Secondary Market Transaction, Borrower shall have delivered (or
shall have caused to be delivered) to Lender Rating Agency Confirmation with
respect to such sale, (d) the identity, experience, financial condition and
creditworthiness of the Transferee Borrower shall be satisfactory to Lender in
its reasonable discretion, (e) Borrower and/or Transferee Borrower shall have
delivered (or shall have caused to be delivered) to Lender and the Rating
Agencies opinion letters of counsel relating to such sale (including, without
limitation, tax, REMIC and bankruptcy opinions, and a new substantive
non-consolidation opinion), each in form and substance reasonably satisfactory
to Lender (in Lender’s reasonable discretion) (provided, that the new
substantive non-consolidation opinion shall be deemed satisfactory to Lender so
long as it is substantially identical in form and substance to the substantive
non-consolidation opinion delivered on behalf of Borrower as of the Closing
Date) and satisfactory to the Rating Agencies, (f) Transferee Borrower shall
satisfy all applicable Rating Agency criteria with respect to bankruptcy
remoteness and special purpose entities, (g) Borrower and Transferee Borrower
shall execute and deliver any and all documentation as may be reasonably
required by Lender or required by the Rating Agencies, as the case may be
(including, without limitation, assumption documents), in form and substance
reasonably satisfactory to Lender or satisfactory to the Rating Agencies, as the
case may be, in Lender’s reasonable discretion or the Rating Agencies’
discretion, as applicable, (h) Borrower shall deliver (or cause to be delivered)
to Lender an endorsement to the Title Insurance Policy relating to the change in
the identity of the vestee and the execution and delivery of the transfer
documentation in form and substance reasonably acceptable to Lender and
(i) Borrower or Transferee Borrower pays all reasonable out-of-pocket expenses
incurred by Lender in connection with such sale, including, without limitation,
Lender’s reasonable attorneys fees and expenses, all recording fees, all fees of
the Rating Agencies and all fees payable to the Title Company for the delivery
to Lender of the endorsement referred to in clause (h) above (provided, that no
assumption, transfer or similar fee shall be payable to Lender in connection
with such sale), and (e) upon closing of the sale, Borrower shall be released
from all obligations accruing from and after the date of such sale under the
Note and the other Loan Documents with respect to the indebtedness secured by
the Individual Properties sold, (x) any lien or security interest granted
directly or indirectly in any Equity Interest in Borrower as security for a
Mezzanine Loan in accordance with Section 2.15 (xi) any Partial Defeasance or
Full Defeasance in accordance with Section 2.10, and (xii) any Property
Substitution in accordance with Section 2.14; and (B) with respect to Operating
Lessee, (i) provided that no Event of Default has

 

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occurred and is continuing, transfers of direct or indirect equity interests in
Operating Lessee which in the aggregate during the term of the Loan (a) do not
exceed forty-nine percent (49%) of the total interests in Operating Lessee, and
(b) do not result in any partner’s, member’s or other Person’s interest in any
Operating Lessee exceeding forty-nine percent (49%) of the total interests in
Operating Lessee; (ii) provided that no Event of Default has occurred and is
continuing, any other transfer of direct or indirect equity interests in
Operating Lessee provided that (a) Operating Lessee or Borrower provides thirty
(30) days’ prior written notice of such transfer to Lender, (b) prior to any
Secondary Market Transaction, Lender shall have consented to such transfer, such
consent not to be unreasonably withheld or delayed, (c) after any Secondary
Market Transaction, Borrower or Operating Lessee shall have delivered (or shall
have caused to be delivered) to Lender Rating Agency Confirmation with respect
to such transfer, (d) Borrower or Operating Lessee shall have delivered (or
shall have caused to be delivered) to Lender and the Rating Agencies opinion
letters of counsel relating to such transfer (including, without limitation,
tax, REMIC and bankruptcy opinions, and a new substantive non-consolidation
opinion substantially identical in form and substance to the substantive
non-consolidation opinion delivered on behalf of Borrower and Operating Lessee
as of the Closing Date), each in form and substance reasonably satisfactory to
Lender (in Lender’s reasonable discretion) and satisfactory to the Rating
Agencies, (e) following the proposed transfer, Borrower and Operating Lessee
shall satisfy all applicable Rating Agency criteria with respect to bankruptcy
remoteness and special purpose entities, and (f) Borrower and/or Operating
Lessee pays all reasonable out-of-pocket expenses incurred by Lender in
connection with such transfer (provided, that no assumption, transfer or similar
fee shall be payable to Lender in connection with such transfer);
(iii) transfers, issuance, conversions, pledges and redemptions of stock,
membership interests and partnership interests in Ashford Hospitality Trust,
Inc., a Maryland corporation, Ashford OP General Partner LLC, a Delaware limited
liability company, Ashford OP Limited Partner LLC, a Delaware limited liability
company, or Ashford Hospitality Limited Partnership, a Delaware limited
partnership (or their respective succussors); and (iv) the merger or
consolidation of Ashford Hospitality Trust, Inc., Ashford OP General Partner
LLC, Ashford OP Limited Partner LLC or Ashford Hospitality Limited Partnership
(or their respective successors).

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

“PIP Costs” means the costs described on Exhibit H.

“PIP Guaranty” means the Amended and Restated Capital Expenditures and PIP
Guaranty in form and substance satisfactory to Lender, dated as of the Closing
Date, from Ashford Hospitality Limited Partnership to Lender, as the same may
thereafter be from time to time supplemented, amended, modified or extended by
one or more agreements supplemental thereto.

“PIP Work” has the meaning set forth in Section 5.1(W).

 

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“Plan” means an employee benefit or other plan established or maintained by any
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA, other
than a Multiemployer Plan.

“Principal Indebtedness” means the principal amount of the entire Loan
outstanding as the same may be increased or decreased, as a result of prepayment
or otherwise, from time to time.

“Prepayment Premium” means, to the extent applicable, with respect to any
prepayment of the Principal Indebtedness or acceleration of the Loan, an amount
equal to the greater of (i) Yield Maintenance and (ii) one percent (1.00%) of
the Principal Indebtedness being prepaid or accelerated.

“Proceeds” means all “proceeds,” as such term is defined in the UCC, and, to the
extent not included in such definition, all proceeds whether cash or non-cash,
movable or immovable, tangible or intangible (including all Insurance Proceeds,
all Condemnation Proceeds and proceeds of proceeds), from the Collateral,
including, without limitation, those from the sale, exchange, transfer,
collection, loss, damage, disposition, substitution or replacement of any of the
Collateral and all income, gain, credit, distributions and similar items from or
with respect to the Collateral.

“Property Improvement Plan” has the meaning provided in Section 4.1(QQ).

“Property Substitution” has the meaning provided in Section 2.14.

“Prudent Lender Standard” shall, with respect to any matter, be deemed to have
been satisfied if the matter in question (i) prior to the Start-Up Day, is
reasonably acceptable to Lender, and (ii) after the Start-Up Day, would be
acceptable to a prudent lender of securitized commercial mortgage loans.

“Qualified Substitute Property” means the fee simple interest in real property
located in the United States of America, together with all buildings and other
improvements thereon and leasehold interests therein, added to the Property
subject to the Liens of the Loan Documents in connection with a Property
Substitution pursuant to Section 2.14 after satisfaction of the conditions
described therein. No Qualified Substitute Property may be subject to a ground
lease.

“Qualified Successor Borrower” means a Single-Purpose Entity that assumes the
Loan in connection with a Property Substitution pursuant to Section 2.14 and
that is wholly owned (directly or indirectly) by Ashford Hospitality Limited
Partnership.

“Rating Agencies” means Fitch, Inc., Moody’s Investors Service, Inc., S&P, and
Dominion Bond Rating Service Limited, or any successor thereto, and any other
nationally recognized statistical rating organization but only to the extent
that any of the foregoing have been or will be engaged by Lender or its
designees in connection with or in anticipation of a Secondary Market
Transaction (each, individually a “Rating Agency”).

 

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“Rating Agency Confirmation” means a written confirmation from each of the
Rating Agencies rating any securities issued in connection with a Secondary
Market Transaction that an action shall not result in a downgrade, withdrawal or
qualification of any securities issued in connection with a Secondary Market
Transaction.

“Recourse Distributions” has the meaning provided in Section 8.14.

“Release” with respect to any Hazardous Substance includes but is not limited to
any release, deposit, discharge, emission, leaking, leaching, spilling, seeping,
migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing
or other movement of Hazardous Substances.

“Remediation” (and its correlative terms) includes but is not limited to any
response, remedial, removal, or corrective action; any activity to clean up,
detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance;
any actions to prevent, cure or mitigate any Release of any Hazardous Substance;
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto; any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or evaluation
relating to any Hazardous Substances or to anything referred to herein,
including the preparation of any plans, studies, reports or documents with
respect thereto.

“REMIC” means a real estate mortgage investment conduit as defined under
Section 860D of the Code.

“Remington Manager” means Remington Lodging & Hospitality LP, a Delaware limited
partnership.

“Rents means, collectively, “Rents” as defined in each Mortgage.

“Required Debt Service Payment” means, on any Payment Date, the Debt Service
then due and payable by Borrowers.

“RevPAR” means revenue per available room, calculated with respect to any
Individual Property by dividing the total guestroom revenue for such Individual
Property during the period being measured by the room count and the number of
days in the period being measured, as determined by Lender in its discretion.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill
Companies, Inc.

“Secondary Market Transaction” shall have the meaning set forth in Section 2.13.

“Secretary’s Certificate” means, with respect to each Borrower, Operating Lessee
and Manager, the certificate in form and substance satisfactory to Lender in
Lender’s discretion dated as of the Closing Date.

“Securities Act” has the meaning provided in Section 2.13.

 

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“Single Member LLC” means a limited liability company that (i) is either (a) a
single member limited liability company or (b) a multiple member limited
liability company that does not have a Single-Purpose Entity that owns at least
one percent (1%) of the equity interests in such limited liability company as
its managing member, and (ii) is organized under the laws of the State of
Delaware.

“Single-Purpose Entity” means a corporation, limited partnership, or limited
liability company which, at all times since its formation and thereafter (i) was
and will be organized solely for the purpose of (w) owning, leasing, operating,
managing, financing and maintaining any or all of the Individual Properties or
(x) acting as an operating lessee pursuant to the terms of an Operating Lease or
(y) acting as the managing member of the limited liability company which owns
any or all of the Individual Properties or (z) acting as the general partner of
a limited partnership which owns any or all of the Individual Property, (ii) has
not and will not engage in any business unrelated to (x) the ownership, leasing,
operating, managing, financing and maintaining of any or all of the Individual
Properties or (y) acting as a member of a limited liability company which owns
any or all of the Individual Properties or (z) acting as a general partner of a
limited partnership which owns any or all of the Individual Properties,
(iii) has not and will not have any assets other than (x) those related to any
or all of the Individual Properties or (y) its member interest in the limited
liability company which owns any or all of the Individual Properties or (z) its
general partnership interest in the limited partnership which owns any or all of
the Individual Properties, as applicable, (iv) has not and will not engage in,
seek or consent to any dissolution, winding up, liquidation, consolidation or
merger, and, except as otherwise expressly permitted by this Agreement, has not
and will not engage in, seek or consent to any asset sale, transfer of
partnership or membership or shareholder interests, or amendment of its limited
partnership agreement, articles of incorporation, articles of organization,
certificate of formation or operating agreement (as applicable), (v) if such
entity is a limited partnership, has and will have at all times while the Loan
is outstanding as its only general partners, general partners which are and will
be Single-Purpose Entities which are corporations or a Single Member LLC,
(vi) if such entity is a corporation or a Single Member LLC, at all relevant
times while the Loan is outstanding, has and will have at least two Independent
Directors, (vii) the board of directors of such entity (or if such entity is a
Single Member LLC, the entity, each member, each director, each manager, the
board of managers, if any, and all other Persons on behalf of such entity), has
not taken and will not take any action requiring the unanimous affirmative vote
of one hundred percent (100%) of the members and all directors and managers, as
applicable, unless all of the directors or managers, as applicable, including,
without limitation, all Independent Directors, shall have participated in such
vote, (viii) has not and will not fail to correct any known misunderstanding
regarding the separate identity of such entity, (ix) if such entity is a limited
liability company (other than a Single Member LLC), has and will have at least
one member that is and will be a Single-Purpose Entity which is and will be a
corporation, and such corporation is and will be the managing member of such
limited liability company, (x) without the unanimous consent of all of the
partners, directors or managers (including, without limitation, all Independent
Directors) or members, as applicable, has not and will not with respect to
itself or to any other entity in which it has a direct or indirect legal or
beneficial ownership interest (w) file a bankruptcy, insolvency or
reorganization petition or otherwise institute insolvency proceedings or
otherwise seek any relief under any laws relating to the relief from debts or
the protection of debtors generally; (x) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar
official for such

 

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entity or such entity’s properties; (y) make any assignment for the benefit of
such entity’s creditors; or (z) take any action that might cause such entity to
become insolvent, (xi) has maintained and will maintain its accounts, books and
records separate from any other Person or entity, (xii) has maintained and will
maintain its books, records, resolutions and agreements as official records,
(xiii) has not commingled and will not commingle its funds or assets with those
of any other entity except as permitted by the Loan Documents, (xiv) has held
and will hold its assets in its own name, (xv) has conducted and will conduct
its business in its name and will not permit its name, identity or type of
entity to be changed, (xvi) has maintained and will maintain its financial
statements, accounting records and other entity documents separate from any
other Person or entity, except to the extent that such Person or entity is
required to file consolidated tax returns by law; provided, that any such
consolidated financial statement shall contain a footnote indicating that
separate assets and liabilities are neither available to pay the debts of the
consolidated entity nor constitute obligations of the consolidated entity,
(xvii) has paid and will pay its own liabilities out of its own funds and
assets, (xviii) has observed and will observe all partnership, corporate or
limited liability company formalities as applicable, (xix) has maintained and
will maintain an arms-length relationship with its Affiliates, (xx) if (x) such
entity owns all of any portion of any or all of the Individual Properties, has
and will have no indebtedness other than the Indebtedness, unsecured trade
payables in the ordinary course of business relating to the ownership and
operation of such Individual Property which (1) are not evidenced by a
promissory note (2) when aggregated with the unsecured trade payables of all
other Borrowers and Operating Lessee do not exceed, at any time, a maximum
amount of two and one-half percent (2.5%) of the original Loan Amount and
(3) are paid within 60 days of the date incurred (unless same are being
contested in accordance with the terms of this Agreement), or other indebtedness
that has been fully discharged on or prior to the date hereof, or (y) if such
entity acts as the general partner of a limited partnership which owns such
Individual Property, has and will have no indebtedness other than unsecured
trade payables in the ordinary course of business relating to acting as general
partner of the limited partnership which owns such Individual Property which
(1) do not exceed, at any time, $10,000 and (2) are paid within 60 days of the
date incurred, or (z) if such entity acts as a managing member of a limited
liability company which owns such Individual Property, has and will have no
indebtedness other than unsecured trade payables in the ordinary course of
business relating to acting as a member of the limited liability company which
owns such Individual Property which (1) do not exceed, at any time, $10,000 and
(2) are paid within 60 days of the date incurred, (xxi) has not and will not
assume or guarantee or become obligated for the debts of any other entity or
hold out its credit as being available to satisfy the obligations of any other
entity except for the Indebtedness, (xxii) has not acquired and will not acquire
obligations or securities of its partners, members or shareholders, (xxiii) has
allocated and will allocate fairly and reasonably shared expenses, including,
without limitation, shared office space and use separate stationery, invoices
and checks, (xxiv) except pursuant hereto, has not and will not pledge its
assets for the benefit of any other person or entity, (xxv) has held and
identified itself and will hold itself out and identify itself as a separate and
distinct entity under its own name and not as a division or part of any other
person or entity, (xxvi) has not made and will not make loans to any person or
entity, (xxvii) has not and will not identify its partners, members or
shareholders, or any affiliates of any of them as a division or part of it,
(xxviii) if such entity is a limited liability company (other than a Single
Member LLC), such entity shall dissolve only upon the bankruptcy of the managing
member, and such entity’s articles of organization, certificate of formation
and/or operating agreement, as applicable, shall

 

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contain such provision, (xxix) has not entered and will not enter into or be a
party to, any transaction with its partners, members, shareholders or its
affiliates except in the ordinary course of its business and on terms which are
intrinsically fair and are no less favorable to it than would be obtained in a
comparable arms-length transaction with an unrelated third party and which are
fully disclosed to Lender in writing in advance, (xxx) has paid and will pay the
salaries of its own employees from its own funds, (xxxi) has maintained and
intends to maintain adequate capital in light of its contemplated business
operations, (xxxii) if such entity is a limited liability company (other than a
Single Member LLC) or limited partnership, and such entity has one or more
managing members or general partners, as applicable, then such entity shall
continue (and not dissolve) for so long as a solvent managing member or general
partner, as applicable, exists and such entity’s organizational documents shall
contain such provision, (xxxiii) if such entity is a Single Member LLC, its
organizational documents shall provide that, as long as any portion of the
Indebtedness remains outstanding, upon the occurrence of any event that causes
the last remaining member of such Single Member LLC to cease to be a member of
such Single Member LLC (other than (y) upon an assignment by such member of all
of its limited liability company interest in such Single Member LLC and the
admission of the transferee, if permitted pursuant to the organizational
documents of such Single Member LLC and the Loan Documents, or (z) the
resignation of such member and the admission of an additional member of such
Single Member LLC, if permitted pursuant to the organizational documents of such
Single Member LLC and the Loan Documents), the individuals acting as the
Independent Directors of such Single Member LLC shall, without any action of any
Person and simultaneously with the last remaining member of the Single Member
LLC ceasing to be a member of the Single Member LLC, automatically be admitted
as non-economic members of the Single Member LLC (the “Special Member”) and
shall preserve and continue the existence of the Single Member LLC without
dissolution, and (xxxiv) if such entity is a Single Member LLC, its
organizational documents shall provide that for so long as any portion of the
Indebtedness is outstanding, no Special Member may resign or transfer its rights
as Special Member unless (y) a successor Special Member has been admitted to
such Single Member LLC as a Special Member, and (z) such successor Special
Member has also accepted its appointment as the Independent Director.

“Special Member” has the meaning provided in the definition of “Single-Purpose
Entity.”

“SPE Equity Owner” means, with respect to each Borrower, individually or
collectively, as the context may require, Ashford Senior General Partner IV LLC
and New Houston GP LLC.

“SPE Equity Owner’s Certificate” means the SPE Equity Owner’s Certificate in
form and substance satisfactory to Lender dated as of the Closing Date.

“Start-Up Day” means the “start-up day,” within the meaning of
Section 860G(a)(9) of the Code, of any REMIC that holds the Notes.

“Sub-Account” shall have the meaning provided in Section 2.11(c).

 

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“Subordination, Attornment and Security Agreement” shall mean for each Operating
Lease, a Subordination, Attornment and Security Agreement or other similar
agreement among Lender, the applicable Borrower and the Operating Lessee, in
form and substance acceptable to Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified in accordance with the terms
hereof.

“Successor Obligor” has the meaning provided in Section 2.10.

“Survey” means, with respect to each Individual Property, a survey of such
Individual Property satisfactory to Lender, (i) prepared by a registered
Independent surveyor satisfactory to Lender and Title Insurer and containing a
surveyor’s certification satisfactory to Lender, (ii) together with a metes and
bounds or platted lot/block legal description of the land corresponding with the
survey, and (iii) prepared based on a scope of work determined by Lender in
Lender’s discretion.

“Taking” has the meaning, with respect to each Individual Property, provided in
the Mortgage for such Individual Property.

“Tax Fair Market Value” means, with respect to each Individual Property, the
fair market value of such Individual Property, and (x) shall not include the
value of any personal property or other property that is not an “interest in
real property” within the meaning of Treasury Regulation §§1.860G-2 and
1.856-3(c), or is not “qualifying real property” within the meaning of Treasury
Regulation §1.593-11(b)(iv), and (y) shall be reduced by the “adjusted issue
price” (within the meaning of Code § 1272(a)(4)) (the “Tax Adjusted Issue
Price”) of any indebtedness, other than the Loan, secured by a Lien affecting
such Individual Property, which Lien is prior to or on a parity with the Lien
created under the Mortgage for such Individual Property.

“Title Instruction Letter” means an instruction letter in form and substance
satisfactory to Lender in Lender’s discretion.

“Title Insurance Policy” means, with respect to each Individual Property, a loan
policy of title insurance for such Individual Property issued by Title Insurer
with respect to such Individual Property in an amount acceptable to Lender and
insuring the first priority lien in favor of Lender created by the Mortgage for
such Individual Property, in each case acceptable to Lender in Lender’s
discretion.

“Title Insurer” means First American Title Insurance Company and Stewart Title
Guaranty Company, as co-insurers.

“Transaction Costs” means all fees, costs, expenses and disbursements of Lender
relating to the Transactions, including, without limitation, all appraisal fees,
legal fees, accounting fees and the costs and expenses described in
Section 8.24.

“Transactions” means the transactions contemplated by the Loan Documents.

“Transfer” means any conveyance, transfer (including, without limitation, any
transfer of any direct or indirect legal or beneficial interest (including,
without limitation, any profit interest) in any Borrower, Operating Lessee or
any SPE Equity Owner), any sale, any Lease (including, without limitation, any
amendment, extension, modification, waiver or renewal thereof), or any Lien,
whether by law or otherwise, of, on or affecting any Collateral, any Borrower,
Operating Lessee or any SPE Equity Owner, other than a Permitted Transfer.

 

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“UCC” means, with respect to any Collateral, the Uniform Commercial Code in
effect in the jurisdiction in which the relevant Collateral is located.

“UCC Searches” has the meaning provided in Section 3.1.

“Upfront Remediation” has the meaning provided in Section 5.1(Z).

“Upfront Remediation Costs” means the costs incurred by Borrower in connection
with any Upfront Remediation.

“Upfront Remediation Sub-Account” means the Sub-Account of the Cash Collateral
Account established and maintained pursuant to Section 2.11 relating to the
payment of Upfront Remediation Costs.

“U.S. Obligations” means obligations or securities not subject to prepayment,
call or early redemption which are direct obligations of, or obligations fully
guaranteed as to timely payment by, the United States of America or any agency
or instrumentality of the United States of America, the obligations of which are
backed by the full faith and credit of the United States of America.

“Yield Maintenance” shall mean the positive difference, if any, between (i) the
present value on the date of prepayment (by acceleration or otherwise) of all
future installments of principal and interest which the Borrowers would
otherwise be required to pay under the Note from the date of such prepayment
until the Maturity Date absent such prepayment, including the unpaid principal
amount which might otherwise be due upon the Maturity Date absent such
prepayment, with such present value being determined by the use of a discount
rate equal to the yield to maturity (adjusted to a “Mortgage Equivalent Basis”
pursuant to the standards and practices of the Securities Industry Association),
on the date of such prepayment of the United States Treasury Security having the
term to maturity closest to what otherwise would have been the remaining term
hereof absent such prepayment and (ii) the principal balance of the Loan on the
date of such prepayment.

ARTICLE 2

GENERAL TERMS

Section 2.1. Amount of the Loan. Lender shall lend to Borrowers a total
aggregate amount equal to the Loan Amount.

Section 2.2. Use of Proceeds. Proceeds of the Loan shall be used for the
following purposes: (a) to pay the acquisition or refinance costs for each
Individual Property by Borrower, (b) to fund any upfront reserves or escrow
amounts required hereunder, and (c) to pay any Transaction Costs. Any excess
will be available to Borrowers (and appointed at Borrower’s request) and may be
used for any lawful purpose.

 

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Section 2.3. Security for the Loan. The Notes and each Borrower’s obligations
hereunder and under the other Loan Documents shall be secured by all Mortgages,
the Assignments of Leases, the Assignments of Agreements, the Manager’s
Subordinations, and the security interests and Liens granted in this Agreement
and in the other Loan Documents.

Section 2.4. Borrowers’ Notes.

(a) Each Borrowers’ obligation to pay the principal of and interest on the Loan
(including Late Charges, Default Rate interest, and the Prepayment Premium, if
any), shall be evidenced by this Agreement and by the Notes, duly executed and
delivered by all Borrowers. The Note shall be payable as to principal, interest,
Late Charges, Default Rate interest and Prepayment Premium, if any, as specified
in this Agreement, with a final maturity on the Maturity Date. Borrowers shall
pay all outstanding Indebtedness on the Maturity Date.

(b) Lender is hereby authorized, at its option, to endorse on a schedule
attached to the Notes (or on a continuation of such schedule attached to the
Notes and made a part thereof) an appropriate notation evidencing the date and
amount of each payment of principal, interest, Late Charges, Default Rate
interest and Prepayment Premium, if any, in respect thereof, which schedule
shall be made available to Borrowers, at Borrowers’ sole cost and expense on
reasonable advance notice, for examination at Lender’s offices.

Section 2.5. Principal, Interest and Other Payments.

(a) Accrual of Interest. Interest shall accrue on the outstanding principal
balance of the Notes and all other amounts due to Lender under the Loan
Documents at the Interest Rate.

(b) Monthly Payments of Interest and Principal.

(i) On the Payment Date occurring in December, 2005, and on each Payment Date
thereafter to and including the Payment Date occurring in July, 2010, Borrower
shall pay to Lender a monthly payment of interest only on the unpaid Principal
Indebtedness, in the amounts set forth on the amortization schedule attached
hereto as Schedule 3, which payments shall be calculated using the Interest
Rate.

(ii) On the Payment Date occurring in August, 2010, and on each Payment Date
thereafter, Borrower shall pay to Lender a monthly constant payment in the
amount of $511,672.42,which amount is calculated by using the Interest Rate and
a 25-year amortization schedule.

(c) Payment Dates. All payments required to be made pursuant to paragraph
(b) above shall be made beginning on the first Payment Date; provided, however,
that Borrower shall pay interest for the first Interest Accrual Period on the
Closing Date.

(d) Calculation of Interest. Interest shall accrue on the outstanding principal
balance of the Loan and all other amounts due to Lender under the Loan Documents
commencing upon the Closing Date. Interest shall be computed on the actual
number of days elapsed, based on a 360 day year.

 

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(e) Default Rate Interest. Upon the occurrence and during the continuance of an
Event of Default, and at the sole option of Lender and without need for notice
to the Borrowers, the entire unpaid amount outstanding hereunder and under the
Notes will bear interest at the Default Rate.

(f) Late Charge. If Borrowers fail to make any payment of any sums due under the
Loan Documents on the date when the same is due, Borrowers shall pay a Late
Charge.

(g) Other Payments. On each Payment Date, Borrowers shall pay to Lender (for
allocation as set forth herein) the Basic Carry Costs Monthly Installment, the
Required Debt Service Payment, the Capital Reserve Monthly Installment and any
and all fees and other amounts then due to the Cash Collateral Account Bank, all
for the then Current Interest Accrual Period, except as otherwise provided in
Section 2.11.

(h) Maturity Date. On the Maturity Date, Borrowers shall pay to Lender all
amounts owing under the Loan Documents including, without limitation, interest,
principal, Late Charges, Default Rate interest and any Prepayment Premium.

(i) Prepayment Premium. Upon any prepayment of the Principal Indebtedness,
including, without limitation, in connection with an acceleration of the Loan,
but excluding a prepayment made in connection with Section 2.6(b) hereof,
Borrowers shall pay to Lender on the date of such prepayment or acceleration of
the Loan the Prepayment Premium applicable thereto. All Prepayment Premium
payments hereunder shall be deemed earned by Lender upon the funding of the
Loan.

Section 2.6. Prepayment.

(a) Provided no Event of Default has occurred and is continuing, Borrower may
voluntarily prepay the Indebtedness in full and not in part (i) only on or prior
to the day that is two (2) years after the Start-Up Day, and such prepayment
shall be subject to payment of Prepayment Premium, and (ii) only on or after the
date which is sixty (60) days prior to the Maturity Date and there shall be no
Prepayment Premium or penalty assessed against Borrower by reason of such
prepayment; provided, however, that Borrower shall give to Lender at least
fifteen (15) days prior written notice of any such prepayment. Any prepayment of
the Loan shall be made on a Payment Date, and if any such prepayment is not made
on a Payment Date, Borrower shall also pay to Lender interest calculated at the
Interest Rate that would have accrued on such prepaid Principal Indebtedness
through the end of the Interest Accrual Period in which such prepayment occurs.
Notwithstanding the foregoing, Permitted Transfers, defeasance in accordance
with Section 2.10 and Property Substitutions in accordance with Section 2.14 are
not prepayments.

(b) Subject to Section 8.40, at any time during the term of the Loan, if any
Borrower is required by Lender under the provisions of any Mortgage to prepay
the Loan or any portion thereof in the event of damage to or destruction of, or
a Taking of any Individual Property, such Borrower shall pay any Insurance
Proceeds or Condemnation proceeds in the following manner and order of priority
(i) first, to prepay the Loan to the full extent of the Insurance Proceeds or
the Condemnation Proceeds, as applicable, to the extent of the Allocated Loan
Amount for the applicable Individual Property, and (ii) to the Borrowers.

 

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(c) All prepayments of the Indebtedness made pursuant to this Section shall be
applied by Lender in accordance with the provisions of Section 2.7 hereof.

(d) No Borrower shall be permitted at any time to prepay all or any part of the
Loan except as expressly provided in this Section.

Section 2.7. Application of Payments.

At all times, all proceeds of repayment, including without limitation any
payment or recovery on the Collateral and any prepayments on the Loan, shall be
applied to the Note and to such amounts payable by Borrowers under the Loan
Documents and in such order and in such manner as Lender shall elect in Lender’s
discretion.

Section 2.8. Payment of Debt Service, Method and Place of Payment.

(a) Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement and the Notes shall be made to Lender not later
than 12:00 noon, New York City time, on the date when due, and shall be made in
lawful money of the United States of America in federal or other immediately
available funds to an account specified to Borrower by Lender in writing, and
any funds received by Lender after such time, for all purposes hereof, shall be
deemed to have been paid on the next succeeding Business Day.

(b) All payments made by any Borrower hereunder or by any Borrower under the
other Loan Documents, shall be made irrespective of, and without any deduction
for, any set-offs or counterclaims.

Section 2.9. Taxes.

All payments made by any Borrower under this Agreement and under the other Loan
Documents shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, and all
liabilities with respect thereto, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority (all such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions, withholdings and
liabilities, collectively, “Applicable Taxes”). If any Borrower shall be
required by law to deduct any Applicable Taxes from or in respect of any sum
payable hereunder to Lender, the following shall apply: (i) such Borrower shall
make all such required deductions, (ii) the sum payable to Lender shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 2.9(a)), Lender receives an amount equal to the sum Lender would have
received had no such deductions been made and (iii) such Borrower shall pay the
full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law. Payments made pursuant to this Section 2.9(a)
shall be made within ten (10) Business Days after Lender makes written demand
therefor.

 

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Section 2.10. Defeasance.

Borrower shall not be permitted at any time to defease all or any portion of the
Loan except as expressly provided in this Section 2.10. Provided that no Event
of Default has occurred and is continuing, after the date which is two (2) years
after the Start-Up Day of the last Note securitized, Borrower may voluntarily
defease all of the Loan (a “Full Defeasance”) or a portion of the Loan (a
“Partial Defeasance”), in either case, subject to the satisfaction of the
following conditions precedent:

(a) Any Full Defeasance or Partial Defeasance of the Loan by Borrower shall be
made on a Payment Date,

(b) Borrower shall provide not less than fifteen (15) days prior written notice
to Lender specifying (i) a Payment Date (the “Defeasance Release Date”) on which
the Full Defeasance or Partial Defeasance is to occur, and (ii) in the event of
a Partial Defeasance, the Individual Property proposed to be defeased; provided,
that, Borrower shall be required to defease the Loan on the Defeasance Release
Date specified in such notice unless such notice is revoked in writing by
Borrower prior to the such Defeasance Release Date in which event Borrower shall
immediately reimburse Lender for any reasonable costs incurred by Lender in
connection with Borrower’s giving of such notice and revocation,

(c) Borrower shall have paid to Lender all principal and interest accrued and
unpaid on the Principal Indebtedness to and including the Defeasance Release
Date,

(d) Borrower shall pay to Lender all reasonable out-of-pocket fees and expenses
associated with the Full Defeasance or Partial Defeasance, as applicable
(including, without limitation, fees of Rating Agencies and accountants, and
fees incurred in connection with the delivery of opinion letters related to such
Full Defeasance or Partial Defeasance, as applicable), reasonable fees and
out-of-pocket costs of any loan servicer (if any) in connection with the Full
Defeasance or Partial Defeasance, as applicable, and all other sums then due and
payable under the Loan Documents,

(e) Borrower shall either deposit with Lender an amount equal to the Defeasance
Deposit, or, at Lender’s request, deliver to Lender the Defeasance Collateral.
In connection with the foregoing, Borrower appoints Lender as Borrower’s agent
for the purpose of applying the Defeasance Deposit to purchase the Defeasance
Collateral,

(f) Borrower shall execute and deliver to Lender all documents reasonably
required by Lender (i) in the case of a Full Defeasance, to amend and restate
the Note in a principal amount equal to the then outstanding principal balance
of the Loan (the “Full Defeased Note”), and (ii) in the case of a Partial
Defeasance, to issue two substitute notes as follows: (A) one promissory note in
a principal amount equal to 125% of the Allocated Loan Amount of the Individual
Property to be defeased (the “Defeased Note”); and (B) the other promissory note
having a principal balance equal to the Allocated Loan Amounts of all Individual
Properties (including the Individual Property being defeased) less the amount of
the Defeased Note (the “Undefeased Note”). The Defeased Note and the Undefeased
Note shall have terms identical to the terms of the Note, except for the
principal balance and a pro rata allocation of the Required Debt Service
Payment. Neither a Full Defeased Note nor a Defeased Note may be the subject of
any further defeasance; after a Partial Defeasance, all references herein and in
the other Loan Documents to “Note” shall be deemed to mean the Undefeased Note,
unless expressly provided otherwise,

 

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(g) Borrower shall deliver to Lender the following items:

(i) a security agreement, in form and substance satisfying the Prudent Lender
Standard, creating a first priority perfected Lien on the Defeasance Deposit and
the Defeasance Collateral (the “Security Agreement”),

(ii) for execution by Lender, a release of each applicable Individual Property
being defeased from the lien of the applicable Mortgage in a form appropriate
for the jurisdiction in which such Individual Property is located,

(iii) an Officer’s Certificate of Borrower certifying that the requirements set
forth in this Section 2.10 have been satisfied including, without limitation,
that no Event of Default has occurred and is continuing,

(iv) an opinion of counsel in form and substance satisfying the Prudent Lender
Standard stating, among other things, (A) that, the Defeasance Collateral has
been duly and validly assigned and delivered to Lender and Lender has a first
priority perfected security interest in and Lien on the Defeasance Deposit and a
first priority perfected security interest in and Lien on the Defeasance
Collateral and the Proceeds thereof and (B) that the subject Partial Defeasance
will not adversely affect the status of any REMIC formed in connection with a
Secondary Market Transaction, and

(v) such other certificates, documents or instruments as Lender may reasonably
request including, without limitation, (A) written confirmation from the
relevant Rating Agencies that such Partial Defeasance will not cause any Rating
Agency to withdraw, qualify or downgrade the then-applicable rating on any
security issued in connection with any Secondary Market Transaction and (B) a
certificate from an Independent certified public accountant certifying that the
Defeasance Collateral complies with all of the requirements of this
Section 2.10,

(h) In the case of a Partial Defeasance, the Debt Service Coverage Ratio with
respect to the Undefeased Note shall be equal to or greater than (i) 1.51:1.00,
and (ii) the Debt Service Coverage Ratio with respect to the Loan for the
trailing twelve (12) months immediately prior to such Partial Defeasance, and

(i) In the case of a Partial Defeasance, the RevPAR with respect to the
Individual Properties securing the Undefeased Note shall be equal to or greater
than (i) RevPAR with respect to all of the Individual Properties as of the
Closing Date, and (ii) RevPAR with respect to all of the Individual Properties
for the trailing twelve (12) months immediately prior to such Partial
Defeasance, each as determined in accordance with the Prudent Lender Standard.

Upon compliance with the requirements of this Section 2.10, the Individual
Property which is the subject of such Full Defeasance or Partial Defeasance
shall be released from the lien of the applicable Mortgage, and shall thereafter
no longer be subject to restrictions on transfer set forth herein.

 

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In connection with a defeasance of the Loan, Borrower shall assign to an entity,
which entity which shall be a Special-Purpose Entity (the “Successor Obligor”),
all of Borrower’s obligations under the Full Defeased Note or Defeased Note, as
the case may be, the other Loan Documents and the Security Agreement, together
with the pledged Defeasance Collateral. The Successor Obligor shall assume, in a
writing or writings satisfying the Prudent Lender Standard, all of Borrower’s
obligations under the Full Defeased Note or the Defeased Note, as the case may
be, the other Loan Documents and the Security Agreement and, upon such
assignment, Borrower shall, except as set forth herein, be relieved of its
obligations hereunder. If a Successor Borrower assumes Borrower’s obligations,
Lender may require as a condition to such defeasance, such additional legal
opinions from Borrower’s or Successor Obligor’s counsel as Lender reasonably
deems necessary to confirm the valid creation and authority of the Successor
Borrower (including a non-consolidation opinion), the assignment and assumption
of the Loan, the Security Agreement and the Defeasance Collateral between
Borrower and Successor Borrower, and the enforceability of the assignment
documents and of the Loan Documents as the obligation of Successor Borrower.
Borrower shall pay all out-of-pocket costs and expenses incurred by Lender,
including Lender’s reasonable attorney’s fees and expenses, incurred in
connection with Successor Borrower’s assumption of the Loan, the Security
Agreement and the Defeasance Collateral.

Nothing in this Section 2.10 shall release Borrower from any liability or
obligation relating to any environmental matters arising under Section 5.1(F).

Section 2.11. Central Cash Management.

(a) Collection Account; Manager Account.

(i) With respect to each Non-Marriott Property, each applicable Borrower or
Operating Lessee shall open and maintain at a Collection Account Bank a trust
account (a “Collection Account”) with respect to such Individual Property. Each
of the Collection Accounts shall be assigned an identification number by the
related Collection Account Bank and shall be opened and maintained in the name
“Merrill Lynch Mortgage Lending, Inc. as Mortgagee/Pledgee (as applicable) of
the applicable Borrower or Operating Lessee.” None of any Borrower, Operating
Lessee or any Manager shall have any right of withdrawal from any Collection
Account. Borrowers shall, on a twice-weekly basis, cause all Rents and all other
items of Gross Revenue to be deposited or transferred directly into the related
Collection Account. Without in any way limiting Borrowers’ obligations pursuant
to the preceding sentence, Borrowers, Operating Lessee and each Manager shall
deposit or cause the transfer directly into the relevant Collection Account all
Rents, other items of Gross Revenue and all Credit Card Receivables received by
any Borrower, Operating Lessee and each Manager within one (1) Business Day
after receipt thereof.

 

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(ii) With respect to each Marriott Property, Borrowers and Operating Lessee
shall cause all Rents and all other items of Gross Revenue to be deposited or
transferred directly into the related Manager Account immediately upon payment
of the same. Without in any way limiting Borrowers’ obligations pursuant to the
preceding sentence, Borrowers, Operating Lessee and each Manager shall deposit
or cause the transfer of directly into the relevant Manager Account all Rents,
other items of Gross Revenue and all Credit Card Receivables received by any
Borrower, Operating Lessee and each Manager in violation or contradiction of the
preceding sentence within one (1) Business Day after receipt thereof.

(iii) Any breach of this Section by any Borrower shall be an Event of Default;
provided, however, that, with respect to any Marriott Property, any breach of
this Section that arises by reason of any act or omission within the exclusive
control or responsibility of a Manager operating under a Management Agreement
shall not be an Event of Default hereunder so long as Borrower is taking prompt,
diligent and commercially reasonable action to require such Manager to remedy
such Event of Default.

(b) Non-Marriott Property Operating Account; Cash Collateral Account.

(i) Pursuant to each Collection Account Agreement (with respect to each
Non-Marriott Property), Borrowers will authorize and direct each Collection
Account Bank to promptly (and in any event within one Business Day of receipt
thereof) transfer all funds deposited in the Collection Account for such
Borrower’s Individual Property to the Non-Marriott Property Operating Account
(other than a minimum balance of cash of $5,000 at all times for payment of any
of the Collection Account Bank’s charges, fees and expenses, as provided in the
Collection Account Agreement). Pursuant to the terms of each Cash Collateral
Account Agreement, at such time as the aggregate amount of funds deposited into
the Non-Marriott Property Operating Account during any Current Interest Accrual
Period shall be equal to at least the Non-Marriott Property Operating Expenses
Monthly Installment for such Current Interest Accrual Period, the Cash
Collateral Account Bank shall promptly transfer to the Cash Collateral Account
all funds deposited into the Non-Marriott Property Operating Account during such
Interest Accrual Period in excess of such Non-Marriott Property Operating
Expenses Monthly Installment. Provided that no Non-Marriott Property Operating
Account Cash Trap Period is continuing, the Non-Marriott Property Operating
Account shall be under the sole dominion and control of Borrower, and Borrower
shall have full access thereto and right of withdrawal therefrom for payment of
operating expenses relating to the Non-Marriott Properties. During the
continuance of any Non-Marriott Property Operating Account Cash Trap Period, no
Borrower or Operating Lessee shall have any right of withdrawal in respect to
the Non-Marriott Property Operating Account.

 

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(ii) Pursuant to each Manager’s Subordination (with respect to each Marriott
Property), Borrowers will authorize and direct each Manager to promptly transfer
all funds due and payable to Borrower (in accordance with the terms of the
Management Agreement and the Manager’s Subordination) deposited in the Manager
Account for such Borrower’s Individual Property to a cash collateral account
that is an Eligible Account established by Lender in Lender’s name (the “Cash
Collateral Account”). Lender may elect to change the financial institution at
which the Cash Collateral Account shall be maintained. Lender shall give
Borrowers not less than thirty (30) days prior notice of each change. The Cash
Collateral Account shall be under the sole dominion and control of Lender. No
Borrower or Operating Lessee shall have any right of withdrawal in respect to
the Cash Collateral Account.

(c) Establishment of Sub-Accounts. The Cash Collateral Account shall contain a
Debt Service Payment Sub-Account, a Basic Carrying Costs Sub-Account, a Capital
Reserve Sub-Account, a Cash Management Fee Sub-Account, a Hotel Operations
Sub-Account, a Deferred Maintenance Sub-Account, an Upfront Remediation
Sub-Account and a Mezzanine Debt Service Payment Sub-Account (if applicable),
each of which accounts (individually, a “Sub-Account” and collectively, the
“Sub-Accounts”) shall be an Eligible Account to which certain funds shall be
allocated and from which disbursements shall be made pursuant to the terms of
this Loan Agreement.

(d) Monthly Funding of Sub-Accounts. During each Interest Accrual Period and,
except as provided below, during the term of the Loan commencing with the
Interest Accrual Period in which the Closing Date occurs (each, the “Current
Interest Accrual Period”), Lender shall allocate all funds then on deposit in
the Cash Collateral Account among the Sub-Accounts as follows and in the
following priority:

(i) first, to the Basic Carrying Costs Sub-Account, until an amount equal to the
Basic Carrying Costs Monthly Installment for the Current Interest Accrual Period
has been allocated to the Basic Carrying Costs Sub-Account, provided, that with
respect to each Marriott Property, so long as (A) Marriott is Manager of such
Marriott Property, (B) no default has occurred and is continuing under the
Management Agreement applicable to such Marriott Property beyond any applicable
notice and cure periods set forth therein, (C) Marriott is making all required
payments as and when due pursuant to the Management Agreement and/or the
Manager’s Subordination, and (D) with respect to Impositions, sufficient funds
have been deducted from Gross Revenues (as defined under the applicable
Management Agreement) to provide for payment in full of the next due
installments of Impositions in accordance with the terms hereof, as reasonably
determined by Lender based on Marriott’s periodic reporting obligations under
the Management Agreement and/or Manager’s Subordination or otherwise, funds
shall be allocated to the Basic Carrying Costs Sub-Account pursuant to this
Section 2.11(d)(ii) only in an amount equal to the portion of the Basic Carrying
Costs Monthly Installment relating to Impositions not otherwise reserved for and
paid by Manager pursuant to the Management Agreement;

(ii) second, to the Debt Service Payment Sub-Account, until an amount equal to
the Required Debt Service Payment for the Payment Date immediately after the
Current Interest Accrual Period has been allocated to the Debt Service Payment
Sub-Account;

 

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(iii) third, to the Capital Reserve Sub-Account, until an amount equal to the
Capital Reserve Monthly Installment for the Current Interest Accrual Period has
been allocated to the Capital Reserve Sub-Account (and, upon calculation of the
Capital Reserve True-Up Amount, if the Capital Reserve True-Up Amount is a
positive number, until an amount equal to the Capital Reserve True-Up Amount has
been allocated to the Capital Reserve Sub-Account), provided, that with respect
to each Marriott Property, so long as (A) Marriott is Manager of such Marriott
Property, (B) no default has occurred and is continuing under the Management
Agreement applicable to such Marriott Property beyond any applicable notice and
cure periods set forth therein, and (C) Marriott is making all required payments
as and when due pursuant to the Management Agreement and/or the Manager’s
Subordination, funds shall be allocated to the Capital Reserve Sub-Account
pursuant to this Section 2.11(d)(iv) only in an amount equal to the portion of
the Capital Reserve Monthly Installment and the Capital Reserve True-Up Amount
relating to Capital Improvement Costs not otherwise reserved for and paid by
Manager pursuant to the Management Agreement and/or the Manager’s Subordination;

(iv) fourth, funds sufficient to pay the amounts then due Cash Collateral
Account Bank shall be deposited in the Cash Management Fee Sub-Account;

(v) fifth, to the Hotel Operations Sub-Account, until an amount equal to the
amount of operating expenses for such Interest Accrual Period as set forth on
the Approved Budget has been allocated to the Hotel Operations Sub-Account
(provided, however, that such amounts shall be deemed inclusive of any amounts
disbursed in accordance with Section 2.11(f) below), provided, that with respect
to each Marriott Property, so long as (A) Marriott is Manager of such Marriott
Property, (B) no default has occurred and is continuing under the Management
Agreement applicable to such Marriott Property beyond any applicable notice and
cure periods set forth therein, and (C) Marriott is making all required payments
as and when due pursuant to the Management Agreement and/or the Manager’s
Subordination, no funds shall be allocated to the Hotel Operations Sub-Account
pursuant to this Section 2.11(d)(vi), and, provided further, that with respect
to the Non-Marriott Properties, so long as no Non-Marriott Property Operating
Account Cash Trap Period has occurred and is continuing, no funds shall be
allocated to the Hotel Operations Sub-Account pursuant to this
Section 2.11(d)(vi);

(vi) sixth, to the Hotel Operations Sub-Account, until an amount equal to any
Extra Funds approved pursuant to Section 2.11(f) has been allocated to such
Sub-Account, provided, that with respect to each Marriott Property, so long as
(A) Marriott is Manager of such Marriott Property, (B) no default has occurred
and is continuing under the Management Agreement applicable to such Marriott
Property beyond any applicable notice and cure periods set forth therein, and
(C) Marriott is making all required payments as and when due pursuant to the
Management Agreement and/or the Manager’s Subordination, no funds shall be
allocated to the Hotel Operations Sub-Account pursuant to this
Section 2.11(d)(vii), and, provided further, that with respect to the
Non-Marriott Properties, so long as no Non-Marriott Property Operating Account
Cash Trap Period has occurred and is continuing, no funds shall be allocated to
the Hotel Operations Sub-Account pursuant to this Section 2.11(d)(vii);

 

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(vii) seventh, in the event that a permitted Mezzanine Financing under
Section 2.15 has occurred, for the benefit of the Mezzanine Borrower, to the
Mezzanine Debt Service Payment Sub-Account, until an amount equal to the
scheduled monthly interest payment portion of Mezzanine Debt Service for the
applicable monthly payment date set forth in the Mezzanine Loan Agreement for
the then current interest accrual period set forth in the Mezzanine Loan
Agreement has been allocated to the Mezzanine Debt Service Payment Sub-Account;

(viii) eighth, funds sufficient to pay amounts equal to any Costs of
Uncollectible Drafts then due to the Morgan Collection Account Bank shall be
deposited with the Morgan Collection Account Bank;

(ix) ninth, provided that (a) no Event of Default has occurred and is continuing
and (b) Lender has received all financial information described in
Section 5.1(Q) for the most recent periods for which the same are due, Lender
agrees that in each Current Interest Accrual Period any amounts deposited into
or remaining in the Cash Collateral Account after the minimum amounts set forth
in clauses (i) through (viii), inclusive, above, have been satisfied with
respect to the Current Interest Accrual Period and any periods prior thereto
shall be disbursed by Lender on a weekly basis, at Borrowers’ expense, to (A) at
any time while the Mezzanine Loan is outstanding, the Mezzanine Deposit Account
(to the extent, if any, required under the Mezzanine Loan Agreement), and (B) at
any time after the Mezzanine Loan has been repaid in full or at any time during
which there is no Mezzanine Loan, such account that Borrowers may request in
writing. Lender and its agents shall not be responsible for monitoring
Borrowers’ use of any funds disbursed from the Cash Collateral Account or any of
the Sub-Accounts. If an Event of Default has occurred and is continuing, any
amounts deposited into or remaining in the Cash Collateral Account shall be for
the account of Lender and may be withdrawn by Lender to be applied in any manner
at any time to amounts owing under the Loan Documents as Lender may elect in
Lender’s discretion or maintained in the Cash Collateral Account as security for
the Indebtedness.

If an Event of Default has occurred and exists or if on any Payment Date the
balance in any Sub-Account is insufficient to make the required payment due from
such Sub-Account, Lender may, in its sole discretion, in addition to any other
rights and remedies available hereunder, withdraw funds from any other
Sub-Account to (a) pay such deficiency, or (b) apply to payment of the
Indebtedness. If a Non-Marriott Property Operating Account Cash Trap Period has
occurred and exists, Lender may, in its sole discretion, in addition to any
other rights and remedies available hereunder, withdraw funds from the
Non-Marriott Property Operating Account to apply to payment of the Indebtedness.
If Lender elects to apply funds of any such Sub-Account or Non-Marriott Property
Operating Account to pay any Required Debt Service Payment, Borrowers shall,
upon demand, repay to Lender the amount of such withdrawn funds to replenish
such Sub-Account or Non-Marriott Property Operating Account , and if Borrowers
fail to repay such amounts within five (5) days after notice of such withdrawal,
an Event of Default shall exist hereunder. Notwithstanding the foregoing, on the
Closing Date Borrowers shall deposit the Initial Deferred Maintenance Amount
into the Deferred Maintenance Sub-Account, the Initial Basic Carrying Cost
Amount into the Basic Carrying Cost Sub-Account and the Initial Upfront
Remediation Amount into the Upfront Remediation Sub-Account.

 

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(e) Payment of Basic Carrying Costs, Debt Service, Capital Improvement Costs,
Cash Collateral Account Bank Fees.

(i) Payment of Basic Carrying Costs.

(x) At least five (5) Business Days prior to the due date of any Basic Carrying
Cost payment, and not more frequently than once each Interest Accrual Period,
Borrowers shall notify Lender in writing and request that Lender make such Basic
Carrying Cost payment on behalf of the applicable Borrowers on or prior to the
due date thereof. Together with each such request, Borrowers shall furnish
Lender with copies of bills and other documentation as may be reasonably
required by Lender to establish that such Basic Carrying Cost payment is then
due. Lender shall be entitled to conclusively rely on all bills or other
documentation received from any Borrower, in each case without independent
investigation or verification. Lender shall make such payments out of the Basic
Carrying Cost Sub-Account before the same shall be delinquent to the extent that
there are funds available in the Basic Carrying Cost Sub-Account and Lender has
received appropriate documentation to establish the amount(s) due and the due
date(s) as and when provided above. Notwithstanding anything herein to the
contrary, with respect to each Marriott Property, so long as (A) Marriott is
Manager of such Marriott Property, (B) no default has occurred and is continuing
under the Management Agreement applicable to such Marriott Property beyond any
applicable notice and cure periods set forth therein, (C) Marriott is making all
required payments as and when due pursuant to the Management Agreement and/or
the Manager’s Subordination, and (D) with respect to Impositions, sufficient
funds have been deducted from Gross Revenues (as defined under the applicable
Management Agreement) to provide for payment in full of the next due
installments of Impositions in accordance with the terms hereof, as reasonably
determined by Lender based on Marriott’s periodic reporting obligations under
the Management Agreement and/or Manager’s Subordination or otherwise, this
Section 2.11(e)(i)(x) shall only apply to the payment of Impositions not
otherwise reserved for and paid by Manager pursuant to the Management Agreement
and/or the Manager’s Subordination.

(y) Except to the extent that Lender is obligated to pay Basic Carrying Costs
from the Basic Carrying Costs Sub-Account pursuant to the terms of this Section,
Borrowers shall pay or shall cause payment of all Basic Carrying Costs with
respect to itself and the Individual Properties in accordance with the
provisions of the Mortgages. Borrowers’ obligation to pay or to cause payment
(or to enable Lender to pay) Basic Carrying Costs pursuant to this Agreement
shall include, to the extent permitted by applicable law, Impositions resulting
from future changes in law which impose upon Lender or any Deed of Trust Trustee
an obligation to pay any property taxes or other Impositions or which otherwise
adversely affect Lender’s or the Deed of Trust Trustee’s interests. (In the
event such a change in law prohibits any Borrower from assuming liability for
payment of any such Imposition, the outstanding Indebtedness shall, at the
option of Lender, become due and payable on the date that is one hundred twenty
(120) days after such change in law; and failure to pay such amounts on the date
due shall be an Event of Default.) If an Event of Default has occurred, the
proceeds on deposit in the Basic Carrying Costs Sub-Account may be applied by
Lender in any manner as Lender in its discretion may determine.

 

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(ii) Payment of Debt Service. At or before 12:00 noon, New York City time, on
each Payment Date during the term of the Loan, Lender shall transfer to Lender’s
own account from the Debt Service Payment Sub-Account an amount equal to the
Required Debt Service Payment for the applicable Payment Date. Borrowers shall
be deemed to have timely made the Required Debt Service Payment pursuant to
Section 2.8 regardless of the time Lender makes such transfer as long as
sufficient funds are on deposit in the Debt Service Payment Sub-Account at 12:00
noon, New York City time on the applicable Payment Date. At all times after such
Payment Date Lender may, at its option, transfer amounts in the Debt Service
Payment Sub-Account to Lender’s own account, provided that Borrowers shall
receive credit against the Required Debt Service Payment in the amounts so
transferred to Lender such that in any given Current Interest Accrual Period
Borrowers shall not be required to deposit into the Debt Service Payment
Sub-Account any amounts in excess of the aggregate amount of the Required Debt
Service Payment for such Current Interest Accrual Period.

(iii) Payment of Capital Improvement Costs. Not more frequently than once each
Interest Accrual Period, and provided that no Default or Event of Default has
occurred and is continuing, Borrowers may notify Lender in writing and request
that Lender release to a Borrower or its designee funds from the Capital Reserve
Sub-Account, to the extent funds are available therein, for payment of Capital
Improvement Costs. Together with each such request, Borrowers shall furnish
Lender or cause to be furnished to Lender copies of bills and other
documentation as may be reasonably required by Lender to establish that such
Capital Improvement Costs are reasonable (provided such Capital Improvement
Costs shall be deemed reasonable if such Capital Improvement Costs are reflected
in the Approved Budget), that the work relating thereto has been completed and
that such amounts are then due or have been paid. Lender shall approve or
disapprove such request, within ten (10) Business Days after Lender’s receipt of
such request, provided such request shall be deemed approved if no response is
received from Lender within twenty (20) Business Days after Lender’s receipt of
such request and related documentation, and, if approved or deemed approved,
Lender shall release the funds to each applicable Borrower or such Borrower’s
designee within ten (10) Business Days after Lender’s approval. Notwithstanding
anything herein to the contrary, with respect to each Marriott Property, so long
as (A) Marriott is Manager of such Marriott Property, (B) no default has
occurred and is continuing under the Management Agreement applicable to such
Marriott Property beyond any applicable notice and cure periods set forth
therein, and (C) Marriott is making all required payments as and when due
pursuant to the Management Agreement and/or the Manager’s Subordination, this
Section 2.11(e)(iii) shall only apply to the payment of Capital Improvement
Costs not otherwise paid by Manager pursuant to the Management Agreement and/or
the Manager’s Subordination.

(iv) Payment of Deferred Maintenance Costs. Not more frequently than once each
Interest Accrual Period, and provided that no Event of Default has occurred and
is continuing, Borrower may notify Lender in writing and request that Lender
release to Borrower funds from the Deferred Maintenance Sub-Account, to the
extent funds are available therein, for payment of Deferred Maintenance Costs.
Together with each such request, Borrower shall furnish Lender with copies of
bills and other

 

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documentation reasonably required by Lender to establish that such Deferred
Maintenance Costs are reasonable, that the work relating thereto has been
completed and that such amounts are then due or have been paid. Lender shall
approve or disapprove such request within ten (10) Business Days after Lender’s
receipt of such request, provided such request shall be deemed approved if no
response is received from Lender within twenty (20) Business Days after Lender’s
receipt of such request and related documentation, and, if approved or deemed
approved, Lender shall release the funds to each applicable Borrower or such
Borrower’s designee within ten (10) Business Days after Lender’s approval.

(v) Payment of Cash Collateral Account Bank Fees. Not more frequently than once
each Interest Accrual Period, Lender shall transfer to the Cash Collateral
Account Bank an amount equal to the amount of the monthly fee payable to the
Cash Collateral Account Bank under the Cash Collateral Account Agreement.

(vi) Payment of Upfront Remediation Costs. Not more frequently than once each
Interest Accrual Period, and provided that no Event of Default has occurred and
is continuing, Borrower may notify Lender in writing and request that Lender
release to Borrower funds from the Upfront Remediation Sub-Account, to the
extent funds are available therein, for payment of Upfront Remediation Costs.
Together with each such request, Borrower shall furnish Lender with copies of
bills and other documentation reasonably required by Lender to establish that
such Upfront Remediation Costs are reasonable, that the work relating thereto
has been completed and that such amounts are then due or have been paid. Lender
shall approve or disapprove such request within ten (10) Business Days after
Lender’s receipt of such request, provided such request shall be deemed approved
if no response is received from Lender within twenty (20) Business Days after
Lender’s receipt of such request and related documentation, and, if approved or
deemed approved, Lender shall release the funds to each applicable Borrower or
such Borrower’s designee within ten (10) Business Days after Lender’s approval.

(f) Payment of Operating Expenses.

(i) Provided that no Event of Default has occurred and is continuing, and
provided that all amounts required to be deposited into the Sub-Accounts set
forth in Sections 2.11(d)(i) through (vi) for the Current Interest Accrual
Period have been deposited therein, Lender shall transfer within two Business
Days thereafter at Borrowers’ sole cost and expense, to an account designated by
the Borrowers, all amounts contained in the Hotel Operating Sub-Accounts up to
an amount equal to the amount set forth in the Approved Budget for such Interest
Accrual Period provided, however, that the aggregate withdrawals from the Hotel
Operating Sub-Account pursuant to this Section 2.11(f)(i) for any Interest
Accrual Period shall not exceed the amount set forth in the Approved Budget for
such Interest Accrual Period (except to the extent set forth in subsection (ii),
below).

 

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(ii) Provided that no Event of Default has occurred and is continuing, if in a
given Interest Accrual Period, Borrowers require amounts in excess of the
amounts set forth in the Approved Budget for such Interest Accrual Period for
Operating Expenses (“Extra Funds”), Borrowers may deliver a written request to
Lender to allocate an amount equal to Extra Funds to the Hotel Operations
Sub-Account as set forth in Section 2.11(d)(vii) and for a disbursement of Extra
Funds stating (1) the amount of such Extra Funds and (2) the purpose for which
such amount is intended with attachments of copies of bills and other
documentation as may be required by Lender to establish that such Operating
Expenses are reasonable and that such amounts are then due or expected to become
due in that month. Lender shall approve or disapprove such request, within ten
(10) Business Days after Lender’s receipt of such request and related
documentation, provided such request shall be deemed approved if no response is
received from Lender within ten (10) Business Days after Lender’s receipt of
such request and related documentation, and, if approved or deemed approved,
Lender shall release the funds to each applicable Borrower or such Borrower’s
designee within five (5) Business Days after Lender’s approval.

(iii) Notwithstanding anything herein to the contrary, with respect to each
Marriott Property, so long as (A) Marriott is Manager of such Marriott Property,
(B) no default has occurred and is continuing under the Management Agreement
applicable to such Marriott Property beyond any applicable notice and cure
periods set forth therein, and (C) Marriott is making all required payments as
and when due pursuant to the Management Agreement and/or the Manager’s
Subordination, this Section 2.11(f) shall not apply.

(g) Payment of Mezzanine Debt Service. In the event that a permitted Mezzanine
Financing under Section 2.15 has occurred, at or before 12:00 noon, New York
City time, on each Payment Date during the term of the Loan, Lender shall
transfer to Mezzanine Lender’s account from the Mezzanine Debt Service Payment
Sub-Account an amount equal to the Mezzanine Debt Service for the applicable
payment date.

(h) Permitted Investments. Upon the written request of Borrowers, which request
may be made once per Interest Accrual Period, Lender shall direct the Cash
Collateral Account Bank to invest and reinvest any balance in the Cash
Collateral Account from time to time in Permitted Investments as instructed by
Borrowers; provided, however, that: (i) if Borrowers fail to so instruct Lender,
or if a Default or an Event of Default shall have occurred and is continuing,
Lender shall direct the Cash Collateral Account Bank to invest and reinvest such
balance in Permitted Investments as Lender shall determine in Lender’s
discretion; (ii) the maturities of the Permitted Investments on deposit in the
Cash Collateral Account shall, to the extent such dates are ascertainable, be
selected and coordinated to become due not later than the day before any
disbursements from the Sub-Accounts must be made; (iii) all such Permitted
Investments shall be held in the name and be under the sole dominion and control
of Lender; (iv) no Permitted Investment shall be made unless Lender shall retain
a first priority perfected Lien in such Permitted Investment and all filings and
other actions necessary to ensure the validity, perfection, and priority of such
Lien have been taken; (v) Lender shall only be required to follow the written
investment instructions which were most recently received by Lender and
Borrowers shall be bound by such last received investment instructions; and
(vi) any request from Borrowers containing investment instructions shall contain
an Officer’s Certificate from Borrowers (which may be conclusively relied upon
by Lender and its agents) that any such

 

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investments constitute Permitted Investments. It is the intention of the parties
hereto that all amounts deposited in the Cash Collateral Account shall at all
times be invested in Permitted Investments. All funds in the Cash Collateral
Account that are invested in a Permitted Investment are deemed to be held in
such Cash Collateral Account for all purposes of this Agreement and the other
Loan Documents. Lender shall have no liability for any loss in investments of
funds in the Cash Collateral Account that are invested in Permitted Investments
(unless invested contrary to Borrowers’ request other than after the occurrence
of a Default or an Event of Default) and no such loss shall affect Borrowers’
obligation to fund, or liability for funding, the Cash Collateral Account and
each Sub-Account, as the case may be. Borrowers and Lender agree that Borrowers
shall include all such earnings and losses (other than those for Lender’s
account in accordance with the immediately preceding sentence) on the Cash
Collateral Account as income of the applicable Borrowers for federal and
applicable state tax purposes. Borrowers shall be responsible for any and all
fees, costs and expenses with respect to Permitted Investments.

(i) Interest on Accounts. All interest paid or other earnings on the Permitted
Investments made hereunder shall be income of the applicable Borrower and
applied in the manner and priority set forth in Section 2.11(d) hereof.

(j) Termination of Central Cash Management. The obligations of Borrowers under
Section 2.11 and Section 2.12 to maintain and fund or to cause the maintenance
and funding of the Collection Accounts, the Manager Accounts and the Cash
Collateral Account shall terminate in their entirety and be of no further force
or effect upon the satisfaction of each of the following conditions: (i) no
Default or Event of Default shall have occurred and be continuing; (ii) the
release of all Mortgages by Lender in accordance with the provisions of this
Agreement and the other Loan Documents; and (iii) Borrowers’ receipt of Lender’s
written acknowledgment that the conditions described in (i) and (ii) above have
been satisfied to Lender’s satisfaction.

Section 2.12. Security Agreement.

(a) Pledge of Accounts. To secure the full and punctual payment and performance
of all of the Indebtedness, each Borrower hereby sells, assigns, conveys,
pledges and transfers to Lender and grants to Lender a first priority and
continuing Lien on and security interest in and to its Account Collateral.

(b) Covenants. Each Borrower covenants that (i) all Rents and all other items of
Gross Revenue shall be deposited or transferred into the relevant Collection
Account or Manager Account, as applicable, in accordance with Section 2.11(a),
and (ii) so long as any portion of the Indebtedness is outstanding, no Borrower
shall open (nor permit any Manager or any Person to open) any other account for
the collection of any Rents or any other items of Gross Revenue, other than
(A) a replacement Manager Account pursuant to the terms of the applicable
Management Agreement, or a replacement Collection Account approved by Lender in
Lender’s discretion, and (B) any account held by Borrower in the locality where
the applicable Individual Property is located for the purposes of the collection
of any Rents or any other items of Gross Revenue prior to the time such Rents or
items of Gross Revenue are deposited in the Collection Account or Manager
Account, as applicable, pursuant to the terms of this Agreement.

 

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(c) Instructions and Agreements. On or before the Closing Date, each applicable
Borrower and Operating Lessee will submit to the Collection Account Bank for
each related Individual Property a Collection Account Agreement to be executed
by the Collection Account Bank. On or before the Closing Date, Borrowers,
Operating Lessee and the Cash Collateral Account Bank will execute and deliver a
Cash Collateral Account Agreement in form and substance satisfactory to Lender
in Lender’s discretion (the “Cash Collateral Account Agreement”) and consistent
with the terms of this Agreement. Each Borrower and Operating Lessee agrees that
prior to the payment in full of the Indebtedness, the Cash Collateral Account
Agreement shall be irrevocable by any Borrower or Operating Lessee without the
prior written consent of Lender.

(d) Financing Statements; Further Assurances. Each Borrower hereby authorizes
Lender to file a financing statement or statements in connection with the
Account Collateral in the form required to properly perfect Lender’s security
interest in the Account Collateral to the extent that it may be perfected by
such a filing. Each Borrower agrees that at any time and from time to time, at
the expense of Borrowers, such Borrower shall promptly execute and deliver all
further instruments, and take all further action, that Lender may reasonably
request, in order to perfect and protect the pledge, security interest and Lien
granted or purported to be granted hereby, or to enable Lender to exercise and
enforce Lender’s rights and remedies hereunder with respect to, the Account
Collateral.

(e) Transfers and Other Liens. Each Borrower agrees that it will not sell or
otherwise dispose of any of the Account Collateral other than pursuant to the
terms hereof and of the other Loan Documents, or create or permit to exist any
Lien upon or with respect to all or any of the Account Collateral, except for
the Liens granted to Lender under this Agreement.

(f) Lender’s Reasonable Care. Beyond the exercise of reasonable care in the
custody thereof, Lender shall not have any duty as to any Account Collateral or
any income thereon in Lender’s possession or control or in the possession or
control of any agents for, or of Lender, or the preservation of rights against
any Person or otherwise with respect thereto. Lender shall be deemed to have
exercised reasonable care in the custody of the Account Collateral in Lender’s
possession if the Account Collateral is accorded treatment substantially equal
to that which Lender accords Lender’s own property, it being understood that
Lender shall not be liable or responsible for (i) any loss or damage to any of
the Account Collateral, or for any diminution in value thereof from a loss of,
or delay in Lender’s acknowledging receipt of, any wire transfer from the
Collection Account Bank or from any Manager Account or (ii) any loss, damage or
diminution in value by reason of the act or omission of Lender, or Lender’s
agents, employees or bailees, except for any loss, damage or diminution in value
resulting from the gross negligence, fraud or willful misconduct of Lender, its
agents or employees.

 

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(g) Lender Appointed Attorney-In-Fact. Each Borrower hereby irrevocably
constitutes and appoints Lender as such Borrower’s true and lawful
attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuance of an Event of Default to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of such Borrower with respect to the Account
Collateral, and do in the name, place and stead of such Borrower, all such acts,
things and deeds for and on behalf of and in the name of such Borrower with
respect to the Account Collateral, which such Borrower could or might do or
which Lender may deem necessary or desirable to more fully vest in Lender the
rights and remedies provided for herein with respect to the Account Collateral
and to accomplish the purposes of this Agreement. The foregoing powers of
attorney are irrevocable and coupled with an interest.

(h) Continuing Security Interest; Termination. This Section shall create a
continuing pledge of, Lien on and security interest in the Account Collateral
and shall remain in full force and effect until payment in full of the
Indebtedness. Upon payment in full of the Indebtedness, each applicable Borrower
shall be entitled to the return, upon such Borrower’s written request and at
Borrowers’ expense, of such of the Account Collateral as shall not have been
sold or otherwise applied pursuant to the terms hereof, and Lender shall execute
such instruments and documents as may be reasonably requested by such Borrower
in writing to evidence such termination and the release of the pledge and Lien
hereof, provided, however, that such Borrower shall pay on demand all of
Lender’s expenses in connection therewith.

Section 2.13. Secondary Market Transactions.

(a) Each Borrower hereby acknowledges that Lender may in one or more
transactions (i) sell or securitize the Loan or portions thereof in one or more
transactions through the issuance of securities, which securities may be rated
by one or more of the Rating Agencies, (ii) sell or otherwise transfer the Loan
or any portion thereof one or more times, (iii) sell participation interests
(including without limitation, senior and subordinate participation interests)
in the Loan one or more times, (iv) re-securitize the securities issued in
connection with any securitization, or (v) further divide the Loan into more
separate notes, loans or components or change the principal balances (but not
increase the aggregate principal balance) or interest rates of the Notes
(including, without limitation, senior and subordinate notes or components) (the
transactions referred to in clauses (i) through (v), each a “Secondary Market
Transaction” and collectively “Secondary Market Transactions”).

(b) With respect to any Secondary Market Transaction described in
Section 2.13(a)(v) above, such notes or note components may be assigned
different interest rates, so long as, at such time the weighted average of the
relevant interest rates equals the Interest Rate; provided, that after an Event
of Default each Borrower recognizes that, in the case of prepayments, the
weighted average interest rate of the Loan may increase because Lender shall
have the right to apply principal payments to one or more notes or components
with lower rates of interest before applying principal payments to one or more
notes or components with higher rates of interest; and provided, further, that
the principal balance of the Note shall not change. Lender shall have the same
rights to sell or otherwise transfer, participate or securitize one or more of
the divided, amended, modified or otherwise changed notes or components,
individually or collectively, as Lender has with respect to the Loan.

 

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(c) Each Borrower agrees that it shall cooperate with Lender and use such
Borrower’s commercially reasonably efforts to facilitate the consummation of
each Secondary Market Transaction including, without limitation, by:
(i) amending or causing the amendment of this Agreement and the other Loan
Documents, and executing such additional documents, instruments and agreements
including amendments to such Borrower’s organizational documents and preparing
financial statements as requested by the Rating Agencies to conform the terms of
the Loan to the terms of similar loans underlying completed or pending secondary
market transactions having or seeking ratings similar to those then being sought
in connection with the relevant Secondary Market Transaction; (ii) promptly and
reasonably providing such information (including, without limitation, financial
information) as may be requested in connection with the preparation of a private
placement memorandum, prospectus or a registration statement required to
privately place or publicly distribute the securities in a manner which does not
conflict with federal or state securities laws; (iii) providing in connection
with each of (A) a preliminary and a final private placement memorandum or other
offering documents or (B) a preliminary and final prospectus, as applicable, an
indemnification certificate (x) certifying that such Borrower has carefully
examined such private placement memorandum, prospectus, registration statement
or other offering document, as applicable, including, without limitation, the
sections entitled “Special Considerations,” “Description of the Mortgage Loan,”
“The Underlying Mortgaged Property,” “The Manager,” “Borrower” and “Certain
Legal Aspects of the Mortgage Loan,” and such sections (and any other sections
requested) insofar as they relate to a Borrower, its Affiliates, the Loan or any
Individual Property does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading;
provided, however, that such Borrower shall not be required to indemnify Lender
for any losses relating to untrue statements or omissions which such Borrower
identified to Lender in writing at the time of such Borrower’s examination of
such memorandum or prospectus, as applicable, and (y) indemnifying (i) Lender
and each of its affiliates and their respective successors and assigns
(including their respective officers, directors, partners, employees, attorneys,
accountants, professionals and agents and each other person, if any, controlling
Lender or any of its affiliates within the meaning of either Section 15 of the
Securities Act of 1933, as amended (the “Securities Act”), or Section 20 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each,
including Lender, an “Indemnified Party”) and the (ii) party that has filed the
registration statement relating to the Secondary Market Transaction (the
“Registration Statement”), each of its directors and officers who have signed
the Registration Statement and each Person that controls such Party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(collective, the “Underwriter Group”), for any losses, claims, damages, costs,
expenses or liabilities (including, without limitation, all liabilities under
all applicable federal and state securities laws) (collectively, the
“Liabilities”) to which any of them may become subject (a) insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact relating to any Borrower, its Affiliates,
the Loan, any Individual Property, any Manager and the Operating Lessee
contained in such sections or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated in such
sections or necessary in order to make the statements in such sections, in light
of the circumstances under which they were made, not misleading or (b) as a
result of any untrue statement of material fact in any of the financial
statements of any Borrower incorporated into any placement memorandum,
prospectus, registration statement or other document connected with the issuance
of securities or the failure to include in such financial statements or in any
placement memorandum, prospectus, registration statement or other document
connected with the issuance of securities any material fact relating to any

 

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Borrower, its Affiliates, any Individual Property, the Loan, any Manager and the
Operating Lessee necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; and (z) agreeing
to reimburse the Indemnified Party and the Underwriter Group for any legal or
other expenses reasonably incurred by the Indemnified Party and the Underwriter
Group in connection with investigating or defending the Liabilities;
(iv) causing to be rendered such customary opinion letters as shall be requested
by the Rating Agencies for other secondary market or transactions having or
seeking ratings comparable to that then being sought for the relevant Secondary
Market Transaction; (v) making such representations, warranties and covenants,
as may be reasonably requested by the Rating Agencies and comparable to those
required in other secondary market transactions having or seeking the same
rating as is then being sought for the Secondary Market Transaction;
(vi) providing such information regarding the Collateral as may be reasonably
requested by the Rating Agencies or otherwise required in connection with the
formation of a REMIC; and (vii) providing any other information and materials
required in the Secondary Market Transaction.

(d) Each Borrower agrees to participate and cooperate in any meetings with the
Rating Agencies or Investors, and providing any other information and materials
reasonably required in the Secondary Market Transaction to make the certificates
offered in such Secondary Market Transaction saleable in the secondary market
and to obtain ratings from two or more rating agencies.

(e) Each Borrower acknowledges and agrees that the Lender may, at any time on or
after the Closing Date, assign its duties, rights or obligations hereunder or
under any Loan Document in whole, or in part, to a servicer and/or a trustee in
Lender’s discretion. Nothing herein shall in any way limit Lender’s right to
sell all or a portion of the Loan in a transaction which is not a Secondary
Market Transaction.

(f) Liability for costs and expenses relating to any transaction described in
this Section 2.13 shall be governed by Section 12 of the Cooperation Agreement.

(g) Notwithstanding anything to the contrary contained herein or in any other
Loan Document, Lender reserves the right to increase, decrease, or otherwise
re-allocate the outstanding principal balance of the Note, and each Borrower and
Operating Lessee covenants and agrees to execute amendments to the Note, this
Agreement, and the other Loan Documents and the Borrowers’ or Operating Lessee’s
organizational documents reasonably requested by Lender in connection with any
such re-allocation, provided that such modification shall not (a) increase the
aggregate outstanding principal balance of the Note, (b) change the stated
maturity date of the Loan as set forth herein, or (c) modify or amend any other
economic or other term of the Loan.

Section 2.14. Property Substitutions. Subject to the terms and conditions set
forth in this Section 2.14, Borrower may, from time to time, replace an
Individual Property with a Qualified Substitute Property (a “Property
Substitution”), provided, in the case of each Property Substitution, the
following conditions are met:

(a) The aggregate of (i) the Allocated Loan Amount with respect to the
Individual Property to be replaced, plus (ii) the Allocated Loan Amounts with
respect to all Individual Properties previously or simultaneously replaced by
Property Substitutions, shall be less than 50% of the then-current principal
balance of the Loan;

 

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(b) no Event of Default shall have occurred and be continuing on such date
either before or after the Property Substitution;

(c) Borrower shall have given Lender at least thirty (30) days’ prior written
notice of any Property Substitution, identifying the proposed Individual
Property to be replaced, the proposed Qualified Substitute Property, and the
proposed date of the Property Substitution (which date may be extended by up to
thirty (30) days, provided that Borrower gives Lender reasonable prior written
notice of Borrower’s requirement to extend the date for such Property
Substitution). If such Property Substitution does not occur on such date (as may
have been extended), (i) such Borrower’s notice will be deemed rescinded, and
(ii) Borrower shall on such date reimburse Lender for all expenses actually
incurred by Lender in connection with the proposed Property Substitution;

(d) the then-current market value of any proposed Qualified Substitute Property
(as determined by an Appraisal satisfying the Prudent Lender Standard) shall
equal or exceed the then-current market value of the Individual Property
proposed to be replaced immediately prior to the Property Substitution (as
determined by an Appraisal satisfying the Prudent Lender Standard);

(e) the Net Operating Income of any proposed Qualified Substitute Property for
the twelve-month period trailing the date of determination shall equal or exceed
the Net Operating Income of the Individual Property proposed to be replaced
during such period, as would be determined in accordance with the Prudent Lender
Standard following notice of the proposed Property Substitution;

(f) after giving effect to the Property Substitution, the Debt Service Coverage
Ratio for the aggregate of all Individual Properties for the trailing twelve
(12) months shall be no less than the greater of (i) 1.63:1:00, and (ii) the
Debt Service Coverage Ratio with respect to the Loan for the trailing twelve
(12) months immediately prior to the Property Substitution, as would be
determined in accordance with the Prudent Lender Standard;

(g) each Qualified Substitute Property shall be (i) fully constructed and
operating for a minimum of twelve (12) months, and (ii) a limited service hotel
property or full service hotel property, in each case operating under a
Marriott, Starwood Hotels & Resorts Worldwide, Inc. or Hilton Hotels Corporation
franchise or any other brand affiliated with the foregoing;

(h) each of the representations and warranties contained in this Agreement shall
be true and correct in all material respects with respect to the applicable
Individual Borrower acquiring the applicable Qualified Substitute Property, as
well as to the Qualified Substitute Property, on and as of the date of the
Property Substitution (and such Individual Borrower’s acquisition of such
Qualified Substitute Property shall be deemed to constitute their representation
to such effect);

 

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(i) (i) the applicable Individual Borrower shall have executed, acknowledged and
delivered to Lender, with respect to each Qualified Substitute Property, a
Mortgage and an Assignment of Leases, and such other customary documents and
agreements as are required to satisfy the Prudent Lender Standard, in each case
with such state-specific modifications as shall be recommended by counsel
admitted to practice in such state and selected by Lender, and (ii) each other
Individual Borrower shall have executed such additional customary Loan Documents
and such modifications to and reaffirmations of the existing Loan Documents to
which it is a party as required to satisfy the Prudent Lender Standard;

(j) each Mortgage shall secure the entire Indebtedness, provided that in the
event that the jurisdiction in which the applicable Qualified Substitute
Property is located imposes a mortgage recording, intangibles or similar tax and
does not permit the allocation of indebtedness for the purpose of determining
the amount of such tax payable, the principal amount secured by such Mortgage
shall be equal to 125% of the Allocated Loan Amount of the Individual Property
replaced by the Qualified Substitute Property as of immediately prior to such
Property Substitution;

(k) Lender shall have received copies of all Leases in effect with respect to
the Qualified Substitute Property (together with such estoppels and
subordination, non-disturbance and attornment agreements as required to satisfy
the Prudent Lender Standard), UCC and other credit and public records search
reports, certificates of insurance, title insurance policies and endorsements,
surveys, evidence of zoning compliance, copies of material Permits, contracts
and agreements, environmental and engineering reports, operating statements and
other financial information, and such other customary certificates, documents
and instruments relating to the Loan, Borrower, or the Qualified Substitute
Property as required to satisfy the Prudent Lender Standard, in each case in
form and substance which satisfies the Prudent Lender Standard;

(l) if corrective measures are recommended by any applicable environmental or
engineering report, the applicable Individual Borrower shall have deposited with
the Lender, pursuant to customary documentation reasonably satisfactory to
Lender, 125% of the amount required to fund such corrective measures, which
funds shall be made available to such Individual Borrower upon completion of
such corrective measures to an extent that would be satisfactory in accordance
with the Prudent Lender Standard, and the applicable Individual Borrower shall
covenant to perform such corrective measures within the time period recommended
in such reports;

(m) Lender shall have received applicable REMIC opinions and such other
customary opinions of counsel as Lender may require, in form and content which
satisfies the Prudent Lender Standard (including a new non-consolidation
opinion);

(n) no Individual Property may be replaced with more than one Qualified
Substitute Property;

(o) if the owner of the proposed Qualified Substitute Property is not a current
Borrower under the Loan then such owner must be a Qualified Successor Borrower;

 

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(p) Lender shall have received a copies of the management agreement and/or
franchise agreement (as applicable) for the Qualified Substitute Property and
tri-party subordination agreements or similar agreements, as applicable, with
respect to each such agreement, among the applicable Individual Borrower, the
manager and/or franchisor thereunder, and Lender, in form and content as
executed in connection with the Loan, or otherwise acceptable in accordance with
the Prudent Lender Standard;

(q) (i) Prior to the Start-Up Day, Lender shall have consented to the Property
Substitution, such consent not to be unreasonably withheld or delayed, and
(ii) on or after the Start-Up Day, Borrower shall have delivered or caused to be
delivered to Lender confirmation by each of the applicable Rating Agencies that
the Property Substitution will not result in ay qualification, withdrawal or
downgrading of any existing ratings of securities created in any applicable
Secondary Market Transaction; and

(r) Borrower shall have paid or reimbursed Lender for all out-of-pocket costs
and expenses actually incurred by Lender in connection with the foregoing
(including the reasonable fees and expenses of legal counsel and all fees and
expenses of the Rating Agencies, if any), and shall have paid all reasonable
fees and out-of-pocket costs of any loan servicer (if any) in connection with
any Property Substitution.

Upon the satisfaction of the conditions set forth in Section 2.14, (i) Lender
shall execute customary instruments satisfying the Prudent Lender Standard
releasing and discharging the applicable Individual Property from the Liens of
the Loan Documents, and (ii) if as a result of the Property Substitution, any
Individual Borrower no longer owns any Individual Property, then Lender shall
execute customary instruments satisfying the Prudent Lender Standard releasing
and discharging such Individual Borrower from its obligations under the Loan
Documents (other than any liability or obligation relating to any environmental
matters arising under Section 5.1(F) of this Agreement).

Section 2.15. Permitted Mezzanine Financing.

(a) Notwithstanding anything herein to the contrary, provided that (i) no
Default or Event of Default has occurred and is continuing, (ii) the Debt
Service Coverage Ratio for the twelve (12) month period trailing the date of
determination is at least 1.5:1, and (iii) the principal amount of the Loan as
of the date of determination does not exceed seventy percent (70%) of the
aggregate fair market value of the Property as reasonably determined by Lender
based upon an Appraisal, obtained at Borrower’s sole cost and expense, dated not
more than sixty (60) days prior to the date of determination, Borrower may, at
Borrower’s sole cost and expense, elect on a one-time basis to obtain a
mezzanine loan (a “Mezzanine Loan”) from a lender or lenders (any such party or
parties, collectively, the “Mezzanine Lender”), which Mezzanine Loan may be
secured by a pledge of Mezzanine Borrower’s (hereinafter defined) direct equity
interests in Borrower or in any SPE Equity Owner; provided, further, that
Borrower shall be permitted hereunder to obtain a Mezzanine Loan only upon
satisfaction of the following additional terms and conditions:

(i) Lender shall have received at least sixty (60) and no more than ninety
(90) days’ prior written notice of the proposed Mezzanine Loan;

 

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(ii) the aggregate unpaid principal amounts of the Loan and the Mezzanine Loan
immediately after the effective date of the Mezzanine Loan shall not exceed
seventy five percent (75%) of the aggregate fair market value of the Property as
reasonably determined by Lender based upon an Appraisal, obtained at Borrower’s
sole cost and expense, dated not more than sixty (60) days prior to the date of
determination;

(iii) the Combined Debt Service Coverage Ratio for the period from the effective
date of the Mezzanine Loan through the Maturity Date, as reasonably determined
by Lender, is at least 1.4:1.00 based upon the assumption that Adjusted Net Cash
Flow for such period will be consistent with Adjusted Net Cash Flow for the
twelve (12) month period trailing the effective date of the Mezzanine Loan;

(iv) the term of the Mezzanine Loan (including any extension terms) shall be
co-terminus with the term of the Loan;

(v) Borrower shall have created and inserted into Borrower’s organizational
structure a new Single-Purpose Entity (the “Mezzanine Borrower”) which will be
wholly-owned by the equity owners of Borrower, and the sole asset of which will
be all of the direct and indirect equity interests in Borrower and/or SPE Equity
Owner;

(vi) the Mezzanine Lender shall have executed and delivered to Lender a
mezzanine intercreditor agreement in substantial conformity to intercreditor
agreements required by the Rating Agencies;

(vii) Borrower shall have delivered to Lender written confirmation from each
Rating Agency that the Mezzanine Loan would not result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any security
issued in connection with a Secondary Market Transaction;

(viii) Borrower shall have delivered to Lender, at Borrower’s sole cost and
expense, a non-consolidation opinion in form and substance acceptable to the
Rating Agencies reflecting the Mezzanine Loan;

(ix) Borrower shall have paid or reimbursed Lender for all reasonable,
out-of-pocket costs and expenses incurred by Lender (including, without
limitation, reasonable attorneys’ fees and disbursements) in connection with the
Mezzanine Loan and Borrower shall have paid or shall have caused Mezzanine
Borrower to pay all title premiums, recording charges, filing fees, taxes or
other expenses (including, without limitation, mortgage and intangibles taxes
and documentary stamp taxes) payable in connection with the Mezzanine Loan; and

(x) Borrower shall certify in writing to Lender that the requirements set forth
in this Section 2.15 (a) have been satisfied.

In connection with the foregoing, Lender agrees that, upon satisfaction of the
terms and conditions of clauses (i) through (x) of this Section 2.15(a), Lender
shall cooperate with Borrower and Lender shall use good faith efforts to
facilitate the consummation of the Mezzanine Loan.

 

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Notwithstanding anything in this Loan Agreement to the contrary, Lender shall
not have any obligation to provide mezzanine financing to Borrower or any
Affiliate or principal of Borrower.

(b) In connection with any Permitted Transfer set forth in clause (A)(ix) of the
definition thereof, the Borrower selling its interest in any Individual
Property, or Ashford Hospitality Trust, Inc., a Maryland corporation, or any
Affiliate of Ashford Hospitality Trust, Inc., may provide mezzanine financing
for the purchase of the Individual Properties, subject to the following terms
and conditions:

(i) no Event of Default shall have occurred and is continuing;

(ii) the aggregate principal amounts of the mezzanine financing to be provided
under this Section 2.15(b) and any other financing obtained by such purchaser
shall not exceed 90% of the price for which such purchaser is purchasing the
Individual Properties;

(iii) the term of the mezzanine loan provided under this Section 2.15(b)
(including any extension terms) shall be co-terminus with the term of the Loan;

(iv) there shall be a new Single-Purpose Entity inserted in purchaser’s
organizational structure which will be wholly-owned by the equity owners of such
purchaser, and the sole asset of which will be all of the direct and indirect
equity interests in purchaser;

(v) the mezzanine lender shall have executed and delivered to Lender a mezzanine
intercreditor agreement in substantial conformity to intercreditor agreements
required by the Rating Agencies;

(vi) Borrower shall have delivered to Lender written confirmation from each
Rating Agency that the mezzanine loan under this Section 2.15(b) would not
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a Secondary Market
Transaction;

(vii) Borrower shall have delivered to Lender, at Borrower’s sole cost and
expense, a non-consolidation opinion in form and substance acceptable to the
Rating Agencies reflecting the mezzanine loan under this Section 2.15(b);

(viii) Borrower shall have paid or reimbursed Lender for all reasonable,
out-of-pocket costs and expenses incurred by Lender (including, without
limitation, reasonable attorneys’ fees and disbursements) in connection with the
mezzanine loan and Borrower shall have paid or shall have caused the mezzanine
borrower to pay all title premiums, recording charges, filing fees, taxes or
other expenses (including, without limitation, mortgage and intangibles taxes
and documentary stamp taxes) payable in connection with the mezzanine loan under
this Section 2.15(b); and

(ix) Borrower shall certify in writing to Lender that the requirements set forth
in this Section 2.15 (b) have been satisfied.

 

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ARTICLE 3

CONDITIONS PRECEDENT

Section 3.1. Conditions Precedent to the Making of the Loan.

(a) As a condition precedent to the making of the Loan, each Borrower shall have
satisfied the following conditions (unless waived by Lender in accordance with
Section 8.4) on or before the Closing Date:

(A) Loan Documents.

(i) Loan Agreement. Each Borrower shall have executed and delivered this
Agreement to Lender.

(ii) Note. Each Borrower shall have executed and delivered to Lender the Note.

(iii) Mortgage. Each applicable Borrower shall have executed and delivered to
Lender the Mortgages and the Mortgages shall have been irrevocably delivered to
an authorized title agent for the Title Insurer for recordation in the
appropriate filing offices in the jurisdiction in which the applicable
Individual Properties are located.

(iv) Supplemental Mortgage Affidavits. The Liens to be created by each Mortgage
are intended to encumber the applicable Individual Property described therein to
the full extent of each Borrower’s obligations under the Loan Documents. As of
the Closing Date, each Borrower shall have paid all state, county and municipal
recording and all other taxes imposed upon the execution and recordation of the
Mortgages.

(v) Assignment of Leases. Each applicable Borrower and each applicable Operating
Lessee shall have executed and delivered to Lender the Assignments of Leases,
and the Assignments of Leases shall have been irrevocably delivered to an
authorized title agent for the Title Insurer for such recordation in the
appropriate filing offices in the jurisdiction in which the applicable
Individual Property is located.

(vi) Assignment of Agreements. Each applicable Borrower shall have executed and
delivered to Lender the Assignments of Agreements, and the Assignments of
Agreements shall, to the extent prudent pursuant to local practice, have been
irrevocably delivered to an authorized title agent for the Title Insurer for
such recordation in the appropriate filing offices in the jurisdiction in which
the applicable Individual Property is located.

 

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(vii) Financing Statements. Each applicable Borrower and its partners or members
(and their shareholders), as applicable, shall have authorized Lender to file
all financing statements required by Lender and such financing statements shall
have been irrevocably delivered to an authorized title agent for the Title
Insurer for such recordation in the appropriate filing offices in each of the
appropriate jurisdictions.

(viii) Manager’s Subordination. Each Manager and each applicable Borrower shall
have executed and delivered to Lender the Manager’s Subordinations.

(ix) Operating Lease; Subordination, Attornment and Security Agreement.
Operating Lessee and each applicable Borrower shall have executed and delivered
to Lender (1) each Operating Lease, and (2) each applicable Subordination,
Attornment and Security Agreement.

(x) REA Estoppels. Borrower shall have delivered to Lender an executed REA
estoppel letter, which shall be in form and substance satisfactory to Lender,
from each party to any REA required by Lender with respect to any Individual
Property.

(xi) Environmental Indemnity. Each Borrower shall have executed and delivered to
Lender the Environmental Indemnity.

(xii) Cash Collateral Account Agreement. Each Borrower, the Operating Lessee,
each Manager and Cash Collateral Account Bank shall have executed and delivered
the Cash Collateral Account Agreement and shall have delivered an executed copy
of such Cash Collateral Account Agreement to Lender.

(xiii) Collection Account Agreement. With respect to each Non-Marriott Property,
each applicable Borrower, the Operating Lessee, each Manager and the relevant
Collection Account Banks shall have executed and delivered the Collection
Account Agreements and shall have delivered an executed copy of such Agreement
to Lender.

(xiv) PIP Guaranty. Ashford Hospitality Limited Partnership shall have executed
and delivered to Lender the PIP Guaranty.

(B) Opinions of Counsel. Lender shall have received from counsel satisfactory to
Lender, legal opinions in form and substance satisfactory to Lender in Lender’s
discretion (including, without limitation, a bankruptcy opinion). All such legal
opinions will be addressed to Lender and the Rating Agencies, dated as of the
Closing Date, and in form and substance satisfactory to Lender, the Rating
Agencies and their counsel. Each applicable Borrower hereby instructs any of the
foregoing counsel, to the extent that such counsel represents such Borrower, to
deliver to Lender such opinions addressed to Lender and the Rating Agencies.

(C) Secretary’s Certificates and SPE Equity Owner’s Certificate. Lender shall
have received a Secretary’s Certificate acceptable to Lender with respect to
each applicable Borrower’s managing equity owner and each applicable SPE Equity
Owner’s Certificate with respect to the applicable Borrower.

 

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(D) Insurance. Lender shall have received certificates of insurance
demonstrating insurance coverage in respect of each Individual Property as
required by and in accordance with the Mortgages.

(E) Lien Search Reports. Lender shall have received satisfactory reports of UCC
(collectively, the “UCC Searches”), federal tax lien, bankruptcy, state tax
lien, judgment and pending litigation searches conducted by a search firm
reasonably acceptable to Lender. Such searches shall have been received in
relation to each Borrower and each equity owner in each Borrower, the Operating
Lessee and each Manager.

(F) Title Insurance Policy. Lender shall have received (i) a Title Insurance
Policy for each Individual Property or a marked-up commitment (in form and
substance satisfactory to Lender) from Title Insurer to issue a Title Insurance
Policy for each Individual Property and (ii) a fully executed copy of the Title
Instruction Letter from the Title Insurer.

(G) Environmental Matters. Lender shall have received an Environmental Report
with respect to each Individual Property.

(H) Consents, Licenses, Approvals. Lender shall have received copies of all
consents, licenses and approvals, if any, required in connection with the
execution, delivery and performance by each Borrower under, and the validity and
enforceability of, the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect.

(I) Additional Matters. Lender shall have received such other Permits,
certificates (including certificates of occupancy reflecting the permitted uses
of the Individual Properties as of the Closing Date), opinions, documents and
instruments (including, without limitation, written proof from the appropriate
Governmental Authority regarding the zoning of each Individual Property in form
and substance satisfactory to Lender in Lender’s discretion) relating to the
Loan as may be required by Lender and all other documents and all legal matters
in connection with the Loan shall be satisfactory in form and substance to
Lender. Each Borrower shall provide Lender with information reasonably
satisfactory to Lender regarding Basic Carrying Costs on or before the Closing
Date.

(J) Representations and Warranties. The representations and warranties herein
and in the other Loan Documents shall be true and correct in all material
respects.

(K) No Injunction. No law or regulation shall have been adopted, no order,
judgment or decree of any Governmental Authority shall have been issued or
entered, and no litigation shall be pending or threatened, which in the judgment
of Lender would have a Material Adverse Effect.

(L) Survey. Lender shall have received a Survey for each Individual Property.

 

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(M) Engineering Report. Lender shall have received an Engineering Report for
each Individual Property.

(N) Appraisal. Lender shall have received an Appraisal satisfactory to Lender
with respect to each Individual Property which shall be (i) prepared by an
Appraiser approved by Lender in Lender’s reasonable discretion, (ii) prepared
based on a scope of work determined by Lender in Lender’s reasonable discretion
and (iii) in form and content acceptable to Lender in Lender’s reasonable
discretion.

(O) Security Deposits. Borrowers shall be in compliance with all applicable
Legal Requirements relating to all security deposits held for any Leases.

(P) Service Contracts and Permits. Borrowers shall have delivered to Lender
true, correct and complete copies of all material contracts and Permits relating
to each Individual Property.

(Q) Site Inspection. Unless waived by Lender in accordance with Section 8.4,
Lender shall have performed, or caused to be performed on its behalf, an on-site
due diligence review of each Individual Property to be acquired or refinanced
with the Loan, the results of which shall be satisfactory to Lender in Lender’s
discretion.

(R) Use. Each Individual Property shall be operating and operated only as a
hotel of the same class and in a similar manner as each such Individual Property
is operated on the Closing Date.

(S) Financial Information. Lender shall have received all financial information
(which financial information shall be satisfactory to Lender in Lender’s
discretion) relating to each Individual Property including, without limitation,
audited financial statements of each Borrower and Operating Lessee for the
calendar year ending December 31, 2004, if any, and other financial reports
requested by Lender in Lender’s reasonable discretion. Such financial
information shall be (i) prepared by an accounting firm approved by Lender in
Lender’s reasonable discretion, (ii) prepared based on a scope of work
determined by Lender in Lender’s reasonable discretion and (iii) in form and
content acceptable to Lender in Lender’s reasonable discretion.

(T) Management Agreements. Lender shall have received the Management Agreements.

(U) Franchisor Subordinations. Borrower shall have delivered to Lender
(1) certified copies of each Franchise Agreement and (2) the Franchisor’s
Subordinations, and Borrower shall have paid or undertaken to pay any fees,
costs and expenses requested by the Franchisors in connection with providing the
foregoing items.

(V) Leases; Tenant Estoppels; Subordination, Nondisturbance and Attornment
Agreements. With respect to each Individual Property, Borrowers shall have
delivered a true, complete and correct rent roll and a copy of each of the
Leases identified in such rent roll, and each Lease shall be satisfactory to
Lender in Lender’s reasonable discretion.

 

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(W) Subdivision. Evidence satisfactory to Lender (including title endorsements)
that the Land relating to each Individual Property constitutes a separate lot
for conveyance and real estate tax assessment purposes.

(X) Transaction Costs. Borrowers shall have paid or caused to be paid all
Transaction Costs.

(b) Lender shall not be obligated to make the Loan unless and until each of the
applicable conditions precedent set forth in this Section 3.1 is satisfied and
until Borrower provides any other information reasonably required by Lender.

(c) In connection with the Loan, Borrower shall execute and/or deliver to Lender
all additions, amendments, modifications and supplements to the items set forth
in this Article III, including, without limitation, amendments, modifications
and any supplements to the Note, any Mortgage, any Assignment of Leases, any
Assignment of Agreements, and Manager’s Subordination, if reasonably requested
by Lender to effectuate the provisions hereof, and to provide Lender with the
full benefit of the security intended to be provided under the Loan Documents.
Without in any way limiting the foregoing, such additions, modifications and
supplements shall include those deemed reasonably desirable by Lender’s counsel
in the jurisdiction in which the applicable Individual Property is located.

(d) The making of the Loan shall constitute, without the necessity of
specifically containing a written statement to such effect, a confirmation,
representation and warranty by Borrower to Lender that all of the applicable
conditions to be satisfied in connection with the making of the Loan have been
satisfied (unless waived by Lender in accordance with Section 8.4 or otherwise
made known to Lender by the Borrowers,) and that all of the representations and
warranties of Borrowers set forth in the Loan Documents are true and correct in
all material respects as of the date of the making of the Loan.

Section 3.2. Form of Loan Documents and Related Matters.

The Loan Documents and all of the certificates, agreements, legal opinions and
other documents and papers referred to in this Article III, unless otherwise
specified, shall be delivered to Lender, and shall be in form and substance
satisfactory to Lender.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

Section 4.1. Representations and Warranties of Borrower and Operating Lessee.
Each Borrower and Operating Lessee represents, warrants and covenants as follows
as to all Borrowers, Operating Lessee, and all Individual Properties, as of
October 14, 2005:

(A) Organization. That each Borrower and Operating Lessee (i) is a duly
organized and validly existing Entity in good standing under the laws of the
State of its formation, (ii) is duly qualified as a foreign Entity in each
jurisdiction in which the nature of its business, the applicable Individual
Properties or any of the Collateral makes such qualification necessary or
desirable, (iii) has the requisite Entity power and authority to carry on its
business as now being conducted, and (iv) has the requisite Entity power to
execute and deliver, and perform its obligations under, the Loan Documents.

 

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(B) Authorization. The execution and delivery by each applicable Borrower and
Operating Lessee of the Loan Documents, each Borrower’s and Operating Lessee’s
performance of its obligations thereunder and the creation of the security
interests and Liens provided for in the Loan Documents (i) have been duly
authorized by all requisite Entity action on the part of each Borrower and
Operating Lessee, (ii) will not violate any provision of any applicable Legal
Requirements, any order, writ, decree, injunction or demand of any court or
other Governmental Authority, any organizational document of any Borrower or
Operating Lessee or any indenture or agreement or other instrument to which any
Borrower or Operating Lessee is a party or by which Borrower or Operating Lessee
is bound except, with respect to violations of any such indentures, agreements
or other instruments, where such violation would not have a Material Adverse
Effect, (iii) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
property or assets of any Borrower or Operating Lessee pursuant to, any
indenture or agreement or instrument, and (iv) have been duly executed and
delivered by each Borrower or Operating Lessee, as applicable. Except for those
obtained or filed on or prior to the Closing Date, no Borrower or Operating
Lessee is required to obtain any consent, approval or authorization from, or to
file any declaration or statement with, any Governmental Authority or other
agency in connection with or as a condition to the execution, delivery or
performance of the Loan Documents. The Loan Documents to which any Borrower,
Operating Lessee or any Manager is a party have been duly authorized, executed
and delivered by such parties.

(C) Single-Purpose Entity.

(i) Each Borrower, each SPE Equity Owner and Operating Lessee has been, and will
continue to be, a duly formed and existing Entity, and a Single-Purpose Entity.

(ii) Each SPE Equity Owner at all times since its formation has been, and will
continue to be, a duly formed and existing limited liability company or a
limited partnership in good standing under the laws of the jurisdiction of its
formation and a Single-Purpose Entity, is duly qualified as a foreign entity in
each other jurisdiction in which the nature of its business or any of the
Collateral makes such qualification necessary or desirable, and no Borrower will
take action to cause any SPE Equity Owner not to be a duly formed and existing
limited liability company in good standing under the laws of the jurisdiction of
its formation and a Single-Purpose Entity.

(iii) Each Borrower and Operating Lessee at all times since its formation has
complied, and will, at all times while the Loan is outstanding, continue to
comply, with the provisions of all of its organizational documents, and the laws
of the state in which such Borrower and Operating Lessee was formed relating to
the Entity.

 

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(D) Litigation. Except as disclosed on Schedule 1 attached hereto, there are no
actions, suits or proceedings at law or in equity by or before any Governmental
Authority or other agency now pending and served or, to the knowledge of any
Borrower and Operating Lessee, threatened against any Borrower, Operating
Lessee, any SPE Equity Owner, any Manager or any Individual Property which, if
determined against the Borrowers, Operating Lessee, SPE Equity Owner, Manager or
Individual Property could reasonably be expected to have a Material Adverse
Effect.

(E) Agreements. No Borrower or Operating Lessee is a party to any agreement or
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. Each applicable Borrower and Operating Lessee is not in default
in any material respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any indenture, agreement
or instrument to which it is a party or by which such Borrower, Operating Lessee
or the applicable Individual Property is bound which could reasonably be
expected to have a Material Adverse Effect.

(F) No Bankruptcy Filing. No Borrower or Operating Lessee is contemplating
either the filing of a petition under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of any Borrower’s
assets or property, and no Borrower or Operating Lessee has any knowledge of any
Person contemplating the filing of any such petition against any Borrower or
Operating Lessee.

(G) Full and Accurate Disclosure. No statement of fact made by Borrower or
Operating Lessee in the Loan Documents contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained herein or therein not misleading. There is no fact presently known to
any Borrower or Operating Lessee which has not been disclosed to Lender which
materially adversely affects, nor as far as any Borrower or Operating Lessee can
foresee, might materially adversely affect the business, operations or condition
(financial or otherwise) of any Borrower or Operating Lessee.

(H) Management Agreements. Each Management Agreement is valid, binding and
enforceable and in full force and effect and has not been modified (other than
by written instrument provided to Lender or except as otherwise disclosed to
Lender in writing) and there are no material defaults under any of them, nor
(a) to Borrowers’ or Operating Lessee’s knowledge has any event occurred that
with the passage of time, the giving of notice or both would result in such a
material default under the terms of each Management Agreement with any Manager
other than Remington Manager, and (b) with respect to any Management Agreement
with Remington Manager, has any event occurred that with the passage of time,
the giving of notice or both would result in such a material default under the
terms of such Management Agreement

(I) Compliance. Except as expressly disclosed in the Engineering Reports, the
Environmental Reports, the PZR zoning reports or the Surveys delivered to Lender
by Borrower, each applicable Borrower, Operating Lessee, each Individual
Property and each applicable Borrower’s or Operating Lessee’s use thereof as a
hotel and operations thereat comply in all material respects with all applicable
Legal Requirements and all Insurance Requirements. No Borrower is in default or
violation of any order, writ, injunction,

 

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decree or demand of any Governmental Authority, the violation of which is
reasonably likely to have a Material Adverse Effect. Borrowers further represent
and covenant that (i) parking at the Individual Property know as Courtyard
Alpharetta, Georgia is sufficient to satisfy all applicable Legal Requirements,
or that the applicable Borrower has the capability to and will restripe the
parking areas at such Individual Property in conformance with all applicable
Legal Requirements if requested or required by any Governmental Authority to
comply with such Legal Requirements.

(J) Other Debt and Obligations. No Borrower or Operating Lessee has any
financial obligation under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which any Borrower or Operating
Lessee is a party, or by which Borrower, Operating Lessee or any Individual
Property is bound, other than (a) unsecured trade payables incurred in the
ordinary course of business relating to the ownership and operation of an
Individual Property which are not evidenced by a promissory note and when
aggregated with the unsecured trade payables of all other Borrowers and
Operating Lessee, do not exceed a maximum amount of two and one-half percent
(2.5%) of the Loan Amount and are paid within sixty (60) days of the date
incurred (unless same are being contested in accordance with the terms of this
Agreement), and (b) obligations under the Mortgage and the other Loan Documents.
No Borrower or Operating Lessee has borrowed or received other debt financing
that has not been heretofore repaid in full and no Borrower has any known
material contingent liabilities.

(K) ERISA. (a) Each Plan and, to the knowledge of any Borrower or Operating
Lessee, each Multiemployer Plan, is in compliance in all material respects with,
and has been administered in all material respects in compliance with, its terms
and the applicable provisions of ERISA, the Code and any other federal or state
law, and no event or condition has occurred as to which any Borrower or
Operating Lessee would be under an obligation to furnish a report to Lender
under Section 5.1(S).

(b) As of the date hereof and throughout the term of the Loan (a) no Borrower or
Operating Lessee is or will be an “employee benefit plan,” as defined in
Section 3(3) of ERISA, subject to Title I of ERISA, or a “plan,” as defined in
Section 4975(e)(1) of the Code, subject to Code Section 4975, (b) no Borrower or
Operating Lessee is or will be a “governmental plan” within the meaning of
Section 3(32) of ERISA, (c) none of the assets of any Borrower or Operating
Lessee constitutes or will constitute “plan assets” of one or more of any such
plans under 29 C.F.R. Section 2510.3-101 or otherwise, and (d) transactions by
or with each Borrower or Operating Lessee do not and will not violate state
statutes regulating investment of, and fiduciary obligations with respect to,
governmental plans and such state statutes do not in any manner affect the
ability of the Borrower or Operating Lessee to perform its obligations under the
Loan Documents or the ability of Lender to enforce any and all of its rights
under the Loan Agreement.

(L) Solvency. No Borrower or Operating Lessee has entered into this Loan
Agreement or any Loan Document with the actual intent to hinder, delay, or
defraud any creditor, and each Borrower and Operating Lessee has received
reasonably equivalent value in exchange for its obligations under the Loan
Documents. Giving effect to the transactions contemplated hereby and the
agreements set forth herein, the fair saleable value of each of Borrower’s and
Operating Lessee’s assets exceeds and will, immediately following the

 

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execution and delivery of this Agreement, exceed such Borrower’s or Operating
Lessee’s, as applicable, total liabilities, including, without limitation,
subordinated, unliquidated, or disputed liabilities or Contingent Obligations.
The fair saleable value of each Borrower’s or Operating Lessee’s assets is and
will, immediately following the execution and delivery of this Agreement, be
greater than such Borrower’s or Operating Lessee’s, as applicable, probable
liabilities, including the maximum amount of its Contingent Obligations or its
debts as such debts become absolute and matured. No Borrower’s or Operating
Lessee’s assets do and, immediately following the execution and delivery of this
Agreement, will, constitute unreasonably small capital to carry out its business
as conducted or as proposed to be conducted. No Borrower or Operating Lessee
intends to, or believes that it will, incur debts and liabilities (including,
without limitation, Contingent Obligations and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of each Borrower).

(M) Not Foreign Person. No Borrower or Operating Lessee is a “foreign person”
within the meaning of § 1445(f)(3) of the Code.

(N) Investment Company Act; Public Utility Holding Company Act. No Borrower or
Operating Lessee is (i) an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended, (ii) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.

(O) No Defaults. No Event of Default or, to Borrower’s knowledge, Default exists
under or with respect to any Loan Document.

(P) Labor Matters. No Borrower or Operating Lessee is a party to any collective
bargaining agreements.

(Q) Title to the Property. Each Borrower owns either good, indefeasible and
marketable fee simple or leasehold title to the applicable Individual Properties
which it owns, free and clear of all Liens, other than the Permitted
Encumbrances applicable to such Individual Property. There are no outstanding
options to purchase or rights of first refusal affecting any Individual
Property. The Permitted Encumbrances do not and are not likely to materially and
adversely affect (i) the ability of any Borrower to pay in full all sums due
under the Notes or any of its other obligations in a timely manner or (ii) the
use of any Individual Property for the use currently being made thereof, the
operation of such Individual Property as currently being operated or the value
of any Individual Property.

(R) Use of Proceeds; Margin Regulations. Each Borrower will use the proceeds of
the Loan for the purposes described in Section 2.2. No part of the proceeds of
the Loan will be used for the purpose of purchasing or acquiring any “margin
stock” within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent with
such Regulation U or any other Regulations of such Board of Governors, or for
any purposes prohibited by applicable Legal Requirements.

 

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(S) Financial Information. All historical financial data concerning any
Borrower, Operating Lessee or any Individual Property (including without
limitation all rent rolls and operating statements) that has been delivered by
any Borrower or Operating Lessee to Lender is true, complete and correct in all
material respects. Since the delivery of such data, except as otherwise
disclosed in writing to Lender, there has been no material adverse change in the
financial position of any Borrower, Operating Lessee or Individual Property, or
in the results of operations of any Borrower or Operating Lessee. No Borrower or
Operating Lessee has incurred any obligation or liability, contingent or
otherwise, not reflected in such financial data which might materially adversely
affect its business operations or any Individual Property.

(T) Condemnation. No Taking has been commenced or, to any Borrower’s or
Operating Lessee’s knowledge, is contemplated with respect to all or any portion
of any Individual Property or for the relocation of roadways providing access to
any Individual Property.

(U) Utilities and Public Access. Except as otherwise disclosed on the Surveys,
each Individual Property has adequate rights of access to public ways and is
served by adequate water, sewer, sanitary sewer and storm drain facilities as
are adequate for full utilization of such Individual Property for its current
purpose. Except as otherwise disclosed by the Surveys, all public utilities
necessary to the continued use and enjoyment of each Individual Property as
presently used and enjoyed are located in the public right-of-way abutting the
premises, and all such utilities are connected so as to serve each Individual
Property either (i) without passing over other property or, (ii) if such
utilities pass over other property, pursuant to valid easements. All roads
necessary for the full utilization of each Individual Property for its current
purpose have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the benefit
of such Individual Property.

(V) Environmental Compliance. Except as disclosed in the Environmental Reports,
each of Borrower and Operating Lessee represents, warrants and covenants, as to
itself and its applicable Individual Property: (a) there are no Hazardous
Substances or underground storage tanks in, on, or under such Individual
Property, except those that are both (i) in compliance with all Environmental
Laws and with permits issued pursuant thereto and (ii) which do not require
Remediation; (b) there are no past, present or threatened Releases of Hazardous
Substances in, on, under, from or affecting any Individual Property which have
not been fully Remediated in accordance with Environmental Law; (c) there is no
Release or threat of any Release of Hazardous Substances which has or is
migrating to any Individual Property; (d) there is no past or present
non-compliance with Environmental Laws, or with permits issued pursuant thereto,
in connection with any Individual Property which has not been fully Remediated
in accordance with Environmental Law; (e) such Borrower and Operating Lessee
does not know of, and has not received, any written or oral notice or other
communication from any Person (including but not limited to a governmental
entity) relating to Hazardous Substances or the Remediation thereof, of possible
liability of any Person pursuant to any

 

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Environmental Law, other environmental conditions in connection with any
Individual Property, or any actual or potential administrative or judicial
proceedings in connection with any of the foregoing; and (f) such Borrower or
Operating Lessee has truthfully and fully provided to Lender, in writing, any
and all information relating to conditions in, on, under or from each Individual
Property that is known to such Borrower or Operating Lessee and that is
contained in files and records of such Borrower or Operating Lessee, including
but not limited to any reports relating to Hazardous Substances in, on, under or
from such Individual Property and/or to the environmental condition of each
Individual Property.

(W) No Joint Assessment; Separate Lots. No Borrower or Operating Lessee has or
shall suffer, permit or initiate the joint assessment of any applicable
Individual Property (i) with any other real property constituting a separate tax
lot, and (ii) with any portion of any Individual Property which may be deemed to
constitute personal property, or any other procedure whereby the lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to any Individual Property as a single lien. Each Individual
Property is comprised of one or more parcels, each of which constitutes a
separate tax lot and none of which constitutes a portion of any other tax lot.

(X) Assessments. Except as disclosed in the Title Insurance Policy and any title
exception documents referenced therein, there are no pending or, to the
knowledge of any Borrower or Operating Lessee, proposed special or other
assessments for public improvements or otherwise affecting any Individual
Property, nor, to the knowledge of any Borrower or Operating Lessee, are there
any contemplated improvements to any Individual Property that may result in such
special or other assessments.

(Y) Mortgage and Other Liens. The Mortgages create valid and enforceable first
mortgage Liens on each Individual Property as security for the repayment of the
Indebtedness, subject only to the Permitted Encumbrances applicable to such
Individual Property. Each security agreement, assignment, pledge, grant or other
hypothecation which is contained in any Loan Document establishes and creates a
valid and enforceable lien on and a security interest in, or claim to, the
rights and property described therein. All property covered by each such
security agreement, assignment, pledge, grant or other hypothecation is subject
to a UCC financing statement filed and/or recorded, as appropriate, in all
places necessary to perfect a valid first priority lien with respect to the
rights and property that are the subject of such security agreement, assignment,
pledge, grant or other hypothecation to the extent governed by the UCC to the
extent such a security interest in such property is perfectible by the filing of
a UCC financing statement.

(Z) Enforceability. The Loan Documents executed by each applicable Borrower or
Operating Lessee in connection with the Loan are the legal, valid and binding
obligations of each such Borrower or Operating Lessee, enforceable against each
such Borrower or Operating Lessee in accordance with their terms, subject only
to bankruptcy, insolvency and other limitations on creditors’ rights generally
and to equitable principles. Such Loan Documents are, as of the Closing Date,
not subject to any right of rescission, set-off, counterclaim or defense by any
Borrower or Operating Lessee, including the defense of usury, nor will the
operation of any of the terms of the Notes, any Mortgage, or such other Loan
Documents, or the exercise of any right thereunder, render any Mortgage
unenforceable against any Borrower or Operating Lessee, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense by any
Borrower or Operating Lessee, including the defense of usury, and no Borrower or
Operating Lessee has asserted any right of rescission, set-off, counterclaim or
defense with respect thereto.

 

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(AA) No Liabilities. No Borrower or Operating Lessee has any liabilities or
obligations including, without limitation, Contingent Obligations (and
including, without limitation, liabilities or obligations in tort, in contract,
at law, in equity, pursuant to a statute or regulation, or otherwise) other than
those liabilities and obligations expressly permitted by this Agreement.

(BB) No Prior Assignment. As of the Closing Date, (i) Lender is the assignee of
each Borrower’s or Operating Lessee’s interest under the Leases, and (ii) there
are no prior assignments of the Leases or any portion of the Rents due and
payable or to become due and payable which are presently outstanding.

(CC) Certificate of Occupancy. Borrowers and Operating Lessee have provided to
Lender copies of all Permits for each Individual Property necessary to use and
operate the Individual Property for the use described in Section 3.1(R) where
such Permits are available, or otherwise confirmation of issuance of such
Permits either in the PZR Report or from the applicable zoning authority, and
where such Permits require re-issuance in the event of a transfer of title to an
Individual Property, the applicable Borrower is diligently pursuing a Permit in
the name of the applicable Borrower. The use being made of each Individual
Property is in conformity with the certificate of occupancy and/or Permits for
each such Individual Property and any other restrictions, covenants or
conditions affecting each such Individual Property to the extent that any
existing nonconformity would not have a Material Adverse Effect. Each such
Individual Property contains all equipment necessary to use and operate each
such Individual Property in a first-class manner.

(DD) Flood Zone. Except as shown on a Survey, no Individual Property is located
in a flood hazard area as designated by the Federal Emergency Management Agency.

(EE) Physical Condition. Except as disclosed in an Engineering Report, each
Individual Property is free of material structural defects and all building
systems contained therein are in good working order in all material respects
subject to ordinary wear and tear.

(FF) Intellectual Property. All trademarks, trade names and service marks owned
by any Borrower or Operating Lessee or that are pending, or under which any
Borrower or Operating Lessee is licensed, are in good standing and uncontested.
There is no right under any trademark, trade name or service mark necessary to
the business of any Borrower or Operating Lessee as presently conducted or as
Borrower or Operating Lessee contemplates conducting its business. No Borrower
or Operating Lessee has infringed, is infringing, or has received notice of
infringement with respect to asserted trademarks, trade names and service marks
of others. To Borrower’s or Operating Lessee’s knowledge, there is no
infringement by others of trademarks, trade names and service marks of any
Borrower or Operating Lessee.

 

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(GG) Intentionally Omitted.

(HH) Title Insurance. Each Individual Property is covered by either an American
Land Title Association (ALTA) mortgagee’s title insurance policy, or a
commitment to issue such a title insurance policy, insuring a valid first lien
on such Individual Property, which is in full force and effect and is freely
assignable to and will inure to the benefit of Lender and any successor or
assignee of Lender, including but not limited to the trustee in a
Securitization, subject only to the Permitted Encumbrances.

(II) Tax Fair Market Value. The Allocated Loan Amount with respect to each
Individual Property does not exceed the Tax Fair Market Value of such Individual
Property. The Loan Amount does not exceed the aggregate Tax Fair Market Values
of the Individual Properties. If any Note is significantly modified prior to the
closing date of a Secondary Market Transaction so as to result in a taxable
exchange under Code Section 1001, Borrowers will, if requested by Lender,
represent that the amount of such Note does not exceed the aggregate Tax Fair
Market Value of the applicable Individual Property as of the date of such
significant modification.

(JJ) Leases. (a) Each Borrower or Operating Lessee is the sole owner of the
entire lessor’s interest in the Leases; (b) the Leases are the valid, binding
and enforceable obligations of the applicable Borrowers or Operating Lessee and
the applicable tenant or lessee thereunder; (c) the terms of all alterations,
modifications and amendments to the Leases are reflected in the certified rent
roll statement delivered to and approved by Lender; (d) no Rents reserved in any
Leases have been assigned or otherwise pledged or hypothecated; (e) no Rents
have been collected for more than one (1) month in advance; (f) the premises
demised under the Leases have been completed and the tenants under the Leases
have accepted the same and have taken possession of the same on a rent-paying
basis; (g) there exists no offset or defense to the payment of any portion of
any Rents; (h) no Lease contains an option to purchase, right of first refusal
to purchase, expansion right, or any other similar provision; and (i) no Person
has any possessory interest in, or right to occupy, any Individual Property
except under and pursuant to a Lease.

(KK) Bank Holding Company. No Borrower or Operating Lessee is a “bank holding
company” or a direct or indirect subsidiary of a “bank holding company” as
defined in the Bank Holding Company Act of 1956, as amended, and Regulation Y
thereunder of the Board of Governors of the Federal Reserve System.

(LL) Embargoed Person. None of the funds or other assets of any Borrower,
Operating Lessee, or any SPE Equity Owner constitute property of, or are
beneficially owned, directly or indirectly, by any person, entity or government
subject to trade restrictions under federal law, including, without limitation,
the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The
Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. , and any executive orders
or regulations promulgated thereunder, with the result that (i) the investment
in any Borrower, Operating Lessee, any SPE Equity Owner, as applicable (whether
directly or indirectly), is prohibited by law, or (ii) the Loan made by the
Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has
any interest of any nature whatsoever in any Borrower, Operating Lessee, any SPE
Equity Owner, as applicable (whether

 

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directly or indirectly), with the result that (i) the investment in any
Borrower, Operating Lessee, any SPE Equity Owner, as applicable (whether
directly or indirectly) is prohibited by law, or (ii) the Loan is in violation
of law; and (c) none of the funds of any Borrower, Operating Lease, any SPE
Equity Owner, as applicable, have been derived from any unlawful activity with
the result that (i) the investment in any Borrower, Operating Lessee, any SPE
Equity Owner, as applicable (whether directly or indirectly) is prohibited by
law, or (ii) the Loan is in violation of law.

(MM) Illegal Activity. No portion of any of each Individual Property has been or
will be purchased, improved, equipped or furnished with proceeds of any illegal
activity.

(NN) Compliance. No Borrower or Operating Lessee, and to the best of each
Borrower’s and Operating Lessee’s knowledge after due and diligent inquiry,
neither (a) any Person owning an interest in a Borrower, Operating Lessee or any
SPE Equity Owner, (b) each Manager, and (c) any tenant at each Individual
Property: (i) is currently identified on the OFAC List (“OFAC List”), and
(ii) is not a Person with whom a citizen of the United States is prohibited to
engage in transactions by any trade embargo, economic sanction, or other
prohibition of any Legal Requirement (including the September 24, 2001,
Executive Order Blocking Property and Prohibiting Transactions With Person Who
Commit, Threaten to Commit, or Support Terrorism), and (iii) is not in violation
of the U.S. Federal Bank Secrecy Act, as amended, and its implementing
regulations (31 C.F.R. part 103), the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Public Law 107-56 and the regulations promulgated thereunder, any order
issued with respect to anti-money laundering by the U.S. Department of the
Treasury’s Office of Foreign Assets Control, or any other anti-money laundering
law. Each Borrower and Operating Lessee has implemented procedures, and will
consistently apply those procedures throughout the term of the Loan, to ensure
the foregoing representations and warranties remain true and correct during the
term of the Loan.

(OO) Operating Budget. Attached hereto as Exhibit E is a true, complete and
correct copy of the operating budget for each Borrower’s or Operating Lessee’s
Individual Property for the period between the Closing Date and December 31,
2005, which Operating Budget has been approved by Lender pursuant to the terms
of this Agreement.

(PP) Organizational Chart. Attached hereto as Exhibit G is a true, complete and
correct copy of the Borrowers’ organizational chart.

(QQ) Property Improvement Plans. Attached hereto as Exhibit H is (i) a true,
complete and correct copy of all property improvement plans or similar
agreements affecting each Individual Property (each, a “Property Improvement
Plan”), and (ii) a true, complete and correct description of the estimated
amounts to be expended and time frames for required expenditure and completion
pursuant to each Property Improvement Plan.

(RR) Franchise Agreements. Each Franchise Agreement is in full force and effect,
there is no material default thereunder by any party thereto and to the best of
Borrower’s and Operating Lessee’s knowledge and except as set forth on Schedule
2 hereof, no event has occurred that, with the passage of time and/or the giving
of notice would constitute a default thereunder, and no fees under any Franchise
Agreement are accrued and unpaid.

 

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Section 4.2. Survival of Representations and Warranties.

Each Borrower and Operating Lessee agrees that (i) all of the representations
and warranties of each Borrower set forth in this Agreement and in the other
Loan Documents delivered on the Closing Date are made as of the Closing Date
(except as expressly otherwise provided) and (ii) all representations and
warranties made by each Borrower shall survive the delivery of the Note and
continue for so long as any amount remains owing to Lender under this Agreement,
the Note or any of the other Loan Documents; provided, however, that the
representations, warranties and covenants set forth in Section 4.1(V),
Section 4.1(LL), Section 4.1(NN) and Sections 5.1(D) through 5.1(G), inclusive,
shall survive in perpetuity and shall not be subject to the exculpation
provisions of Section 8.14. All representations, warranties, covenants and
agreements made in this Agreement or in the other Loan Documents shall be deemed
to have been relied upon by Lender notwithstanding any investigation heretofore
or hereafter made by Lender or on its behalf. Without limiting any other
provision of this Agreement, with respect to each Secondary Market Transaction,
within three (3) days of receipt of Lender’s request, each Borrower or Operating
Lessee shall deliver to Lender a certification (a) remaking all of the
representations and warranties contained in this Agreement as of the date of
such Secondary Market Transaction, or (y) otherwise specifying any changes in or
qualifications to such representations and warranties as of such date as may be
necessary to make such representations consistent with the facts as they exist
on such date.

ARTICLE 5

AFFIRMATIVE COVENANTS

Section 5.1. Borrower Covenants.

Each Borrower and Operating Lessee covenants and agrees that, from the date
hereof and until payment in full of the Indebtedness:

(A) Existence; Compliance with Legal Requirements; Insurance. Each Borrower and
Operating Lessee shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its Entity existence, rights, licenses,
Permits and franchises necessary for the conduct of its business and to comply
or to initiate compliance in all material respects with all applicable Legal
Requirements and Insurance Requirements applicable to it and each Individual
Property. Each Borrower and Operating Lessee shall notify Lender promptly of any
written notice or order that such Borrower or Operating Lessee receives from any
Governmental Authority relating to such Borrower’s or Operating Lessee’s failure
to comply with such applicable Legal Requirements relating to such Borrower’s or
Operating Lessee’s applicable Individual Property and promptly take any and all
actions necessary to bring its operations at such Individual Property into
compliance with such applicable Legal Requirements (and shall fully comply with
the requirements of such Legal Requirements that at any time are applicable to
its operations at any Individual Property) provided, that such Borrower or
Operating Lessee at its expense may, after prior notice to the Lender, contest
by appropriate

 

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legal, administrative or other proceedings conducted in good faith and with due
diligence, the validity or application, in whole or in part, of any such
applicable Legal Requirements as long as (i) neither the applicable Collateral
nor any part thereof or any interest therein, will be sold, forfeited or lost or
subject to a continuing Lien if such Borrower or Operating Lessee pays the
amount or satisfies the condition being contested, and such Borrower or
Operating Lessee would have the opportunity to do so, in the event of such
Borrower’s or Operating Lessee’s failure to prevail in the contest, (ii) Lender
would not, by virtue of such permitted contest, be exposed to any risk of any
civil liability or criminal liability, and (iii) such Borrower or Operating
Lessee shall have furnished to the Lender additional security in respect of the
claim being contested or the loss or damage that may result from such Borrower’s
or Operating Lessee’s failure to prevail in such contest in such amount as may
be reasonably requested by Lender but in no event less than one hundred
twenty-five percent (125%) of the amount of such claim. Each Borrower and
Operating Lessee shall at all times maintain, preserve and protect, or cause the
maintenance, preservation and protection of, all franchises and trade names and
preserve or cause the preservation of all the remainder of its property
necessary for the continued conduct of its business and keep the applicable
Individual Properties, or cause the same to be kept, in good repair, working
order and condition, except for reasonable wear and use, and from time to time
make, or cause to be made, all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as more fully provided in the
Mortgages. Borrowers and Operating Lessee shall keep their Individual Properties
insured at all times, as provided in the Mortgages.

(B) Impositions and Other Claims. Subject to Section 2.11(e)(i)(x) hereof,
Borrowers and Operating Lessee shall pay and discharge or cause to be paid and
discharged all Impositions, as well as all lawful claims for labor, materials
and supplies or otherwise, which could become a Lien, all as more fully provided
in, and subject to any rights to contest contained in, the Mortgages.

(C) Litigation. Each Borrower and Operating Lessee shall give prompt written
notice to Lender of any litigation or governmental proceedings pending or
threatened against such Borrower or Operating Lessee which is reasonably likely
to have a Material Adverse Effect.

(D) Environmental.

(i) Borrowers and Operating Lessee covenant and agree that: (a) all uses and
operations on or of the Individual Properties, whether by any Borrower,
Operating Lessee or any other Person, shall be in compliance with all
Environmental Laws and permits issued pursuant thereto; (b) there shall be no
Releases of Hazardous Substances in, on, under or from any Individual Property;
(c) there shall be no Hazardous Substances used, present or Released in, on,
under or from any Individual Property, except those that are (i) in compliance
in all material respects with all Environmental Laws and with permits issued
pursuant thereto, if required under Environmental Laws; (ii) fully disclosed to
Lender in writing; and (iii) which do not require Remediation, (d) Borrowers and
Operating Lessee shall keep each Individual Property free and clear of all
Environmental Liens; (e) Borrowers and Operating Lessee shall, at its sole cost
and expense, fully and expeditiously cooperate in all activities pursuant to
Section 5.1(E) of this Agreement, including but not limited to providing all

 

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relevant information and making knowledgeable Persons available for interviews;
(f) intentionally omitted; (g) such Borrower or Operating Lessee shall, at its
sole cost and expense, (i) effectuate Remediation of any condition (including
but not limited to a Release of a Hazardous Substance or violation of
Environmental Laws) in, on, under or from each Individual Property for which
Remediation is legally required; (ii) comply with all Environmental Laws;
(iii) comply with any directive from any governmental authority; and (iv) take
any other reasonable action necessary or appropriate for protection of human
health or the environment, if required under Environmental Laws; (h) Borrowers
and Operating Lessee shall not do or allow any tenant or other user of any
Individual Property to do any act that materially increases the dangers to human
health or the environment, poses an unreasonable risk of harm to any Person
(whether on or off any Individual Property), impairs or may impair the value or
marketability of any Individual Property, is contrary to any requirement of any
insurer, constitutes a public or private nuisance, constitutes waste, or
violates in any material respect any covenant, condition, agreement or easement
applicable to any Individual Property; (i) Borrowers and Operating Lessee shall
immediately notify Lender in writing of (A) any unlawful presence or Releases or
threatened Releases of Hazardous Substances in, on, under, from or migrating
towards any Individual Property; (B) any material non-compliance with any
Environmental Laws related in any way to any Individual Property; (C) any actual
or potential Environmental Lien; (D) any Remediation of environmental conditions
relating to any Individual Property required by Environmental Laws; and (E) any
written notice or other communication of which any Borrower or Operating Lessee
becomes aware from any source whatsoever (including but not limited to a
governmental entity) relating in any way to Release, presence, or Release or
threatened Release of Hazardous Substances in violation of Environmental Laws or
the Remediation thereof, Law, other environmental conditions in connection with
any Individual Property, or any actual or potential administrative or judicial
proceedings in connection with anything referred to in this Agreement; and
(j) without limiting the foregoing, upon becoming aware of the presence of or
potential for Mold in violation of applicable Environmental Laws on any
Individual Property, at its sole cost and expense Borrowers and Operating Lessee
shall (i) undertake or cause an investigation to identify the source(s) of such
Mold, including any water intrusion, and develop and implement a plan for the
Remediation of any Mold required under applicable Environmental Laws;
(ii) perform, or cause to be performed, all acts required under applicable
Environmental Laws for the Remediation of the Mold in a timely manner given the
circumstances; (iii) properly dispose in accordance with all applicable
Environmental Laws of any materials generated as a result of or in connection
with the foregoing items (i) and (ii); and (iv) provide Lender with evidence of
Borrower’s or Operating Lessee’s compliance with the requirements of each of the
foregoing to Lender’s reasonable satisfaction.

(E) Environmental Cooperation and Access. In the event the Environmental
Indemnified Parties reasonably believe that an environmental condition exists on
any Individual Property that, in the discretion of the Lender, could endanger
any tenants or other occupants of any Individual Property or their guests or the
general public or materially and adversely affects the value of any Individual
Property, upon reasonable notice from the Lender, Borrowers shall, at any
Borrowers’ sole cost and expense, promptly cause an engineer or consultant
satisfactory to the Lender to conduct any environmental assessment or audit (the
scope

 

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of which shall be determined in the sole and absolute discretion of Lender) and
take any samples of soil, groundwater or other water, air, or building materials
or any other invasive testing reasonably requested by Lender and promptly
deliver the results of any such assessment, audit, sampling or other testing;
provided, further, that such Borrowers, the Environmental Indemnified Parties
and any other Person designated by the Environmental Indemnified Parties,
including but not limited to any receiver, any representative of a governmental
entity, and any environmental consultant, shall have the right, but not the
obligation, to enter upon such Individual Property at all reasonable times
(without materially interfering with the business conducted at the Individual
Property) to assess any and all aspects of the environmental condition of such
Individual Property and its use, including but not limited to conducting any
environmental assessment or audit (the scope of which shall be determined in the
reasonable discretion of Lender) and taking samples of soil, groundwater or
other water, air, or building materials, and reasonably conducting other
invasive testing (which shall be at Borrowers’ sole cost and expense if
Borrowers fail to conduct or deliver an assessment or audit as required pursuant
to this Section), Borrowers shall cooperate with and provide the Environmental
Indemnified Parties and any such Person designated by the Environmental
Indemnified Parties with access to each Individual Property.

(F) Environmental Indemnity. Borrowers covenant and agree, at their sole cost
and expense, to protect, defend, indemnify, release and hold Environmental
Indemnified Parties harmless from and against any and all Losses imposed upon or
incurred by or asserted against any Environmental Indemnified Parties and
directly or indirectly arising out of or in any way relating to any one or more
of the following (other than Losses imposed upon or incurred by or asserted
against any Environmental Indemnified Parties to the extent that the Borrowers
can prove (1) that such Losses were caused exclusively by actions, conditions or
events that occurred entirely after the date that Lender (or Lender’s designee
or transferee by reason of exercise of remedies) actually acquired title to the
applicable Individual Property, and (2) that such Losses were not caused or
occasioned by the actions or inactions of any Borrower, any Manager, Operating
Lessee or any agent, employee, contractor or any Affiliate of any of the
foregoing): (a) any presence or use of any Hazardous Substances in, on, above,
under, from or affecting any Individual Property; (b) any past, present or
threatened Release of Hazardous Substances in, on, above, under, from or
affecting any Individual Property; (c) any activity by any Borrower, any Person
affiliated with any Borrower, and any tenant or other user of such Individual
Property 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 such Individual
Property of or exposure to any Hazardous Substances at any time located in,
under, on or above such Individual Property; (d) any activity by any Borrower,
any Person affiliated with any Borrower, and any tenant or other user of such
Individual Property in connection with any actual or proposed Remediation of any
Hazardous Substances at any time located in, under, on, above or affecting such
Individual Property, 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; (e) any past, present or threatened
non-compliance or violations of any Environmental Laws (or permits issued
pursuant to any Environmental Law) in connection with such Individual Property
or operations thereon, including but not limited to any failure by any Borrower,
any Person affiliated with any Borrower, and any tenant or other user of any
Individual Property to comply with any order of any governmental authority in
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recording or filing or the threatened imposition, recording or filing of any
Environmental Lien encumbering any Individual Property; (g) any administrative
processes or proceedings or judicial proceedings in any way connected with any
matter addressed in this Agreement; (h) any past, present or threatened injury
to, destruction of or loss of natural resources in any way connected with any
Individual Property, including but not limited to costs to investigate and
assess such injury, destruction or loss; (i) any acts of such Borrower, any
Person affiliated with any Borrower, and any tenant or other user of any
Individual Property in arranging for disposal or treatment, or arranging with a
transporter for transport for disposal or treatment, of Hazardous Substances at
any facility or incineration vessel containing such or similar Hazardous
Substances; (j) any acts of such Borrower, any Person affiliated with any such
Borrower, and any tenant or other user of such Individual Property in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites from which there is a Release, or a threatened
Release of any Hazardous Substance which causes the incurrence of costs for
Remediation; (k) any personal injury, wrongful death, or property or other
damage arising under any statutory or common law or tort law theory, including
but not limited to damages assessed for private or public nuisance or for the
conducting of an abnormally dangerous activity on or near such Individual
Property; and (l) 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 or any other Loan Document. IT IS
EXPRESSLY ACKNOWLEDGED AND AGREED BY EACH BORROWER THAT THE INDEMNITY (AND/OR
THE RELEASE) CONTAINED IN THIS SECTION 5.1(F) PROTECTS LENDER FROM THE
CONSEQUENCES OF LENDER’S ACTS OR OMISSIONS, INCLUDING WITHOUT LIMITATION, THE
NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE EXTENT PERMITTED BY LAW; PROVIDED,
HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE THE LENDER
FROM LIABILITY DUE TO ITS FRAUD, WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.

(G) Duty to Defend. Upon written request by any Environmental Indemnified Party,
Borrowers shall defend same (if requested by any Environmental Indemnified
Party, in the name of the Environmental Indemnified Party) by attorneys and
other professionals reasonably approved by the Environmental Indemnified
Parties. Borrowers shall, within five Business Days of receipt thereof, give
written notice to Lender of (i) any notice, advice or other communication from
any governmental entity or any source whatsoever with respect to Hazardous
Substances on, from or affecting any Individual Property, and (ii) any legal
action brought against any party or related to any Individual Property, with
respect to which any Borrower may have liability under this Agreement. Such
notice shall comply with the provisions of Section 8.6 hereof.

(H) Operating Lease.

(i) Each Borrower shall (a) promptly perform and observe all of the covenants
required to be performed and observed by it under the Operating Leases and do
all things necessary to preserve and to keep unimpaired its material rights
thereunder; (b) promptly notify Lender of any material default under any
Operating Lease of which it is aware; (c) promptly deliver to Lender a copy of
any notice of default or other material notice under any Operating Lease
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Lessee by Borrower; (d) promptly give notice to Lender of any notice or
information that Borrower receives which indicates that an Operating Lessee is
terminating its Operating Lease or that any Operating Lessee is otherwise
discontinuing its operation of the applicable Individual Property; and
(e) promptly enforce the performance and observance of all of the material
covenants required to be performed and observed by the Operating Lessee under
the applicable Operating Lease.

(ii) If at any time, (A) an Operating Lessee shall become insolvent or a debtor
in a bankruptcy proceeding or (B) Lender or its designee has taken title to an
Individual Property by foreclosure or deed in lieu of foreclosure, has become a
mortgagee-in-possession, has appointed a receiver with respect to the applicable
Individual Property or has otherwise taken title to such Individual Property,
Lender shall have the absolute right to (and Borrower and Operating Lessee shall
reasonably cooperate and not in any way hinder, delay or otherwise interfere
with Lender’s right to), immediately terminate the applicable Operating Lease
under and in accordance with the terms of the applicable Subordination,
Attornment and Security Agreement.

(iii) Borrower shall not, without the prior written consent of Lender, which
consent shall not be unreasonably withheld: (a) surrender, terminate or cancel
any Operating Lease or otherwise replace any Operating Lessee or enter into any
other operating lease with respect to any Individual Property, provided,
however, at the end of the term of each Operating Lease, the applicable Borrower
may renew such Operating Lease or enter into a replacement Operating Lease with
Operating Lessee on substantially the same terms as the expiring Operating Lease
except that Lender shall have the right to approve any material change thereto;
(b) reduce or consent to the reduction of the term of any Operating Lease; or
(c) enter into, renew, amend, modify, waive any provisions of, reduce Rents
under, or shorten the term of any Operating Lease.

(I) Management Agreements.

(i) Each Individual Property shall be operated under the terms and conditions of
the applicable Management Agreement. Each Borrower shall or shall cause the
applicable Operating Lessee to (x) pay all sums required to be paid by the owner
under each Management Agreement, (y) diligently perform, observe and enforce all
of the terms, covenants and conditions of each Management Agreement on the part
of the owner thereunder to be performed, observed and enforced to the end that
all things shall be done which are necessary to keep unimpaired the rights of
said owner under each Management Agreement, (z) promptly notify Lender of the
giving of any written notice to any Borrower and/or Operating Lessee of any
default by the owner in the performance or observance of any of the terms,
covenants or conditions of any Management Agreement on the part of the owner
thereunder to be performed and observed (which Borrower or Operating Lessee may
contest in accordance with the terms of the Management Agreement) and deliver to
Lender a true copy of each such notice, and (aa) promptly deliver to Lender a
copy of each financial statement, business plan, capital expenditure plan,
notice of a default under the Management Agreement, report regarding operations
at the related Individual Property, estimates of any monetary nature and any
other items reasonably requested by Lender, in each case received by any
Borrower or Operating Lessee under any Management Agreement.

 

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(ii) No Borrower shall (and shall not cause or permit any Operating Lessee to),
without the prior consent of the Lender (which consent shall not be unreasonably
withheld), surrender any Management Agreement or terminate or cancel any
Management Agreement or modify, change, supplement, alter or amend, in any
material respect, any Management Agreement, either orally or in writing, and
each Borrower hereby assigns to Lender as further security for the payment of
the Indebtedness and for the performance and observance of the terms, covenants
and conditions of this Loan Agreement, any and all rights, privileges and
prerogatives of each Borrower to surrender any Management Agreement or to
terminate, cancel, modify, change, supplement, alter or amend, in any material
respect, any Management Agreement, and any such surrender of any Management
Agreement or termination, cancellation, modification, change, supplement,
alteration or amendment of any Management Agreement without the prior consent of
Lender (which consent shall not be unreasonably withheld) shall be void and of
no force and effect.

(iii) If any Borrower or Operating Lessee shall default in the performance or
observance of any material term, covenant or condition of any Management
Agreement on the part of the Borrower or Operating Lessee thereunder to be
performed or observed beyond any applicable notice and cure periods contained
therein, and Borrower or Operating Lessee is not contesting the validity of such
default in good faith in accordance with the terms of the Management Agreement,
then, without limiting the generality of the other provisions of this Agreement,
and without waiving or releasing any Borrower from any of its obligations
hereunder, Lender shall have the right, but shall be under no obligation, to pay
any sums and to perform any act or take any action as may be appropriate to
cause all the terms, covenants and conditions of such Management Agreement on
the part of the owner to be performed or observed to be promptly performed or
observed on behalf of such Borrower, to the end that the rights of said Borrower
and/or Operating Lessee in, to and under such Management Agreement shall be kept
unimpaired and free from default. Any such amounts so advanced by Lender
together with interest thereon from the date expended by Lender of the Default
Rate shall be part of the Indebtedness and Borrower shall immediately repay such
amounts to Lender upon demand. Pursuant to the terms of the applicable
Subordination, Attornment and Security Agreement and/or Assignment of Management
Agreement, Lender and any person designated by Lender shall have, and are hereby
granted, the right to enter upon the applicable Individual Property at any time
and from time to time for the purpose of taking any such action. If any Manager
shall deliver to Lender a copy of any notice sent to any Borrower and/or
Operating Lessee of any default under any Management Agreement, and Borrower or
Operating Lessee is not contesting said default in good faith in accordance with
the terms of the Management Agreement, such notice shall constitute full
protection to Lender for any action taken or omitted to be taken by Lender in
good faith, in reliance thereon.

 

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(iv) Each Borrower shall (or shall cause the applicable Operating Lessee to)
exercise each individual option, if any, to extend or renew the term of each
Management Agreement upon demand by Lender made at any time within ninety
(90) days prior to the last day upon which any such option may be exercised, and
each Borrower hereby expressly authorizes and appoints Lender as its
attorney-in-fact to exercise (or cause the applicable Operating Lessee to
exercise) any such option in the name of and upon behalf of such Borrower should
such Borrower fail to do so, which power of attorney shall be irrevocable and
shall be deemed to be coupled with an interest.

(v) Any sums expended by Lender pursuant to this Section shall bear interest at
the Default Rate from the date such cost is incurred to the date of payment to
Lender, shall be deemed to constitute a portion of the Indebtedness, shall be
secured by the lien of the Mortgage and the other Loan Documents and shall be
immediately due and payable within two (2) Business Days after demand by Lender
therefor.

(vi) Each Borrower shall, promptly upon request of Lender, but no more than two
(2) times in any calendar year during the term of the Loan (unless (x) an Event
of Default has occurred and is continuing or (y) such request is occasioned in
connection with a Secondary Market Transaction) use its diligent best efforts to
obtain and deliver (or cause to be delivered) an estoppel certificate from each
Manager (A) certifying (1) that the Management Agreement is unmodified and in
full force and effect (or if there have been modifications, that the same, as
modified, is in full force and effect and stating the modifications), and
(2) the date through which the management fees due under the Management
Agreement have been paid; (B) stating whether or not to the best knowledge of
Manager (1) there is a continuing default by Borrower or Operating Lessee in the
performance or observance of any covenant, agreement or condition contained in
the Management Agreement or the Operating Lease, or (2) there shall have
occurred any event that, with the giving of notice or passage of time or both,
would become such a default, and, if so, specifying each such default or
occurrence of which Manager may have knowledge; and (C) stating such other
information as Lender may reasonably request. Such statement shall be binding
upon Manager and may be relied upon by Lender and/or such third party specified
by Lender.

(vii) Upon the termination of any Management Agreement, subject to
Section 5.1(P), each Borrower shall (or shall cause Operating Lessee to)
promptly enter into a new Management Agreement with a replacement Manager, which
shall deliver a comfort or similar letter and/or a Manager’s Subordination to
and in favor of Lender, all upon terms and conditions acceptable to Lender in
its discretion.

(J) Access to Property. Each Borrower and Operating Lessee shall permit agents,
representatives and employees of Lender to inspect their Individual Properties
or any part thereof at such reasonable times as may be requested by Lender upon
reasonable advance written notice and without materially interfering with the
business conducted at the Individual Property.

 

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(K) Notice of Default. Each Borrower and Operating Lessee shall promptly advise
Lender of any material adverse change in such Borrower’s or Operating Lessee’s
condition, financial or otherwise, or of the occurrence of any Default or Event
of Default.

(L) Cooperate in Legal Proceedings. Except with respect to any claim by any
Borrower against Lender, such Borrower and Operating Lessee shall cooperate with
Lender with respect to any proceedings before any Governmental Authority which
may in any way affect the rights of Lender hereunder or any rights obtained by
Lender under any of the Loan Documents and, in connection therewith, not
prohibit Lender, at its election, from participating in any such proceedings.

(M) Perform Loan Documents. Borrowers and Operating Lessee shall observe,
perform and satisfy all the terms, provisions, covenants and conditions required
to be observed, performed or satisfied by them, and shall pay when due all
costs, fees and expenses required to be paid by them, under the Loan Documents
executed and delivered by such Borrower or Operating Lessee.

(N) Insurance Benefits; Condemnation Claims. Each Borrower and Operating Lessee
shall cooperate with Lender in settling any insurance or condemnation claim
and/or obtaining for Lender the benefits of any Insurance Proceeds and/or
Condemnation Proceeds lawfully or equitably payable to Lender in connection with
any Individual Property, and Lender shall be reimbursed for any expenses
incurred in connection therewith (including reasonable attorneys’ fees and
disbursements) and the payment by any Borrower or Operating Lessee of the
expense of an Appraisal on behalf of Lender in case of a fire or other casualty
affecting any Individual Property or any part thereof out of such Insurance
Proceeds and/or Condemnation Proceeds, all as more specifically provided in the
Mortgages.

(O) Further Assurances. Borrowers shall, at Borrowers’ sole cost and expense:

(i) upon Lender’s request therefor given from time to time after the occurrence
of any Event of Default pay for (a) reports of UCC, federal tax lien, state tax
lien, judgment and pending litigation searches with respect to any Borrower and
(b) searches of title to any Individual Property, each such search to be
conducted by search firms reasonably designated by Lender in each of the
locations reasonably designated by Lender.

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

(iii) execute and deliver to Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary, to evidence,
preserve and/or protect the Collateral at any time securing or intended to
secure the Notes, as Lender may require in Lender’s discretion; and

 

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

(P) Management of Property.

(i) Each Individual Property will be managed at all times by the applicable
Manager pursuant to a Management Agreement unless terminated as herein provided.
Subject to Section 5.1(I), each Borrower and Operating Lessee shall comply with
the terms of and enforce its rights under the Management Agreement in all
material respects. The Management Agreement shall be terminated by Borrowers or
Operating Lessee, at Lender’s request, upon thirty (30) days prior written
notice to Borrowers, Operating Lessee and the applicable Manager (i) upon the
occurrence of an Event of Default, (ii) if the applicable Manager commits any
act which would permit termination by any Borrower or Operating Lessee under the
Management Agreement and/or any applicable Franchise Agreement, (iii) the
applicable Manager commits any act which constitutes an act of fraud, material
misrepresentation, intentional misrepresentation, gross negligence, willful
misconduct, misappropriation of funds, or intentional physical waste of any
Individual Property, or (iv) Borrower changes the Manager or Franchisor of an
Individual Property without prior written consent of Lender (except as otherwise
permitted hereunder). If a manager is terminated pursuant hereto, or the
Management Agreement is otherwise terminated by Manager pursuant to the terms
contained therein, Borrowers and Operating Lessee shall promptly seek to appoint
a replacement manager acceptable to Lender in Lender’s discretion, and
Borrowers’ or Operating Lessee’s failure to appoint an acceptable manager within
thirty (30) days after Lender’s request of Borrowers to terminate the Management
Agreement or other termination of the Management Agreement shall constitute an
immediate Event of Default. Borrowers or Operating Lessee may from time to time
appoint a successor manager to manage an Individual Property, which successor
manager shall be approved in writing by Lender in Lender’s discretion.
Notwithstanding the foregoing, any successor manager selected hereunder by
Lender, any Borrower or Operating Lessee to serve as Manager (a) shall be either
(1) the Remington Manager provided, that the Remington Manager shall manage the
applicable Individual Property pursuant to the terms of the master management
agreement by and among the Borrowers and the Remington Manager, or (2) a
reputable management company having at least seven (7) years’ experience in the
management of commercial properties with similar uses as the Individual
Properties and in the jurisdiction in which the Individual Properties are
located and (ii) shall not be paid management fees in excess of fees which are
market fees for comparable managers of comparable properties in the same
geographic area.

 

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(ii) In the event that Marriott is Manager pursuant to a Management Agreement
and elects not to renew the term of the Management Agreement at the end of the
initial term or any renewal term of the Management Agreement in accordance with
the terms thereof, or the Management Agreement is otherwise terminated by
Manager pursuant to the terms contained therein, then Borrower and Operating
Lessee, upon notice of Marriott’s election not to renew the Management Agreement
or within thirty (30) days of any other termination of the Management Agreement,
shall promptly seek to appoint (x) a replacement manager acceptable to Lender
and the Rating Agencies, each in their discretion, and (y) a replacement hotel
franchise, acceptable to Lender and the Rating Agencies, each in their
discretion, to occupy and operate at the applicable Individual Property.
Borrowers’ or Operating Lessee’s failure to appoint an acceptable manager by the
time the Management Agreement expires by its terms or within thirty (30) days of
any other termination of the Management Agreement, shall constitute an immediate
Event of Default. Borrowers’ or Operating Lessee’s failure to enter into hotel
management and operating agreements and other documents in connection therewith
(such as subordinations and comfort letters) acceptable to Lender and the Rating
Agencies, each in their discretion, with an acceptable hotel franchise to
operate a hotel at the applicable Individual Property by the time the Management
Agreement expires by its terms shall constitute an immediate Event of Default.
For the purposes of this paragraph, (1) Remington Manager shall be deemed an
acceptable replacement manager, and (2) Starwood Hotels & Resorts Worldwide,
Inc., Hilton Hotels Corporation, Marriott International, Inc. or any brand of
any of them shall be deemed an acceptable replacement hotel franchise, and the
approval of any of the foregoing as manager or hotel franchise, as applicable,
by Lender and the Rating Agencies will not be required.

(Q) Financial Reporting.

(i) Each Borrower and Operating Lessee shall keep and maintain or shall cause to
be kept and maintained, on a Fiscal Year basis, in accordance with GAAP, books,
records and accounts reflecting in reasonable detail all of the financial
affairs of such Borrower or Operating Lessee, as applicable, and all items of
income and expense in connection with the operation of the applicable Individual
Properties and in connection with any services, equipment or furnishings
provided in connection with the operation of such Individual Properties. Lender,
at Lender’s cost and expense, whether such income or expense may be realized by
the applicable Borrower, Operating Lessee or by any other Person whatsoever,
shall have the right from time to time and at all times during normal business
hours upon reasonable prior written notice to such Borrower or Operating Lessee
to examine such books, records and accounts at the office of such Borrower,
Operating Lessee or other Person maintaining such books, records and accounts
and to make such copies or extracts thereof as Lender shall desire. After the
occurrence of an Event of Default, Borrowers and Operating Lessee shall pay any
out of pocket costs and expenses incurred by Lender to examine any and all of
such Borrower’s or Operating Lessee’s books, records and accounts as Lender
shall determine in Lender’s discretion to be necessary or appropriate in the
protection of Lender’s interest.

 

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(ii) Borrower shall furnish to Lender annually within ninety (90) days following
the end of each Fiscal Year, a true, complete, correct and accurate copy of the
consolidated financials of Ashford Hospitality Trust, Inc. audited by a “Big
Four” accounting firm or other firm reasonably acceptable to Lender accompanied
by an unqualified opinion from an Independent certified public accountant
acceptable to Lender in Lender’s discretion, and each Borrower and Operating
Lessee shall furnish financial statements and all such financial statements
above shall (a) be in form and substance reasonably acceptable to Lender, (b) be
prepared in accordance with GAAP, (c) include or be accompanied by without
limitation, a statement of operations (profit and loss), a statement of cash
flows, a calculation of Net Operating Income for all applicable Individual
Properties, a balance sheet, an aged accounts receivable report and such other
information or reports as shall be requested by Lender or any applicable Rating
Agency, (d) be accompanied by an Officer’s Certificate from a senior executive
of such Borrower or Operating Lessee, as applicable, certifying as of the date
thereof (x) that such statement is true, correct, complete and accurate, and
fairly reflects the results of operations and financial condition of such
Borrower or Operating Lessee for the relevant period, and (y) notice of whether
there exists an Event of Default or Default, and if such Event of Default or
Default exists, the nature thereof, the period of time it has existed and the
action then being taken to remedy same.

(iii) Intentionally Omitted.

(iv) Each Borrower and Operating Lessee shall furnish to Lender within twenty
(20) days following the end of each calendar month, a true, correct, complete
and accurate monthly unaudited financial statement which shall (a) be in form
and substance reasonably acceptable to Lender, (b) be prepared in accordance
with GAAP, (c) include, without limitation, a statement of operations (profit
and loss), a statement of cash flows, a calculation of Net Operating Income for
all applicable Individual Properties, a consolidated balance sheet, an aged
accounts receivable report and such other information or reports as shall be
requested by Lender or any applicable Rating Agency and (d) be accompanied by an
Officer’s Certificate from a senior executive of such Borrower or Operating
Lessee, as applicable, certifying as of the date thereof (x) that such statement
is true, correct, complete and accurate and fairly reflects the results of
operations and financial condition of such Borrower or Operating Lessee for the
relevant period, and (y) notice of whether there exists an Event of Default or
Default, and if such Event of Default or Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy same.

(v) Each Borrower and Operating Lessee shall furnish to Lender, within thirty
(30) days following the end of each calendar month:

(1) a true, complete, correct and accurate rent roll and occupancy report and
such other occupancy and rate statistics as Lender shall reasonably request;

(2) Smith Travel Star Reports for the applicable month for each Individual
Property in “Microsoft Excel” format (if available);

 

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(3) operating statements for each Individual Property, containing (a) monthly,
year-to-date and trailing twelve month (or Marriott’s trailing thirteen-month
reporting period) results compared to the results from the prior year for the
same periods for each Individual Property, and (b) monthly, year-to-date and
trailing twelve month (or Marriott’s trailing thirteen-month reporting period)
results compared to the results from the prior year for the same periods for
each Individual Property on a consolidated basis, and Borrowers shall use
commercially reasonable efforts to provide such statements in “Microsoft Excel”
format;

(4) updated quality scores for the applicable month for each Individual
Property, including detailed criteria and thresholds, if available;

(5) summary reports of franchise terminations, defaults, reflagging efforts and
conversions for each Individual Property (if applicable);

Each such document shall (a) be delivered to Lender in form and substance as
delivered by Manager pursuant to the terms of the Management Agreement and any
side letter agreement relating thereto, and (b) be accompanied by an Officer’s
Certificate from a senior executive of each Borrower and Operating Lessee, as
applicable, certifying as of the date thereof and to such party’s knowledge
(x) that such statement is true, correct, complete and accurate and (y) notice
of whether there exists an Event of Default or Default, and if such Event of
Default or Default exists, the nature thereof, the period of time it has existed
and the action then being taken to remedy same.

(vi) Each Borrower and Operating Lessee shall furnish to Lender, within twenty
(20) days after request, such further information with respect to the operation
of all applicable Individual Properties and the financial affairs of such
Borrower or Operating Lessee, as applicable, or the applicable Manager as may be
reasonably requested by Lender from time to time including, without limitation,
all business plans prepared for such Borrower or Operating Lessee and for the
operation of all such Individual Properties.

(vii) Each Borrower and Operating Lessee shall furnish to Lender, within twenty
(20) days after request, such further information regarding any Plan or
Multiemployer Plan and any reports or other information required to be filed
under ERISA as may be requested by Lender.

(viii) Each Borrower and Operating Lessee shall, concurrently with such
Borrower’s or Operating Lessee’s delivery to Lender, provide a copy of the items
required to be delivered to Lender under this Section 5.1(Q) to the Lender and
any servicer and/or special servicer that may be retained in conjunction with
the Loan or any Secondary Market Transaction (upon written direction from Lender
with reasonable prior written notice of such servicer and/or special servicer).
Each Borrower and Operating Lessee shall furnish to Lender written notice,
within two (2) Business Days after receipt by such Borrower or Operating Lessee,
as applicable, of any Rents or other items of Gross Revenue that any Borrower or
Operating Lessee is not required by this Agreement to deposit in any Collection
Account, Manager Account, Non-Marriott Property Operating Account or Cash
Collateral Account, together with such other documents and materials relating to
such Rents or other items of Gross Revenue as Lender reasonably requests.

 

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(ix) Each Borrower and Operating Lessee shall provide Lender with updated
information (reasonably satisfactory to Lender) concerning its related Basic
Carrying Costs for the next succeeding Fiscal Year prior to the termination of
each Fiscal Year.

(x) Each Borrower and Operating Lessee shall furnish to Lender annually no less
than thirty (30) days prior to the beginning of each Fiscal Year, a true,
complete, correct and accurate copy of such Borrower’s or Operating Lessee’s
draft annual capital and operating budget for each such Borrower’s or Operating
Lessee’s Individual Property (each, an “Approved Budget”), which Approved
Budgets shall be subject to Lender’s prior review and approval, which may be
granted or withheld in Lender’s sole and absolute discretion. Borrowers and
Operating Lessee shall promptly revise and resubmit to Lender, for Lender’s
review and approval, any draft annual capital and operating budget to which
Lender has objected and requested revisions. Until such time that Lender
approves or is deemed to have approved an Approved Budget, the most recently
approved Approved Budget shall apply; provided that such approved Approved
Budget shall be adjusted to reflect (x) matters in the proposed Approved Budget
approved by Lender, (y) as to matters in the proposed Approved Budget not yet
approved by Lender (i) increases for expenses actually incurred which vary in
relation to gross revenues to the extent of increases in such gross revenues
(“Variable Expenses”), and (ii) expenditures actually incurred which are beyond
the reasonable control of Borrower such as taxes, utilities and insurance
(“Uncontrollable Expenses”). Notwithstanding anything contained in the Loan
Documents to the contrary, expenditures shall be deemed in compliance with and
made pursuant to the Approved Budget even though such expenditures exceed the
amount budgeted therefore in the Approved Budget if such expenditures are for
Variable Expenses or Uncontrollable Expenses.

(R) Conduct of Business. Each Borrower and Operating Lessee shall cause the
operation of the Individual Properties to be conducted at all times in a manner
consistent with the following:

(i) to maintain or cause to be maintained the standard of operations at each
Individual Property at all times at a level necessary to insure a level of
quality for each such Individual Property consistent with similar facilities in
the same competitive market;

(ii) to operate or cause to be operated each Individual Property in a prudent
manner in compliance in all material respects with applicable Legal Requirements
and Insurance Requirements relating thereto and cause all licenses, Permits, and
any other agreements necessary for the continued use and operation of each
Individual Property to remain in effect except to the extent the failure thereof
would not have a Material Adverse Effect; and

 

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(iii) to maintain or cause to be maintained sufficient inventory and equipment
of types and quantities at each Individual Property to enable Borrowers or the
applicable Manager to operate the Individual Properties.

(S) ERISA.

(a) Each Borrower and Operating Lessee shall deliver to Lender as soon as
possible, and in any event within ten (10) days after such Borrower or Operating
Lessee knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan maintained by
Borrower, Operating Lessee or any ERISA Affiliate of either of them has occurred
or exists, a statement signed by a senior financial officer of such Borrower
setting forth details respecting such event or condition and the action, if any,
that such Borrower, Operating Lessee or its ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by such Borrower, Operating Lessee or an ERISA Affiliate
with respect to such event or condition):

(ii) any reportable event, as defined in Section 4043(b) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided that a failure
to meet the minimum funding standard of Section 412 of the Code or Section 302
of ERISA, including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code); and any request
for a waiver under Section 412(d) of the Code for any Plan;

(iii) the distribution under Section 4041 of ERISA of a notice of intent to
terminate any Plan or any action taken by Borrower, Operating Lessee or an ERISA
Affiliate to terminate any Plan;

(iv) the institution by PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by any Borrower, Operating Lessee or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been taken by PBGC with respect
to such Multiemployer Plan;

(v) the complete or partial withdrawal from a Multiemployer Plan by any
Borrower, Operating Lessee or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by any
Borrower, Operating Lessee or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA;

 

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(vi) the institution of a proceeding by a fiduciary of any Multiemployer Plan
against any Borrower, Operating Lessee or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days;

(vii) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss
of tax-exempt status of the trust of which such Plan is a part if any Borrower,
Operating Lessee or an ERISA Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections; and

(viii) the imposition of a lien or a security interest in connection with a
Plan.

(b) No Borrower or Operating Lessee shall engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Notes, this Agreement or the other Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”).

(c) Each applicable Borrower and Operating Lessee hereby certifies and shall
deliver to Lender such certifications or other evidence from time to time
throughout the term of the Loan, as reasonably requested by Lender, that
(A) such Borrower or Operating Lessee is not an “employee benefit plan” as
defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, a “plan”
as defined in Section 4975 of the Code, which is subject to Section 4975 of the
Code, or a “governmental plan” within the meaning of Section 3(32) of ERISA;
(B) such Borrower or Operating Lessee is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans or, if such Borrower is subject to such statutes, such statutes do not in
any manner affect the ability of the such Borrower or Operating Lessee to
perform its obligations under the Loan Documents or the ability of Lender to
enforce any and all of its rights under the Loan Agreement; and (C) one or more
of the following circumstances is true: (i) Equity interests in such Borrower or
Operating Lessee are publicly offered securities, within the meaning of 29
C.F.R. §2510.3-101(b)(2); (ii) Less than twenty-five percent of each outstanding
class of equity interests in such Borrower or Operating Lessee are held by
“benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or
(iii) such Borrower or Operating Lessee qualifies as an “operating company”
within the meaning of 29 C.F.R. §2510.3-101(c).

(d) If an investor or equity owner in any Borrower or Operating Lessee is
(directly or indirectly) a plan that is not subject to Title I of ERISA or
Section 4975 of the Code, but is subject to the provisions of any federal,
state, local, non-U.S. or other laws or regulations that are similar to those
portions of ERISA or the Code (collectively, “Other Plan Laws”), the assets of
such Borrower or Operating Lessee shall not constitute the assets of such plan
under such Other Plan Laws.

(T) Single Purpose Entity. Each Borrower, each SPE Equity Owner and Operating
Lessee shall at all times be a Single-Purpose Entity.

 

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(U) Trade Indebtedness. Each Borrower and Operating Lessee will pay its trade
payables within sixty (60) days of the date incurred, unless such Borrower or
Operating Lessee is in good faith contesting such Borrower’s obligation to pay
such trade payables in a manner reasonably satisfactory to Lender (which may
include Lender’s requirement that such Borrower or Operating Lessee post
security with respect to the contested trade payable).

(V) Deferred Maintenance. Borrower shall, within six (6) months of the date
hereof, perform the deferred maintenance work (the “Deferred Maintenance”) to
the Property itemized on Exhibit B hereto. Furthermore, Borrowers shall
diligently perform, or cause to be performed, in a timely and workmanlike manner
all repairs and maintenance contemplated by and itemized in the Approved Budget.

(W) PIP Requirements and Capital Improvements. Borrowers shall (i) complete all
work required to be performed in the Property Improvement Plans for each
Individual Property (collectively, the “PIP Work”) on or prior to the relevant
dates set forth in the Property Improvement Plans (as such dates may be extended
by Manager from time to time), and (ii) perform all capital improvements to each
Individual Property (other than the PIP Work) contemplated by and itemized in
the Capital Improvements and PIP Schedule attached hereto as Exhibit J on or
prior to December 31, 2006; provided, that notwithstanding anything herein or in
any other Loan Documents to the contrary, with respect to each Individual
Property, (x) Borrowers shall not spend an unreasonable amount on the foregoing
items (i) and (ii) (it being agreed that, with respect to any PIP Work, an
amount less than or equal to the related PIP Costs shall be a reasonable amount,
and, with respect to any capital improvement, an amount less than or equal to
the related cost of such capital improvement shown on Exhibit J shall be deemed
a reasonable amount), (y) Borrowers shall spend at least an amount equal to the
“Required Expenditure Amount” shown opposite such Individual Property on Exhibit
I hereto on the foregoing items (i) and (ii) of this subsection, exclusive of
any amounts reserved for or otherwise reimbursed to any Borrower pursuant to the
terms of this Agreement or any Management Agreement, including, without
limitation, any amounts which are reimbursable from the Capital Reserve
Sub-Account or from any account relating to FF&E and repairs maintained pursuant
to any Management Agreement, and (z) Borrowers shall, on or prior to
December 31, 2006 (or, with respect to PIP Work, within five (5) Business Days
of any later date of completion if such date has been extended by Manager),
furnish Lender with copies of bills and other documentation as may be reasonably
requested by Lender to establish that that such PIP Work and capital
improvements have been completed and that the conditions set forth in the
foregoing clauses (x) and (y) of this subsection have been fulfilled and the
amounts referenced therein paid in full.

(X) Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws. Each Borrower and Operating Lessee shall comply with all Legal
Requirements relating to money laundering, anti-terrorism, trade embargoes and
economic sanctions, now or hereafter in effect. Upon Lender’s request from time
to time during the term of the Loan, each Borrower and Operating Lessee shall
certify in writing to Lender that such Borrower’s or Operating Lessee’s, as
applicable, representations, warranties and obligations under Section 4.1(NN)
and this Section remain true and correct and have not been breached. Each
Borrower and Operating Lessee shall immediately notify Lender in writing if any

 

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representations, warranties or covenants are no longer true or have been
breached or if such Borrower or Operating Lessee has a reasonable basis to
believe that they may no longer be true or have been breached. In connection
with such an event, such Borrower or Operating Lessee shall comply with all
Legal Requirements and directives of Governmental Authorities and, at Lender’s
request, provide to Lender copies of all notices, reports and other
communications exchanged with, or received from, Governmental Authorities
relating to such an event. Borrowers and Operating Lessee shall also promptly
reimburse to Lender any and all costs and expenses incurred by Lender in
evaluating the effect of such an event on the Loan and Lender’s interest in the
collateral for the Loan, in obtaining any necessary license from Governmental
Authorities as may be necessary for Lender to enforce its rights under the Loan
Documents, and in complying with all Legal Requirements applicable to Lender as
the result of the existence of such an event and for any penalties or fines
imposed upon Lender as a result thereof.

(Y) Franchise Agreements.

(a) Each Non-Marriott Property shall be operated under the terms and conditions
of the applicable Franchise Agreement in all material respects. Each Borrower
shall or shall cause the applicable Operating Lessee to (i) pay all sums
required to be paid by the franchisee under each Franchise Agreement,
(ii) diligently perform, observe and enforce all of the terms, covenants and
conditions of each Franchise Agreement on the part of the franchisee thereunder
to be performed, observed and enforced to the end that all things shall be done
which are necessary to keep unimpaired the rights of said franchisee under each
Franchise Agreement, (iii) promptly notify Lender of the giving of any notice to
any Borrower and/or Operating Lessee of any material default by the franchisee
in the performance or observance of any of the terms, covenants or conditions of
any Franchise Agreement on the part of the franchisee thereunder to be performed
and observed and deliver to Lender a true copy of each such notice, and
(iv) promptly deliver to Lender a copy of each financial statement, business
plan, capital expenditure plan, notice of a material default under the Franchise
Agreement, report regarding operations at the related Individual Property,
estimates of any monetary nature and any other items reasonably requested by
Lender, in each case received by any Borrower or Operating Lessee under any
Franchise Agreement.

(b) No Borrower shall (and shall not cause or permit any Operating Lessee to),
without the prior consent of the Lender (which consent shall not be unreasonably
withheld), surrender any Franchise Agreement or terminate or cancel any
Franchise Agreement or modify, change, supplement, alter or amend any Franchise
Agreement, in any material respect, either orally or in writing, and each
Borrower hereby assigns to Lender as further security for the payment of the
Indebtedness and for the performance and observance of the terms, covenants and
conditions of this Loan Agreement, any and all rights, privileges and
prerogatives of each Borrower to surrender any Franchise Agreement or to
terminate, cancel, modify, change, supplement, alter or amend any Franchise
Agreement in any respect, and any such surrender of any Franchise Agreement or
termination, cancellation, modification, change, supplement, alteration or
amendment of any Franchise Agreement without the prior consent of Lender (which
consent shall not be unreasonably withheld) shall be void and of no force and
effect.

 

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(c) If any franchisee shall default in the performance or observance of any
material term, covenant or condition of any Franchise Agreement on the part of
the franchisee thereunder to be performed or observed, then, without limiting
the generality of the other provisions of this Agreement, and without waiving or
releasing any Borrower from any of its obligations hereunder, Lender shall have
the right, but shall be under no obligation, to pay any sums and to perform any
act or take any action as may be appropriate to cause all the terms, covenants
and conditions of such Franchise Agreement on the part of the franchisee to be
performed or observed to be promptly performed or observed on behalf of such
Borrower, to the end that the rights of said franchisee (and/or such Borrower
and/or Operating Lessee) in, to and under such Franchise Agreement shall be kept
unimpaired and free from default. Any such amounts so advanced by Lender
together with interest thereon from the date expended by Lender of the Default
Rate shall be part of the Indebtedness and Borrower shall immediately repay such
amounts to Lender upon demand. Pursuant to the terms of the applicable
Subordination Attornment and Security Agreement and/or Assignment of Management
Agreement, Lender and any person designated by Lender shall have, and are hereby
granted, the right to enter upon the applicable Individual Property at any time
and from time to time for the purpose of taking any such action. If any
Franchisor shall deliver to Lender a copy of any notice sent to any Borrower
and/or Operating Lessee of any default under any Franchise Agreement, such
notice shall constitute full protection to Lender for any action taken or
omitted to be taken by Lender in good faith, in reliance thereon.

(d) Each Borrower shall (or shall cause the applicable Operating Lessee to)
exercise each individual option, if any, to extend or renew the term of each
Franchise Agreement upon demand by Lender made at any time within ninety
(90) days prior to the last day upon which any such option may be exercised, and
each Borrower hereby expressly authorizes and appoints Lender as its
attorney-in-fact to exercise (or cause the applicable Operating Lessee to
exercise) any such option in the name of and upon behalf of such Borrower should
such Borrower fail to do so, which power of attorney shall be irrevocable and
shall be deemed to be coupled with an interest.

(e) Any sums expended by Lender pursuant to this Section shall bear interest at
the Default Rate from the date such cost is incurred to the date of payment to
Lender, shall be deemed to constitute a portion of the Indebtedness, shall be
secured by the lien of the Mortgage and the other Loan Documents and shall be
immediately due and payable within two (2) Business Days after demand by Lender
therefor.

(f) Each Borrower shall, promptly upon request of Lender, but no more than two
(2) times in any calendar year during the term of the Loan (unless (i) an Event
of Default has occurred and is continuing or (ii) such request is occasioned in
connection with a Secondary Market Transaction) use its diligent best efforts to
obtain and deliver (or cause to be delivered) an estoppel certificate from each
Franchisor stating that (i) each applicable Franchise Agreement is in full force
and effect and has not been modified, amended or assigned, (ii) neither such
Franchisor nor the franchisee named thereunder is in default under any of the
terms, covenants or provisions of each applicable Franchise Agreement and such
Franchisor knows of no event which, but for the passage of time or the giving of
notice or both, would constitute an event of default under each applicable
Franchise Agreement, (iii) neither such Franchisor nor the franchisee thereunder
has commenced any action or given or received any notice for the purpose of
terminating any applicable Franchise Agreement and (iv) all sums due and payable
to such Franchisor under each applicable Franchise Agreement have been paid in
full.

 

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(g) Upon the termination of any Franchise Agreement, each Borrower shall (or
shall cause Operating Lessee to) promptly enter into a new Franchise Agreement
with a replacement Franchisor, which shall deliver a comfort or similar letter
to and in favor of Lender, all upon terms and conditions reasonably acceptable
to Lender.

(Z) Upfront Remediation. Borrower shall, by the respective required completion
dates set forth in Exhibit K, perform the environmental remediation to the
Property itemized on Exhibit K hereto (the “Upfront Remediation”). Furthermore,
Borrower shall diligently perform, or cause to be performed, all other
Remediation as required by and in accordance with the terms of this Agreements.

ARTICLE 6

NEGATIVE COVENANTS

Section 6.1. Borrower Negative Covenants.

Each Borrower and Operating Lessee covenants and agrees that, until payment in
full of the Indebtedness, it will not do, directly or indirectly, any of the
following unless Lender consents thereto in writing:

(A) Liens on the Property. Incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Lien with respect to any
Individual Property or any portion thereof, except: (i) Liens in favor of
Lender, and (ii) the Permitted Encumbrances.

(B) Transfer. Except as expressly permitted by or pursuant to this Agreement,
any Mortgage or the other Loan Documents (except as otherwise approved by Lender
in writing in Lender’s discretion), allow any Transfer to occur or modify,
change, supplement, alter, amend, fail to comply with, in any material respect,
or terminate the Management Agreement or any Operating Lease, or enter into a
new Management Agreement or any Operating Lease, with respect to any Individual
Property except as permitted under this Agreement.

(C) Other Borrowings. Incur, unsecured trade payables (not evidenced by a
promissory note) incurred in the ordinary course of business relating to the
ownership and operation of the applicable Borrower’s and Operating Lessee’s
Individual Properties which when aggregated with the unsecured trade payables of
all other Borrowers and Operating Lessee do not exceed, at any time, a maximum
amount of two and one-half percent (2.5%) of the Loan Amount and are paid within
sixty (60) days of the date incurred, create, assume, become or be liable in any
manner with respect to Other Borrowings.

(D) Change In Business. Cease to be a Single-Purpose Entity or make any material
change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business.

 

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(E) Debt Cancellation. Cancel or otherwise forgive or release any material claim
or debt owed to the Borrower by any Person, except for adequate consideration or
in the ordinary course of such Borrower’s and Operating Lessee’s business or
otherwise if such cancellation, release or forgiveness is prudent and
commercially reasonable.

(F) Affiliate Transactions. Except as otherwise permitted under the Loan
Documents, enter into, or be a party to, any transaction with an Affiliate of
any Borrower or Operating Lessee, except in the ordinary course of business and
on terms which are no less favorable to such Borrower, Operating Lessee or such
Affiliate than would be obtained in a comparable arm’s length transaction with
an unrelated third party, and, if the amount to be paid to the Affiliate
pursuant to the transaction or series of related transactions is greater than
Fifty Thousand Dollars ($50,000.00) (determined annually on an aggregate basis)
fully disclosed to Lender in advance.

(G) Creation of Easements. Create, or permit any Individual Property or any part
thereof to become subject to, any easement, license or restrictive covenant,
other than a Permitted Encumbrance. Without limiting the generality of the
immediately preceding sentence, no Borrower shall enter into, consent to, grant,
amend, modify, restate or supplement any document, instrument or agreement
affecting, related to or impacting upon any Individual Property, the title
thereto or any portion or aspect thereof, including, without limitation, any
easement, reciprocal easement agreement, or any declaration of easements or
covenants other than a Permitted Encumbrance.

(H) Certain Restrictions. Enter into any agreement which expressly restricts the
ability of any Borrower or Operating Lessee to enter into amendments,
modifications or waivers of any of the Loan Documents.

(I) Issuance of Equity Interests. Issue or allow to be created any stocks or
shares or shareholder, partnership or membership interests, as applicable, or
other ownership interests other than the stocks, shares, shareholder,
partnership or membership interests and other ownership interests which are
outstanding or exist on the Closing Date or any security or other instrument
which by its terms is convertible into or exercisable or exchangeable for stock,
shares, shareholder, partnership or membership interests or other ownership
interests in any Borrower or Operating Lessee, unless otherwise permitted under
this Agreement in connection with any Mezzanine Loan. No Borrower or Operating
Lessee shall allow to be issued or created any stock in any Borrower’s or
Operating Lessee’s general partner or managing member, as applicable, other than
the stock which is outstanding or existing on the Closing Date or any security
or other instrument which by its terms is convertible into or exercisable or
exchangeable for any stock in such Borrower’s general partner or managing
member, as applicable.

(J) Assignment of Licenses and Permits. Assign or transfer any of its interest
in any Permits pertaining to any Individual Property, or assign, transfer or
remove or permit any other Person to assign, transfer or remove any records
pertaining to any Individual Property without Lender’s prior written consent
which consent may be granted or refused in Lender’s discretion.

 

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(K) Place of Business. Change its chief executive office or its principal place
of business or place where its books and records are kept without giving Lender
at least thirty (30) days’ prior written notice thereof and promptly providing
Lender such information as Lender may reasonably request in connection
therewith.

ARTICLE 7

DEFAULTS

Section 7.1. Event of Default.

The occurrence of one or more of the following events shall be an “Event of
Default” hereunder:

(i) if on any Payment Date the funds in the Debt Service Payment Sub-Account are
insufficient to pay the Required Debt Service Payment due on such Payment Date
and the Borrowers fail to pay such insufficiency on such Payment Date; provided
that Borrowers shall have an additional two Business Days past the related
Payment Date to make any such payment, but only once during any twelve month
period;

(ii) intentionally omitted;

(iii) if the Borrowers fail to pay the outstanding Indebtedness on the Maturity
Date;

(iv) if on any Payment Date the Borrowers fail to pay the Basic Carrying Costs
Monthly Installment, the Capital Reserve Monthly Installment, the Cash
Collateral Account Bank Fees due on such Payment Date (to the extent Borrowers
are obligated to make such payments hereunder); provided that Borrowers shall
have an additional two (2) Business Days past the related Payment Date to make
any such payment, but only once during any twelve (12) month period;

(v) if on the date any payment of a Basic Carrying Cost would become delinquent,
the funds in the Basic Carrying Costs Sub-Account together with any funds in the
Cash Collateral Account not allocated to another Sub-Account are insufficient to
make such payment and Borrower has not otherwise paid such Basic Carrying Cost
or funded such shortfall to Lender; provided that Borrowers shall have an
additional two (2) Business Days past the related Payment Date to make any such
payment, but only once during any twelve (12) month period;

(vi) the occurrence of the events identified elsewhere in the Loan Documents as
constituting an “Event of Default”;

(vii) any breach of Sections 2.11(a) (subject, however, to the proviso in
Section 2.11(a)(ii)) , 2.11(b), 2.11(e), 5.1(T), 5.1(V), 5.1(W), 5.1(X), or
6.1(B);

 

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(viii) intentionally omitted;

(ix) if without Lender’s prior written consent (which consent shall not be
unreasonably withheld) (A) any Franchisor resigns or is removed or is replaced
(except as otherwise expressly provided herein), or (B) any Franchise Agreement
is entered into for any Individual Property or (C) there is any material change
in or termination of any Franchise Agreement for any Individual Property;

(x) if any Borrower fails to pay any other amount payable pursuant to this
Agreement or any other Loan Document within two (2) Business Days of the date
when due and payable in accordance with the provisions hereof or thereof, as the
case may be;

(xi) if any representation or warranty made herein by Borrowers or Operating
Lessee or in any other Loan Document, or in any report, certificate, financial
statement or other Instrument, agreement or document furnished by any Borrower
or Operating Lessee in connection with this Agreement, the Note or any other
Loan Document executed and delivered by such Borrower or Operating Lessee, as
applicable, shall be false in any material respect as of the date such
representation or warranty was made or remade;

(xii) if any Borrower, any of such Borrower’s partners or members, as
applicable, Operating Lessee, or any SPE Equity Owner makes an assignment for
the benefit of creditors;

(xiii) if a receiver, liquidator or trustee shall be appointed for any Borrower,
any of such Borrower’s partners, members or shareholders, as applicable, or any
SPE Equity Owner or if any Borrower, any of such Borrower’s partners, members or
shareholders, as applicable, Operating Lessee or any SPE Equity Owner shall be
adjudicated as bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced
in by such Borrower, any of such Borrower’s partners, members or shareholders,
as applicable, Operating Lessee or any SPE Equity Owner or if any proceeding for
the dissolution or liquidation of such Borrower, any of such Borrower’s
partners, members or shareholders, as applicable, Operating Lessee or any SPE
Equity Owner shall be instituted; provided, however, that if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
such Borrower, any of such Borrower’s partners, members or shareholders, as
applicable, Operating Lessee or any SPE Equity Owner as the case may be, upon
the same not being discharged, stayed or dismissed within ninety (90) days; or
if such Borrower, any of such Borrower’s partners, members or shareholders, as
applicable, Operating Lessee or any SPE Equity Owner shall generally not be
paying its debts as they become due;

(xiv) if any Borrower or Operating Lessee attempts to delegate its obligations
or assign its rights under this Agreement, any of the other Loan Documents or
any interest herein or therein;

 

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(xv) if any provision of any organizational document of any Borrower, Operating
Lessee or any SPE Equity Owner is amended or modified in any respect, or if any
Borrower, Operating Lessee, any SPE Equity Owner or any of their respective
partners, members, or shareholders as applicable, fails to perform or enforce
the provisions of such organizational documents or attempts to dissolve any
Borrower, Operating Lessee or any SPE Equity Owner; or if any Borrower,
Operating Lessee or any SPE Equity Owner or any of their respective partners,
members or shareholders, as applicable, breaches any of the covenants set forth
in Sections 5.1(T) or 6.1(D);

(xvi) [Intentionally omitted];

(xvii) if an event or condition specified in Section 5.1(S) shall occur or exist
with respect to any Plan, Multiemployer Plan or plan and, as a result of such
event or condition, together with all other such events or conditions, Borrower
or any ERISA Affiliate or any affiliate shall incur or in the opinion of Lender
shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan,
PBGC or plan (or any combination of the foregoing) which would constitute, in
the determination of Lender, a Material Adverse Effect;

(xviii) any breach of Section 5.1(I) or 5.1(P), or, if without Lender’s prior
written consent, except as expressly permitted in this Agreement, (A) any
Manager resigns or is removed or is replaced, (B) any Management Agreement is
entered into for any Individual Property or (C) there is any material change in
or termination of any Management Agreement for any Individual Property;

(xix) any “Event of Default” under any of the other “Loan Agreements” referenced
in the Cooperation Agreement;

(xx) if without Lender’s prior written consent (A) any Operating Lessee resigns
or is removed or is replaced, (B) any Operating Lease is entered into for any
Individual Property or (C) there is any change in or termination of any
Operating Lease;

(xxi) if any Borrower or Operating Lessee shall be in default under any of the
other obligations, agreements, undertakings, terms, covenants, provisions or
conditions of this Agreement, the Notes, any Mortgage or the other Loan
Documents, not otherwise referred to in this Section 7.1, for ten (10) days
after written notice to any Borrower from Lender or its successors or assigns,
in the case of any default which can be cured by the payment of a commercially
reasonable sum of money or for thirty (30) days after written notice from Lender
or its successors or assigns, in the case of any other default (unless otherwise
provided herein or in such other Loan Document); provided, however, that if such
non-monetary default under this subparagraph is susceptible of cure but cannot
reasonably be cured within such thirty (30) day period and provided further that
such Borrower shall have commenced to cure such default within such thirty
(30) day period and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (30) day period shall be extended for such time as is
reasonably necessary for such Borrower in the exercise of due diligence to cure
such default, but in no event shall such period exceed ninety (90) days after
the original notice from Lender;

 

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(xxii) if any Operating Lessee is in default beyond any applicable notice or
cure period under the applicable Operating Lease;

(xxiii) if an “Event of Default” shall occur under any Subordination, Attornment
and Security Agreement;

(xxiv) Borrower’s failure to complete all PIP Work in all material respects on
or before the earlier of (a) the relevant dates set forth in the applicable
Property Improvement Plans (as such dates may be extended by Manager from time
to time) and (b) the date any franchisor under any Franchise Agreement declares
an event of default in connection with Borrower’s PIP Work;

(xxv) [intentionally omitted]; and

(xxvi) if any of the assumptions set forth in that certain non-consolidation
opinion from the Borrowers’ counsel to Lender dated as of the date hereof shall
be untrue in any material respect.

 

  Section 7.2. Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default, all
or any one or more of the rights, powers and other remedies available to Lender
against Borrowers or any Borrower under this Agreement, the Note, any Mortgages
or any of the other Loan Documents, or at law or in equity may be exercised by
Lender at any time and from time to time (including, without limitation, the
right to accelerate and declare the outstanding principal amount, unpaid
interest, Default Rate interest, Late Charges, Prepayment Premium and any other
amounts owing by such Borrower to be immediately due and payable), without
notice or demand, whether or not all or any portion of the Indebtedness shall be
declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and
remedies under any of the Loan Documents with respect to all or any portion of
the Collateral. Any such actions taken by Lender shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or
otherwise, at such time and in such order as Lender may determine in its
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
Notwithstanding anything contained to the contrary herein, the outstanding
principal amount, unpaid interest, Default Rate interest, Late Charges,
Prepayment Premium and any other amounts owing by any Borrower shall be
accelerated and immediately due and payable, without any election by Lender upon
the occurrence of an Event of Default described in Section 7.1(xii) or
Section 7.1 (xiii). Notwithstanding that this Agreement may refer to a
continuing Event of Default, and without limiting any Borrower’s right to cure a
Default which may, with the passage of time, become an Event of Default, no
Borrower shall have any right pursuant to this Agreement to cure any Event of
Default unless permitted by Lender in writing.

 

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Section 7.3. Remedies Cumulative.

The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which Lender
may have against any Borrower or any other Person pursuant to this Agreement or
the other Loan Documents executed by or with respect to any Borrower or any
other Person, or existing at law or in equity or otherwise. Lender’s rights,
powers and remedies may be pursued singly, concurrently or otherwise, at such
time and in such order as Lender may determine in Lender’s discretion. No delay
or omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent Default
or Event of Default or to impair any remedy, right or power consequent thereon.
Any and all of Lender’s rights with respect to the Collateral shall continue
unimpaired, and each Borrower shall be and remain obligated in accordance with
the terms hereof, notwithstanding (i) the release or substitution of Collateral
at any time, or of any rights or interest therein or (ii) any delay, extension
of time, renewal, compromise or other indulgence granted by Lender in the event
of any Default or Event of Default with respect to the Collateral or otherwise
hereunder. Notwithstanding any other provision of this Agreement, but subject to
Section 8.14 hereof, Lender reserves the right to seek a deficiency judgment or
preserve a deficiency claim, in connection with the foreclosure of any or all
Mortgages, to the extent necessary to foreclose on other parts of the
Collateral.

Section 7.4. Lender’s Right to Perform.

If any Borrower fails to perform any covenant or obligation contained herein and
such failure shall continue for a period of (5) five Business Days after such
Borrower’s receipt of written notice thereof from Lender, without in any way
limiting Section 7.1 hereof, Lender may, but shall have no obligation to, itself
perform, or cause performance of, such covenant or obligation, and the expenses
of Lender incurred in connection therewith shall be payable by Borrowers to
Lender upon demand. Notwithstanding the foregoing, Lender shall have no
obligation to send notice to such Borrower of any such failure.

ARTICLE 8

MISCELLANEOUS

Section 8.1. Survival.

Subject to Section 4.2, this Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the execution and delivery of this Agreement and
the execution and delivery by Borrowers to Lender of the Notes, and shall
continue in full force and effect so long as any portion of the Indebtedness is
outstanding and unpaid. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of any such party. All covenants, promises and agreements in this
Agreement contained, by or on behalf of Borrower, shall inure to the benefit of
the respective successors and assigns of Lender. Nothing in this Agreement or in
any other Loan Document, express or implied, shall give to any Person other than
the parties and the holder(s) of the Notes and the other Loan Documents, and
their legal representatives, successors and assigns, any benefit or any legal or
equitable right, remedy or claim hereunder.

 

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Section 8.2. Lender’s Discretion.

Whenever pursuant to this Agreement or any other Loan Document, Lender exercises
any right, option or election given to Lender to approve or disapprove, or
consent or withhold consent, or any arrangement or term is to be satisfactory to
Lender or is to be in Lender’s discretion, the decision of Lender to approve or
disapprove, consent or withhold consent, or to decide whether arrangements or
terms are satisfactory or not satisfactory or acceptable or not acceptable to
Lender in Lender’s discretion, shall (except as is otherwise specifically herein
provided) be in the sole and absolute discretion of Lender. Whenever pursuant to
this Agreement or any other Loan Document (a) the Rating Agencies are given any
right to approve or disapprove, (b) confirmation is required from the Rating
Agencies that an action will not result in a downgrade or withdrawal of the
ratings in a Secondary Market Transaction or (c) any arrangement or term is to
be satisfactory to the Rating Agencies, the approval of Lender shall be
substituted therefore prior to the date that all or any portion of the Loan is
included in a REMIC, among other things, Lender’s reasonable determination of
Rating Agency criteria.

Section 8.3. Governing Law.

(a) The proceeds of the Note delivered pursuant hereto were disbursed from New
York, which State the parties agree has a substantial relationship to the
parties and to the underlying transaction embodied hereby, and in all respects,
including, without limitation, matters of construction, validity and
performance, this Agreement and the obligations arising hereunder shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and performed in such State and any applicable law
of the United States of America. To the fullest extent permitted by law, each
Borrower hereby unconditionally and irrevocably waives any claim to assert that
the law of any other jurisdiction governs this Agreement and the Note, and this
Agreement and the Note shall be governed by and construed in accordance with the
laws of the State of New York pursuant to § 5-1401 of the New York General
Obligations Law.

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST ANY BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN
NEW YORK, NEW YORK, PURSUANT TO § 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW
OR IN ANY FEDERAL OR STATE COURT IN THE JURISDICTION IN WHICH THE COLLATERAL IS
LOCATED, AND EACH BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY EACH SUIT, ACTION OR PROCEEDING, AND EACH
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY EACH COURT IN ANY
SUIT, ACTION OR PROCEEDING. EACH BORROWER DOES HEREBY DESIGNATE AND APPOINT CSC
NETWORKS, 500 CENTRAL AVENUE, ALBANY, NEW YORK,

 

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12206-2290, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY EACH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT AND AGREES THAT SERVICE OF PROCESS UPON
SAID AGENT AT SAID ADDRESS (OR AT EACH OTHER OFFICE AS MAY BE DESIGNATED BY EACH
BORROWER FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO
EACH BORROWER AT ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND
WRITTEN NOTICE OF SAID SERVICE OF EACH BORROWER MAILED OR DELIVERED TO EACH
BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY EACH SUIT, ACTION OR
PROCEEDING. EACH BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED
ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO
TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT (WHICH OFFICE SHALL BE DESIGNATED
AS THE ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE EACH
A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.

Section 8.4. Modification, Waiver in Writing.

No modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, the Notes or any other Loan Document, or consent to
any departure by any Borrower therefrom, shall in any event be effective unless
the same shall be in a writing signed by the party against whom enforcement is
sought, and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to or demand on any Borrower shall entitle such
Borrower to any other or future notice or demand in the same, similar or other
circumstances.

Section 8.5. Delay Not a Waiver.

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

 

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Section 8.6. Notices.

All notices, consents, approvals and requests required or permitted hereunder or
under any other Loan Document shall be given in writing and shall be effective
for all purposes if hand delivered or sent by (a) hand delivery, with proof of
attempted delivery, (b) certified or registered United States mail, postage
prepaid, (c) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or (d) by telecopier
(with answerback acknowledged) provided that such telecopied notice must also be
delivered by one of the means set forth in (a), (b) or (c) above, addressed to
the parties as follows:

 

If to Lender:

  

Merrill Lynch Mortgage Lending, Inc.

4 World Financial Center, 16th Floor

New York, New York 10080

Attn: Robert Spinna

Telecopier: 212-449-7684

with a copy to:

  

Dechert LLP

One Market Street

Steuart Tower, Suite 2500

San Francisco, CA 94105

Attn: David Linder, Esquire

Telecopier: 415-262-4555

If to Borrower:

  

[Applicable Borrower]

c/o Ashford Hospitality Limited Partnership

14185 Dallas Parkway

Suite 1100

Dallas, TX 75254

Attn: David Brooks, Esquire

Telecopier: (972) 490-9605

with a copy to:

  

Andrews Kurth LLP

1717 Main Street, Suite 3700

Dallas, Texas 75201

Attn: Brigitte Kimichik, Esquire

Telecopier: (214) 659-4764

A party receiving a notice which does not comply with the technical requirements
for notice under this Section 8.6 may elect to waive any deficiencies and treat
the notice as having been properly given. A notice shall be deemed to have been
given: (a) in the case of hand delivery, at the time of delivery; (b) in the
case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; (c) in the case of expedited prepaid delivery upon
the first attempted delivery on a Business Day; or (d) in the case of
telecopier, upon receipt of answerback confirmation, provided that such
telecopied notice was also delivered as required in this Section 8.6. All
notices given by Lender hereunder that are effective against any Borrower shall
be deemed effective against all Borrowers. Any notice given to Lender by any
Borrower hereunder shall be deemed binding against all Borrowers.

 

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Section 8.7. Trial By Jury.

EACH BORROWER AND LENDER, TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO,
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS
AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.

Section 8.8. Headings.

The Article and Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

Section 8.9. Assignment.

Lender shall have the right to assign in whole or in part this Agreement and/or
any of the other Loan Documents and the obligations hereunder or thereunder to
any Person and to participate all or any portion of the Loan evidenced hereby,
including without limitation, any servicer or trustee in connection with a
Secondary Market Transaction. Lender shall provide any Borrower with written
notice of any such assignment; provided, however, that such notice shall not be
a condition of Lender’s right to assign this Agreement and/or any of the Loan
Documents and the failure to deliver such notice shall not constitute a default
under this Loan Agreement. At the option of Lender, the Loan may be serviced by
a servicer and/or trustee selected by Lender and Lender may delegate all or any
portion of its responsibilities under this Agreement and the other Loan
Documents to such servicer and/or trustee pursuant to a servicing agreement
between Lender and such servicer and/or trustee.

Section 8.10. Severability.

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

Section 8.11. Preferences.

Lender shall have no obligation to marshal any assets in favor of any Borrower
or any other party or against or in payment of any or all of the obligations of
any Borrower pursuant to this Agreement, the Notes or any other Loan Document.
Lender shall have the continuing and exclusive right to apply or reverse and
reapply any and all payments by any Borrower to any portion of the obligations
of any Borrower hereunder. To the extent any Borrower makes a payment or
payments to Lender for any Borrower’s benefit, which payment or proceeds or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be revived
and continue in full force and effect, as if such payment or proceeds had not
been received by Lender.

 

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Section 8.12. Waiver of Notice.

No Borrower shall be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by Lender
to such Borrower and except with respect to matters for which such Borrower is
not, pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Each Borrower hereby expressly waives the right to receive any notice
from Lender with respect to any matter for which this Agreement or the other
Loan Documents does not specifically and expressly provide for the giving of
notice by Lender to such Borrower.

Section 8.13. Remedies of Borrower.

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

Section 8.14. Exculpation.

Except as otherwise set forth in this Section 8.14 and Section 4.2 to the
contrary, Lender shall not enforce the liability and obligation of any Borrower
or Operating Lessee to perform and observe the obligations contained in this
Agreement, the Note, any Mortgage or any of the other Loan Documents executed
and delivered by any Borrower or Operating Lessee except that Lender may pursue
any power of sale, bring a foreclosure action, action for specific performance,
action for money judgment, or other appropriate action or proceeding (including,
without limitation, to obtain a deficiency judgment) against any or all
Borrowers, or Operating Lessee or any other Person solely for the purpose of
enabling Lender to realize upon (a) any Collateral, and (b) any Rents to the
extent (x) received by any Borrower or any Manager (or any of their affiliates),
after the occurrence of an Event of Default or (y) distributed to any Borrower,
Operating Lessee or any Manager, or their respective shareholders, or partners
or members, as applicable, or affiliates during or with respect to any period
for which Lender did not receive the full amounts it was entitled to receive as
prepayments of the Loan pursuant to Section 2.6(b) (all Rents covered by clauses
(x) and (y) being hereinafter referred to as the “Recourse Distributions”) and
(c)) any other collateral given to Lender under the Loan Documents ((a), (b),
and (c) collectively, the “Default Collateral”); provided, however, that any
judgment in any action or proceeding shall be enforceable only to the extent of
any Default Collateral. The provisions of this Section 8.14 shall not, however,
(a) impair the validity of the Indebtedness evidenced by the Loan Documents or
in any way affect or impair the Liens of any Mortgage or any of the other Loan
Documents or the right of Lender to foreclose any Mortgage following an

 

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Event of Default; (b) impair the right of Lender to name any Person as a party
defendant in any action or suit for judicial foreclosure and sale under any
Mortgage; (c) affect the validity or enforceability of the Note, any Mortgage or
the other Loan Documents; (d) impair the right of Lender to obtain the
appointment of a receiver; (e) impair the right of Lender to bring suit for and
recover against any Person any damages, losses, expenses, liabilities or costs
resulting from fraud, willful misrepresentation, waste of all or any portion of
any Individual Property, or wrongful removal or disposal of all or any portion
of any Individual Property by any Person in connection with this Agreement, the
Note, any Mortgage or the other Loan Documents; (f) impair the right of Lender
to obtain the Recourse Distributions received by any Person; (g) impair the
right of Lender to bring suit for and recover against any Person with respect to
any misappropriation of security deposits or Rents collected more than one
(1) month in advance; (h) impair the right of Lender to obtain Insurance
Proceeds or Condemnation Proceeds due to Lender pursuant to any Mortgage;
(i) impair the right of Lender to enforce the provisions of Sections 4.1(V) or
5.1(D) through 5.1(G), inclusive of this Agreement, Section 2.8 of each Mortgage
or the Environmental Indemnity even after repayment in full by any Borrower of
the Indebtedness; (j) prevent or in any way hinder Lender from exercising, or
constitute a defense, or counterclaim, or other basis for relief in respect of
the exercise of, any other remedy against any or all of the Collateral securing
the Note as provided in the Loan Documents; (k) impair the right of Lender to
bring suit for and recover against any person with respect to any misapplication
of any funds (including, without limitation, insurance proceeds and condemnation
proceeds); (l) impair the right of Lender to sue for, seek or demand a
deficiency judgment against any Person solely for the purpose of foreclosing on
any Collateral or any part thereof, or realizing upon the Default Collateral, or
(m) impair the right of Lender to bring suit for and recover against any Person
any damages, losses, expenses, liabilities or costs in the event that Borrower
or any Operating Lessee shall take any action of any kind or nature whatsoever,
either directly or indirectly to oppose, impede, obstruct, challenge, hinder,
frustrate, enjoin or otherwise interfere with (A) Lender’s termination of any
Operating Lease with any Operating Lessee, (B) Lender or the party acquiring any
Individual Property following the occurrence of a foreclosure or deed in lieu
thereof (in full substitution of the applicable Operating Lessee) being deemed
the “Owner” under the Management Agreement, (C) the execution, delivery or
effectiveness of a new Management Agreement directly between Lender or the party
acquiring any Individual Property following a foreclosure or deed in lieu
thereof and applicable Manager or (D) any payment or other transfer by any
Manager of funds which would otherwise be paid to any Operating Lessee under any
Operating Lease directly to Lender or the party acquiring any Individual
Property following the occurrence of a foreclosure or deed in lieu thereof, in
each case after or as a result of any automatic termination of the applicable
Operating Lease or of Lender exercising its right to terminate the Operating
Lease, in each case pursuant to the applicable Subordination, Attornment and
Security Agreement and this Agreement, or shall, either directly or indirectly,
cause or permit any other person to take any action which, if taken by such
Operating Lessee would constitute an event described in this Section 8.14(m);
provided, however, that any deficiency judgment referred to in this
Section 8.14(m) shall be enforceable only to the extent of any of the Default
Collateral. The preceding provisions of this Section 8.14 shall be inapplicable
to any Person if (i) any petition for bankruptcy, reorganization or arrangement
pursuant to federal or state law against any Borrower or Operating Lessee shall
be filed by any Borrower, Operating Lessee, or any Affiliate of any Borrower or
Operating Lessee, (ii) if an involuntary bankruptcy or other insolvency
proceeding is commenced against any Borrower or Operating

 

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Lessee (by a party other than Lender) but only if such Borrower has consented or
acquiesced to such proceeding or if Borrower, Operating Lessee or any Affiliate
of Borrower or Operating Lessee has acted in concert with, colluded or conspired
with the party to cause the filing thereof or has consented to or acquiesced
thereto, (iii) if any Borrower or Operating Lessee shall institute any
proceeding for the dissolution or liquidation of any Borrower or Operating
Lessee, (iv) if any Borrower or Operating Lessee shall make an assignment for
the benefit of creditors, (v) if any Borrower or Operating Lessee shall breach
any representation, warranty or covenant in Section 4.1(C) (such that such
breach was considered by a court as a factor in the court’s finding for a
consolidation of the assets of a Borrower or Operating Lessee with the assets of
another person or entity or as a result thereof Lender suffers any material
damage, cost, liability or expense; provided, however, that in the absence of an
actual consolidation, recourse may be had against Borrower or Operating Lessee
only to the extent of losses for such breach), 4.1(V), 4.1(AA), 5.1(T) (such
that such breach was considered by a court as a factor in the court’s finding
for a consolidation of the assets of a Borrower or Operating Lessee with the
assets of another person or entity or as a result thereof Lender suffers any
material damage, cost, liability or expense; provided, however, that in the
absence of an actual consolidation, recourse may be had against Borrower or
Operating Lessee only to the extent of losses for such breach) or 5.1(X), (v) if
any Borrower or Operating Lessee allows any Transfer to occur in violation of
Section 6.1(B) hereof or otherwise fails to obtain Lender’s prior written
consent to any Transfer to the extent any consent is required in the Loan
Documents, (vi) any Borrower or Operating Lessee interferes with Lender’s
exercise of any of its rights or remedies hereunder or (vii) if any Borrower or
Operating Lessee breaches any representation or warranty contained in
Section 4.1(S).

Section 8.15. Exhibits Incorporated.

The information set forth on the cover, heading and recitals hereof, and the
Exhibits attached hereto, are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.

Section 8.16. Offsets, Counterclaims and Defenses.

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

Section 8.17. No Joint Venture or Partnership.

Each Borrower and Lender intend that the relationship created hereunder be
solely that of borrower and lender. Nothing herein is intended to create a joint
venture, partnership, tenants-in-common, or joint tenancy relationship between
any Borrower and Lender nor to grant Lender any interest in any Individual
Property other than that of mortgagee or lender.

 

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Section 8.18. Waiver of Marshalling of Assets Defense.

To the fullest extent that each Borrower may legally do so, each Borrower waives
all rights to a marshalling of the assets of each such Borrower, and others with
interests in such Borrower, and of any Individual Property, or to a sale in
inverse order of alienation in the event of foreclosure of the interests hereby
created, and agrees not to assert any right under any laws pertaining to the
marshalling of assets, the sale in inverse order of alienation, homestead
exemption, the administration of estates of decedents, or any other matters
whatsoever to defeat, reduce or affect the right of Lender under the Loan
Documents to a sale of any Individual Property for the collection of the
Indebtedness without any prior or different resort for collection, or the right
of Lender or Deed of Trust Trustee to the payment of the Indebtedness in
preference to every other claimant whatsoever.

Section 8.19. Waiver of Counterclaim.

Each Borrower hereby waives the right to assert a counterclaim, other than
compulsory counterclaim, in any action or proceeding brought against Borrower by
Lender or Lender’s agents.

Section 8.20. Conflict; Construction of Documents.

In the event of any conflict between the provisions of this Agreement and the
provisions of the Notes, any Mortgage or any of the other Loan Documents, the
provisions of this Agreement shall prevail. The parties hereto acknowledge that
they were represented by counsel in connection with the negotiation and drafting
of the Loan Documents and that the Loan Documents shall not be subject to the
principle of construing their meaning against the party which drafted same.

Section 8.21. Brokers and Financial Advisors.

Borrower and Lender hereby represent that they have dealt with no financial
advisors, brokers, underwriters, placement agents, agents or finders in
connection with the transactions contemplated by this Agreement. Each Borrower
hereby agrees to indemnify and hold Lender harmless from and against any and all
claims, liabilities, costs and expenses of any kind in any way relating to or
arising from a claim by any Person, that such Person acted on behalf of any
Borrower in connection with the transactions contemplated herein. The provisions
of this Section shall survive the expiration and termination of this Agreement
and the repayment of the Indebtedness.

Section 8.22. Counterparts.

This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.

 

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Section 8.23. Estoppel Certificates.

Each Borrower and Lender each hereby agree at any time and from time to time
upon not less than fifteen (15) days prior written notice by any Borrower or
Lender (but no more than four (4) times per year unless (i) an Event of Default
has occurred and is continuing or (ii) such request is occasioned in connection
with a Secondary Market Transaction) to execute, acknowledge and deliver to the
party specified in such notice, a statement, in writing, certifying that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the knowledge
of such certifying party, any Default or Event of Default has occurred, and, if
so, specifying each such Default or Event of Default; provided, however, that it
shall be a condition precedent to Lender’s obligation to deliver the statement
pursuant to this Section, that Lender shall have received, together with
Borrower’s request for such statement, an Officer’s Certificate stating that no
Default or Event of Default exists as of the date of such certificate (or
specifying such Default or Event of Default).

Section 8.24. Payment of Expenses.

Borrowers shall, whether or not the Transactions are consummated, pay all
Transaction Costs, which shall include, without limitation, reasonable
out-of-pocket fees, costs, expenses, and disbursements of Lender and its
attorneys, local counsel, accountants and other contractors in connection with
(i) the negotiation, preparation, execution and delivery of the Loan Documents
and the documents and instruments referred to therein, (ii) the creation,
perfection or protection of Lender’s Liens in the Collateral (including, without
limitation, fees and expenses for title and lien searches and filing and
recording fees, intangibles taxes, personal property taxes, mortgage recording
taxes, due diligence expenses, travel expenses, and accounting firm fees, costs
of the Appraisals, Environmental Reports (and an environmental consultant),
Surveys and the Engineering Reports), (iii) the negotiation, preparation,
execution and delivery of any amendment, waiver or consent relating to any of
the Loan Documents, and (iv) the preservation of rights under and enforcement of
the Loan Documents and the documents and instruments referred to therein,
including any restructuring or rescheduling of the Indebtedness, to the extent
expressly required hereunder.

Section 8.25. Bankruptcy Waiver.

Each Borrower hereby agrees that, in consideration of the recitals and mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, if any Borrower
(i) files with any bankruptcy court of competent jurisdiction or be the subject
of any petition under Title 11 of the U.S. Code, as amended, (ii) is the subject
of any order for relief issued under Title 11 of the U.S. Code, as amended,
(iii) files or is the subject of any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or law relating to bankruptcy, insolvency or other
relief of debtors, (iv) has sought or consents to or acquiesces in the
appointment of any trustee, receiver, conservator or liquidator or (v) is the
subject of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future federal or state

 

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act or law relating to bankruptcy, insolvency or other relief for debtors, the
automatic stay provided by the Federal Bankruptcy Code shall be modified and
annulled as to Lender, so as to permit Lender to exercise any and all of its
rights and remedies, upon request of Lender made on notice to any Borrower and
any other party in interest but without the need of further proof or hearing.
Neither Borrower nor any Affiliate of any Borrower shall contest the
enforceability of this Section.

Section 8.26. Entire Agreement.

This Agreement, together with the Exhibits hereto and the other Loan Documents
constitutes the entire agreement among the parties hereto with respect to the
subject matter contained in this Agreement, the Exhibits hereto and the other
Loan Documents and supersedes all prior agreements, understandings and
negotiations between the parties.

Section 8.27. Dissemination of Information.

If Lender determines at any time to participate in a Secondary Market
Transaction, Lender may forward to each purchaser, transferee, assignee,
servicer, participant or investor in such securities (collectively, the
“Investor”), any Rating Agency rating such securities, any organization
maintaining databases on the underwriting and performance of commercial loans,
trustee, counsel, accountant, and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Loan,
any Borrower, any direct or indirect equity owner of any Borrower, any
guarantor, any indemnitor and each Individual Property, which shall have been
furnished by such Borrower any Affiliate of any Borrower, any guarantor, any
indemnitor, or any party to any Loan Document, or otherwise furnished in
connection with the Loan, as Lender in its discretion determines necessary or
desirable.

Section 8.28. Limitation of Interest.

It is the intention of each Borrower and Lender to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law, then, in that event, notwithstanding
anything to the contrary in any Loan Document, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under any Loan
Document or otherwise in connection with the Loan shall under no circumstances
exceed the maximum amount of interest allowed by applicable law, and any excess
shall be credited to principal by Lender (or if the Loan shall have been paid in
full, refunded to any Borrower); and (ii) in the event that maturity of the Loan
is accelerated by reason of an election by Lender resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest may never include more than
the maximum amount of interest allowed by applicable law, and any interest in
excess of the maximum amount of interest allowed by applicable law, if any,
provided for in the Loan Documents or otherwise shall be cancelled automatically
as of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited to principal (or if the principal portion of the Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to any Borrower.)

 

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In determining whether or not the interest paid or payable under any specific
contingency exceeds the maximum amount allowed by applicable law, Lender shall,
to the maximum extent permitted under applicable law (a) exclude voluntary
prepayments and the effects thereof, and (b) amortize, prorate, allocate and
spread, in equal parts, the total amount of interest throughout the entire
contemplated term of the Loan so that the interest rate is uniform throughout
the entire term of the Loan; provided, that if the Loan is paid and performed in
full prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence thereof exceeds the maximum amount
allowed by applicable law, Lender shall refund to any Borrower the amount of
such excess, and in such event, Lender shall not be subject to any penalties
provided by any laws for contracting for, charging or receiving interest in
excess of the maximum amount allowed by applicable law.

Section 8.29. Indemnification.

Borrowers shall indemnify and hold Lender and each other Indemnified Party
harmless against any and all losses, claims, damages, costs, expenses (including
the fees and disbursements of outside counsel retained by any such person) or
liabilities in connection with, arising out of or as a result of the
transactions and matters referred to or contemplated by this Agreement, except
to the extent that it is finally judicially determined that any such loss,
claim, damage, cost, expense or liability resulted directly and solely from the
gross negligence, fraud or willful misconduct of such Indemnified Party. If any
Indemnified Party becomes involved in any action, proceeding or investigation in
connection with any transaction or matter referred to or contemplated in this
Agreement, Borrowers shall periodically reimburse any Indemnified Party upon
demand herefore in an amount equal to its reasonable legal and other expenses
(including the costs of any investigation and preparation) incurred in
connection therewith to the extent such legal or other expenses are the subject
of indemnification hereunder. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY EACH
BORROWER THAT THE INDEMNITY (AND/OR THE RELEASE) CONTAINED IN THIS SECTION 8.29
PROTECTS LENDER FROM THE CONSEQUENCES OF LENDER’S ACTS OR OMISSIONS, INCLUDING
WITHOUT LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE EXTENT
PERMITTED BY LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE
DEEMED TO RELIEVE THE LENDER FROM LIABILITY DUE TO ITS FRAUD, WILLFUL MISCONDUCT
OR GROSS NEGLIGENCE.

Section 8.30. Borrower Acknowledgments.

Each Borrower hereby acknowledges to and agrees with Lender that (i) the scope
of Lender’s business is wide and includes, but is not limited to, financing,
real estate financing, investment in real estate and other real estate
transactions which may be viewed as adverse to or competitive with the business
of such Borrower or its Affiliates and (ii) such Borrower has been represented
by competent legal counsel and such Borrower has consulted with such counsel
prior to executing this Loan Agreement and of the other Loan Documents.

 

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Section 8.31. Publicity.

Lender shall have the right to issue press releases, advertisements and other
promotional materials describing Lender’s participation in the origination of
the Loan or the Loan’s inclusion in any Secondary Market Transaction effectuated
or to be effectuated by Lender. All news releases, publicity or advertising by
any Borrower or their affiliates through any media intended to reach the general
public which refers to the Loan Documents or the financing evidenced by the Loan
Documents, to the Lender, Merrill Lynch Mortgage Lending, Inc., or any of their
respective affiliates shall be subject to the prior written approval of Lender
and Merrill Lynch Mortgage Lending, Inc., except for disclosures required by law
which shall not require Lender approval but which shall require prior written
notice to Lender.

Section 8.32. Intentionally omitted.

Section 8.33. Cross-Collateralization. Notwithstanding anything herein or in any
of the other Loan Documents to the contrary, (a) the Loan and the Indebtedness
shall be secured by each Individual Property, and (b) the Loan and the
Indebtedness shall be cross-collateralized and cross-defaulted with each of the
other “Loans” referenced in the Cooperation Agreement and the indebtedness
relating thereto, each as described in and in accordance with the terms of the
Cooperation Agreement.

Section 8.34. Time of the Essence. Each Borrower and Lender agrees that time is
of the essence with regard to all obligations under this Agreement and the other
Loan Documents.

Section 8.35. FINAL AGREEMENT. THE WRITTEN LOAN DOCUMENTS TO WHICH THIS NOTICE
RELATES REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 8.36. [Intentionally omitted]

Section 8.37. Joint and Several Liability. Each of the Borrowers shall be
jointly and severally liable for payment of the Indebtedness and performance of
all other obligations of Borrowers (or any of them) under this Agreement and any
other Loan Documents.

Section 8.38. Loan Modification. Borrowers and Lender acknowledge and agree that
the Loan and the security therefore are subject to modification pursuant to and
in accordance with the terms of the Cooperation Agreement.

Section 8.39. Consent Fees. In the event that Borrower intends to effectuate a
transaction not permitted under this Agreement or under any of the other Loan
Documents, in connection with obtaining the consent of Lender or, if a Secondary
Market Transaction has occurred, any loan servicer, Borrower shall be required
to pay to Lender or any such loan servicer a maximum fee of $10,000 plus any
reasonable out-of-pocket costs and expenses of Lender or such loan servicer, as
the case may be.

 

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Section 8.40. Insurance, Casualty and Condemnation Provisions. Notwithstanding
anything herein or in any of the other Loan Documents to the contrary, with
respect to each Marriott Property, so long as (a) Marriott is Manager of such
Marriott Property, (b) Borrower participates in Manager’s insurance programs as
set forth in the Management Agreement, (c) no default has occurred and is
continuing under any Management Agreement beyond the expiration of any
applicable notice and cure periods, and (d) Manager is making all required
insurance payments as and when due pursuant to each Management Agreement,
Borrower shall not be required to make escrow payments relating to insurance
matters to the Basic Carrying Costs Sub-Account hereunder. With respect to each
Marriott Property, so long as (x) Marriott is Manager of such Marriott Property,
(y) Borrower participates in Manager’s insurance programs as set forth in the
Management Agreement, (z) no default has occurred and is continuing under any
Management Agreement beyond the expiration of any applicable notice and cure
periods, Borrower shall strictly enforce the insurance, casualty and
condemnation requirements and obligations set forth in the Manager’s
Subordination, and shall provide to Lender acceptable evidence that such
insurance is, at all times, in full force and effect as regards to such Marriott
Property. Notwithstanding anything herein or in any of the other Loan Documents
to the contrary, with respect to each Marriott Property, unless and until
Marriott is no longer Manager of such Marriott Property pursuant to the terms
and provisions of the applicable Management Agreement, Lender acknowledges and
agrees that the insurance, casualty and condemnation requirements set forth in
the applicable Manager’s Subordination shall govern and control over any
inconsistent provisions set forth in the provisions of this Agreement or any of
the other Loan Documents. If at any time Marriott is no longer Manager of any
Marriott Property pursuant to the terms and provisions of the applicable
Management Agreement, Borrower shall comply with all of the insurance, casualty
and condemnation requirements and obligations set forth in this Agreement and in
the other Loan Documents with respect to such Individual Property.

Section 8.41. Assumption by New Borrowers; Release of Original Borrowers. Each
Borrower that was not a party to the Original Loan Agreement hereby assumes all
of the rights, duties, obligations and liabilities of a “Borrower” with respect
to the Loan and the Loan Documents, and agrees to be bound by all such Loan
Documents. Each Original Borrower that is not a “Borrower” hereunder is hereby
released from any duties, obligations or liabilities with respect to the Loan
accruing from and after the date hereof.

Section 8.42. Origination of Loan; Payments Made. The Original Loan was made by
Lender on June 17, 2005. The Loan represents a restructuring of the Original
Loan, and this Agreement reflects the terms and conditions of the Loan as
restructured. Prior to this Agreement, monthly payments of interest only on the
Original Loan that were due and payable on the Payment Dates (as defined in the
Original Loan Agreement) in August, September and October, 2005, pursuant to the
terms of the Original Loan Agreement and the promissory note relating thereto,
were paid in full.

[Signatures on the following pages]

 

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

 

LENDER:

 

        MERRILL LYNCH MORTGAGE

        LENDING, INC. a Delaware corporation

        By:   /S/ MICHAEL BRODY  

Name: Michael Brody

Title:

[signatures continued on following page]

 

S-1

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ORIGINAL BORROWER: /S/ DAVID A. BROOKS

David A. Brooks

Chief Legal Officer

 

BORROWER: /S/ DAVID A. BROOKS

David A. Brooks

Chief Legal Officer

 

OPERATING LESSEE:

 

Acknowledged and agreed to with respect to its obligations set forth in Articles
4, 5 and 6 hereof and Section 2.13(g):

/S/ DAVID J. KIMICHIK

 

David J. Kimichik

 

Chief Financial Officer

 

S-2

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EXHIBIT A

Additional Definitions

 

Initial Deferred Maintenance Amount

   $ 25,000   

Initial Basic Carrying Cost Amount

   $ 442,755   

Initial Upfront Remediation Amount

   $ 618.75   

 

A-1

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EXHIBIT B

Deferred Maintenance

 

Individual Property

  

Deferred Maintenance

Residence Inn Fairfax, Falls Church, VA

   Repair asphalt pavement; Paint wood trim.

Residence Inn Sorrento Mesa, San Diego, CA

   Replace carpet, replace soft goods.

Courtyard Irvine Spectrum, Foothill Ranch, CA

   None

Embassy Suites Houston, Houston, TX

   None

Courtyard Alpharetta, Alpharetta, GA

   Replace roof flashing.

 

B-1

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EXHIBIT C

Individual Properties and Allocated Loan Amounts

 

Individual Property

   Deferred Maintenance  

Residence Inn Fairfax, Falls Church, VA

   $ 23,850,000   

Residence Inn Sorrento Mesa, San Diego, CA

   $ 21,375,000   

Courtyard Irvine Spectrum, Foothill Ranch, CA

   $ 14,000,000   

Embassy Suites Houston, Houston, TX

   $ 13,050,000   

Courtyard Alpharetta, Alpharetta, GA

   $ 10,800,000   

 

C-1

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EXHIBIT D

Franchisors and Managers

 

Individual Property

  

Franchisor

   Manager

Residence Inn Fairfax, Falls Church, VA

   N/A    Residence Inn by Marriott, Inc.
Residence Inn Sorrento Mesa, San Diego, CA    N/A    Residence Inn by Marriott,
Inc. Courtyard Irvine Spectrum, Foothill Ranch, CA    N/A   
Courtyard Management Corporation Embassy Suites Houston, Houston, TX    Promus
Hotels, Inc.    Remington Lodging & Hospitality LP Courtyard Alpharetta,
Alpharetta, GA    N/A    Courtyard Management Corporation

 

D-1

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EXHIBIT E

Operating Budget for Closing Date through 12/31/2005

Attached following this page.

 

E-1

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EXHIBIT F

FF&E FINANCING

Residence Inn Sorrento Mesa, San Diego, CA

Alamo Leasing Co. (Vehicle lease)

Residence Inn Fairfax, Falls Church, VA

 

1. Alamo Leasing Co. (Vehicle)

 

2. Cooler Smart (Coolers)

 

3. Xerox (Office equipment)

Courtyard Irvine Spectrum, Foothill Ranch, CA

 

1. Alamo Leasing Co. (2004 Ford E150 Wagon)

 

2. Cit Group (Office equipment)

 

3. Xerox (Office equipment)

Courtyard Alpharetta, Alpharetta, GA

 

1. Imagistics (Copier equipment)

 

2. Marriott (Telecom equipment and PBX switch)

 

3. Shared Technologies (Nortel networks equipment)

 

4. Williams Communication (Equipment lease)

 

F-1

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EXHIBIT G

Organizational Chart

Attached following this page.

 

G-1

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EXHIBIT H

Property Improvement Plans

Attached following this page.

 

H-1

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EXHIBIT I

Required Expenditure Amounts for Individual Properties

 

Individual Property

   Required Expenditure Amount  

Residence Inn Fairfax, Falls Church, VA

   $ 918,500   

Residence Inn Sorrento Mesa, San Diego, CA

   $ 1,225,000   

Courtyard Irvine Spectrum, Foothill Ranch, CA

   $ 0   

Embassy Suites Houston, Houston, TX

   $ 726,310   

Courtyard Alpharetta, Alpharetta, GA

   $ 853,500   

 

I-1

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EXHIBIT J

Capital Improvements and PIP Schedule

 

Individual Property

   Required PIP Work and  Capital
Improvements Costs     

Required PIP Work and

Capital Improvements

   Required
Completion Date   Residence Inn Fairfax, Falls Church, VA    $ 918,500      
Replace carpet and wall vinyl; update upholstery where needed; ensure compliance
with brand standards.      12/31/2006    Residence Inn Sorrento Mesa, San Diego,
CA    $ 1,225,000       Replace carpet and wall vinyl; update upholstery where
needed; ensure compliance with brand standards.      12/31/2006    Courtyard
Irvine Spectrum, Foothill Ranch, CA    $ 0       N/A      N/A    Embassy Suites
Houston, Houston, TX    $ 726,310       Replace all doorknobs with lever
handles; Replace all worn carpet, upholstery, tiles, paint, and wall covering;
Add guest laundry facility to meet current brand standards; Provide business
center solution for guests; Refresh meeting areas; Refresh corridors and
elevators; Purchase digital thermostats and beds to meet brand standard;
Purchase new guestroom bathroom hardware.      4/12/2006    Courtyard
Alpharetta, Alpharetta, GA    $ 853,500       Replace carpet and wall vinyl;
update upholstery where needed; ensure compliance with brand standards.     
12/31/2006   

 

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EXHIBIT K

Upfront Remediation

 

Individual Property

  

Upfront Remediation

   Required Completion Date Residence Inn Fairfax, Falls Church, VA    None   
N/A Residence Inn Sorrento Mesa, San Diego, CA    None    N/A Residence Inn
Sorrento Mesa, San Diego, CA    None    N/A Embassy Suites Houston, Houston, TX
   Develop and implement Asbestos O&M Program.    12/14/2005 Courtyard
Alpharetta, Alpharetta, GA    None    N/A

 

K-1

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SCHEDULE 1

Litigation

Embassy Suites, Houston, TX

Toy, Christopher v. Hilton Hotels Corporation and New Houston Hotel LP d/b/a
Houston Embassy Suites, 11th Judicial District Court, Harris County, Texas;
Cause No. 2003-57333 (Plaintiff alleges breach of contract for cancellation of
rooms Plaintiff’s company reserved through the internet for Super Bowl weekend.)

 

1-1

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SCHEDULE 2

Franchise Defaults

None.

 

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SCHEDULE 3

Amortization Schedule

Attached following this page.

 

2-1