Exhibit 10.2

 

JUNIOR LOAN AGREEMENT

 

by and between

 

 

REST EASY LLC,

 

a Delaware limited liability company,

 

as Borrower,

 

 

and

 

 

BEHRINGER HARVARD PAL I, LLC,

 

a Delaware limited liability company,

 

as Lender,

 

 

with respect to a

 

$25,000,000 term Loan facility

 

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TABLE OF CONTENTS

 

Article I

General Information

1

Section 1.1

Conditions to Closing; Fees

1

Section 1.2

Schedules

2

Section 1.3

Defined Terms

2

Section 1.4

Lock Box Agreement

2

Article II

Advances of the Junior Loan

3

Section 2.1

Junior Loan Advances, Requisitions and Drawings

3

Section 2.2

Direct Costs Verification

5

Section 2.3

Office for Advances

6

Section 2.4

Advances After Construction; Monthly Advances

6

Section 2.5

Notice of Lender’s Rights to Make Advances

6

Section 2.6

Evidence of and Security for Junior Loan

6

Section 2.7

Junior Loan Reallocation

7

Section 2.8

Construction Agreements

7

Section 2.9

Advances for Costs of Improvements

7

Section 2.10

Additional Terms Regarding Advances

7

Section 2.11

Liability of Lender

7

Section 2.12

Payments to Lender

7

Section 2.13

Verified Statement

8

Article III

Representations and Warranties

8

Section 3.1

Organization, Power and Authority of Borrower and Managing Member; Junior Loan
Documents

8

Section 3.2

Other Documents; Laws

9

Section 3.3

Taxes

9

Section 3.4

Legal Actions

9

Section 3.5

Nature of Junior Loan

10

Section 3.6

[Reserved]

10

Section 3.7

Financial Statements

10

Section 3.8

ERISA and Prohibited Transactions

10

Section 3.9

Compliance with Zoning and Other Requirements

10

Section 3.10

Plans and Specifications

10

 

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Section 3.11

Building Permits; Other Permits

11

Section 3.12

Utilities

11

Section 3.13

Access; Roads

11

Section 3.14

Other Liens

12

Section 3.15

No Material Adverse Change

12

Section 3.16

Defaults

12

Section 3.17

Affirmation of Representations and Warranties

12

Section 3.18

Governmental Authorities

12

Section 3.19

Prior Work

13

Section 3.20

Hazardous Materials; Related Claims

13

Section 3.21

Not an Investment Company

13

Section 3.22

Patriot Act

13

Section 3.23

Compliance with Laws and Project Documents

14

Article IV

Affirmative Covenants and Agreements

14

Section 4.1

Commencement and Completion of Construction

14

Section 4.2

Approval of Construction

14

Section 4.3

Deposits

15

Section 4.4

Compliance with Laws; Encroachments

15

Section 4.5

Inspections; Cooperation

16

Section 4.6

Contracts, Vouchers and Receipts

16

Section 4.7

Payment and Performance of Contractual Obligations

16

Section 4.8

Correction of Construction Defects

17

Section 4.9

Insurance

17

Section 4.10

Adjustment of Condemnation and Insurance Claims

19

Section 4.11

Utilization of Net Award

20

Section 4.12

Management

20

Section 4.13

Books and Records; Financial Statements; Tax Returns

21

Section 4.14

Estoppel Certificates

22

Section 4.15

Taxes

22

Section 4.16

Lender’s Rights to Pay and Perform

23

Section 4.17

Reimbursement; Interest

23

Section 4.18

Notification by Borrower

23

Section 4.19

Indemnification by Borrower

24

 

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Section 4.20

Fees and Expenses

24

Section 4.21

Appraisals

25

Section 4.22

Yearly Budget Approvals

25

Section 4.23

[Reserved]

25

Section 4.24

Permanent Loan/Capital Markets Transaction

25

Section 4.25

[Reserved]

26

Section 4.26

[Reserved]

26

Section 4.27

[Reserved]

26

Section 4.28

Organizational Documents

26

Section 4.29

Subordination

26

Section 4.30

Patriot Act

26

Section 4.31

Single Purpose Covenants

26

Section 4.32

Preservation of Rights

27

Section 4.33

Income from Project; Rents

27

Section 4.34

Notice to Lender

27

Section 4.35

Site Assessments and Information

28

Section 4.36

Response to Releases, Non-Compliance and Environmental Claims

28

Section 4.37

Delivery and Maintenance of Payment and Performance Bond

29

Section 4.38

Intercreditor Agreement

29

Article V

Negative Covenants

29

Section 5.1

Conditional Sales

29

Section 5.2

Changes to Plans and Specifications

29

Section 5.3

Insurance Policies and Bonds

29

Section 5.4

Commingling

29

Section 5.5

Additional Debt

29

Section 5.6

Compliance with Environmental Requirements

30

Section 5.7

Lease

30

Section 5.8

Swap Contracts

30

Section 5.9

Construction

30

Section 5.10

Project Document Modifications

31

Article VI

Events of Default

31

Section 6.1

Payment Default

31

 

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Section 6.2

Default Under Other Junior Loan Documents and Project Documents

31

Section 6.3

Accuracy of Information; Representations and Warranties

31

Section 6.4

Deposits

31

Section 6.5

Insurance Obligations

32

Section 6.6

Other Obligations

32

Section 6.7

Progress of Construction

32

Section 6.8

Damage to Improvements

32

Section 6.9

Lapse of Permits or Approvals

32

Section 6.10

Completion of Construction

32

Section 6.11

Mechanic’s Lien

33

Section 6.12

Survey Matters

33

Section 6.13

Design/Build Contractor Default

33

Section 6.14

Senior and Subordinate Loan Default

33

Section 6.15

Bankruptcy

33

Section 6.16

Appointment of Receiver, Trustee, Liquidator

33

Section 6.17

Inability to Pay Debts; Judgment

34

Section 6.18

Dissolution; Change in Business Status

34

Section 6.19

Default Under Other Indebtedness

34

Section 6.20

Liens

34

Section 6.21

Change in Controlling Interest

34

Section 6.22

Material Adverse Change

34

Section 6.23

Termination of Lease or other Project Documents

34

Section 6.24

Default Under Guaranty

35

Article VII

Remedies on Default

35

Section 7.1

Remedies on Default

35

Section 7.2

No Release or Waiver; Remedies Cumulative and Concurrent

37

Article VIII

Miscellaneous

37

Section 8.1

Further Assurances; Authorization to File Documents

37

Section 8.2

No Warranty by Lender

38

Section 8.3

Standard of Conduct of Lender

38

Section 8.4

No Partnership

38

Section 8.5

Severability

38

 

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Section 8.6

Notices

39

Section 8.7

Permitted Successors and Assigns; Disclosure of Information

40

Section 8.8

Amendment; Modification; Waiver

41

Section 8.9

Third Parties; Benefit

41

Section 8.10

Rules of Construction

41

Section 8.11

Counterparts

42

Section 8.12

Signs; Publicity

42

Section 8.13

Governing Law

42

Section 8.14

Time of Essence

43

Section 8.15

Electronic Transmission of Data

43

Section 8.16

Dispute Resolution

43

Section 8.17

Nature of Obligations

45

Section 8.18

Waiver of Jury Trial

46

Section 8.19

Additional Waivers

46

Section 8.20

Limitation on Liability

47

Section 8.21

Entire Agreement

47

Section 8.22

Lost Junior Note

47

Section 8.23

Method of Payment

48

Section 8.24

Pledge to the Federal Reserve

48

Section 8.25

Right of Setoff

48

Section 8.26

Usury

48

Section 8.27

Application of Payments

48

Section 8.28

Payment Date Adjustment for Non-Business Days

49

Section 8.29

Payment of Fees and Expenses

49

Section 8.30

[Reserved]

49

Section 8.31

Capital Adequacy

49

Section 8.32

Right to Sell Junior Loan to Participant

50

Section 8.33

Junior Loan Assignment

50

Section 8.34

[Reserved]

51

Section 8.35

Integration

51

Section 8.36

Use of Proceeds

51

Section 8.37

[Reserved]

51

Section 8.38

[Reserved]

51

 

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Section 8.39

[Reserved]

51

Section 8.40

Administrative Agent

51

Section 8.41

Appraisal

53

Section 8.42

USA Patriot Act Notice

54

Section 8.43

[Reserved]

54

Section 8.44

Confidentiality

54

Section 8.45

Termination

55

Section 8.46

Documents, etc. to be Satisfactory

55

Section 8.47

Factual Matters

56

Section 8.48

Modification of Junior Loan in Accordance With Lease

56

Section 8.49

Not Government Obligations

56

Section 8.50

Refinancing of Senior Loan

56

Section 8.51

Guarantor Controlled Person

57

Section 8.52

New York Contacts

57

Section 8.53

Payment at Maturity

57

Section 8.54

Payment in Full of Senior Loan/Purchase of Senior Loan

57

Section 8.55

Refinance of Subordinate Loan

58

 

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SCHEDULES TO JUNIOR LOAN AGREEMENT

 

Schedule 1

Definitions

 

Schedule 2

Form of Draw Request

 

Schedule 3

Component Budgets

 

Schedule 4

Project Schedule

 

Schedule 5

Additional Terms Regarding Advances

 

Schedule 6

Form of Guaranty and Indemnity

 

Schedule 7

Lien Waivers

 

Schedule 8

[Reserved]

 

Schedule 9

[Reserved]

 

Schedule 10

[Reserved]

 

Schedule 11

Lien Waiver

 

Schedule 12

Construction Development Budget

 

Schedule 13

Litigation

 

Schedule 14

Support Leases and Licenses

 

 

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Junior Loan Agreement

 

This Junior Loan Agreement (as the same may be amended or supplemented from time
to time, this “Agreement”) is made as of the 14th day of August, 2009, by and
between Rest Easy LLC, a Delaware limited liability company (together with its
successors and assigns, the “Borrower”), and Behringer Harvard PAL I, LLC, a
Delaware limited liability company (together with its successors and assigns,
the “Lender” or “Junior Lender”).

 

Recitals

 

Borrower has applied to Lender for a Loan (the “Junior Loan”) to finance certain
costs related to the construction, revitalization, renovation and development of
improvements on real property located or to be located at various United States
Army (the “Army”) installations, specifically, Fort Hood, Texas, Fort
Leavenworth, Kansas, Fort Myer, Virginia, Fort Polk, Louisiana, Fort Riley,
Kansas, Fort Rucker, Alabama, Fort Sam Houston, Texas, Tripler Army Medical
Center and Fort Shafter, Hawaii, Fort Sill, Oklahoma, and Yuma Proving Ground,
Arizona, through the Privatization of Army Lodging (“PAL”) pursuant to Title 10,
United States Code, Section 2871 et. seq. In connection with the implementation
of the PAL, the Army has agreed, among other things, to transfer the use of a
portion of the installations’ lands under a long-term ground lease and several
shorter term support leases and licenses and to convey the existing lodging and
certain other improvements on the respective installations to the Borrower. The
rentals, profits and income from such improvements will serve, together with the
Mortgages and other Collateral, as security for the Junior Loan. Lender has
agreed to make the Junior Loan on the terms and conditions set forth in this
Agreement and in the other documents evidencing and securing the Junior Loan.

 

Now, therefore, in consideration of the premises, and in further consideration
of the mutual covenants and agreements herein set forth, the receipt and
sufficiency of which are hereby acknowledged, the parties covenant and agree as
follows:

 

Agreements

 

Article I

General Information

 

Section 1.1             Conditions to Closing; Fees.

 

(a)           The conditions precedent to closing the Junior Loan and recording
the Mortgages set forth in the Letter of Intent are satisfied, subject to
Borrower’s payment of the commitment fee as provided in Section 1.1(c) below and
the delivery of the Guaranty as provided in Section 1.1(f) below.

 

(b)           On or prior to the Closing, Borrower shall (i) pay to Lender an
initial commitment fee for Lender’s commitment to fund the Junior Loan equal to
$500,000, payable in immediately available funds, and (ii) pay, or provide funds
for payment of, all reasonable costs and expenses incurred in connection with
the Junior Loan, including, but

 

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not limited to, Lender’s reasonable documentation fees, attorneys’ fees
(exclusive of Lender’s in-house attorneys’ fees), travel expenses and all
expenses directly associated with due diligence, including all expenses
described in the Letter of Intent. Borrower shall separately be responsible for
payment of all attorneys’ fees (other than Lender’s in-house counsel), including
all local counsel fees and expenses.

 

(c)           On or prior to the Closing, Lender shall have received:
(i) executed copies of this Agreement, the Junior Note, the Mortgages, the
Environmental Agreement, the Design/Build Agreement, and the financing
statements, (ii) insurance policies or certificates of insurers evidencing the
insurance required by the Mortgages, (iii) paid title insurance policies in ALTA
1990 form or such other form acceptable to Lender, in the amount of the Junior
Note, insuring the Mortgages to be valid liens on the Property free and clear of
all defects and encumbrances not previously approved by Lender or its counsel,
which shall contain no survey exceptions other than those previously approved by
Lender, full coverage against mechanics’ and materialmen’s liens, subject to
availability under applicable law or commercial title insurance practices, an
undertaking by the issuer thereof to provide the notice of title continuation or
endorsement above and a pending disbursements clause (or such other comparable
clause or affirmative insurance or endorsement to title policy as is available
in such jurisdiction), (iv) opinions of counsel for Borrower in form and
substance reasonably satisfactory to Lender, and (v) such other documents,
instruments or assurances as Lender or its counsel may reasonably request.

 

(d)           No fees payable hereunder, including in this Section 1.1, shall be
deemed to be paid with respect to the acquisition of any interest in real
property located in the State of Hawaii.

 

(e)           As a condition precedent to Lender’s obligation to fund any
portion of the Loan, Borrower must cause Guarantor to execute and deliver the
Guaranty at Closing.

 

Section 1.2             Schedules.

 

The Schedules attached to this Agreement are incorporated herein and made a part
hereof.

 

Section 1.3             Defined Terms.

 

Capitalized terms in this Agreement shall have the meanings ascribed to such
terms in the Preamble hereto and in Schedule 1.

 

Section 1.4             Lock Box Agreement.

 

At or prior to Closing, Borrower will enter into the Lock Box Agreement and will
establish, or will cause to be established, the Lock Box Account and each of the
other accounts and subaccounts contemplated by the Lock Box Agreement. All
Project revenues will be applied, held and disbursed in the order of priority,
and in accordance with the terms and conditions of the Lock Box Agreement.
Except as otherwise provided in the Lock Box Agreement, Borrower will cause all
Project revenues to be deposited into one of the Collection Accounts in
accordance with the Lock Box Agreement. Funds deposited into the Collection
Accounts shall be swept into the Revenue Subaccount in accordance with the Lock
Box Agreement.

 

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Article II

Advances of the Junior Loan

 

Section 2.1             Junior Loan Advances, Requisitions and Drawings.

 

(a)           Borrower agrees to borrow the Junior Loan from Lender, and Lender
agrees to lend the Junior Loan to Borrower, subject to the terms and conditions
herein set forth, in incremental advances which will not exceed, in the
aggregate, the Junior Loan Amount. Interest shall accrue and be payable in
arrears only on sums advanced hereunder for the period of time outstanding. The
Junior Loan is not a revolving loan; amounts repaid may not be re-borrowed.

 

(b)           Subject to the provisions of this Agreement, Lender will advance
and Borrower will accept the Junior Loan installments as follows:

 

The Initial Advance will be made upon the satisfaction of the applicable
conditions and upon payment of the then-due fees set forth in Section 1.1 and
this Article II hereof, and all subsequent Advances shall be made periodically
thereafter, upon the satisfaction of the applicable conditions set forth herein,
in amounts which shall be equal to the aggregate of the unpaid and unreimbursed
Direct Costs and Indirect Costs specified in the Draw Request, less any costs
covered by the Draw Request not approved, certified or verified as provided in
Section 2.2 hereof, any Indirect Costs covered by a previous Draw Request for
which any requested proof of payment or payment receipts have not been received
by Lender, and/or any Direct Costs covered by a previous Draw Request for which
any requested proof of payment or payment receipts or Lien Waivers have not been
received by Lender and the Construction Consultant.

 

(c)           Subsequent to the Initial Advance, Advances shall be made not more
frequently than monthly based on Draw Requests signed by an Authorized Signer in
the form attached hereto as Schedule 2 or in another form reasonably approved by
Lender, each of which Draw Request shall include the applicable Payment
Certificate issued by the Construction Consultant. Unless otherwise agreed to
between Borrower and Lender, in accordance with the Lock Box Agreement, all
Advances shall be deposited into the Loan Proceeds Sub-subaccount of the
Construction Escrow Reserve Subaccount (as defined in the Lock Box Agreement)
for application by the Cash Management Agent in accordance with the terms of the
Lock Box Agreement. Each Draw Request for Direct Costs shall be set forth on AIA
Forms G702 and G703 or another form reasonably approved by Lender, and shall be
approved by the Construction Consultant and signed by the Design/Build
Contractor. Draw Requests for Direct Costs shall show the percentage of
completion of construction and shall set forth on a Component basis and in such
detail as may be reasonably required by Construction Consultant or Lender the
amounts expended and/or costs incurred for work done and materials incorporated
in the Improvements. Each Draw Request shall be supported by such information
and documentation (such as paid receipts, invoices, statements of accounts, lien
releases, etc.) as Lender may reasonably require to assure that amounts
requested are to be used to reimburse Borrower for costs previously paid by
Borrower or to pay costs incurred by Borrower that are to be paid from proceeds
of the Junior Loan, as set forth in the Lock

 

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Box Agreement, the Design/Build Agreement and the applicable Component Budgets.
If so required by the Lender, a request for an Advance shall also be accompanied
by (i) a certificate of Borrower, signed by an officer of Borrower, to the
effect that Borrower has paid or actually incurred costs in the amount of the
requested Advance, that such costs have not been made the basis for any other
request for an advance of Junior Loan proceeds under this Agreement or any other
agreement between Borrower and Lender, that all representations and warranties
of Borrower herein are true as of the time of such request, and that no material
adverse change in Borrower’s financial condition has occurred since the
immediately preceding Advance and (ii) a notice of title continuation or an
endorsement to the title policy (or such other comparable clause or affirmative
insurance or endorsement to title policy as is available in such jurisdiction)
indicating that, since the date of the last preceding Advance, there has been no
change in the state of title not approved by Lender and no survey exception not
theretofore approved by Lender, which endorsement shall have the effect of
increasing the coverage of the policy by the amount of the Advance then being
made. Borrower shall only be entitled to payment in the amount and for such
items as are approved in respect of each Draw Request.

 

(d)           The Junior Loan shall be advanced from time to time as provided
herein for the payment of costs described in Section 4.3 and Article V of the
Lock Box Agreement. Lender shall not be obligated to make any advance unless all
conditions to the making of an Advance under this Agreement have been and
continue to be satisfied unless waived in writing by Lender.

 

(e)           No subsequent Advances of the Junior Loan shall be advanced until
the satisfaction of the following conditions:

 

(i)            There shall be (1) no default by Borrower beyond applicable
periods of notice and grace under this Agreement, the Junior Note, the
Mortgages, or any other Junior Loan Document, (2) no Default (as defined in the
PAL Lease) under the PAL Lease that Lender determines cannot be cured before the
end of any applicable notice and cure period, (3) no Termination Default (as
defined in the PAL Lease) under the PAL Lease, (4) no default that Lender
determines cannot be cured before the end of any applicable notice and cure
period under any Project Document (other than the PAL Lease), and (5) no “Event
of Default” (as defined therein) under any Senior Loan Document or under any
Subordinate Loan Document, unless in each instance waived in writing by Lender;
and

 

(ii)           Lender shall have received: (a) executed copies of this
Agreement, the Junior Note, the Mortgages and the Environmental Agreement, which
must be satisfactory to Lender in all respects, and the financing statements,
(b) insurance policies or certificates of insurers evidencing the insurance
required by the Mortgages, (c) paid title insurance policies in ALTA 1990 form
or such other form acceptable to Lender, in the amount of the Junior Note,
insuring the Mortgages to be valid liens on the Property free and clear of all
defects and encumbrances not previously approved by Lender or its counsel, which
shall contain no survey exceptions other than those previously approved by
Lender, full coverage against

 

4

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mechanics’ and materialmen’s liens, an undertaking by the issuer thereof to
provide the notice of title continuation or endorsement above and a pending
disbursements clause, (d) an opinion of counsel for Borrower in form and
substance satisfactory to Lender, (e) all other conditions to receiving an
Advance under this Agreement have been met, and (f) such other standard and
customary documents, instruments, opinions or assurances as Lender or its
counsel may reasonably request.

 

(f)            If at the time of an Advance following the Initial Advance there
are incurred costs which shall be paid by Borrower from such Advance and which
have not been paid by Borrower, then prior to and as a condition to the next
advance, Borrower shall submit to Lender proof reasonably satisfactory to Lender
that such incurred costs have been paid in full.

 

(g)           The Lender shall have the right to approve all material amendments
to the Design/Build Agreement (except for Change Orders not requiring the
consent of the Lender pursuant to the Design/Build Agreement).

 

(h)           Borrower shall comply with the Project Schedule set forth in
Schedule 4, unless the Lender approves a modification of such Schedule 4 in
writing (such approval not to be unreasonably withheld, conditioned or delayed).
The Lender shall not be obligated to fund any Advance after the Final Project
Completion Date.

 

(i)            Notwithstanding the foregoing, other than the Initial Advance
made on the date hereof, no subsequent Advance shall be made hereunder unless
and until (i) all amounts have been advanced by the Subordinate Lender pursuant
to the Subordinate Loan; (ii) the amount to be funded by Lender in connection
with such Draw Request shall not be greater than the amount necessary to satisfy
the Draw Request taking into account the amount of the balance in the Excess NOI
Sub-subaccount (as such capitalized term is defined in the Lock Box Agreement)
as of the date of such Draw Request (except for any amount less than $10,000
retained in the Excess NOI subaccount); and (iii) the Control Agreements have
been fully executed and delivered and are in full force and effect; provided,
however, that the Borrower shall have three months from the date hereof to have
all Control Agreements in place.

 

(j)            Other than the Initial Advance made on the date hereof,
subsequent Advances made by the Lender hereunder are subject to the conditions
in Schedule 5 hereto.

 

(k)           All disbursements from the Construction Escrow Reserve Subaccount
shall be made in accordance with the terms and conditions of the Lock Box
Agreement.

 

Section 2.2             Direct Costs Verification.

 

All Direct Costs shall be certified by the Design/Build Contractor and must be
in accordance with the Direct Cost Statement (as the same may be updated and
amended by the Borrower as necessary). Verification of the monthly progress and
Direct Costs which have been

 

5

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incurred by Borrower from time to time, and the estimated total Direct Costs,
shall be conclusively determined by the Construction Consultant (absent manifest
error).

 

Section 2.3             Office for Advances.

 

All advances to Borrower are to be made at such place as Lender may designate.
Draw Requests together with all attachments thereto shall be received by Lender
at least seven (7) Business Days prior to the date of the requested Advance and
Borrower shall schedule a site inspection with Construction Consultant with
respect to each such Advance on or before the date of the submission to the
Lender of such Draw Request.

 

Section 2.4             Advances After Construction; Monthly Advances.

 

Amounts of the Direct Costs not advanced pursuant to this Section 2.4 or
Section 2.1 hereof during the course of construction of the Improvements may be
advanced by Lender in its sole discretion upon the satisfaction of the
conditions set forth herein. Advances for Indirect Costs not advanced prior to
completion of construction of the Improvements shall be advanced until
exhausted, not more frequently than once a month, for Indirect Costs as incurred
after such completion, upon satisfaction of the conditions set forth herein.

 

Section 2.5             Notice of Lender’s Rights to Make Advances.

 

(a)           Lender may, in its absolute discretion, accelerate all or any
portion of the amounts requested by Borrower to be advanced hereunder without
regard to Borrower’s satisfaction of the conditions to its entitlement to Junior
Loan proceeds and no person dealing with Borrower or the Design/Build Contractor
and any Subcontractor or any other person shall have standing to demand any
different performance from Lender.

 

(b)           CONTRACTORS, SUBCONTRACTORS, LABORERS, and SUPPLIERS are cautioned
that if Junior Loan advances are made under the alternative set forth in
paragraph (a) above, proceeds of the Junior Loan remaining to be advanced at the
time of the actual completion date, or at any time prior thereto, may be
inadequate to pay all lienable claims incurred by Borrower and unpaid at that
time. All potential lienors are therefore cautioned to exercise sound business
judgment in the extension of credit to Borrower and should not expect Lender to
make Junior Loan advances in such amounts and to exercise such judgment for
themselves.

 

Section 2.6             Evidence of and Security for Junior Loan.

 

Advances under the Junior Loan shall be evidenced by the Junior Note and secured
by the Mortgages, the Junior Loan Documents and the other Collateral. Borrower’s
obligation to repay the Obligations (including (without limitation) as evidenced
by the Junior Note) is with full recourse as to the Collateral (including all
assets of the Borrower) but shall not be recourse to the Borrower’s members,
shareholders, officers, affiliates, directors, partners, agents, employees or
consultants, or any affiliate of any such person, or to the property or assets
of any such person.

 

6

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Section 2.7             Junior Loan Reallocation.

 

The Lender shall have the right to approve Change Orders in accordance with
Section 8.6.2 of the Design/Build Agreement. Unless authorized by Change Order,
the Guaranteed Maximum Price shall not be increased and the Guaranteed Scope of
Work shall not be reduced and/or modified without the consent of the Lender.

 

Section 2.8             Construction Agreements.

 

Notwithstanding anything in this Agreement to the contrary, no advances of the
Junior Loan for Direct Costs with respect to any particular category of expenses
shall be made until such time as the Lender has received from the Borrower
copies of the Design/Build Agreement and each Subcontract in Proper Form in
excess of $100,000 with respect to such category certified by the Borrower to be
true, complete and correct.

 

Section 2.9             Advances for Costs of Improvements.

 

Lender shall not be required to make any advances for Stored Materials, except
as permitted by Schedule 5 hereto.

 

Section 2.10           Additional Terms Regarding Advances.

 

Other than the Initial Advance made on the date hereof, subsequent Advances of
the Junior Loan shall also be subject to the terms and conditions set forth in
Schedule 5.

 

Section 2.11           Liability of Lender.

 

Lender shall in no event be responsible or liable to any Person other than
Borrower for the disbursement of or failure to disburse the Junior Loan proceeds
or any part thereof and neither the Design/Build Contractor, Construction
Consultant nor any subcontractor, laborer or material supplier shall have any
right or claim against Lender under this Agreement or the other Junior Loan
Documents.

 

Section 2.12           Payments to Lender.

 

(a)           The Junior Loan shall bear interest on the outstanding principal
amount thereof as provided in the Junior Note, which interest shall be payable
by the Borrower at the times and in the manner provided in the Junior Note. The
principal of the Junior Loan shall be repaid by the Borrower at the times, in
the amounts and in the manner provided in the Junior Note. The Borrower may
prepay the Junior Loan at the times, in the amounts and in the manner provided
in the Junior Note, subject to payment of the Prepayment Premium, if same is
due. All payments to Lender shall be made in accordance with the provisions of
the Lock Box Agreement, the Junior Note and this Agreement.

 

(b)           Lender shall be entitled, but not obligated, and is hereby
irrevocably authorized to request payment from the Lock Box Agreement without
any notice to Borrower in such sums as are necessary to pay accrued and unpaid
interest on the Junior

 

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Note and all fees and expenses payable hereunder or thereunder, to the extent
the same are due and payable.

 

Section 2.13           Verified Statement.

 

At Lender’s written request, Borrower shall provide Lender with a verified
written statement, in such form and detail as Lender may reasonably require,
setting forth: (i) the names and addresses of all contractors, subcontractors
and suppliers furnishing labor or materials in the development of the Land or
the Construction of the Improvements valued in excess of $100,000 and (ii) such
reasonable evidence confirming that that the Improvements have not been
materially damaged by fire or other Casualty unless Lender shall have received
Insurance Proceeds, or satisfactory assurance that it will receive such proceeds
in a timely manner pursuant to Section 4.10, sufficient in the judgment of
Lender to effect a satisfactory restoration and completion of the Improvements
in accordance with the terms of the Mortgages and this Agreement and (iii) such
reasonable evidence confirming that the Improvements have not been materially
damaged by fire or other Casualty unless Lender shall have received Insurance
Proceeds, or satisfactory assurance that it will receive such proceeds in a
timely manner pursuant to Section 4.10, sufficient in the judgment of Lender to
effect a satisfactory restoration and completion of the Improvements in
accordance with the terms of the Mortgages and this Agreement.

 

Article III

Representations and Warranties

 

Borrower represents and warrants to Lender that:

 

Section 3.1             Organization, Power and Authority of Borrower and
Managing Member; Junior Loan Documents.

 

(a)           Borrower (a) is a limited liability company duly organized,
existing and in good standing under the laws of the state in which it is
organized and is duly qualified to do business and in good standing in each
state in which the Land or any portion thereof is located (if different from the
state of its formation) and in any other state where the nature of Borrower’s
business or property requires it to be qualified to do business, and (b) has the
power, authority and legal right to own its property and carry on the business
now being conducted by it and to engage in the transactions contemplated by the
Junior Loan Documents and the Project Documents. The Junior Loan Documents and
the Project Documents to which Borrower is a party have been duly executed and
delivered by Borrower, and the execution and delivery of, and the carrying out
of the transactions contemplated by, such Junior Loan Documents and Project
Documents, and the performance and observance of the terms and conditions
thereof, have been duly authorized by all necessary organizational action by and
on behalf of Borrower. The Junior Loan Documents and the Project Documents to
which Borrower is a party constitute the valid and legally binding obligations
of Borrower and are fully enforceable against Borrower in accordance with their
respective terms, except to the extent that such enforceability may be limited
by laws generally affecting the enforcement of creditors’ rights or principles
of equity.

 

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(b)           Borrower represents and warrants that RE-MM (i) is a limited
liability company duly organized, existing and in good standing under the laws
of the State of Delaware and is duly qualified to do business and in any state
where the nature of RE-MM’s business or property requires it to be qualified to
do business, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect on the ability of RE-MM to perform
its obligations under the Operating Agreement, and (ii) has the power, authority
and legal right to carry on the business now being conducted by it and to engage
in the transactions contemplated by the Operating Agreement. The Borrower
represents and warrants that the Operating Agreement has been duly executed and
delivered by RE-MM, and the execution and delivery by RE-MM of, and the carrying
out by RE-MM of the transactions contemplated by, the Operating Agreement, and
the performance and observance by RE-MM of the terms and conditions thereof,
have been duly authorized by all necessary organizational action by and on
behalf of RE-MM. The Borrower represents and warrants that the Operating
Agreement constitutes the valid and legally binding obligation of RE-MM and is
fully enforceable against RE-MM in accordance with its terms, except to the
extent that such enforceability may be limited by laws generally affecting the
enforcement of creditors’ rights or principles of equity.

 

Section 3.2             Other Documents; Laws.

 

The execution and performance of the Junior Loan Documents and the Project
Documents to which Borrower is a party and the consummation of the transactions
contemplated thereby will not conflict with, result in any breach of, or
constitute a default under, the organizational documents of Borrower, or any
contract, agreement, document or other instrument to which Borrower is a party
or by which Borrower, or any of its respective properties may be bound or
affected, and such actions do not and will not violate or contravene any Law to
which Borrower is subject.

 

Section 3.3             Taxes.

 

Borrower has filed all federal, state, county and municipal Tax returns required
to have been filed by Borrower and has paid (or will pay prior to the due date
therefor) all Taxes which have become due pursuant to such returns or pursuant
to any Tax assessments received by Borrower unless Borrower is contesting such
Taxes in good faith as provided in Section 46 of the PAL Lease.

 

Section 3.4             Legal Actions.

 

Except as set forth in Schedule 13 hereto, there are no Claims or investigations
by or before any court or Governmental Authority, pending, or to the best of
Borrower’s knowledge and belief, threatened against or affecting Borrower,
Borrower’s business or the Property which could reasonably be expected to have a
Material Adverse Effect. Borrower is not in default with respect to any order,
writ, injunction, decree or demand of any court or any Governmental Authority
affecting Borrower or the Property which could reasonably be expected to have a
Material Adverse Effect.

 

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Section 3.5             Nature of Junior Loan.

 

Borrower is a business or commercial organization. The Junior Loan is being
obtained solely for business or investment purposes, and will not be used for
personal, family, household or agricultural purposes.

 

Section 3.6             [Reserved].

 

Section 3.7             Financial Statements.

 

Borrower’s financial statements heretofore delivered by Borrower to Lender are
true and correct in all material respects, have been prepared in accordance with
sound accounting principles consistently applied, and fairly present the
respective financial conditions of the subjects thereof in all material respects
as of the respective dates thereof.

 

Section 3.8             ERISA and Prohibited Transactions.

 

As of the date hereof and throughout the term of the Junior Loan: (a) Borrower
is not and will not be (i) an “employee benefit plan,” as defined in
Section 3(3) of ERISA, (ii) a “governmental plan” within the meaning of
Section 3(32) of ERISA, or (iii) a “plan” within the meaning of
Section 4975(e) of the Code; (b) the assets of Borrower do not and will not
constitute “plan assets” within the meaning of the United States Department of
Labor Regulations set forth in Section 2510.3-101 of Title 29 of the Code of
Federal Regulations; (c) transactions by or with Borrower are not and will not
be subject to state statutes applicable to Borrower regulating investments of
fiduciaries with respect to governmental plans; and (d) Borrower will not engage
in any transaction that would cause any Obligation or any action taken or to be
taken hereunder (or the exercise by Lender of any of its rights under the
Mortgages) or under any of the other Senior Loan Documents, Junior Loan
Documents or Subordinate Loan Documents to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA or
Section 4975 of the Code. Borrower agrees to deliver to Lender such reasonable
certifications or other evidence of compliance with the provisions of this
Section as Lender may from time to time request.

 

Section 3.9             Compliance with Zoning and Other Requirements.

 

The anticipated use of the Property and proposed Improvements comply with
applicable zoning ordinances, regulations and restrictive covenants affecting
the Land. All use and other requirements of any Governmental Authority having
jurisdiction over the Property have been or will, prior to completion of the
Improvements, be satisfied. No material violation of any Law will, upon
completion of the Improvements, exist with respect to the Property.

 

Section 3.10           Plans and Specifications.

 

The Plans and Specifications shall be complete and adequate for the Construction
of the Improvements. The Plans and Specifications shall be approved by all
Governmental Authorities having or claiming jurisdiction over the Property and
by the beneficiary of each restrictive covenant affecting the Property whose
approval is required. The Plans and Specifications shall also be approved by the
Design/Build Contractor. To the best of Borrower’s knowledge, the

 

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Improvements to be constructed pursuant to the Plans and Specifications, if
constructed substantially in accordance with the Plans and Specifications, will
fully comply with all applicable Laws (other than as set forth in the
Installation Specific Development Plans approved by the Army), including those
Laws relating to access and facilities for disabled persons. All construction,
if any, already performed by or on behalf of Borrower on the Improvements has
been performed on the Land in accordance with the Plans and Specifications
approved by the persons named above and with any restrictive covenants
applicable thereto and, to the knowledge of Borrower, there are no structural
defects in such existing portions of the Improvements to be constructed pursuant
to the Plans and Specifications or violations of any requirement of any
Governmental Authorities with respect thereto; the planned use of the
Improvements complies with applicable zoning ordinances, regulations and
restrictive covenants affecting the Land as well as all environmental,
ecological, landmark, and other applicable laws and regulations; and all
requirements for such use have been satisfied.

 

Section 3.11           Building Permits; Other Permits.

 

All building, construction and other permits necessary or required in connection
with the Construction of the Improvements have been validly issued or will be
issued in a timely manner by a date sufficient to ensure commencement of
construction and Completion of Construction in a timely manner. All required
fees have been or will be paid and bonds and/or other security have been or will
be posted in connection with all permits that have been issued, and adequate
amounts have been budgeted by Borrower to pay all fees and the cost of all bonds
and other security in connection with permits to be issued in the future.
Borrower will promptly obtain all permits required from Governmental Authorities
to construct the Improvements to be constructed pursuant to the Plans and
Specifications and, upon written request from Lender, Borrower shall send copies
thereof to Lender. Following the issuance thereof, all permits will remain in
full force and effect as necessary to complete the Improvements to be
constructed pursuant to the Plans and Specifications.

 

Section 3.12           Utilities.

 

Subject to the terms and conditions of the Municipal Agreement, all utility
services necessary for the Construction of the Improvements and the operation
thereof for their intended purposes are available at the boundaries of the Land
(or will be available upon the completion of work shown in the Plans and
Specifications), including, as applicable, telephone service, cable television,
water supply, storm and sanitary sewer facilities, natural gas and electric
facilities, including cabling for telephonic and data communication.

 

Section 3.13           Access; Roads.

 

All roads and other accesses necessary for the Construction of the Improvements
and utilization thereof for their intended purposes have been or shall be
completed or the necessary rights of way therefor have either been or shall be
provided by the Army or appropriate Governmental Authority, or have been or
shall be dedicated to public use and accepted by the Army or such Governmental
Authority.

 

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Section 3.14           Other Liens.

 

Except for (a) contracts with contractors for labor, materials and services
furnished or to be furnished in connection with the Construction of the
Improvements, which contractors Borrower shall pay or cause to be paid in
accordance with the applicable Subcontracts from the proceeds of the Junior Loan
advanced hereunder, and (b) the Senior Loan Documents, the Junior Loan
Documents, the Subordinate Loan Documents, the Debt Documents (as defined in the
Lock Box Agreement), the Lock Box Agreement and the Project Documents, Borrower
has made no contract or arrangement of any kind the performance of which by the
other party thereto would give rise to a lien on the Property, except with
respect to encumbrances of record existing as of the Closing and other
encumbrances created by the Army in accordance with the terms of the Lease.

 

Section 3.15           No Material Adverse Change.

 

No material adverse change which would result in a Material Adverse Effect has
occurred in the financial conditions reflected in the financial statements of
Borrower referred to in Section 3.7 since the respective dates of such
statements, and no material additional liabilities have been incurred by
Borrower since the dates of such statements other than the borrowings
contemplated herein, in the other Senior Loan Documents, in the Junior Loan
Documents, in the Subordinate Loan Documents or the Project Documents or as
approved in writing by Lender.

 

Section 3.16           Defaults.

 

There is (a) no default by Borrower under any of the Junior Loan Documents,
(b) no Default (as defined in the PAL Lease) under the PAL Lease that cannot be
cured before the end of any applicable notice and cure period, (c) no
Termination Default (as defined in the PAL Lease) under the PAL Lease, (d) no
default that cannot be cured before the end of any applicable notice and cure
period under any Project Document (other than the PAL Lease), and (e) no “Event
of Default” (as defined therein) under any Senior Loan Document or under any
Subordinate Loan Document, unless in each instance waived in writing by Lender.

 

Section 3.17           Affirmation of Representations and Warranties.

 

Each Draw Request and each receipt of the funds requested thereby shall
constitute an affirmation that (a) the representations and warranties of
Borrower contained in this Article III are true and correct in all material
respects as of the date of the Draw Request (except for exclusions listed
therein) and, unless Lender is notified to the contrary prior to the
disbursement of the Advance requested, will be so on the date of the
disbursement, (b) the work completed to the date of the Draw Request is of
quality and in all other respects consistent with the Plans and Specifications,
and (c) if applicable, construction of the Improvements is proceeding in
accordance with the Project Schedule.

 

Section 3.18           Governmental Authorities.

 

There are no actions, suits or proceedings pending, or, to the knowledge of the
Borrower, threatened, against or affecting Borrower or the Property, the
validity or enforceability of the Mortgages or the priority of the lien thereof
at law, in equity or before or by any Governmental

 

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Authorities which, if adversely determined, would result in a Material Adverse
Effect; to Borrower’s knowledge, it is not in default beyond any applicable
notice and cure period with respect to any material order, writ, injunction,
decree or demand of any court or Governmental Authorities.

 

Section 3.19           Prior Work.

 

Borrower has advised the title insurer in writing prior to the issuance of the
title policy insuring Lender whether any survey, soils-testing,
site-development, excavation or other work related to construction of the
Improvements was begun or done by or on behalf of Borrower before each related
Mortgage was recorded.

 

Section 3.20           Hazardous Materials; Related Claims.

 

To the best of Borrower’s knowledge, except for those conditions listed in the
Phase 1, Phase 2 and other environmental reports, the Focused Feasibility Study
for Fort Rucker and the Army’s Environmental Condition of Property reports and
the environmental reports prepared and/or provided for Lender with respect to
the Property, (i) the Property and the Improvements thereon, if any, and the
contiguous areas, are not currently and have not been impacted by the presence
of Hazardous Materials or their effects; and (ii) there are no claims,
litigation, administrative or other proceedings, whether actual or threatened,
or judgments or orders, relating to any hazardous or toxic substances or wastes,
discharges, emissions or other forms of pollution relating in any way to the
Land or the Improvements, if any, thereon.

 

Section 3.21           Not an Investment Company.

 

Borrower is not an “investment company” or an entity controlled by an
“investment company” as such term is defined in the Investment Company Act of
1940, as amended.

 

Section 3.22           Patriot Act.

 

Borrower is not now, nor has ever been (i) listed on any Government Lists (as
hereinafter defined), (ii) a Person who has been determined by competent
authority to be subject to the prohibitions contained in Presidential Executive
Order No. 13224 (September 23, 2001) or any other similar prohibitions contained
in the rules and regulations of OFAC (as hereinafter defined) or in any enabling
legislation or other Presidential Executive Orders in respect thereof,
(iii) indicted for or convicted of any felony for any Patriot Act Offense, or
(iv) under investigation by any Governmental Authorities for alleged criminal
activity. For purposes hereof, the term “Patriot Act Offense” means any
violation of the criminal laws of the United States of America or of any of the
several states relating to terrorism or the laundering of monetary instruments,
including any offense under (A) the criminal laws against terrorism; (B) the
criminal laws against money laundering, (C) the Bank Secrecy Act, as amended,
(D) the Money Laundering Control Act of 1986, as amended, or (E) the Patriot
Act. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or
aiding and abetting another to commit, a Patriot Act Offense. For purposes
hereof, the term “Government Lists” means (1) the specially designated nationals
and blocked persons lists maintained by the Office of Foreign Assets Control
(“OFAC”), (2) any other list of terrorists, terrorist organizations or narcotics
traffickers maintained pursuant to any of the rules and regulations of OFAC that
Lender notified Borrower

 

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in writing is now included in “Government Lists,” or (3) any similar lists
maintained by the United States Department of State, the United States
Department of Commerce or any other Governmental Authorities or pursuant to any
executive order of the President of the United States of America that Lender
notified Borrower in writing is now included in “Government Lists.”

 

Section 3.23           Compliance with Laws and Project Documents.

 

Borrower is in material compliance with (a) the requirements of all Project
Documents and all other agreements entered into by Borrower as of the date
hereof and (b) in all material respects, with the requirements of all applicable
Laws; provided, however in certain instances Borrower may not be in compliance
with all Project Documents or with all applicable laws as of the date hereof;
however, Borrower shall implement a cure of any such non-compliance as required
pursuant to Condition 9.h. of the PAL Lease.

 

Article IV

Affirmative Covenants and Agreements

 

Section 4.1             Commencement and Completion of Construction.

 

Borrower shall cause the initial Construction of the Improvements (which are
contemplated to be commenced on or before the Commencement Date pursuant to the
Design/Build Agreement) to be commenced and prosecuted in a good and workmanlike
manner on or before the Commencement Date and shall cause the Construction of
the Improvements to be completed in accordance with the Design/Build Agreement
and PAL Lease and substantially in accordance with the Plans and Specifications
in full on or before the Final Project Completion Date.

 

Section 4.2             Approval of Construction.

 

(a)           No work associated with the Construction of any component of the
Improvements to be constructed by Borrower pursuant to the Plans and
Specifications shall be commenced or continued by Borrower unless and until the
applicable Plans and Specifications for such component (and any changes thereto)
have been approved by Lender to the extent Lender’s approval is required in
accordance with the terms of the Design/Build Agreement and this Agreement.
Lender agrees that, where Lender’s approval is required under the Design/Build
Agreement and this Agreement, such approval shall not be unreasonably withheld,
conditioned or delayed and shall be granted or denied in no event later than ten
(10) Business Days after the receipt of all documentation by the Lender in
connection with the request for approval. In addition, no work associated with
the Construction of any component of the Improvements to be constructed by
Borrower pursuant to the Plans and Specifications shall be commenced or
continued by Borrower unless and until the applicable Plans and Specifications
for such component (and any changes thereto) have been approved by all
Governmental Authorities having or claiming jurisdiction over the Land and
Improvements, by the beneficiary of any applicable restrictive covenant whose
approval is required, and by any other party whose approval is required under
applicable agreements, and unless and until

 

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all building, construction and other permits necessary or required in connection
with the Construction of such component of the Improvements to be constructed by
Borrower pursuant to the Plans and Specifications have been validly issued and
all fees, bonds and any other security required in connection therewith have
been paid or posted.

 

(b)           The Construction Consultant shall receive copies of all Change
Orders in accordance with the Design/Build Agreement.

 

(c)           Except for Change Orders which do not require Lender’s approval in
accordance with the Design/Build Agreement, Borrower will not amend or
supplement the Design/Build Agreement without the prior written consent of
Lender (not to be unreasonably withheld conditioned or delayed). Borrower will
not enter into, authorize or permit any Change Order under the Design/Build
Agreement except in compliance with Section 8.6.2 thereof.

 

Section 4.3             Deposits.

 

Any amounts required under the Lock Box Agreement to be deposited by the
Borrower shall be deposited by Borrower in accordance with the terms of the Lock
Box Agreement.

 

Section 4.4             Compliance with Laws; Encroachments.

 

Subject to the provisions of Section 9 of the PAL Lease, the Improvements shall
be constructed, maintained and operated in accordance with all applicable
(whether present or future) Laws. The Improvements shall be constructed entirely
on the Land, including the land described in the support leases and licenses in
Schedule 14, and shall not encroach upon any easement or right-of-way in a
manner which would violate such easement or right-of-way, or upon the land of
others. Construction of the Improvements shall occur wholly within all
applicable building restriction lines and set-backs, however established, and
shall be in strict compliance with all applicable use or other restrictions and
the provisions of any prior agreements, declarations, covenants, restrictions,
easements and all applicable zoning and subdivision ordinances and regulations.
Borrower covenants and agrees with Lender that it will at its expense use good
faith efforts to comply, subject to the provisions of Section 9 of the PAL
Lease, promptly with all laws, ordinances, orders, rules, statutes and
regulations of any court or any Governmental Authorities or it will timely and
at its own expense contest the validity of any such laws, ordinances, orders,
rules, statutes and regulations by appropriate legal proceedings and post a
sufficient bond or other security reasonably satisfactory to Lender in
connection with such contest in order to avoid the filing of a lien against the
Property or any part thereof, and upon written request (i) provide Lender with
copies of all filings and correspondence related thereto, (ii) promptly furnish
Lender with reports of any official searches made by Governmental Authorities
and any claims of violations thereof, (iii) promptly obtain all permits required
from Governmental Authorities and, within ten (10) days of receipt of such
permits, send copies thereof to Lender. Notwithstanding the foregoing, if any
delay in compliance with any Laws shall, in the reasonable judgment of Lender,
place all or any part of the Property in imminent danger of being forfeited or
lost, or if penalties, fines and/or interest shall accrue as a result thereof,
Borrower, shall upon notice from Lender, use best efforts to endeavor to comply
with such Law as soon as is reasonably practical. Borrower shall comply in all
material respects with

 

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all Laws and all orders, writs, injunctions, decrees and demands of any court or
any Governmental Authority affecting Borrower or the Project, except as
otherwise provided in accordance with Section 3.23 hereof. Borrower shall use
all proceeds of the Junior Loan for business purposes which are not in direct
contravention of any Law, any Project Document, any Senior Loan Document, any
Junior Loan Document or any Subordinate Loan Document.

 

Section 4.5             Inspections; Cooperation.

 

Borrower shall permit representatives of Lender and the Construction Consultant
to enter upon the Land, to inspect the Improvements and any and all materials to
be used in connection with the development of the Land and the construction of
the Improvements, to examine all detailed plans and shop drawings and similar
materials as well as all of Borrower’s records and books of account maintained
by or on behalf of Borrower relating thereto and to discuss the affairs,
finances and accounts pertaining to the Junior Loan and the Improvements with
representatives of Borrower, subject to Borrower’s security and the Army’s other
rules and regulations. Borrower shall at all times reasonably cooperate and
cause the Design/Build Contractor and each and every one of its subcontractors
and material suppliers to reasonably cooperate with the representatives of
Lender and the Construction Consultant in connection with, or in aid of, the
performance of Lender’s functions under this Agreement (it being acknowledged by
Lender that this Section 4.5. shall in no way be deemed to require Borrower to
disclose or cause to be disclosed financial documents relating to the
Design/Build Contractor and any subcontractor or material supplier). Except in
the event of an emergency, Lender shall give Borrower at least twenty-four (24)
hours’ advance notice in writing or by telephone in each instance before
entering upon the Land and/or exercising any other rights granted in this
Section and shall use reasonable efforts not to interfere with the Project
and/or the operation of Borrower’s and its agents’ and representatives’ business
during any such inspection.

 

Section 4.6             Contracts, Vouchers and Receipts.

 

Borrower shall furnish to Lender, promptly on written demand, any contracts,
subcontracts, bills of sale, statements, receipted vouchers or other agreements
of Borrower relating to the development of the Land or the Construction of the
Improvements, including any such items pursuant to which Borrower has any claim
of title to any materials, fixtures or other articles delivered or to be
delivered to the Land or incorporated or to be incorporated into the
Improvements.

 

Section 4.7             Payment and Performance of Contractual Obligations.

 

Borrower shall perform in a timely manner all of its obligations under the
Design/Build Agreement and any and all other Project Documents and Borrower will
pay when due in accordance with applicable agreements all bills for services or
labor performed and materials supplied in connection with the development of the
Land and the construction of the Improvements. Within thirty (30) days after the
filing of any mechanic’s lien or other lien or encumbrance against the Property,
Borrower will promptly discharge the same by payment or filing a bond or
otherwise as permitted by Law. So long as Lender’s security has been protected
by the filing of a bond or otherwise in a manner satisfactory to Lender in its
reasonable discretion (i) Borrower shall have the right to contest in good faith
any claim, lien or

 

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encumbrance, provided that Borrower does so diligently and without prejudice to
Lender, and (ii) the filing of such lien or encumbrance shall not be grounds for
Lender to disapprove any request for a subsequent advance.

 

(a)           Before entering into or terminating any Project Documents (other
than a termination, except for the Lease, upon an uncured default thereunder),
Borrower shall obtain the written consent of Lender (which consent is deemed
granted with respect to any such contract or agreement received by Lender and
effective at the Closing) and shall, if required by Lender, provide Lender a
consent, assignment, subordination and/or attornment agreement executed by such
persons as required by Lender in form and substance satisfactory to Lender.
Before entering into any amendment or supplement to a Project Document, Borrower
shall obtain the written consent of Lender (which consent shall not be
unreasonably withheld, conditioned or delayed).

 

Section 4.8             Correction of Construction Defects.

 

Promptly following any written demand by Lender, Borrower shall correct or cause
the correction of any structural defects in the Improvements to be constructed
in accordance with the Plans and Specifications, any work that fails to comply
with the requirements of Section 4.4 and any material departures or deviations
from the Plans and Specifications.

 

Section 4.9             Insurance.

 

(a)           Borrower shall maintain the following insurance (in addition to
any insurance required by the Project Documents) at its sole cost and expense:

 

(i)            Insurance against Casualty to the Property under a policy or
policies covering such risks as are presently included in “special form” (also
known as “all risk”) coverage, including such risks as are ordinarily insured
against by similar businesses, but in any event, including wind, fire,
lightning, windstorm, hail, explosion, riot, riot attending a strike, civil
commotion, damage from aircraft, smoke, vandalism, and malicious mischief and
acts of terrorism. Such insurance shall name Lender as mortgagee and loss payee.
Unless otherwise agreed in writing by Lender, such insurance shall be for the
full insurable value of the Property, except for Named Windstorm, Earthquake and
Flood. The insurance policy shall be written without any co-insurance.
Deductible amounts are to be commercially reasonable with standard and customary
catastrophe peril deductibles for property damage and business interruption
combined which shall be satisfactory to Lender. No such property insurance as
set forth in this Section shall be required with respect to lodging units that
are scheduled for demolition. No policy of insurance shall be written such that
the proceeds thereof will produce less than the minimum coverage required by
this Section by reason of co-insurance provisions or otherwise. The term “full
insurable value” means one hundred percent (100%) of the actual replacement cost
of the Property (excluding foundation and excavation costs and costs of
underground flues, pipes, drains and other underground items). Notwithstanding
the foregoing, Named Windstorm and Earthquake Insurance limits will only be
required in an amount not less than the

 

17

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PML (Probable Maximum Loss) on a blanket basis except full replacement coverage
for Named Windstorm will be provided if specific coverage is purchased unless
full limits are not commercially available at reasonable premiums). Such
policies shall name Lender as additional insured and loss payee.

 

(ii)           Commercial general liability insurance on an “occurrence” basis
against claims for “personal injury” liability and liability for death, bodily
injury and damage to property, products and completed operations, in limits of
$35,000,000 with respect to any one occurrence and the aggregate of all
occurrences during any given annual policy period. Such insurance shall name
Lender as an additional insured.

 

(iii)          During any period of construction upon the Property, Borrower
shall maintain, or cause others to maintain, builder’s risk insurance
(non-reporting form) of the type customarily carried in the case of similar
construction for one hundred percent (100%) of the full replacement cost of work
in place and materials stored at or upon the Property. Such insurance may
contain sub limits for transit, materials stored off site, flood, earthquake,
named wind and debris removal.

 

(iv)          Workers’ compensation insurance for all employees of Borrower in
such amount as is required by Law and including employer’s liability insurance,
if required by Lender.

 

(v)           If at any time any portion of any structure on the Property is
insurable against Casualty by flood and is located in a Special Flood Hazard
Area under the Flood Disaster Protection Act of 1973, as amended, a flood
insurance policy in form and amount acceptable to Lender but in no event less
than the amount sufficient to meet the requirements of applicable Law as such
requirements may from time to time be in effect..

 

(vi)          Loss of rental value insurance or business interruption insurance
in an amount acceptable to Lender but in no event shall the rental value or
business interruption loss provision be in an amount less than the semiannual
rental income of the Project. Lender will be added as a loss payee.

 

(vii)         Environmental Impairment Liability Insurance in such amounts as
required by Lender at or prior to the Closing.

 

(viii)        Such other and further insurance as may be required from time to
time by Lender in order to comply with regular requirements and practices of
Lender in similar transactions, so long as any such insurance is generally
available at commercially reasonable premiums as mutually agreed upon by Lender
and Borrower from time to time.

 

(b)           In addition to the foregoing, Borrower shall cause the
Design/Build Contractor to provide and maintain commercial general liability
insurance and workers’

 

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compensation insurance for all employees of the Design/Build Contractor meeting,
respectively, the requirements of Subsections (a)(ii) and (iv), above.

 

(c)           Each policy of insurance (i) shall be issued by one or more
insurance companies each of which must have an A.M. Best Company financial and
performance rating of A-IX or better or a minimum S&P rating of “A-” and are
qualified or authorized by the respective Laws of the State in which the
Property is located to assume the risks covered by such policy, (ii) with
respect to the insurance described under the preceding Subsections (a)(i),
(a)(iii), (a)(v) and (a)(vi), shall have attached thereto standard
non-contributing, non-reporting mortgagee clauses in favor of and entitling
Lender without contribution to collect any and all proceeds payable under such
insurance, either as sole payee or as joint payee with Borrower and the Senior
Lender and Subordinate Lender, (iii) shall provide that such policy shall not be
canceled or materially modified without at least thirty (30) days prior written
notice to Lender, but only ten (10) days if such cancellation is due to
non-payment of premiums, and (iv) shall provide that any loss otherwise payable
thereunder shall be payable notwithstanding any act or negligence of Borrower
which might, absent such agreement, result in a forfeiture of all or a part of
such insurance payment. Borrower shall promptly pay all premiums when due on
such insurance and, not less than fifteen (15) days prior to the expiration
dates of each such policy, Borrower will deliver to Lender acceptable evidence
of insurance, such as a certificate of insurance, a renewal policy or policies
marked “premium paid” or other evidence satisfactory to Lender reflecting that
all required insurance is current and in force. Borrower will promptly give
Notice to Lender of any cancellation of, or material change in, any insurance
policy. Lender shall not, because of accepting, rejecting, approving or
obtaining insurance, incur any liability for (x) the existence, nonexistence,
form or legal sufficiency thereof, (y) the solvency of any insurer, or (z) the
payment of losses. Borrower may satisfy any insurance requirement hereunder by
providing one or more “blanket” insurance policies covering other projects,
subject to Lender’s approval in each instance as to limits, coverages, forms,
deductibles, inception and expiration dates, and cancellation provisions. During
any period of construction, the Borrower may provide the commercial general
liability and workers’ compensation required in Subsections (a)(ii) and
(a)(iv) of this Section 4.9 through the purchase of a wrap up contractor
controlled insurance program sponsored by the Design/Builder. This program shall
provide coverage for the Borrower and all parties engaged in construction or
operations of the Project, subject to Lender’s review and approval.

 

Section 4.10           Adjustment of Condemnation and Insurance Claims.

 

Borrower shall give prompt Notice to Lender of any Casualty or any Condemnation
or threatened Condemnation which is threatened in writing. Lender is authorized,
at its sole and absolute option, to commence, appear in and prosecute, in its
own or Borrower’s name, any action or proceeding relating to any Condemnation or
Casualty, and to make proof of loss for and to settle or compromise any Claim in
connection therewith. In such case, Lender shall, subject to the provisions of
the Lease, have the right to receive all Condemnation Awards and Insurance
Proceeds, and may deduct therefrom any or all of its Expenses. However, so long
as no Event of Default has occurred and is continuing and Borrower is diligently
pursuing its rights and remedies with respect to a Claim, Borrower will obtain
Lender’s written consent (which consent

 

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shall not be unreasonably withheld, conditioned or delayed) before making proof
of loss for or settling or compromising each Claim if Lender is not exercising
any of its rights pursuant to this Section, except Borrower shall have the right
to make proof of loss for all covered property insurance claims without Lender’s
written consent if less than $2,000,000. Borrower agrees to diligently assert
its rights and remedies with respect to each Claim and to promptly pursue the
settlement and compromise of each Claim subject to Lender’s approval, which
approval shall not be unreasonably withheld, conditioned or delayed, except
approval is granted herein for covered property insurance claims less than
$2,000,000. If, prior to the receipt by Lender of any Condemnation Award or
Insurance Proceeds, the Property shall have been sold pursuant to the provisions
of the applicable Mortgage, Lender shall have the right to receive such funds
(a) to the extent of any deficiency found to be due upon such sale with interest
thereon (whether or not a deficiency judgment on the applicable Mortgage shall
have been sought or recovered or denied), and (b) to the extent necessary to
reimburse Lender for its Expenses. Notwithstanding anything herein to the
contrary, all Condemnation Awards and Casualty Proceeds shall be applied in
accordance with the Lease and the Lock Box Agreement. If any Condemnation Awards
or Casualty Proceeds are paid to Borrower, Borrower shall immediately (and no
later than ten (10) days after Borrower’s receipt thereof) deposit the same in
accordance with the Lock Box Agreement, except to the extent already distributed
to Borrower in accordance with the preceding sentence. Notwithstanding anything
contained in this Section to the contrary, so long as any Obligations remain
outstanding, no Condemnation Awards or Casualty Proceeds shall be distributed to
Borrower or on behalf of Borrower other than pursuant to the provisions of the
Lock Box Agreement if Borrower elects not to repair, rebuild or restore the
portion of the Project subject to any such Casualty or Condemnation. Borrower
agrees to execute and deliver from time to time, upon the request of Lender,
such further instruments or documents as may be reasonably requested by Lender
to confirm the grant and assignment to Lender of any Condemnation Awards or
Insurance Proceeds.

 

Section 4.11           Utilization of Net Award.

 

Net Award must be applied in accordance with the Lock Box Agreement.

 

Section 4.12           Management.

 

(a)           Borrower at all times shall provide for the competent and
responsible maintenance, management and operation of the Property in accordance
with the requirements of the Lease. Borrower shall maintain managerial and
operational control of the Project at all times while the Junior Loan is
outstanding; provided, however, that Borrower may assign management, maintenance
and/or operation of the Project to affiliates of Actus and may contract with
InterContinental Hotel Group, Inc., or an affiliate thereof, or another hotel
manager reasonably acceptable to Lender to manage and operate the Project
hotels. Any management contract or contracts affecting the Property must be
approved in writing by Lender (not to be unreasonably withheld conditioned or
delayed) prior to the execution of the same and must be subordinate to the
Mortgages (provided that Lender provides such contractor with customary
non-disturbance rights which are in no event less expansive than the
non-disturbance rights offered to InterContinental Hotel Group, Inc., or its
affiliate, at the Closing). Any such management

 

20

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contract must be collaterally assigned, by an instrument or instruments in form
and substance reasonably satisfactory to Lender, to Lender as security for the
Junior Loan.

 

(b)           Borrower may assign the duties of management, maintenance and/or
operation of the Project upon prior written consent of Lender, which consent
shall not be unreasonably withheld, conditioned or delayed. All management,
maintenance and/or operation contracts with such assignees must be approved in
writing by Lender prior to the execution of the same, which approval shall not
be unreasonably withheld, conditioned or delayed. All such contracts must be
collaterally assigned by Borrower to Lender. Notwithstanding the foregoing,
Lender acknowledges that Borrower will engage the Asset Manager, Hotel Operator
and Development Manager to provide certain asset management, business
management, property management, hotel management, development management and
property maintenance services with respect to the Project and hereby consents to
Borrower’s agreements with such Persons dated as of the date hereof.

 

(c)           No contract approved by Lender pursuant to this Section 4.12 may
be amended in any material respect without the prior written consent of Lender
(not to be unreasonably withheld, conditioned or delayed).

 

Section 4.13           Books and Records; Financial Statements; Tax Returns.

 

(a)           Borrower will keep and maintain (or cause to be maintained) full
and accurate books and records administered in accordance with sound accounting
principles, consistently applied, showing in detail the earnings and expenses of
the Property and the operation thereof. Borrower will keep and maintain its
books and records, including recorded data of any kind and regardless of the
medium of recording, at the place or places required under the Lease. Borrower
shall permit Lender, or any Person authorized by Lender, to inspect and examine
such books and records (regardless of where maintained) and all supporting
vouchers and data and to make copies and extracts therefrom at all reasonable
times and as often as may be reasonably requested by Lender. Borrower will
furnish or cause to be furnished to Lender annual financial statements,
including balance sheets and income statements, for Borrower, and the Property,
within one hundred twenty (120) days after each fiscal year end of Borrower. In
addition, Borrower will furnish or cause to be furnished to Lender, with
reasonable promptness, such interim financial statements of Borrower and the
Property, together with such additional information, reports or statements in
connection therewith, as Borrower is required to provide to the Army under
Condition 32.c of the PAL Lease. All financial statements must be in form and
detail acceptable to Lender and must be certified as to accuracy by Borrower,
and the annual financial statements must be audited with an opinion satisfactory
to Lender by an independent certified public accountant satisfactory to Lender.
Borrower shall provide, upon Lender’s reasonable request, convenient facilities
for the audit and verification of any such statement.

 

(b)           Borrower shall provide Lender with certified quarterly profit and
loss statements related to Project operations (including, without limitation,
property operating statements of revenue and expenses and a balance sheet
prepared in accordance with

 

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GAAP and a statement of liabilities), within sixty (60) days following the end
of each fiscal quarter of Borrower, in form and detail reasonably acceptable to
Lender. Borrower shall provide the monthly Project dashboard report that
Borrower is required to provide to the Army under Condition 32.a of the PAL
Lease within twenty-five (25) days following the end of each calendar month.

 

(c)           Within sixty (60) days of the end of each fiscal quarter of
Borrower, Borrower shall furnish to Lender with: (i) a certification of
compliance with Senior Lender’s loan covenants under the Senior Loan Documents
and the Subordinate Lender’s loan covenants under the Subordinate Loan Documents
with no existing or ongoing “Default” or “Event of Default,” and (ii) to the
extent available and subject to cancellation, group reservations for next
twelve-months.

 

(d)           All financial statements shall be prepared in accordance with the
Accounting Principles (as defined in the PAL Lease) consistently applied and
shall fairly present the financial condition of Borrower as of the respective
dates thereof. The Borrower shall provide, upon the Lender’s reasonable request,
facilities for the audit and verification of any such statement. All
certifications and signatures on behalf of corporations, partnerships, limited
liability companies and other entities shall be by a representative of the
reporting party satisfactory to Lender.

 

(e)           Upon request of Lender, Borrower will deliver, or caused to be
delivered, to Lender all reports and other information that Borrower delivers,
or causes to be delivered, to Senior Lender.

 

(f)            The information described in this Section to be provided to
Lender may be transmitted electronically, unless hard copies are otherwise
requested by Lender.

 

Section 4.14           Estoppel Certificates.

 

Within ten (10) days after any reasonable request by Lender or a proposed
assignee or purchaser of the Junior Loan or any interest therein, Borrower shall
certify in writing to Lender, or to such proposed assignee or purchaser, the
then unpaid balance of the Junior Loan and whether Borrower claims any right of
defense or setoff to the payment or performance of any of the Obligations, and
if Borrower claims any such right of defense or setoff, Borrower shall give a
detailed written description of such claimed right.

 

Section 4.15           Taxes.

 

Borrower shall pay and discharge (or cause to be paid and discharged) all Taxes
prior to the date on which penalties are attached thereto unless and to the
extent only that such Taxes are contested in accordance with the terms of the
Mortgages. Borrower shall, at its sole cost and expense, do, execute,
acknowledge and deliver (or cause to be done, executed, acknowledged and
delivered) all and every such acts, information reports, returns and withholding
of monies as shall be necessary or appropriate to comply fully, or to cause full
compliance, with all applicable information reporting and back-up withholding
requirements of the Internal Revenue Code of 1986, as amended (including all
regulations promulgated thereunder) in respect of the Property, and all
transactions related to the Property and shall at all times provide Lender with
reasonably

 

22

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satisfactory evidence of such compliance and notify Lender of the information
reported in connection with such compliance.

 

Section 4.16           Lender’s Rights to Pay and Perform.

 

If, after any required notice, Borrower fails to promptly pay or perform any of
the Obligations within any applicable grace or cure periods, Lender, without
Notice to or demand upon Borrower, and without waiving or releasing any
Obligation or Default, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of Borrower. Upon the occurrence and during the continuance of an Event
of Default, Lender may enter upon the Property for that purpose and take all
action thereon as Lender reasonably considers necessary or appropriate. At the
option of Lender, following the occurrence and during the continuance of an
Event of Default, Lender may apply any undisbursed Junior Loan proceeds to the
satisfaction of such Event of Default. Without limiting the generality of the
foregoing, following the occurrence and during the continuance of an Event of
Default, Lender may pay directly from the undisbursed proceeds of the Junior
Loan all interest bills rendered by Lender in connection with the Junior Loan,
and make advances directly to the Design/Build Contractor, the title insurance
company, any subcontractor or material supplier, the lessor under the Lease, any
manager or supplier of the Project, any provider of utility services, or to any
of them jointly. The execution hereof by Borrower shall, and hereby does,
constitute an irrevocable authorization so to advance the undisbursed proceeds
of the Junior Loan following the occurrence and during the continuance of an
Event of Default. No further direction or authorization from Borrower shall be
necessary to warrant such direct advances. Each Advance shall be secured by the
Mortgages and shall satisfy the obligations of Lender hereunder to the extent of
the amount of the advance.

 

Section 4.17           Reimbursement; Interest.

 

If Lender shall incur any Expenses or pay any Claims by reason of the Junior
Loan or the rights and remedies provided under the Junior Loan Documents
(regardless of whether or not any of the Junior Loan Documents expressly provide
for an indemnification by Borrower against such Claims), Lender’s payment of
such Expenses and Claims shall constitute advances to Borrower which shall be
paid by Borrower to Lender on demand, together with interest thereon from the
date incurred until paid in full at the rate of interest then applicable to the
Junior Loan under the terms of the Junior Note. Each Advance shall be secured by
the Mortgages and the other Junior Loan Documents as fully as if made to
Borrower, regardless of the disposition thereof by the party or parties to whom
such Advance is made. Notwithstanding the foregoing, however, in any action or
proceeding to foreclose the Mortgages or to recover or collect the Obligations,
the provisions of Law governing the recovery of costs, disbursements and
allowances shall prevail unaffected by this Section.

 

Section 4.18           Notification by Borrower.

 

Borrower will promptly give Notice to Lender of the occurrence of any Default or
Event of Default hereunder or under any of the other Junior Loan Documents or
any event of default by Borrower after applicable notice and cure periods under
the Project Documents or any material default under the Project Documents
(except for the PAL Lease) and any Default or Termination

 

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Default (as such capitalized terms are defined in the PAL Lease) under the PAL
Lease. Borrower shall promptly provide notice to Lender of a “Default” and/or
“Event of Default” (as such terms are defined in the Subordinate Loan Documents
and the Senior Loan Documents) under the Subordinate Loan Documents or the
Junior Loan Documents.

 

Section 4.19           Indemnification by Borrower.

 

Borrower agrees to release and to indemnify the Indemnified Parties and to hold
the Indemnified Parties harmless from and against, and to defend Lender by
counsel reasonably approved by Lender against, any and all Claims directly or
indirectly arising out of or resulting from any transaction, act, omission,
event or circumstance in any way connected with the Property or the Junior Loan,
including any Claim arising out of or resulting from (a) construction of any
Improvements, including any defective workmanship or materials; (b) any failure
by Borrower to comply with the requirements of any Laws or to comply with any
agreement that applies or pertains to the Property, including any agreement with
a broker or “finder” in connection with the Junior Loan or other financing of
the Property; (c) any failure by Borrower to observe and perform any of the
obligations imposed upon the lessee under the Lease or Project Documents;
(d) any other Default or Event of Default hereunder or under any of the other
Junior Loan Documents; (e) any assertion or allegation that an Indemnified Party
is liable for any act or omission of Borrower or any other Person in connection
with the ownership, development, financing, leasing, operation or sale of the
Property; (f) the Claims of any broker or finder arising by reason of the
execution hereof or the making of the Junior Loan; (g) Environmental Matters; or
(h) any fraud or material misrepresentation by Borrower. The agreements and
indemnifications contained in this Section shall apply to Claims arising both
before and after the repayment of the Junior Loan and shall survive the
repayment of the Junior Loan, any foreclosure or deed, assignment or conveyance
in lieu thereof and any other action by Lender to enforce the rights and
remedies of Lender hereunder or under the other Junior Loan Documents. Borrower
shall employ suitable means to protect from theft or vandalism all portions of
the Improvements and all tools and building materials stored on the Land. Upon
demand by an Indemnified Party, Borrower shall diligently defend any
Environmental Claim which relates to the Project or is threatened or commenced
against such Indemnified Party, all at Borrower’s own cost and expense and by
counsel to be approved by Lender in the exercise of its reasonable judgment. In
the alternative, Lender may elect, at any time and for any reason, to conduct
its own defense through counsel selected by Lender and at the reasonable cost
and expense of Borrower. Notwithstanding the foregoing, in no event shall
Borrower be required to release, indemnify or hold harmless an Indemnified Party
for any Claims to the extent resulting from such Indemnified Party’s gross
negligence or willful misconduct.

 

Section 4.20           Fees and Expenses.

 

Borrower shall pay all reasonable and documented fees, charges, costs and
Expenses required to satisfy the conditions of the Junior Loan Documents.
Without limitation of the foregoing, (a) Borrower will pay, when due, and if
paid by Lender will reimburse Lender on demand for, all reasonable and
documented fees and expenses of the Construction Consultant, the title insurer,
environmental engineers, appraisers, surveyors and Lender’s outside counsel in
connection with the Closing and the administration, modification or any
“workout” of the Junior Loan, or the enforcement of Lender’s rights and remedies
under any of the Junior Loan

 

24

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Documents; and (b) Borrower shall pay all filing, registration or recording
fees, and all reasonable and documented expenses incident to the execution,
delivery, acknowledgment and recording or filing, as applicable, of the
Mortgages, any mortgage supplemental thereto, any security instrument with
respect to the Personalty, and any instrument of further assurance, and any
Expenses (including reasonable attorneys’ fees and disbursements) and all
federal, state, county and municipal stamp, mortgage or recording taxes and
other taxes, duties, impositions, imposes, fees, costs, expenses, assessments
and charges arising out of or in connection with the execution and delivery of
the Junior Note, the Mortgages or any mortgage supplemental thereto, any
security instrument with respect to the Personalty or any instrument of further
assurance.

 

Section 4.21           Appraisals.

 

Lender may obtain from time to time an appraisal of all or any part of the
Property, prepared in accordance with written instructions from Lender, from a
third-party appraiser satisfactory to, and engaged directly by, Lender.
Notwithstanding the foregoing, the cost of each such appraisal obtained by
Lender shall be at Lender’s sole cost and expense, except that, following the
occurrence and during the continuance of an Event of Default, or in the event of
a request by Borrower for a renewal, extension or modification of the Junior
Loan, such cost of one such appraisal per calendar year shall be borne by
Borrower and shall be paid by Borrower on demand. Borrower shall provide
reasonable access to the Property to any such appraiser as reasonably necessary
to complete the appraisal; provided, however, that in connection with any such
access, such third-party appraiser shall use reasonable efforts not to interfere
with the Project and/or the operation of Borrower’s and its agents’ and
representatives’ business during any such inspection.

 

Section 4.22           Yearly Budget Approvals.

 

Lender shall have the same right to review and approve the Yearly Budget and
each of its components as the Hotel Operator has under the Hotel Operating
Agreement. Borrower shall promptly provide to Lender copies of the draft Yearly
Budget that it receives from Hotel Operator. Lender acknowledges that such
review and approval shall be subject to the time periods and dispute resolutions
provisions set forth in the Hotel Operating Agreement.

 

Section 4.23           [Reserved].

 

Section 4.24           Permanent Loan/Capital Markets Transaction.

 

Borrower covenants that the proceeds of any permanent loan or capital markets
transaction entered into following the Closing will be used first to repay the
Senior Loan and then the Junior Loan, net of financing costs.

 

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Section 4.25           [Reserved].

 

Section 4.26           [Reserved].

 

Section 4.27           [Reserved].

 

Section 4.28           Organizational Documents.

 

Without limiting any other provisions hereof that restrict the ability of
Borrower to incur or extend any indebtedness, Borrower shall comply with all of
the provisions of its articles of organization and operating agreement and shall
not modify any of the provisions in Section 25, 26 or 27 of the Operating
Agreement (collectively, the “SPE Provisions”) without Lender’s written consent
(not to be unreasonably withheld, conditioned or delayed.)

 

Section 4.29           Subordination.

 

Without limiting any other provisions hereof that restrict the ability of
Borrower to incur or extend any indebtedness, Borrower covenants and agrees with
Lender that it will subordinate to the lien of the Mortgages any Loans made
(a) by Borrower to any other entity owned or controlled by the principals of
Borrower or (b) by any entity owned or controlled by the principals of Borrower
to Borrower and to deliver to Lender any and all agreements and or other
documents reasonably requested by Lender and Lender’s legal counsel in
connection with such subordination which documents and agreements shall be
reasonably satisfactory in all material respects to Lender and Lender’s legal
counsel.

 

Section 4.30           Patriot Act.

 

Borrower shall comply in all respects with the Patriot Act.

 

Section 4.31           Single Purpose Covenants.

 

Until the Obligations have been indefeasibly paid to the Lender in cash and all
obligations of the Borrower under this Agreement and the other Junior Loan
Documents have terminated, Borrower shall observe and comply with the following
covenants:

 

(a)           Borrower shall limit the nature, purpose and conduct of its
business to engage solely in the following activities:

 

(i)            To construct, own, hold, sell, assign, transfer, operate, lease,
mortgage, pledge and otherwise deal with the Property and the Improvements as
contemplated hereby; and

 

(ii)           To exercise all powers enumerated in the Limited Liability
Company Act or Business Corporation Law of the State of Delaware necessary or
convenient to the conduct, promotion or attainment of the business or purposes
otherwise set forth herein and for no other purpose.

 

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(b)           The Borrower shall only incur indebtedness in an amount necessary
to (i) acquire, hold, own, manage, finance, re-finance, operate, lease,
maintain, design, develop, improve, demolish, rehabilitate, renovate, alter
and/or dispose of the Project (including additions thereto) in accordance with
the terms of the PAL Lease and the other Operative Documents, (ii) as
applicable, to acquire, hold, own, manage, finance, re-finance, operate, lease,
maintain, design, develop, improve, demolish, rehabilitate, renovate, alter
and/or dispose of additional property reasonably related to the purposes
specified in the preceding clause (i) at or in the vicinity of any Installation
in accordance with the terms of the PAL Lease and the other Operative Documents
and (iii) to engage in any or all lawful activities incidental to the foregoing.
For so long as the Obligations remain unpaid and the liens and security
interests of the Mortgages exist on any portion of the Property, the Borrower
shall not (i) incur, assume, or guaranty any other indebtedness, other than
(x) the Senior Loan, the Junior Loan, the Subordinate Loan and the Swap
Obligations, (y) trade payables or accrued expenses incurred in the ordinary
course of business of owning and operating the Property and due and payable
within thirty (30) days, and (z) financing for furniture, fixture and equipment
that has been approved by the Lender in advance, such approval not to be
unreasonably conditioned, withheld or delayed, (ii) grant any lien(s) or
security interest(s) in the Property other than to the Lender or as specifically
approved by Lender, (iii) dissolve or liquidate, or consolidate or merge with or
into any other entity, or convey or transfer its properties and assets
substantially as an entirety or transfer any of its beneficial interests to any
entity, (iv) voluntarily commence a case with respect to itself, as debtor,
under the Federal Bankruptcy Code or any similar federal or state statute
without the unanimous consent of all of the members of the limited liability
company, or (v) except with respect to such amendments which are required to
effectuate any action by Borrower which is expressly permitted herein, make any
material amendment to its articles of organization or operating agreement
without first notifying the Lender of such amendment and obtaining the prior
written approval of the Lender (which approval will not be unreasonably
withheld, conditioned or delayed).

 

(c)           Borrower shall observe and comply with the SPE Provisions.

 

Section 4.32           Preservation of Rights.

 

Borrower shall obtain, preserve and maintain (or cause to be obtained, preserved
and maintained) in good standing, as applicable, all rights, privileges and
franchises necessary for the operation of the Project and the conduct of
Borrower’s business thereon or therefrom.

 

Section 4.33           Income from Project; Rents.

 

Rents and all other income derived from or in relation to the Project shall be
deposited and applied in accordance with the Lock Box Agreement.

 

Section 4.34           Notice to Lender.

 

If, at any time, Borrower becomes aware, or has reasonable cause to believe,
that any Release or threatened Release of any Hazardous Material has occurred
after the date hereof or

 

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will occur at the Project, or if Borrower identifies or otherwise becomes aware
of any noncompliance or alleged non-compliance with any Environmental
Requirement by Borrower or at the Project, any threatened or pending
Environmental Claim related to the Project or any event or condition which would
reasonably be expected to result in an Environmental Claim, Borrower shall
notify Lender promptly in writing of such circumstance and shall include a full
description of all relevant information. Borrower shall, upon receipt, promptly
deliver to Lender a copy of any report, audit, summary or investigation, of any
kind or character, whether prepared by or on behalf of Borrower or by any other
Person, related to environmental conditions at the Project or the compliance
status of the Project with respect to any Environmental Requirement.

 

Section 4.35           Site Assessments and Information.

 

If Lender shall ever have reasonable cause to believe that any Release or
threatened Release of a Hazardous Material or any non-compliance with any
Environmental Requirement has occurred after the date hereof with respect to the
Project, which Release would reasonably be expected to result in an
Environmental Claim related to the Property which materially adversely affects
the ability of Borrower to perform the Obligations, then Borrower shall, within
ninety (90) days of written request by Lender and at Borrower’s expense, provide
to Lender an environmental site assessment or compliance audit of the Project
which addresses such conditions. Such environmental site assessment or
compliance audit (or both) shall be performed to the reasonable satisfaction of
Lender, in accordance with good environmental engineering practices and by a
consulting firm reasonably acceptable to Lender. Each report shall be addressed
to Lender. A copy of each report and all supporting documents (including,
without limitation, any reliance letters required by Lender) shall be promptly
furnished to Lender.  Simultaneously with the delivery of such supplemental
environmental reports, Borrower will provide an updated reliance letter from
Tetra Tech to the effect that Lender may rely upon the supplemental
environmental reports delivered to Lender after delivery of the initial Phase I
and Phase II environmental reports to at least the same extent that Lender was
entitled to rely on the initial Phase I and Phase II environmental reports.

 

Section 4.36           Response to Releases, Non-Compliance and Environmental
Claims.

 

Except to the extent the responsibility for such matters is retained by the Army
pursuant the Lease, Borrower shall, in compliance with all Environmental
Requirements, promptly undertake and complete any and all investigations,
testing, or abatement, clean up, remediation, response or other corrective
action necessary to: (a) remove, remediate, clean up or abate any Release or
threatened Release of any Hazardous Material at or from the Project; (b) correct
any non-compliance with any Environmental Requirement by Borrower or at the
Project; (c) address any unsafe or hazardous condition at the Project resulting
from or related to any Hazardous Material; or (d) make an appropriate response
to any threatened or pending Environmental Claim related to Borrower or the
Project, in all cases to the extent required by Environmental Laws. A copy of
any such report or other document (and all supporting documents) shall be
promptly furnished to Lender. Borrower shall use commercially reasonable efforts
to enforce the obligations of the Army under the Lease with respect to any
Environmental Requirements.

 

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Section 4.37           Delivery and Maintenance of Payment and Performance Bond.

 

Borrower shall cause to be delivered prior to the commencement of construction
and maintained throughout the period required in the Design/Build Agreement,
payment and performance bonds or such other instruments satisfying the
requirements of Section 3.24.1 of the Design/Build Agreement, including a dual
oblige rider in favor of Lender.

 

Section 4.38           Intercreditor Agreement.

 

Borrower has read and consents to the provisions of the Intercreditor Agreement
(including, without limitation, Section 12(g) and Exhibit E thereto).

 

Article V

Negative Covenants

 

Section 5.1             Conditional Sales.

 

Borrower shall not incorporate in the Improvements any property acquired under a
conditional sales contract or lease or as to which the vendor retains title or a
security interest, without the prior written consent of Lender.

 

Section 5.2             Changes to Plans and Specifications.

 

Borrower shall not make or permit any changes in the Plans and Specifications,
including any such changes that alter, diminish or add to the work to be
performed or change the design of the Improvements, without the prior written
consent of Lender to the extent that Lender’s consent is required under the
Design/Build Agreement, including Section 8.6.2 thereof.

 

Section 5.3             Insurance Policies and Bonds.

 

Borrower shall not do or permit to be done anything that would affect the
coverage or indemnities provided for pursuant to the provisions of any insurance
policy, performance bond, labor and material payment bond or any other bond, or
the Construction Guaranty given in connection with the development of the Land
or the construction of the Improvements.

 

Section 5.4             Commingling.

 

Borrower shall not commingle the funds and other assets of Borrower with those
of any affiliate or any other Person except as otherwise permitted by the Lock
Box Agreement.

 

Section 5.5             Additional Debt.

 

Borrower shall not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than (a) the Senior Loan, (b) any
Swap Obligations of Borrower under any Swap Transaction permitted under the
Senior Loan Agreement, (c) the Junior Loan, (d) the Subordinate Loan and any
other subordinated debt approved by Lender in connection with the Closing,
(e) its obligations under the Project Documents, and (f) advances, leases or
trade debt or accrued expenses incurred in the ordinary course of business of
operating,

 

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using, maintaining, managing or leasing the Project. No debt other than the
Junior Loan may be secured by the Project, whether senior, subordinate or pari
passu so long as any Obligations remain outstanding, except for the Senior Loan,
the Subordinate Loan, any Swap Obligations of Borrower under any Swap
Transaction permitted under the Senior Loan Agreement, and any other secured
subordinated debt approved by Lender in connection with the Closing.

 

Section 5.6             Compliance with Environmental Requirements.

 

Borrower will not cause or commit, and will not permit or allow any employee,
contractor, or other agent of Borrower to continue to cause or commit: (a) any
non-compliance with any Environmental Requirement by Borrower, by or with
respect to the Project or any use of or condition or activity at the Project;
(b) the generation, storage or use of any Hazardous Material at the Project,
except for Hazardous Materials that are legally used, stored or generated as a
consequence of using the Project for its permitted business purposes, but only
so long as the use, storage or generation of such Hazardous Materials is in
compliance with all Environmental Requirements; (c) the treatment, disposal or
Release of any Hazardous Material at the Project in any manner that violates an
Environmental Law or could reasonably be expected to result in a Environmental
Claim; (d) except as permitted by subsection (b) of this Section, the
installation of any below-ground storage tanks containing Hazardous Materials at
the Project; (e) except as permitted by subsection (b) of this Section, any
other activity which could create any unsafe or hazardous condition resulting
from or related to Hazardous Materials at the Project; or (f) the attachment of
any environmental lien to the Project. Borrower shall perform all reasonable
actions necessary to protect the fair market value of the Project from
impairment as a result of Hazardous Materials.

 

Section 5.7             Lease.

 

So long as any Obligations remain outstanding, Borrower will not terminate the
Lease, Borrower will comply with all requirements of the Lease and Borrower will
not amend or supplement the Lease without the written consent of Lender (not to
be unreasonably withheld, conditioned or delayed).

 

Section 5.8             Swap Contracts.

 

Except as provided in the Senior Loan Agreement and in accordance with the terms
thereof, Borrower shall not incur any Swap Obligations or enter into any Swap
Contract without the prior written consent of Lender (such consent to be not
unreasonably withheld, provided that such consent may be conditioned on
intercreditor, security or lien issues).

 

Section 5.9             Construction.

 

Borrower covenants that no construction, other than (i) such work as is
necessary for Borrower to be in compliance with the terms and conditions of the
Lease (including, without limitation, Conditions 21 and 22 of the PAL Lease),
and (ii) the work which is otherwise contemplated in the Closing documents
(including, without limitation, the Design/Build Agreement and Change Orders
thereto), as the same may be amended, will take place during the term of the
Loan without Lender’s consent (such consent not to be unreasonably withheld

 

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conditioned or delayed). The parties agree and acknowledge that such work
consists of the LSCR Phase of the Project, as described in the Lease.

 

Section 5.10           Project Document Modifications.

 

Before entering into any amendment or supplement to a Project Document, Borrower
shall obtain the written consent of Lender (which consent shall not be
unreasonably withheld, conditioned or delayed).

 

Article VI

Events of Default.

 

The occurrence or happening, from time to time, of any one or more of the
following shall constitute an Event of Default under this Agreement:

 

Section 6.1             Payment Default.

 

Borrower fails to pay principal or interest when due and payable under the
Junior Note (without any notice or cure period), or Borrower fails to pay any
other Obligation due and payable under this Agreement within thirty (30) days
after its receipt of written notice from Lender that such Obligation is then due
and payable.

 

Section 6.2             Default Under Other Junior Loan Documents and Project
Documents.

 

An “event of default” (as defined therein) by Borrower following all notice and
cure periods occurs under the Junior Note, any of the Mortgages or any of the
other Junior Loan Documents or the Project Documents, or Borrower fails to
promptly pay, perform, observe or comply with any term, obligation or agreement
contained in any of the other Junior Loan Documents or Project Documents (within
any applicable grace or cure period).

 

Section 6.3             Accuracy of Information; Representations and Warranties.

 

Any information contained in any financial statement, schedule, report or any
other document prepared by or on behalf of the Borrower, Guarantor or an
Affiliate and delivered to Lender in connection with the Junior Loan proves at
any time not to be in all material respects true and accurate, or Borrower shall
have failed to state any material fact or any fact necessary to make such
information not misleading, or any representation or warranty contained in this
Agreement or in any other Junior Loan Document or other document, certificate or
opinion delivered by Borrower or Guarantor to Lender in connection with the
Junior Loan, proves at any time to be incorrect or misleading in any material
respect either on the date when made or on the date when reaffirmed pursuant to
the terms of this Agreement.

 

Section 6.4             Deposits.

 

Borrower fails to deposit funds with Lender, in the amount requested by Lender,
pursuant to the provisions of Section 4.3 or Section 4.11, within ten (10) days
from the effective date of a Notice from Lender requesting such deposit and in
accordance with the Lock Box Agreement, or Borrower fails to deliver to Lender
any Condemnation Awards or Insurance Proceeds within the

 

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earlier of ten (10) days after Borrower’s receipt thereof or five (5) days after
notice from the Lender requesting such deposit and in accordance with the Lock
Box Agreement or Borrower fails to deposit any other funds in accordance with
the Lock Box Agreement.

 

Section 6.5             Insurance Obligations.

 

Borrower fails to promptly perform or comply with any of the covenants contained
in the Junior Loan Documents with respect to maintaining insurance, including
the covenants contained in Section 4.9, and such failure, other than a failure
resulting from the termination of an insurance policy (where written notice of
such termination has been provided to Borrower at least thirty (30) days prior
to such termination), continues for a period of fifteen (15) days after Notice
thereof from Lender to Borrower.

 

Section 6.6             Other Obligations.

 

Borrower fails to promptly perform or comply with any of the Obligations set
forth in this Agreement (other than those expressly described in other Sections
of this Article VI), and such failure continues uncured for a period of thirty
(30) days after Notice from Lender to Borrower, unless (a) such failure, by its
nature, is not capable of being cured within such period, and (b) within such
period, Borrower commences to cure such failure and thereafter diligently
prosecutes the cure thereof, and (c) Borrower causes such failure to be cured no
later than ninety (90) days after the date of such Notice from Lender (or such
longer period as the Lender approves in writing).

 

Section 6.7             Progress of Construction.

 

Construction of all or substantially all of the Improvements is abandoned or is
discontinued for a period of more than twenty (20) consecutive days and such
event impairs the amount of Revenues, as defined in the Lock Box Agreement, to
be paid into the Lock Box Account.

 

Section 6.8             Damage to Improvements.

 

All or substantially all of the Improvements are damaged or destroyed by fire or
other casualty and Lender determines that the Improvements cannot be restored
and completed in accordance with the terms and provisions of this Agreement, the
Lock Box Agreement and the Mortgages.

 

Section 6.9             Lapse of Permits or Approvals.

 

Any permit, license, certificate or approval that Borrower is required to obtain
with respect to the construction, operation, development, leasing or maintenance
of the Improvements or the Property lapses or ceases to be in full force and
effect.

 

Section 6.10           Completion of Construction.

 

Completion of Construction does not occur in accordance with the Project
Schedule or by Final Completion Date.

 

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Section 6.11           Mechanic’s Lien.

 

A lien for the performance of work or the supply of materials filed against the
Property, or any stop notice served on Borrower, the Design/Build Contractor or
Lender, remains unsatisfied or unbonded for a period of sixty (60) days after
the date of filing or service.

 

Section 6.12           Survey Matters.

 

Any Survey required by Lender pursuant to Schedule 5 during the period of
construction shows any matter which in Lender’s reasonable judgment would
interfere with the Construction of the Improvements or the operation or use of
the Property or would create an exception to the title insurance policies
insuring the Mortgages which is not acceptable to Lender, and such matter is not
removed within a period of sixty (60) days after Notice thereof by Lender to
Borrower, unless (a) such matter, by its nature, is not capable of being cured
within such period, and (b) within such period, Borrower commences to cure such
failure and thereafter diligently prosecutes the cure thereof, and (c) Borrower
causes such failure to be cured no later than ninety (90) days after the date of
such Notice from Lender (or such longer period as the Lender approves in
writing).

 

Section 6.13           Design/Build Contractor Default.

 

The Design/Build Contractor defaults under the Design/Build Agreement in a
manner which Lender reasonably deems to be material, and, unless otherwise
agreed in writing by Lender, Borrower fails promptly to exercise its rights and
remedies under the Design/Build Agreement with respect to such default, or
Borrower defaults under the Design/Build Agreement.

 

Section 6.14           Senior Loan Default.

 

An Event of Default (as defined in the Senior Loan Agreement) occurs and such
Event of Default is not cured by Borrower prior to any cure thereof by Lender
(it being agreed that Lender shall be under no obligation to undertake such
cure).

 

Section 6.15           Bankruptcy.

 

Borrower or Guarantor files a bankruptcy petition or makes a general assignment
for the benefit of creditors or a bankruptcy petition is filed against Borrower
or Guarantor and such involuntary bankruptcy petition continues undismissed for
a period of sixty (60) days after the filing thereof.

 

Section 6.16           Appointment of Receiver, Trustee, Liquidator.

 

Borrower or Guarantor applies for or consents in writing to the appointment of a
receiver, trustee or liquidator of Borrower, Guarantor, the Property or all or
substantially all of the other assets of Borrower, or Guarantor, or any member
of the Borrower or an order, judgment or decree is entered by any court of
competent jurisdiction on the application of a creditor appointing a receiver,
trustee or liquidator of Borrower, Guarantor, the Property or all or
substantially all of the other assets of Borrower, Guarantor, or any member of
the Borrower.

 

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Section 6.17           Inability to Pay Debts; Judgment.

 

Borrower or Guarantor becomes unable or admits in writing its inability or fails
generally to pay its debts as they become due, or a final non-appealable
judgment for the payment of money including more than $100,000 is entered
against Borrower or Guarantor, and Borrower or Guarantor fails to discharge the
same, or causes it to be discharged or bonded off to Lender’s satisfaction,
within sixty (60) days from the date of the entry of such judgment.

 

Section 6.18           Dissolution; Change in Business Status.

 

Unless the written consent of Lender is previously obtained, all or
substantially all of the business assets of Borrower or Guarantor are sold,
Borrower or Guarantor is dissolved, or there occurs any change in the form of
business entity through which Borrower or Guarantor presently conducts its
business or any merger or consolidation involving Borrower or Guarantor.

 

Section 6.19           Default Under Other Indebtedness.

 

Borrower fails to pay any indebtedness (other than the Junior Loan) owed by
Borrower to Lender when and as due and payable (whether by acceleration or
otherwise).

 

Section 6.20           Liens.

 

Any lien granted under the Lock Box Agreement in favor of Lender on any
Collateral is not perfected or is released or becomes unperfected and, after
Notice thereof from Lender, Borrower does not take reasonable action directed by
Lender which is necessary to cause such liens to become perfected within thirty
(30) days after such lien becomes unperfected or is released.

 

Section 6.21           Change in Controlling Interest.

 

Without the prior written consent of Lender, at any time (a) less than 51% of
the membership interests of Borrower are owned by RE-MM and/or the Army or
(b) RE-MM and/or the Army ceases to be the managing member of Borrower.

 

Section 6.22           Material Adverse Change.

 

In the reasonable opinion of Lender, the prospect of payment or performance of
all or any part of the Obligations has been impaired because of a material
adverse change in the financial condition, results of operations, business or
properties of Borrower, Guarantor, any other Person liable for the payment or
performance of any of the Obligations and such change has a Material Adverse
Effect.

 

Section 6.23           Termination of Lease or other Project Documents.

 

The Lease is terminated for any reason whatsoever or the other Project Documents
are terminated (without the written consent of the Lender) for any reason
whatsoever.

 

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Section 6.24           Default Under Guaranty.

 

Guarantor defaults in any of its obligations under the Guaranty, after the
expiration of any applicable notice and cure period.

 

Article VII

Remedies on Default

 

Section 7.1             Remedies on Default.

 

If an Event of Default shall occur and be continuing, Lender shall have the
right, in addition to any other rights or remedies available to Lender under the
Mortgages or any of the other Junior Loan Documents or under applicable Law, to
exercise any one or more of the following rights and remedies:

 

(a)           Lender may terminate its obligation to advance any further
principal of the Junior Loan pursuant to this Agreement by Notice to Borrower.

 

(b)           Lender may accelerate all of Borrower’s Obligations under the
Junior Loan Documents, whether or not matured and regardless of the adequacy of
any other collateral securing the Junior Loan, whereupon such Obligations shall
become immediately due and payable, without notice of default, acceleration or
intention to accelerate, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or notices or demands of any kind or character (all of
which are hereby waived by Borrower); it being acknowledged and agreed by Lender
that any such acceleration shall be without the imposition of any prepayment fee
or prepayment penalty of any kind.

 

(c)           Lender may apply to any court of competent jurisdiction for, and
obtain appointment of, a receiver for the Property.

 

(d)           Subject to the terms of the Lock Box Agreement, Lender may set off
the amounts due Lender under the Junior Loan Documents against any and all
accounts, credits, money, securities or other property of Borrower now or
hereafter on deposit with, held by or in the possession of Lender to the credit
or for the account of Borrower, without notice to or the consent of Borrower,
and any and all funds in the funds and accounts established under the Lock Box
Agreement will be applied to the payment of the Junior Loan pursuant to the
terms and conditions of the Lock Box Agreement.

 

(e)           Lender may make Protective Advances and any such Protective
Advances shall bear interest at the Past Due Rate under the Junior Note.

 

(f)            Lender may enter into possession of the Property and perform any
and all work and labor necessary to complete the development of the Land and the
Construction of the Improvements (whether or not in accordance with the Plans
and Specifications) and to employ watchmen to protect the Property and the
Improvements. All sums expended by Lender for such purposes shall be deemed to
have been advanced to Borrower under the Junior Note and shall be secured by the
Mortgages. For this purpose, Borrower hereby constitutes and appoints Lender its
true and lawful attorney-in-fact with

 

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full power of substitution, which power is coupled with an interest, to complete
the work in the name of Borrower, and hereby empowers said attorney or
attorneys, in the name of Borrower or Lender:

 

(i)            To use any funds of Borrower including any balance which may be
held by Lender and any funds which may remain unadvanced hereunder for the
purpose of completing the development of the Land and the construction of the
Improvements, whether or not in the manner called for in the Plans and
Specifications;

 

(ii)           To make such additions and changes and corrections to the Plans
and Specifications as shall be necessary or desirable in the judgment of Lender
to complete the development of the Land and the construction of the
Improvements;

 

(iii)          To employ such contractors, subcontractors, agents, architects
and inspectors as shall be necessary or desirable for said purpose;

 

(iv)          To pay, settle or compromise all existing bills and claims which
are or may be liens against the Property, or may be necessary or desirable for
the completion of the work or the clearance of title to the Property;

 

(v)           To execute all applications and certificates which may be required
in the name of Borrower;

 

(vi)          To enter into, enforce, modify or cancel the Lease and to fix or
modify Rents on such terms as Lender may consider proper;

 

(vii)         To file for record, at Borrower’s cost and expense and in
Borrower’s name, any notices of completion, notices of cessation of labor, or
any other notices that Lender in its sole and absolute discretion may consider
necessary or desirable to protect its security; and

 

(viii)        To do any and every act with respect to the development of the
Land and the construction of the Improvements which Borrower may do in its own
behalf.

 

(g)           It is understood and agreed that this power of attorney shall be
deemed to be a power coupled with an interest which cannot be revoked. Said
attorney-in-fact shall also have the power to prosecute and defend all actions
or proceedings in connection with the development of the Land and the
construction of the Improvements and to take such actions and to require such
performance as Lender may deem reasonably necessary.

 

(h)           Borrower hereby constitutes and appoints Lender its true and
lawful attorney-in-fact with full power of substitution, which power is coupled
with an interest, and hereby empowers said attorney or attorneys, in the name of
Borrower or Lender, to exercise any remedies available to Lender under the
Collateral Assignment; provided, however, such power of attorney shall be
exercisable only during the continuation of an Event of Default.

 

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Section 7.2             No Release or Waiver; Remedies Cumulative and
Concurrent.

 

Borrower shall not be relieved of any Obligation by reason of the failure of
Lender to comply with any request of Borrower or of any other Person to take
action to foreclose on the Property under the Mortgages or otherwise to enforce
any provision of the Junior Loan Documents, or by reason of the release,
regardless of consideration, of all or any part of the Property. No delay or
omission of Lender to exercise any right, power or remedy accruing upon the
happening of an Event of Default shall impair any such right, power or remedy or
shall be construed to be a waiver of any such Event of Default or any
acquiescence therein. No delay or omission on the part of Lender to exercise any
option for acceleration of the maturity of the Obligations, or for foreclosure
of any of the Mortgages following any Event of Default as aforesaid, or any
other option granted to Lender hereunder in any one or more instances, or the
acceptance by Lender of any partial payment on account of the Obligations shall
constitute a waiver of any such Event of Default and each such option shall
remain continuously in full force and effect. No remedy herein conferred upon or
reserved to Lender is intended to be exclusive of any other remedies provided
for in the Junior Loan Documents, and each and every such remedy shall be
cumulative, and shall be in addition to every other remedy given hereunder, or
under the Junior Loan Documents, or now or hereafter existing at Law or in
equity or by statute. Every right, power and remedy given by the Junior Loan
Documents to Lender shall be concurrent and may be pursued separately,
successively or together against Borrower or the Property or any part thereof,
and every right, power and remedy given by the Junior Loan Documents may be
exercised from time to time as often as may be deemed expedient by Lender.

 

Article VIII

Miscellaneous

 

Section 8.1             Further Assurances; Authorization to File Documents.

 

At any time, and from time to time, upon request by Lender, Borrower will, at
Borrower’s expense, (a) correct any defect, error or omission which may be
discovered in the form or content of any of the Junior Loan Documents, and
(b) make, execute, deliver and record, or cause to be made, executed, delivered
and recorded, any and all further instruments, certificates and other documents
as may, in the opinion of Lender, be reasonably necessary or desirable in order
to complete, perfect or continue and preserve the lien of the Mortgages;
provided, however, that the foregoing shall in no event be deemed to require
Borrower to take any action that would increase its obligations or decrease its
rights under this Agreement and the Junior Loan Documents. Upon any failure by
Borrower to do so, Lender may make, execute and record any and all such
instruments, certificates and other documents for and in the name of Borrower,
all at the sole expense of Borrower, and Borrower hereby appoints Lender the
agent and attorney-in-fact of Borrower to do so, this appointment being coupled
with an interest and being irrevocable. Without limitation of the foregoing,
Borrower irrevocably authorizes Lender at any time and from time to time to file
any initial financing statements, amendments thereto and continuation statements
reasonably deemed necessary or desirable by Lender to establish or maintain the
validity, perfection and priority of the security interests granted in the
Mortgages, and Borrower ratifies any such filings made by Lender prior to the
date hereof. In addition, at any time, and from time to time, upon reasonable
request by Lender, Borrower will, at Borrower’s expense, provide any and all
further instruments, certificates and other documents as

 

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may, in the reasonable opinion of Lender, be necessary or desirable in order to
verify the Borrower’s identity and background in a manner satisfactory to
Lender.

 

Section 8.2             No Warranty by Lender.

 

By accepting or approving anything required to be observed, performed or
fulfilled by Borrower or to be given to Lender pursuant to this Agreement,
including any certificate, Survey, receipt, appraisal or insurance policy,
Lender shall not be deemed to have warranted or represented the sufficiency,
legality, effectiveness or legal effect of the same, or of any term, provision
or condition thereof and any such acceptance or approval thereof shall not be or
constitute any warranty or representation with respect thereto by Lender.

 

Section 8.3             Standard of Conduct of Lender.

 

Unless otherwise set forth in this Agreement or any other Junior Loan Document
or Project Document, nothing contained in this Agreement or any other Junior
Loan Document shall limit the right of Lender to exercise its business judgment
or to act, in the context of the granting or withholding of any Advance or
consent under this Agreement or any other Junior Loan Document or Project
Document, in a subjective manner, whether or not objectively reasonable under
the circumstances, so long as Lender’s exercise of its business judgment or
action is made or undertaken reasonably and in good faith. Borrower and Lender
intend by the foregoing to set forth and affirm their entire understanding with
respect to the standard pursuant to which Lender’s duties and obligations are to
be judged and the parameters within which Lender’s discretion may be exercised
hereunder and under the other Junior Loan Documents and Project Documents,
except as otherwise set forth therein. As used herein, “good faith” means
honesty in fact in the conduct and transaction concerned.

 

Section 8.4             No Partnership.

 

Nothing contained in this Agreement shall be construed in a manner to create any
relationship between Borrower and Lender other than the relationship of borrower
and lender and Borrower and Lender shall not be considered partners or
co-venturers for any purpose on account of this Agreement.

 

Section 8.5             Severability.

 

In the event any one or more of the provisions of this Agreement or any of the
other Junior Loan Documents shall for any reason be held to be invalid, illegal
or unenforceable, in whole or in part or in any other respect, or in the event
any one or more of the provisions of any of the Junior Loan Documents operates
or would prospectively operate to invalidate this Agreement or any of the other
Junior Loan Documents, then and in either of those events, at the option of
Lender, such provision or provisions only shall be deemed null and void and
shall not affect the validity of the remaining Obligations, and the remaining
provisions of the Junior Loan Documents shall remain operative and in full force
and effect and shall in no way be affected, prejudiced or disturbed thereby.

 

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Section 8.6             Notices.

 

All Notices required or which any party desires to give hereunder or under any
other Junior Loan Document shall be in writing and, unless otherwise
specifically provided in such other Junior Loan Document, shall be deemed
sufficiently given or furnished if delivered by personal delivery, by nationally
recognized overnight courier service or by certified United States mail, postage
prepaid, return receipt requested, addressed to the party to whom directed at
the applicable address set forth below (unless changed by similar notice in
writing given by the particular party whose address is to be changed) or by
facsimile. Any Notice shall be deemed to have been given either at the time of
personal delivery or, in the case of courier or mail, as of the date of first
attempted delivery at the address and in the manner provided herein, or, in the
case of facsimile, upon receipt; provided that service of a Notice required by
any applicable statute shall be considered complete when the requirements of
that statute are met. Notwithstanding the foregoing, no notice of change of
address shall be effective except upon actual receipt. This Section shall not be
construed in any way to affect or impair any waiver of notice or demand provided
in this Agreement or in any other Junior Loan Document or to require giving of
notice or demand to or upon any Person in any situation or for any reason.

 

The address and fax number of Borrower are:

 

Rest Easy LLC
c/o Actus Lend Lease LLC
1801 West End Avenue
Suite 1700
Nashville, TN 37203
Attention: Dale Connor, Managing Director
Fax: (615) 324-5220

 

With copies to:

 

Rest Easy LLC
c/o Actus Lend Lease LLC
700 Lanidex Plaza
Parsippany, NJ 07054
Attention: General Counsel
Fax: (973) 503-5730

 

Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attention: Edward J. Hunter, Esq.
Fax: (973) 597-2591

 

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The address and fax number of Lender are:

 

Behringer Harvard PAL I, LLC
15601 Dallas Parkway, Suite 600
Addison, TX 75001
Attn: Mr. Andrew Bruce
Fax: (214) 655-1610

 

With copies to:

 

Behringer Harvard PAL I, LLC
15601 Dallas Parkway, Suite 600
Addison, TX 75001
Attention: Chief Legal Officer
Fax: (214) 655-1610

 

and

 

Powell Coleman & Arnold LLP
8080 North Central Expressway, Suite 1380
Dallas, Texas 75206
Attention: Pat Arnold, Esq.
Fax: (214) 373-8768

 

Section 8.7             Permitted Successors and Assigns; Disclosure of
Information.

 

(a)           Each and every one of the covenants, terms, provisions and
conditions of this Agreement and the Junior Loan Documents shall apply to, bind
and inure to the benefit of Borrower, its successors and those assigns of
Borrower consented to in writing by Lender, and shall apply to, bind and inure
to the benefit of Lender and the endorsees, transferees, successors and assigns
of Lender, and all Persons claiming under or through any of them.

 

(b)           Borrower agrees not to transfer, assign, pledge or hypothecate any
right or interest in any payment or advance due pursuant to this Agreement, or
any of the other benefits of this Agreement, without the prior written consent
of Lender, which consent may be withheld by Lender in its sole and absolute
discretion. Any such transfer, assignment, pledge or hypothecation made or
attempted by Borrower without the prior written consent of Lender shall be void
and of no effect. No consent by Lender to an assignment shall be deemed to be a
waiver of the requirement of prior written consent by Lender with respect to
each and every further assignment and as a condition precedent to the
effectiveness of such assignment.

 

(c)           Lender may sell or offer to sell the Junior Loan or interests
therein to one or more assignees or participants. Borrower shall execute,
acknowledge and deliver any and all instruments reasonably requested by Lender
in connection therewith, and to the

 

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extent, if any, specified in any such assignment or participation, such
assignee(s) or participant(s) shall have the same rights and benefits with
respect to the Junior Loan Documents as such Person(s) would have if such
Person(s) were Lender hereunder. Lender may disseminate any information it now
has or hereafter obtains pertaining to the Junior Loan, including any security
for the Junior Loan, any credit or other information on the Property (including
environmental reports and assessments), Borrower or any of Borrower’s
principals, to any actual or prospective assignee or participant, to Lender’s
Affiliates, to any regulatory body having jurisdiction over Lender, to any
actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to Borrower and the Junior Loan, or to any other party as
necessary or appropriate in Lender’s reasonable judgment, provided all such
parties (other than regulatory bodies) agree to use best efforts to keep any
such information so provided confidential (subject to any requirements to
disclose such information to governmental or regulatory authorities and subject
to the ability to provide such information to their respective legal counsel or
accountants).

 

Section 8.8             Amendment; Modification; Waiver.

 

None of the terms or provisions of this Agreement may be amended, changed,
waived, modified, discharged or terminated except by instrument in writing
executed by the party or parties against whom enforcement of the amendment,
change, waiver, modification, discharge or termination is asserted. None of the
terms or provisions of this Agreement shall be deemed to have been abrogated or
waived by reason of any failure or failures to enforce the same. No failure or
delay by Lender in exercising any right or privilege hereunder or under any
other instrument contemplated hereby shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.

 

Section 8.9             Third Parties; Benefit.

 

All conditions to the obligation of Lender to make advances hereunder are
imposed solely and exclusively for the benefit of Lender and its assigns and no
other Persons shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make advances in the absence of strict compliance with any or all thereof and no
other Person shall, under any circumstances, be deemed to be the beneficiary of
such conditions, any or all of which may be freely waived in whole or in part by
Lender at any time in the sole and absolute exercise of its discretion. The
terms and provisions of this Agreement are for the benefit of the parties hereto
and, except as herein specifically provided, no other Person shall have any
right or cause of action on account thereof.

 

Section 8.10           Rules of Construction.

 

The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar
import refer to this Agreement in its entirety. The terms “agree” and
“agreements” mean and include “covenant” and “covenants.” The words “include”
and “including” shall be interpreted as if followed by the words “without
limitation.” The captions and headings contained in this Agreement are included
herein for convenience of reference only and shall not be considered a

 

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part hereof and are not in any way intended to define, limit or enlarge the
terms hereof. All references (a) made in the neuter, masculine or feminine
gender shall be deemed to have been made in all such genders, (b) made in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as well, (c) to the Junior Loan Documents are to
the same as extended, amended, restated, supplemented or otherwise modified from
time to time unless expressly indicated otherwise, (d) to the Land, the
Improvements or the Property shall mean all or any portion of each of the
foregoing, respectively, and (e) to Articles, Sections and Schedules are to the
respective Articles, Sections and Schedules contained in this Agreement unless
expressly indicated otherwise.

 

Section 8.11           Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which
shall be considered an original for all purposes; provided, however, that all
such counterparts shall together constitute one and the same instrument.

 

Section 8.12           Signs; Publicity.

 

Subject to the terms and provisions of the Lease, at Lender’s request and sole
cost and expense, Borrower shall place a sign at a location on the Property
satisfactory to Lender, which sign shall recite, among other things, that Lender
is financing the development of the Land and the construction of the
Improvements. Borrower expressly authorizes Lender to prepare and to furnish to
the news media for publication from time to time news releases with respect to
the Property which are approved by Borrower and the Army in their sole and
absolute discretion, specifically to include releases detailing Lender’s
involvement with the financing of the Property.

 

Section 8.13           Governing Law.

 

This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York, without giving effect to the principles
of conflicts of law. It is the intent and purpose of the parties hereto that the
provisions of Section 5-1401 of the General Obligations Law of the State of New
York shall apply to this Agreement. Notwithstanding anything to the contrary
provided in the foregoing, it is acknowledged and agreed that as to matters
which relate to the creation, perfection and enforcement of security interests
created under the Junior Loan Documents, the same shall be construed in
accordance with the laws of the State in which the applicable Collateral shall
be located.

 

In addition, it is hereby further acknowledged and agreed that ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED IN STATE OR FEDERAL COURTS LOCATED IN THE STATE AND COUNTY OF NEW YORK
AND EACH PARTY TO THIS AGREEMENT HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND IRREVOCABLY CONSENTS TO THE JURISDICTION OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING. THE PARTIES HERETO EACH
HEREBY IRREVOCABLY WAIVE ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY OF THE

 

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AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM OR LACKS JURISDICTION OVER SUCH PARTY. IT IS THE INTENT AND PURPOSE OF THE
PARTIES HERETO THAT THE PROVISIONS OF SECTION 5-1402 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK SHALL APPLY TO THIS AGREEMENT.

 

Section 8.14           Time of Essence.

 

Time shall be of the essence for each and every provision of this Agreement of
which time is an element.

 

Section 8.15           Electronic Transmission of Data.

 

Lender and Borrower agree that certain data related to the Junior Loan
(including confidential information, documents, applications and reports) may be
transmitted electronically, including transmission over the Internet. This data
may be transmitted to, received from or circulated among agents and
representatives of Borrower and/or Lender and their Affiliates and other Persons
involved with the subject matter of this Agreement, including any servicer of
the Junior Loan. Borrower and Lender acknowledge and agree that (a) there are
risks associated with the use of electronic transmission and that neither
Borrower nor Lender controls the method of transmittal or service providers,
(b) Borrower and Lender have no obligation or responsibility whatsoever and
assume no duty or obligation for the security, receipt or third-party
interception of any such transmission, and (c) Borrower and Lender will release,
hold harmless and indemnify each other from any claim, damage or loss, including
that arising in whole or part from strict liability or sole, comparative or
contributory negligence, which is related to the electronic transmission of
data.

 

Section 8.16           Dispute Resolution.

 

(a)           Arbitration. Except to the extent expressly provided below, any
Dispute shall, upon the request of either party, be determined by binding
arbitration in accordance with the Federal Arbitration Act, Title 9, United
States Code (or if not applicable, the applicable state law), the then-current
rules for arbitration of financial services disputes of AAA and the “Special
Rules” set forth below. In the event of any inconsistency, the Special
Rules shall control. The filing of a court action is not intended to constitute
a waiver of the right of Borrower or Lender, including the suing party,
thereafter to require submittal of the Dispute to arbitration. Any party to this
Agreement may bring an action, including a summary or expedited proceeding, to
compel arbitration of any Dispute in any court having jurisdiction over such
action. For the purposes of this Dispute Resolution Section only, the terms
“party” and “parties” shall include any parent corporation, subsidiary or
Affiliate of Lender involved in the servicing, management or administration of
any obligation described in or evidenced by this Agreement, together with the
officers, employees, successors and assigns of each of the foregoing.

 

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(b)           Special Rules.

 

(i)            If the arbitration relates to collateral, the arbitration shall
be conducted in any U.S. state where real or tangible personal property
collateral is located or, if it does not relate to collateral, in the State of
New York.

 

(ii)           The arbitration shall be administered by AAA, who will appoint an
arbitrator; if AAA is unwilling or unable to administer the arbitration, or if
AAA is unwilling or unable to enforce or legally precluded from enforcing any
and all provisions of this Dispute Resolution Section, then any party to this
Agreement may substitute another arbitration organization that has similar
procedures to AAA and that will observe and enforce any and all provisions of
this Dispute Resolution Section. All Disputes shall be determined by one
arbitrator; however, if the amount in controversy in a Dispute exceeds Five
Million Dollars ($5,000,000), upon the request of any party, the Dispute shall
be decided by three arbitrators (for purposes of this Agreement, referred to
collectively as the “arbitrator”).

 

(iii)          All arbitration hearings will be commenced within ninety (90)
days of the demand for arbitration and completed within ninety (90) days from
the date of commencement; provided, however, that upon a showing of good cause,
the arbitrator shall be permitted to extend the commencement of such hearing for
up to an additional sixty (60) days.

 

(iv)          The judgment and the award, if any, of the arbitrator shall be
issued within thirty (30) days of the close of the hearing. The arbitrator shall
provide a concise written statement setting forth the reasons for the judgment
and for the award, if any. The arbitration award, if any, may be submitted to
any court having jurisdiction to be confirmed and enforced, and such
confirmation and enforcement shall not be subject to arbitration.

 

(v)           The arbitrator will give effect to statutes of limitations and any
waivers thereof in determining the disposition of any Dispute and may dismiss
one or more claims in the arbitration on the basis that such claim or claims is
or are barred. For purposes of the application of the statute of limitations,
the service on AAA under applicable AAA rules of a notice of Dispute is the
equivalent of the filing of a lawsuit.

 

(vi)          Any dispute concerning this arbitration provision, including any
such dispute as to the validity or enforceability of this provision, or whether
a Dispute is arbitrable, shall be determined by the arbitrator; provided,
however, that the arbitrator shall not be permitted to vary the express
provisions of these Special Rules or the Reservations of Rights in
subsection (c) below.

 

(vii)         The arbitrator shall have the power to award legal fees and costs
pursuant to the terms of this Agreement.

 

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(viii)        The arbitration will take place on an individual basis with
reference to, resort to, or consideration of any form of class or class action.

 

(c)           Reservations of Rights. Nothing in this Agreement shall be deemed
to (i) limit the applicability of any otherwise applicable statutes of
limitation and any waivers contained in this Agreement, or (ii) apply to or
limit the right of Lender upon the occurrence and during the continuation of an
Event of Default (A) to exercise self help remedies such as (but not limited to)
setoff, or (B) to foreclose judicially or nonjudicially against any real or
personal property collateral, or to exercise judicial or nonjudicial power of
sale rights in any jurisdiction in which the Collateral, or any part thereof, is
located, (C) to obtain from a court provisional or ancillary remedies such as
(but not limited to) injunctive relief, writ of possession, prejudgment
attachment, or the appointment of a receiver, or (D) to pursue rights against a
party to this Agreement in a third-party proceeding in any action brought
against Lender in a state, federal or international court, tribunal or hearing
body (including actions in specialty courts, such as bankruptcy and patent
courts). Lender may exercise the rights set forth in clauses (A) through (D),
inclusive, before, during or after the pendency of any arbitration proceeding
brought pursuant to this Agreement. Neither the exercise of self help remedies
nor the institution or maintenance of an action for foreclosure or provisional
or ancillary remedies shall constitute a waiver of the right of any party,
including the claimant in any such action, to arbitrate the merits of the
Dispute occasioning resort to such remedies. No provision in the Junior Loan
Documents regarding submission to jurisdiction and/or venue in any court is
intended or shall be construed to be in derogation of the provisions in any
Junior Loan Document for arbitration of any Dispute.

 

(d)           Conflicting Provisions for Dispute Resolution. If there is any
conflict between the terms, conditions and provisions of this Section and those
of any other provision or agreement for arbitration or dispute resolution, the
terms, conditions and provisions of this Section shall prevail as to any Dispute
arising out of or relating to (i) this Agreement, (ii) any other Junior Loan
Document, (iii) any related agreements or instruments, or (iv) the transaction
contemplated herein or therein (including any claim based on or arising from an
alleged personal injury or business tort). In any other situation, if the
resolution of a given Dispute is specifically governed by another provision or
agreement for arbitration or dispute resolution, the other provision or
agreement shall prevail with respect to said Dispute.

 

(e)           Jury Trial Waiver in Arbitration. By agreeing to this Section, the
parties irrevocably and voluntarily waive any right they may have to a trial by
jury in respect of any Dispute.

 

Section 8.17           Nature of Obligations.

 

Except as provided in that the Guaranty of even date herewith executed by
Guarantor, the obligations of Borrower hereunder to pay and perform the
Obligations (including, without limitation, such Obligations as are evidenced by
the Junior Note) shall be without recourse to Borrower’ members, shareholders,
officers, affiliates, directors, partners, agents, employees or consultants, or
any affiliate of any such person, or to the property or assets of any such
person.

 

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Notwithstanding anything to the contrary herein, nothing herein shall be deemed
to be a waiver of any right which Lender may have under Sections 506(a), 506(b),
1111(b) or any other provision of the Federal Bankruptcy Code or any similar
federal or state statute to file a claim for the full amount of the Obligations
secured hereby or to require that all Collateral shall continue to secure all
Obligations owing to Lender in accordance with the Junior Note, this Agreement
and the other Junior Loan Documents. The foregoing will in no way limit Lender’s
recourse to the Collateral following an Event of Default or limit the liability
under any Contract to which any Affiliate of Borrower is a party and which has
been assigned to Junior Lender as Collateral for the Junior Loan, including but
not limited to the Construction Guaranty of even date herewith and any Contract
assigned as Collateral under the Assignment of Contracts, Permits and Approvals
of even date herewith executed by Borrower and the other parties thereto and the
Collateral Assignment of Lodging Management Agreement also of even date herewith
executed by Borrower and the other parties thereto.

 

Section 8.18           Waiver of Jury Trial.

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY
“DISPUTE” (FOR PURPOSES OF THIS SECTION, AS DEFINED IN SCHEDULE 1) AS SET FORTH
IN THIS AGREEMENT, TO THE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO ARBITRATION
OR IS DEEMED BY THE ARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT
ARBITRABLE OR NOT REQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY
JURY IN RESPECT OF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.” THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND
BORROWER AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR
TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THE JUNIOR LOAN DOCUMENTS. BORROWER AND
LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER
REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS
HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF
ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER
WITH COUNSEL.

 

Section 8.19           Additional Waivers.

 

BORROWER FURTHER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, IN CONNECTION
WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT BY OR ON BEHALF OF LENDER WITH
RESPECT TO THIS AGREEMENT, THE JUNIOR NOTE OR OTHERWISE IN RESPECT OF THE JUNIOR
LOAN, ANY AND EVERY RIGHT BORROWER MAY HAVE TO (X) INJUNCTIVE RELIEF,
(Y) INTERPOSE ANY COUNTERCLAIM THEREIN, OTHER THAN A

 

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COMPULSORY COUNTERCLAIM, AND (Z) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR
SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING CONTAINED IN THE IMMEDIATELY
PRECEDING SENTENCE SHALL PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR
MAINTAINING A SEPARATE ACTION AGAINST LENDER WITH RESPECT TO ANY ASSERTED CLAIM.
NOTWITHSTANDING ANY PROVISION TO THE CONTRARY IN ANY JUNIOR LOAN DOCUMENT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER SHALL NOT ASSERT,
AND EACH HEREBY WAIVES, ANY CLAIM AGAINST THE OTHER ON ANY THEORY OF LIABILITY
FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT
OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, ANY
JUNIOR LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED THEREBY, THE
JUNIOR LOAN OR THE USE OF THE PROCEEDS THEREOF.

 

Section 8.20           Limitation on Liability.

 

Borrower waives any right to assert or make any claim against Lender (or to sue
Lender upon any claim for) any special, indirect, incidental, punitive or
consequential damages in respect of any breach or wrongful conduct (whether the
claim is based on contract, tort or duty imposed by law) in connection with,
arising out of or in any way related to this Agreement, the other Junior Loan
Documents or the transactions contemplated hereby and/or thereby, or any act,
omission or event in connection therewith.

 

Section 8.21           Entire Agreement.

 

The Junior Loan Documents constitute the entire understanding and agreement
between Borrower and Lender with respect to the transactions arising in
connection with the Junior Loan, and supersede all prior written or oral
understandings and agreements between Borrower and Lender with respect to the
matters addressed in the Junior Loan Documents. In particular, and without
limitation, the terms of the Letter of Intent and any commitment by Lender to
make the Junior Loan are merged into the Junior Loan Documents. Except as
incorporated in writing into the Junior Loan Documents, there are no
representations, understandings, stipulations, agreements or promises, oral or
written, with respect to the matters addressed in the Junior Loan Documents.

 

Section 8.22           Lost Junior Note.

 

Upon receipt of an affidavit of an officer of Lender as to the loss, theft,
destruction or mutilation of the Junior Note or any other security document
which is not of public record, and, in the case of any such loss, theft,
destruction or mutilation, upon cancellation of the Junior Note or other
security document, Borrower will, at Lender’s sole cost and expense, issue, in
lieu thereof, a replacement note or other security document in the same
principal amount thereof and otherwise of like tenor.

 

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Section 8.23           Method of Payment.

 

All payments due hereunder and/or under the Junior Note shall be made by
Borrower to Lender at the address and in the manner provided in the Junior Note
or such other place as Lender may from time to time specify in writing in lawful
currency of the United States of America in immediately available funds, without
counterclaim or setoff and free and clear of, and without any deduction or
withholding for, any taxes or other payments.

 

Section 8.24           Pledge to the Federal Reserve.

 

Lender may at any time pledge or assign all or any portion of its rights under
the Junior Loan Documents which evidence and/or secure the Junior Loan to any of
the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or assignment or enforcement
thereof shall release Lender from its obligations under any of the Junior Loan
Documents (including, without limitation, the obligation to fund future advances
of the Junior Loan) which evidence and/or secure the Junior Loan.

 

Section 8.25           Right of Setoff.

 

Borrower hereby grants to Lender, a continuing lien, security interest and right
of setoff as security for all liabilities and obligations to Lender whether now
existing or hereafter arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Lender or any entity under the control of Bank of
America Corporation and its successors and/or assigns or in transit to any of
them. At any time, without demand or notice (any such notice being expressly
waived by Borrower), Lender may setoff the same or any part thereof and apply
the same to any liability or obligation of Borrower even though unmatured and
regardless of the adequacy of any other collateral security for the Junior Loan.
ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE JUNIOR LOAN, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.

 

Section 8.26           Usury.

 

All agreements between Borrower and Lender are hereby expressly limited so that
in no contingency or event whatsoever, whether by reason of acceleration of
maturity of the indebtedness to be advanced hereby or otherwise, shall the
amount paid or agreed to be paid to Lender for the use or the forbearance of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law and shall be subject to Section 18 of the Junior Note. The provisions of
Section 18 of the Junior Note shall control every other provision of all
agreements between Borrower and Lender.

 

Section 8.27           Application of Payments.

 

All payments received by Lender hereunder shall be applied first to the payment
of all fees, expenses and other amounts due to Lender (excluding principal and
interest), then to

 

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accrued interest, and the balance on account of outstanding principal; provided,
however, that after an Event of Default hereunder, payments will be applied to
the obligations of Borrower to Lender as Lender determines in its sole
discretion.

 

Section 8.28           Payment Date Adjustment for Non-Business Days.

 

If any payment under the Junior Note becomes due on a day which is not a
Business Day (as defined below), the due date of the Junior Note or payment
shall be extended to the next succeeding Business Day, and such extension of
time shall be included in computing interest and fees in connection with such
payment. As used herein, “Business Day” shall mean any day other than (i) a
Saturday or a Sunday, [(ii) a day on which commercial banks in the city in which
the Lock Box Account (as such capitalized term is defined in the Lock Box
Agreement) are located, are authorized or obligated by law, government decree or
executive order to be closed,] (iii) a day observed as a holiday by the federal
government, or (iv) a day on which the New York Stock Exchange is closed.

 

Section 8.29           Payment of Fees and Expenses.

 

Borrower shall pay within thirty (30) days following receipt of written demand
therefor (together with reasonable evidence substantiating such expenditures by
Lender), all Expenses of Lender in connection with the preparation,
administration, default, collection, waiver or amendment of Loan terms, or in
connection with Lender’s exercise, preservation or enforcement of any of its
rights, remedies or options hereunder, including, without limitation, reasonable
fees of outside legal counsel, accounting, consulting, brokerage or other
similar professional fees or expenses, and any reasonable fees or expenses
associated with travel or other reasonable costs relating to any appraisals
(subject to the terms and conditions set forth in this Agreement) or
examinations conducted in connection with the Loan or any collateral therefor,
and the amount of all such expenses shall, until paid, bear interest at the rate
applicable to principal hereunder (including any default rate) and be an
obligation secured by any collateral.

 

Section 8.30           [Reserved].

 

Section 8.31           Capital Adequacy.

 

If at any time Lender is a regulated financial institution such that the
applicable regulatory authority may impose capital adequacy requirements, in the
event the Lender shall have determined that any requirement of any law of the
United States of America, any regulation, order, interpretation, ruling,
official directive or guideline (whether or not having the force of law) of the
Board of Governors of the Federal Reserve System, the Comptroller of the
Currency, the Federal Deposit Insurance Corporation or any other board or
governmental or administrative agency of the United States of America which
shall impose, increase, modify or make applicable to the Junior Note or this
Agreement or cause the Junior Note or this Agreement to be included in any
reserve, special deposit, calculation used in the computation of regulatory
capital standards, assessment or other requirement which imposes on the Lender
any cost that is attributable to the maintenance thereof, then, and in each such
event, the Borrower shall promptly pay the Lender, upon its demand, such amount
as will compensate the Lender for any such cost, which determination may be
based upon the Lender’s reasonable allocation of the aggregate of such

 

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costs resulting from such events. In the event any such cost is a continuing
cost, a fee payable to the Lender may be imposed upon the Borrower periodically
for so long as any such cost is deemed applicable by the Lender, in an amount
determined by the Lender to be necessary to compensate the Lender for any such
cost, which determination may be based upon the Lender’s reasonable allocation
of the aggregate of such costs resulting from such events. The determination by
the Lender of the existence and amount of any such costs shall, in the absence
of manifest error, be conclusive. This section shall be available to Lender
regardless of any possible contention of invalidity or inapplicability of the
law, regulation or condition which shall have been imposed.

 

Section 8.32           Right to Sell Junior Loan to Participant.

 

Lender shall have the unrestricted right at any time and from time to time, and
without the consent of or notice to Borrower, to grant to one or more banks or
other financial institutions (each, a “Participant”) participating interests in
Lender’s obligation to lend hereunder and/or any or all of the Junior Loan,
provided that no such participation shall increase the obligations or decrease
the rights of Borrower under any of the Junior Loan Documents. In the event of
any such grant by Lender of a participating interest to a Participant, whether
or not upon notice to Borrower, Lender shall remain responsible for the
performance of its obligations hereunder (including, without limitation, the
obligation to make future advances) and Borrower shall continue to deal solely
and directly with Lender in connection with Lender’s rights and obligations
hereunder. Lender may furnish any information concerning Borrower in its
possession from time to time to prospective Participants, provided such
Participants agree to keep such information confidential.

 

Section 8.33           Junior Loan Assignment.

 

Lender shall have the unrestricted right from time to time, and without
Borrower’s or anyone else’s consent, to assign all or any portion of its rights
and obligations hereunder to one or more banks or other financial institutions
(each, an “Assignee”), which is an Eligible Assignee, and Borrower agrees that
it shall, at Lender’s sole cost and expense, execute or cause to be executed,
such documents, including without limitation, amendments to this Agreement and
to any other documents, instruments and agreements executed in connection
herewith as Lender shall reasonably deem necessary to effect the foregoing. In
addition, at the request of Lender and any such Assignee, Borrower shall, at
Lender’s sole cost and expense, issue one or more new promissory notes, as
applicable, to any such Assignee, and if Lender has retained any of its rights
and obligations hereunder following such assignment, to Lender, which new
promissory notes shall be issued in replacement of, but not in discharge of, the
liability evidenced by the promissory note held by Lender prior to such
assignment and shall reflect the amount of the respective commitments and Loans
held by such Assignee and Lender after giving effect to such assignment. Upon
the execution and delivery of appropriate assignment documentation, amendments
and any other documentation required by Lender in connection with such
assignment, and the payment by Assignee of the purchase price agreed to by
Lender and such Assignee, such Assignee shall be a party to this Agreement and
shall have all of the rights and obligations of Lender hereunder (and under any
and all other guaranties, documents, instruments and agreements executed in
connection herewith) to the extent that such rights and obligations have been
assigned by Lender pursuant to the assignment documentation between

 

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Lender and such Assignee, and Lender shall be released from its obligations
hereunder and thereunder to a corresponding extent. Borrower may furnish any
information concerning Borrower in its possession from time to time to
prospective Assignees, provided that Lender shall require any such prospective
Assignees to agree in writing to maintain the confidentiality of such
information.

 

Section 8.34           [Reserved].

 

Section 8.35           Integration.

 

This Agreement is intended by the parties as the final, complete and exclusive
statement of the transactions evidenced by this Agreement. All prior or
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superseded by this Agreement, and no party is relying
on any promise, agreement or understanding not set forth in this Agreement. This
Agreement may not be amended or modified except by a written instrument
describing such amendment or modification executed by Borrower and Lender.

 

Section 8.36           Use of Proceeds.

 

No portion of the proceeds of the Junior Loan shall be used, in whole or in
part, for the purpose of purchasing or carrying any “margin stock” as such term
is defined in Regulation U of the Board of Governors of the Federal Reserve
System.

 

Section 8.37           [Reserved].

 

Section 8.38           [Reserved].

 

Section 8.39           [Reserved].

 

Section 8.40           Administrative Agent.

 

(a)           In connection with any assignment pursuant to Section 8.33 hereof,
the Lender shall have the right to appoint, designate and authorize, or act as,
an administrative agent (“Administrative Agent”) to take such action on its
behalf and on behalf of any Assignees under the provisions of this Agreement and
each other Junior Loan Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement, any
other Junior Loan Document or any agreement with respect to such assignment,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere herein or in any other Junior
Loan Document, Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth in writing by the Lender, nor
shall Administrative Agent have or be deemed to have any fiduciary relationship
with the Lender or any Assignee, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Junior Loan Document or otherwise exist against
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term “agent” herein and in the other Junior Loan Documents with
reference to Administrative Agent is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency

 

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doctrine of any applicable Law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.

 

(b)           Lender shall be the initial Administrative Agent, if an
Administrative Agent is deemed necessary or desirable by the Lender hereunder.
Lender or any subsequent Administrative Agent may resign as Administrative Agent
upon 30 days’ notice to Assignees and Borrower subject to the prior written
consent of the Borrower (unless Borrower is in Default, in which case consent of
the Borrower is not required), which consent shall not be unreasonably withheld,
conditioned or delayed (unless the Lender shall retain 25% or less of the Junior
Loan or during the existence and continuation of a Default, in which case
Borrower consent shall not be required). If Administrative Agent resigns under
this Agreement, the Lender shall appoint from among Lender and Assignees a
successor administrative agent, which successor administrative agent shall be
consented to by Borrower at all times other than during the existence of a
Default (which consent of Borrower shall not be unreasonably withheld,
conditioned or delayed). If no successor administrative agent is appointed prior
to the effective date of the resignation of Administrative Agent, subject to
Borrower’s prior written consent (such consent not to be required if a Default
is in existence and continuing), which consent shall not be unreasonably
withheld, delayed or conditioned, Administrative Agent may appoint, after
consulting with Lender, Assignees and Borrower, a successor administrative agent
from among Assignees and the Lender. Upon the acceptance of its appointment as
successor administrative agent hereunder, such successor administrative agent
shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the respective term “Administrative Agent” shall mean
such successor administrative agent, and the retiring Administrative Agent’s
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent’s resignation hereunder as
Administrative Agent, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent Issuer under this Agreement. If no successor administrative
agent has accepted appointment as Administrative Agent by the date which is 30
days following a retiring Administrative Agent’s notice of resignation, the
retiring Administrative Agent’s resignation shall nevertheless thereupon become
effective and Lender shall perform all of the duties of Administrative Agent
hereunder until such time, if any, as the Lender or the Assignees appoint a
successor agent acceptable to Borrower as provided for above.

 

(c)           No Administrative Agent shall (i) be liable for any action taken
or omitted to be taken by it under or in connection with this Agreement or any
other Junior Loan Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of Lender, Assignees or Borrower for any recital, statement,
representation or warranty made by Borrower or any subsidiary or Affiliate of
Borrower, or any officer thereof, contained herein or in any other Junior Loan
Document, or in any certificate, report, statement or other document referred to
or provided for in, or received by Administrative Agent under or in connection
with, this Agreement or any other Junior Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Junior Loan

 

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Document, or for any failure of Borrower or any other party to any Junior Loan
Document to perform its obligations hereunder or thereunder. No Administrative
Agent shall be under any obligation to the Lender, any Assignee or Borrower to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Junior
Loan Document, or to inspect the properties, books or records of Borrower or any
of its Affiliates.

 

(d)           Without limiting the Junior Loan Documents and to the extent not
prohibited by applicable Laws, Borrower shall pay when due, shall reimburse to
Administrative Agent for the benefit of itself, the Lender and any Assignee on
demand and shall indemnify (i) Administrative Agent, the Lender and any Assignee
from, all reasonable and documented out-of-pocket fees, costs, and expenses paid
or incurred by Administrative Agent in connection with the negotiation,
preparation and execution of this Agreement and the other Junior Loan Documents
(and any amendments, approvals, consents, waivers and releases requested,
required, proposed or done from time to time), and (ii) Administrative Agent,
the Lender and any Assignee in connection with the disbursement, administration
or collection of the Junior Loan or the enforcement of the obligations of
Borrower or the exercise of any right or remedy of Administrative Agent,
including (a) all fees and expenses of Administrative Agent’s legal counsel;
(b) fees and charges of each Construction Consultant, inspector and engineer;
(c) appraisal, re-appraisal obtained in accordance with Section 8.41 hereof, and
survey costs; (d) title insurance charges and premiums; (e) title search or
examination costs, including abstracts, abstractors’ certificates and uniform
commercial code searches; (f) judgment and tax lien searches for Borrower;
(g) escrow fees; (h) fees and costs of environmental investigations, site
assessments and remediations; (i) recordation taxes, documentary taxes, transfer
taxes and mortgage taxes; (j) filing and recording fees; and (k) loan brokerage
fees for which Borrower has specifically agreed to pay. Borrower shall pay all
costs and expenses incurred by Administrative Agent, including attorneys’ fees,
if the obligations or any part thereof are sought to be collected by or through
an attorney at Law, whether or not involving probate, appellate, administrative
or bankruptcy proceedings. Borrower shall pay all costs and expenses of
complying with the Junior Loan Documents, whether or not such costs and expenses
are included in the Component Budget. Borrower’s obligations under this
Section shall survive the delivery of the Junior Loan Documents, the making of
Advances, the payment in full of the Obligations, the release or reconveyance of
any of the Junior Loan Documents, the foreclosure of the Mortgages or conveyance
in lieu of foreclosure, any bankruptcy or other debtor relief proceeding, and
any other event whatsoever (other than an enforceable waiver of Borrower’s
obligations under this Section by Administrative Agent).

 

Section 8.41           Appraisal.

 

Lender may obtain from time to time an appraisal of all or any part of the
Property prepared in accordance with written instructions from Lender by a
third-party appraiser engaged directly by Lender (i) after the occurrence and
during the continuation of a Default; (ii) if a Governmental Authority requests,
or a governmental regulation requires, an appraisal; (iii) upon any action under
the Junior Loan Documents or Project Documents which would affect the
Obligations; and (iv) if Lender has received written confirmation from the
Construction

 

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Consultant confirming that an event has occurred or condition exists at the
Property which is reasonably likely to have a Material Adverse Effect. Each such
appraiser and appraisal shall be satisfactory to Lender (including satisfaction
of applicable regulatory requirements). The reasonable cost of any such
appraisal shall be borne by Borrower. Such cost is due and payable by the
Borrower on demand and shall be secured by the Junior Loan Documents. Lender
shall provide a copy of such appraisal to the Borrower upon receipt.

 

Section 8.42           USA Patriot Act Notice.

 

Lender hereby notifies Borrower that pursuant to the requirements of the Act,
Lender is required to obtain, verify and record information that identifies
Borrower, which information includes the name and address of Borrower and other
information that will allow Lender to identify Borrower in accordance with the
Act.

 

Section 8.43           [Reserved]

 

Section 8.44           Confidentiality.

 

Notwithstanding anything to the contrary contained in this Agreement or any
other Junior Loan Document to the contrary, any information disclosed by
Borrower or its Affiliates to Lender in connection with the Junior Loan
(including any data, plans, specifications, proposals, financial projections and
other financial information, material and information regarding the Property,
the Project, Borrower, its members, their affiliates, and their respective
businesses), the terms and any insurance policies required or otherwise
maintained pursuant hereto or thereto, and any other information provided by
Borrower or its Affiliates designated in writing to Lender as confidential
(collectively, the “Information”), shall be regarded by such parties as
confidential, shall not be used or disseminated for any purpose other than in
connection with providing banking, lending and other financial services for
Borrower or in administering, enforcing, managing and disposing of the Junior
Loan and the rights and interest of Lender in the Collateral, and shall not be
disclosed to a third party (other than to the limited extent permitted by the
express provisions of this Agreement), except for such disclosures of
Information:

 

(a)           to Lender, the Cash Management Agent, the Construction Consultant,
proposed transferees or assignees of Lender and the respective investors,
auditors, agents, attorneys, consultants, legal representatives, successors and
assigns of the foregoing to the extent commercially reasonable in connection
with Lender providing banking, lending and other financial services for Borrower
or with respect to administration, enforcement, management and disposition of
the Junior Loan and the rights and interest of Lender in the Collateral;

 

(b)           made with the prior agreement of Borrower;

 

(c)           to the extent such Information is otherwise already available in
the public domain other than as a result of a disclosure by others in violation
of this Section;

 

(d)           to the extent required to be disclosed by court order in a legal
proceeding or by applicable laws; provided, however, that if possible, before
such disclosure, the Person so required to disclose the Information shall give
Borrower prompt written notice

 

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of such order or legal requirement, so as not to limit Borrower’s right to seek
to obtain a protective order or other appropriate remedy;

 

(e)           that were known to Lender or any of its affiliates at the time of
its initial receipt;

 

(f)            were independently developed by Lender or any of its affiliates;

 

(g)           become known to Lender or any of its affiliates from an
independent source without breach of this provision by Lender or any affiliates,
officer, director, employee or consultant of Lender;

 

(h)           are disclosed pursuant to regulatory reviews and investigations;

 

(i)            are disclosed to present or prospective, direct or indirect,
holders of equity in the Lender or any present or prospective lender to the
Lender;

 

(j)            are disclosed to Lender’s attorneys, accountants, tax advisors,
investment advisors and manager, and other consultants engaged to assist Lender
in connection with the Loan or in the performance of its obligations or exercise
of its rights hereunder or connection with regulatory, tax and any other
compliance required under applicable law; or

 

(k)           as may be required by Law upon the advice of legal counsel in
order to comply with all financial reporting, securities laws and other legal
requirements applicable to Lender, including any required disclosures to the
Securities and Exchange Commission, any applicable state agency involved in
securities regulation and the Financial Industry Regulatory Authority.

 

Section 8.45           Termination.

 

The terms, provisions and undertakings in this Agreement and all other Junior
Loan Documents shall terminate and cease to be effective upon the indefeasible
payment in full of the Junior Loan and the full and final discharge of any other
Obligations and except for any indemnification provisions that expressly survive
the payment in full of the Loan. Lender agrees, at Borrower’s reasonable
expense, to take such actions as may be necessary to evidence such termination
and the release of any liens created hereunder or under any other Junior Loan
Document, including (without limitation) the filing of Uniform Commercial Code
termination statements, releases of mortgages/deeds of trust and other lien
releases. Borrower may request in writing an extension of the maturity date of
the Junior Loan from Lender in accordance with the Junior Note.

 

Section 8.46           Documents, etc. to be Satisfactory.

 

All instruments and documents required hereby or affecting the Property, or
relating to Borrower’s capacity and authority to borrow the Junior Loan and to
execute the Loan documents and such other documents, instruments, opinions and
assurances as Lender may request and all procedures in connection herewith shall
be subject to the approval, as to form and substance, of

 

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Lender and its counsel. All persons or entities responsible for the preparation
and/or execution of the instruments specifically required hereby and all
obligors thereunder shall be reasonably satisfactory to Lender.

 

Section 8.47           Factual Matters.

 

Any condition of this Agreement which requires the submission of evidence of the
existence or non-existence of a specified fact or facts implies as a condition
of the existence or non-existence, as the case may be, of such fact or facts
that Lender shall, at all times, be free independently to establish to its
satisfaction and in its absolute discretion such existence or non-existence.

 

Section 8.48           Modification of Junior Loan in Accordance With Lease.

 

Lender agrees, subject to the satisfaction of the requirements of this
Section 8.48 and any other applicable requirements of the Debt Documents, as
defined in the Lock Box Agreement, to consent to the amendment of the PAL Lease
to reflect the inclusion of Parcel C at Fort Shafter and Parcel B at TAMC
(collectively, the “Hawaii Parcels”) in the Site (as defined in the PAL Lease)
and the conveyance of the improvements thereon to the Borrower in accordance
with Section 1.e. and 1.f. of the PAL Lease. The Lender’s obligation to provide
any such consent, however, is conditioned on (i) execution, delivery and/or
recordation of such documents as are reasonably required by the Lender to
confirm and/or provide a second priority leasehold mortgage lien for the benefit
of the Lender on the Hawaii Parcels, including, without limitation, such
additional real estate, environmental, title insurance and survey documents,
reports and materials as are customarily required by the Lender for real estate
transactions of the type contemplated hereby and such consents and estoppels
from the Government as are required or authorized under the PAL Lease,
(ii) execution and delivery by the Borrower of such other modifications to the
Debt Documents as reasonably required by the Lender to reflect the addition of
the Hawaii Parcels to the PAL Lease, and (iii) delivery to the Lender of such
legal opinions relating to documents executed by the Borrower in connection with
the amendment of the PAL Lease and any related amendments to the Debt Documents
as the Lender shall reasonably request.

 

Section 8.49           Not Government Obligations.

 

The obligations of Borrower under this Agreement are not obligations of the U.S
Government.

 

Section 8.50           Refinancing of Senior Loan.

 

Notwithstanding anything to the contrary contained in this Agreement, Borrower
agrees that if the Senior Loan is refinanced with a new loan secured by the
Collateral or any part thereof (a “Replacement Senior Loan”), it is the intent
of such parties that the lender of the Replacement Senior Loan shall not be
subrogated to the rights or priority of the Senior Lender and that the
Replacement Senior Loan (including, without limitation, all mortgages, liens,
assignments, security interests and obligations created by the documents
evidencing and securing the Replacement Senior Loan) will in all respects be
subordinate and inferior to the Junior Loan (including, without limitation, all
mortgages, liens, assignments, security interests and

 

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obligations created by the documents evidencing and securing the Junior Loan)
and the Junior Loan Documents, unless Junior Lender executes a written
instrument to the contrary. Accordingly, in the event a Replacement Senior Loan
is obtained, Borrower shall execute, and shall cause the lender of the
Replacement Senior Loan to execute, such documents as Junior Lender may
reasonably require in order to evidence the subordination of the Replacement
Senior Loan to the Junior Loan.

 

Section 8.51           Guarantor Controlled Person.

 

Subordinate Lender is executing this Agreement for the sole purpose of
acknowledging and agreeing that it is a Guarantor Controlled Person.

 

Section 8.52           New York Contacts.

 

As stated in Section 8.13 above, Lender and Borrower have agreed that the laws
of the State of New York shall govern this Agreement. This Agreement is being
entered into as part of a transaction whereby, among other things, the Army is
granting a leasehold estate in the Property to Borrower and concurrently
therewith Borrower is obtaining the Junior Loan, the Senior Loan and the
Subordinate Loan to perform improvements on the Property. Borrower and Lender
acknowledge and agree that their selection of the laws of the State of New York
to govern this Agreement is appropriate because, among other things: (a) Senior
Lender has multiple offices in New York; (b) the title company that is a party
to the transaction of which the Senior Loan, the Junior Loan and the Subordinate
Loan are a part has its chief executive office in New York; (d) substantive
negotiations regarding the transaction occurred in New York; (e) the Junior
Lender, the Senior Lender and the Subordinate Lender will fund the initial
advances of their respective loans through the offices of the title insurer and
escrow agent in New York; (f) one or more of the agreements relating to the
transaction have been signed in New York and (g) all of the Closing documents
related to this transaction have been delivered into escrow with the title
insurer at its office in New York.

 

Section 8.53           Payment at Maturity.

 

Borrower acknowledges and agrees that the Minimum Monthly Payment and all
payments due and payable hereunder and under the Junior Loan on the Maturity
Date must be paid regardless of the sufficiency of Revenue (as defined in the
Lock Box Agreement.

 

Section 8.54           Payment in Full of Senior Loan/Purchase of Senior Loan.

 

Notwithstanding anything to the contrary set forth in the Project Documents or
any other document, Borrower agrees that at such time as all obligations owed to
Senior Lender under the Senior Loan Documents have been paid in full, Lender
shall automatically succeed to all approval, consent, participation, and similar
rights of Senior Lender set forth in the Project Documents and all rights of
Senior Lender to receive notices, reports and other information pursuant to the
Project Documents, as if such rights were validly assigned by Senior Lender to
Lender prior to payment of the obligations owed to the Senior Lender under the
Senior Loan Documents; provided, however that Lender shall have the right to
reject such assignment in whole or in part by sending written notice to
Borrower. Borrower agrees to use reasonable efforts to cooperate with Lender in
causing any third party to recognize the transfer of rights from

 

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Senior Lender to Lender described in the preceding sentence.  Borrower shall not
purchase, or allow any Affiliate of Borrower to purchase the Senior Loan, unless
(i) concurrently therewith, the Junior Loan is sold to the same party on terms
acceptable to the Junior Lender in its sole discretion, or (ii) the prior
written consent of Junior Lender is obtained (which consent may be given or
withheld in the sole discretion of Junior Lender).

 

Section 8.55           Refinance of Subordinate Loan.

 

Borrower agrees that Borrower will not refinance the Subordinate Loan without
the prior written consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed. If Borrower desires to refinance the
Subordinate Loan, Borrower shall send written notice to Lender describing the
identity of the person or entity providing such refinancing, certifying that
such refinancing will not result in any amendment of any of the Special
Modification Terms of Subordinate Loan Documents, as such term is defined in the
Intercreditor Agreement, and requesting Lender’s approval thereof. Within
fifteen (15) days after delivery of such notice, Lender shall respond to
Borrower with a notice either approving or disapproving the contemplated
refinancing. If Lender fails to respond to a notice sent by Borrower requesting
Junior Lender’s approval of a refinancing within fifteen (15) days after
delivery, then Junior Lender shall be deemed to have approved such refinancing.
Any refinancing made in violation of this Section shall be deemed void. 
Notwithstanding the foregoing, Lender’s consent shall not be required with
respect to a refinancing by an Affiliate of Borrower, provided that Borrower
provides Lender with prior written notice of the refinancing and the identity of
the Affiliate, and the Affiliate provides a certification to Lender on or before
the closing of the refinancing certifying that such refinancing does not result
in any amendment of any of the Special Modification Terms of Subordinate Loan
Documents, acknowledging that such Affiliate is a Guarantor Controlled person as
provided in Section 8.52 hereof, and that such Affiliate agrees to be bound by
all of the terms and conditions of the Intercreditor Agreement binding on
Subordinate Lender.

 

[Signature pages to follow]

 

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[Signature page to Junior Loan Agreement]

 

IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed as of the date first above written.

 

 

 

BORROWER:

 

 

 

REST EASY LLC,

 

a Delaware Limited liability company

 

 

 

 

By:

RE Managing Member LLC,

 

 

its managing member

 

 

 

 

 

By:

Actus Lend Lease Holdings LLC,

 

 

 

its sole member

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Marc Sierra

 

 

 

 

Marc Sierra

 

 

 

 

Executive Vice President

 

 

 

 

 

 

 

 

 

LENDER:

 

 

 

BEHRINGER HARVARD PAL I, LLC,

 

a Delaware limited liability company

 

 

 

 

 

 

 

By:

/s/ Gerald J. Reihsen, III

 

 

Gerald J. Reihsen, III

 

 

Executive Vice President —

 

 

Corporate Development & Legal

 

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[Signature page to Junior Loan Agreement]

 

Subordinate Lender is executing this Agreement solely to evidence its agreement
to Section 8.51

 

 

 

SUBORDINATE LENDER:

 

 

 

LEND LEASE (US) CAPITAL INC.,

 

a Delaware corporation

 

 

 

 

 

 

 

By:

/s/ Kevin M. Davis

 

 

 

 

Name:

Kevin M. Davis

 

 

 

 

Title:

Assistant Secretary

 

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Schedule 1

 

Definitions

 

Unless the context otherwise specifies or requires, the following terms shall
have the meanings herein specified, such definitions to be applicable equally to
the singular and the plural forms of such terms and to all genders:

 

“AAA” means the American Arbitration Association, or any successor thereof.

 

“Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)).

 

“Actus” means Actus Lend Lease LLC, a Delaware limited liability company.

 

“Advance” means any advance of Junior Loan proceeds by Lender made in accordance
with the terms and conditions hereof (inclusive of the Initial Advance).

 

“Affiliate” with respect to any specified Person means (i) any Person directly
or indirectly Controlling, Controlled by or under common Control with, the
specified Person and shall include, if such Person is an individual, members of
the Family of such Person and trusts for the benefit of such individual or
Family members; (ii) any director, officer or trustee of the specified Person;
and (iii) any Person directly, indirectly or beneficially owning or Controlling
more than fifty percent (50%) of any class of voting securities of the specified
Person. Without limiting the foregoing, a limited partnership, the limited
partners of which are trusts for the benefit of Family members of a Person and
the general partners of which are beneficiaries or Family members of the
beneficiaries of such trusts, corporations or partnerships owned by any of the
foregoing, shall be an Affiliate of such trusts.

 

“Ancillary Lease” means a lease or license between the Army, as lessor and
licensor, as applicable, and the Borrower, as lessee or licensee, as applicable,
regarding the demise or license of property which is not demised, licensed or
conveyed to the Borrower under the PAL Lease, as such lease or license may be
extended, amended, restated, supplemented, superseded or otherwise modified from
time to time in accordance with the terms thereof.

 

“Army” means The United States of America, by the Secretary of the Army.

 

“Asset and Property Management Agreement” means the agreement of that name by
and between Borrower and the Asset Manager with respect to the Project, as
amended and supplemented from time to time.

 

“Asset Manager” means the manager engaged by the Borrower from time to time
under the Asset and Property Management Agreement or any substitute or
replacement asset management agreement with the Company. The initial Asset
Manager is RE Asset Management LLC, a Delaware limited liability company.

 

“Assignment of Rents and Leases” means each Junior Assignment of Rents and
Leases by the Borrower in favor of the Lender, as amended and supplemented from
time to time.

 

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“Authorized Signer” means any representative of Borrower duly designated and
authorized by Borrower to sign Draw Requests in a writing addressed to Lender,
which writing may include a Draw Request in the form attached hereto as
Schedule 2.

 

“Banking Day” means any day that is not a Saturday, Sunday or banking holiday in
the State.

 

“Bill of Sale” has the meaning set forth in Appendix A to the Lock Box
Agreement.

 

“Business Days” shall have the meaning as set forth in Section 8.28.

 

“Cash Management Agent” means Bank of America, N.A. as “Cash Management Agent”
under the Lock Box Agreement.

 

“Casualty” means an event of damage or destruction to the Project by fire or
other casualty.

 

“Casualty Proceeds” means the insurance claims under and the proceeds of any and
all policies of insurance covering the Project or any part thereof, including
all returned and unearned premiums with respect to any insurance relating to
such Project, in each case whether now or hereafter existing or arising, and all
other amounts payable as a result of, or in connection with, any Casualty.

 

“Change Order” has the meaning set forth in the Design/Build Agreement.

 

“Claims” means any and all liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, judgments, settlements, costs,
expenses and disbursements (including, reasonable, actually incurred legal fees,
expenses and costs of investigation) of any kind and nature whatsoever.

 

“Closing” means the date of execution of this Junior Loan Agreement and the
Junior Note, which shall be August 14, 2009.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means any and all real and personal property, both tangible and
intangible, that secures any of the Obligations, including any after-acquired
Collateral.

 

“Collateral Assignment” means the Assignment of Contracts, Permits and Approvals
and acknowledgements and consents thereto, as amended and supplemented from time
to time.

 

“Collateral Assignment of Lodging Management Agreement” means the Collateral
Assignment of Lodging Management Agreement between the Borrower and the Lender,
as amended and supplemented from time to time.

 

“Commencement Date” means the date of commencement of the construction of the
Improvements, as determined by the Construction Consultant. Subject to extension
for Force Majeure and Excusable Delay, Commencement Date shall occur no later
than the earlier of: (i) 

 

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February 1, 2010, or (ii) the first Advance after the Initial Advance under the
Senior Loan Agreement.

 

“Completion of Construction” means, with respect to the construction of the
Improvements or any component thereof, the satisfaction of all of the conditions
of Section 5 of Schedule 5.

 

“Component” has the meaning set forth in the Design/Build Agreement.

 

“Component Budget” has the meaning set forth in the Design/Build Agreement and
is subject to modification in accordance with the terms and conditions set forth
in the Design/Build Agreement.

 

“Component Scope” has the meaning set forth in the Design/Build Agreement and is
subject to modification in accordance with the terms and conditions set forth in
the Design/Build Agreement.

 

“Condemnation” means the condemnation, requisition or other taking or sale of
the use, occupancy or title to the Project or any part thereof in, by or on
account of any eminent domain proceeding or other action by any Governmental
Authority or other Person under the power of eminent domain or otherwise or any
transfer in lieu of or in anticipation thereof.

 

“Condemnation Awards” means any and all judgments, awards of damages (including
severance and consequential damages), payments, proceeds, settlements, amounts
paid for a taking in lieu of Condemnation, or other compensation heretofore or
hereafter made, including interest thereon, and the right to receive the same,
as a result of, or in connection with, any Condemnation or threatened
Condemnation.

 

“Consent of Lessor” means the Consent of Lessor among the Army, Borrower, the
Junior Lender, the Junior Lender and the Subordinate Lender, as amended and
supplemented from time to time.

 

“Construction Consultant” means a person or firm appointed or designated as
provided by the Lease from time to time to inspect the progress of the
development of the Land, the Construction of the Improvements and the conformity
of construction with the Plans and Specifications, and the Design/Build
Agreement in accordance with an agreement between the Borrower, Lender, Army and
Construction Consultant.

 

“Construction Escrow Reserve Subaccount” has the meaning set forth in the Lock
Box Agreement.

 

“Construction Guaranty” means the Construction Guaranty made by Lend Lease
Corporation Limited in favor of the Borrower with respect to the Project, as the
same may be extended, amended, restated, supplemented, superseded or otherwise
modified from time to time in accordance with the terms thereof.

 

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“Construction of the Improvements” or “construction of Improvements” means the
development of the Land and/or the construction of the Improvements described as
the LSCR Phase in the PAL Lease.

 

“Control” (and the co-relative terms “Controlling,” “Controlled by” and “under
common Control with”) means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of outstanding securities, equity or other
beneficial ownership interests, by contract or otherwise.

 

“Control Agreement” means, collectively, the Deposit Account Control Agreements
of even date herewith among Borrower, the Senior Lender, the Junior Lender,
Subordinate Lender and Bank of America, N.A., as amended and supplemented from
time to time.

 

“Default” means an event or circumstance that, with the giving of Notice or
lapse of time, or both, would constitute an Event of Default under the
provisions of this Agreement.

 

“Design/Build Agreement” means the (i) Design/Build Agreement dated as of
August 14, 2009, by and between Borrower, as owner, and the Design/Build
Contractor, as general contractor, (ii) any other contract for the development
of the Land and/or the Construction of the Improvements between Borrower and a
contractor, and approved in writing by Lender, as the same may be amended from
time to time with the prior written approval of Lender; and (iii) any purchase
orders for the acquisition and/or installation of budgeted FF&E and OS&E in
connection with the operation of the Project in accordance with Schedule 12.

 

“Design/Build Contractor” means Actus Lend Lease LLC, a Delaware limited
liability company, its successors and permitted assigns and any other contractor
pursuant to a Design/Build Agreement.

 

“Development Manager” means the development manager, from time to time, under
the Development Services Agreement. The initial Development Manager will be RE
Development Management LLC, a Delaware limited liability company.

 

“Development Management Services Agreement” means that certain Development
Management Services Agreement, dated as of the Effective Date, by and between
the Company and Development Manager, as the same may be extended, amended,
restated, supplemented, superseded or otherwise modified from time to time in
accordance with the terms thereof.

 

“Direct Costs” means the aggregate of all design build costs and expenses under
the Design/Build Agreement, labor, materials, equipment, and fixtures necessary
for completion of construction of the Improvements.

 

“Direct Costs Statement” means a statement in form reasonably approved by Lender
of Direct Costs incurred and to be incurred, trade by trade, to be prepared by
the Design/Build Contractor, including the Direct Cost contingencies amount.

 

“Dispute” means any controversy, claim or dispute between or among the parties
to this Agreement, including any such controversy, claim or dispute arising out
of or relating to (a) this Agreement, (b) any other Junior Loan Document,
(c) any related agreements or instruments, or

 

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(d) the transaction contemplated herein or therein (including any claim based on
or arising from an alleged personal injury or business tort).

 

“Draw Request” means a statement prepared by the Borrower in form and substance
similar to Schedule 2 attached hereto and made a part hereof satisfactory to
Lender setting forth the amount of the Junior Loan advance requested in each
instance with respect to the Improvements and including, if requested by Lender
(i) the Direct Cost Statement and Indirect Cost Statement; (ii) a cost
certification executed by the Design/Build Contractor in form approved in
writing by Lender and the Construction Consultant; (iii) payment receipts from
all Subcontractors in a form approved in writing by Lender and Construction
Consultant; (iv) proof of payment of all Direct and Indirect Costs covered by
all previous Draw Requests; and (v) at the time of the Draw Request, a
conditional “Lien Waiver” in Proper Form from the Design/Build Contractor and a
conditional “Lien Waiver” in Proper Form, from all Subcontractors or suppliers
for all sums in excess of $250,000 per Subcontractor or supplier advanced up to
and including the previous Draw Request and within the earlier of (i) thirty
(30) days after the prior Draw Request and (ii) the date of Draw Request next
following the Draw Request related to such payment, an unconditional waiver from
the Design/Build Contractor.

 

“Effective Date” shall mean August 14, 2009.

 

“Eligible Assignee” means: (a) Senior Lender or Subordinate Lender; (b) an
Affiliate of the Borrower; (c) an Affiliate of the Lender, the Senior Lender or
the Subordinate Lender or an entity or an Affiliate of an entity that
administers or manages the Lender, the Senior Lender or the Subordinate Lender;
(d) any person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial real estate
loans and similar extensions of credit in the ordinary course of its business
and is able, after giving effect to the purchase of the Junior Loan, to assume
the Lender’s obligations hereunder; (e) any entity approved by the Borrower
(such approval not to be unreasonably withheld, conditioned or delayed); or
(f) such entity as the Lender shall be required to transfer or assign its rights
and obligations hereunder pursuant to any order of Governmental Authority.

 

“Environmental Agreement” means the Agreement of Environmental Indemnification
of even date herewith by and between Borrower and Lender pertaining to the
Property, as the same may from time to time be extended, amended, restated or
otherwise modified.

 

“Environmental Claim” means any complaint, action, notice, order, claim,
investigation, judicial or administrative proceeding or action, or other similar
claims or communications from any Person (defined below) involving or alleging
any non-compliance with any Environmental Requirement (defined below) or the
existence of any unsafe or hazardous condition resulting from or related to the
Release (defined below) of any Hazardous Material (defined below).

 

“Environmental Law” means any and all applicable federal, state or local laws,
statutes, ordinances, rules, regulations, orders, principles of common law,
judgments, permits, licenses or other determinations of any judicial or
regulatory authority, now or hereafter in effect, imposing liability,
establishing standards of conduct or otherwise relating to protection of the
environment (including natural resources, surface water, groundwater, soils, and
indoor and ambient air),

 

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health and safety, land use matters or the presence, generation, treatment,
storage, disposal, Release or threatened Release, transport or handling of any
Hazardous Material.

 

“Environmental Matters” means (a) the presence, Release or threatened Release of
any Hazardous Material at or from the Project, on or before the Closing; (b) the
breach of any representation, warranty, covenant or agreement contained in this
Agreement with respect to any Environmental Requirement because of any act,
omission, event or condition existing or occurring on or before the Closing;
(c) any violation, on or before the Transition Date, of any Environmental
Requirement in effect on or before the Closing, regardless of whether any act,
omission, event or circumstance giving rise to the violation constituted a
violation at the time of the occurrence or inception of such act, omission,
event or circumstance; (d) any Environmental Claim related to any, act,
omission, event or condition existing or occurring in connection with the use or
occupancy of the Project at any time on or before the Closing; (e) the filing or
imposition of any environmental lien against the Project; and regardless of
whether any matter set forth in the foregoing subsections (a) through (e) was
caused by Borrower, a prior owner of the Project, or any other Person
whatsoever.

 

“Environmental Requirement” means any Environmental Law, or any other applicable
agreement or restriction (including any condition or requirement imposed by any
third party or insurance or surety company), now or hereafter in effect, which
relates to any matters addressed by any Environmental Law, Hazardous Material,
or the prevention of any unsafe or hazardous condition resulting from or related
to the Release of any Hazardous Material.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Event of Default” means any event or circumstance specified in Article VI and
the continuance of such event or circumstance beyond the applicable grace and/or
cure periods therefor, if any, set forth in Article VI.

 

“Excusable Delay” shall have the meaning set forth in the Design/Build Agreement
as of the date hereof, provided that such definition shall not be amended
without Lender’s consent.

 

“Expenses” means all reasonable, actual and documented fees, charges, costs and
expenses of any nature whatsoever incurred at any time and from time to time
(whether before or after an Event of Default) by Lender in making, funding,
administering or modifying the Junior Loan, in negotiating or entering into any
“workout” of the Junior Loan, or in exercising or enforcing any rights, powers
and remedies provided in the Mortgages or any of the other Junior Loan
Documents, including reasonable outside attorneys’ fees, court costs, receiver’s
fees, management fees and reasonable costs incurred in the repair, maintenance
and operation of, or taking possession of, or selling, the Property up and to
the time that Lender accepts title to the Property (through foreclosure, power
of sale or the acceptance of a deed in lieu of foreclosure).

 

“FF&E” means all furniture, furnishings and equipment (excepting which is deemed
to be OS&E (as hereinafter defined) now or hereafter located and installed in or
about the hotels which are used in the operation thereof as hotels in accordance
with the standards set forth in the Hotel Operating Agreement, including,
without limitation, (i) office furnishings and equipment; (ii) specialized hotel
equipment necessary for the operation of any portion of the

 

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Improvements as hotels, including equipment for kitchens, laundries, dry
cleaning facilities, bars, restaurants, public rooms, commercial space, parking
areas, and recreational facilities; and (iii) all other furnishings and
equipment hereafter located and installed in or about the Improvements which are
used in the operation of the Improvements as hotels in accordance with the
standards set forth in the Hotel Operating Agreement.

 

“Final Project Completion Date” means the date by which Borrower shall cause to
occur the completion of the Guaranteed Scope of Work, in accordance with the
Design/Build Agreement and PAL Lease but no later than the earlier of
(i) subject to extension for Force majeure and Excusable Delay, the day prior to
the thirty-seventh (37th) month anniversary of the date of this Agreement;
provided, however, that such date shall be extended every month thereafter (but
in no event beyond September 1, 2013) by Borrower, so long as cash flow derived
from the Project and paid in accordance with the Lock Box Agreement is
sufficient to satisfy Borrower’s payment obligations under the Senior Note and
Junior Note as determined by Lender in its sole discretion; and
(ii) September 1, 2013.

 

“Force Majeure” or “Force Majeure Event” means an act of God, fire, earthquake,
hurricane, cyclone, volcanic eruption, tsunami, flood, war, invasion, terrorist
action, acts of public enemies, civil commotion, civil disorder, riot, mob
violence, insurrection, sabotage, embargos, blockade, epidemics, quarantines,
inability to procure or a general shortage of labor, equipment, facilities,
materials or supplies in the open market, impediment or delay in transportation,
utilities, computers, equipment, communication and other facilities, strike,
lockout, action of labor unions, a taking by eminent domain, acts of any
Governmental Authorities, or of civil or military authorities (other than
actions of the Army under the Operative Documents), ionizing radiation or
contamination by radioactivity from any nuclear weapons, nuclear fuel or from
any nuclear waste or from the combustion of nuclear material or nuclear fuel,
previously unknown environmental or archaeological conditions, or any other
cause whether similar or dissimilar to the foregoing, not within the reasonable
control of any relevant Person, including reasonable delays for adjustments of
insurance; provided, however, that (a) Borrower must give Notice to Lender
within ten (10) days after the occurrence of an event which it believes to
constitute Force Majeure, (b) in no event shall Force Majeure extend the time
for the performance of an Obligation by more than ninety (90) days, and
(c) circumstances that can be remedied or mitigated through the payment of money
shall not constitute Force Majeure hereunder to the extent such remedy or
mitigation is deemed reasonable by Lender in its sole discretion.

 

“Governmental Authority” means any federal, state, county, municipal or other
governmental or regulatory authority, agency, board, body, commission,
instrumentality, court or quasi-governmental authority with jurisdiction over
the Project or the Person in question; provided, however, that the term
“Governmental Authority” shall not include, nor shall it be deemed to include,
the Army in any of its capacities as a party under the Operative Documents, as
defined in the Lock Box Agreement.

 

“Guarantor” means Actus Lend Lease LLC, a Delaware limited liability company,
its successors and permitted assigns, and any other Person executing a Guaranty
in connection with the Junior Loan.

 

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“Guarantor Controlled Person” has the meaning given in the Guaranty.

 

“Guaranty” means the Guaranty and Indemnity to be executed by Guarantor at
Closing in the form attached hereto as Schedule 6.

 

“Guaranteed Maximum Price” shall have the meaning set forth in the Design/Build
Agreement as of the date hereof, provided that such definition shall not be
amended without the Lender’s consent.

 

“Guaranteed Scope of Work” shall have the meaning set forth in the Design/Build
Agreement as of the date hereof, provided that such definition shall not be
amended without the Lender’s consent.

 

“Hazardous Material” means petroleum and petroleum products or byproducts or
components or wastes and compounds containing them, including, without
limitation, gasoline, diesel fuel and oil; explosives; flammable materials;
radioactive materials; polychlorinated biphenyls (“PCBs”) and compounds,
equipment or materials containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form; mold or fungus or similar substances;
urea formaldehyde foam; underground or aboveground storage tanks, whether empty
or containing any substance; infectious material; unexploded or discharged
ordnance; pesticide or pesticide residues; noise; any substance the manufacture,
possession, presence, use, generation, storage, release, treatment, processing,
transport, emission, disposal, abatement, cleanup, removal, remediation,
handling or discharge of which is prohibited, limited or regulated by, or that
may give rise to liability or damages under, any Environmental Law; any material
or substance that is subject to the requirements of any Environmental Law; any
material or substance that may reasonably be expected to constitute or
contribute to a risk, danger or hazard to public health, safety or welfare or to
the environment; and any other material or substance (whether or not naturally
occurring) now or in the future defined as a “hazardous substance,” “hazardous
material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “solid
waste,” “pesticide, contaminant,” “toxic” or “pollutant” or words of similar
meaning or otherwise classified as hazardous, radioactive or toxic within the
meaning of any Environmental Law.

 

“Hotel Operator” means the hotel operator or lodging manager engaged by the
Company from time to time under the Hotel Operating Agreement. The initial Hotel
Operator is PML Services LLC, an affiliate of InterContinental Hotels Group
Resources, Inc.

 

“Hotel Operating Agreement” means (i) that certain Lodging Management Agreement,
by and between the Company and Hotel Operator, dated as of August 14, 2009, as
extended, amended, restated, supplemented, superseded or otherwise modified from
time to time in accordance with the terms thereof, or (ii) any replacement or
successor hotel operating agreement or lodging management agreement between the
Company and a successor Hotel Operator, as the same shall be extended, amended,
restated, supplemented, superseded or otherwise modified from time to time in
accordance with the terms thereof.

 

“Improvements” shall mean, collectively (i) the “Improvements” as defined in the
PAL Lease (expressly excluding the Excluded Improvements, as defined in the Lock
Box Agreement), as such definition shall be amended from time to time in
accordance with the PAL Lease, and

 

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(ii) any building or other improvement (or portion thereof) which is demised or
licensed under any Ancillary Lease, as such portion of the demised or licensed
premises under such Ancillary Lease shall be amended from time to time in
accordance with the applicable Ancillary Lease.

 

“Indemnified Party” means and includes Lender, any Persons owned or controlled
by, owning or controlling, or under common control or directly affiliated with
Lender, any participants in the Junior Loan, the directors, officers, partners,
employees and agents of Lender and/or such Persons, and the successors and
assigns of each of the foregoing Persons.

 

“Independent Construction Consulting Agreement” has the meaning set forth in
Appendix A to the Lock Box Agreement.

 

“Indirect Costs” means certain costs (other than Direct Costs) of completion of
the Improvements, including but not limited to, architects’, engineers’ and
Lender’s counsel’s fees, filing fees, ground rents, interest on and recording
taxes and title charges in respect of Mortgages, real estate taxes, water and
sewer rents, survey costs, Loan commitment fees and insurance and bond premiums
to the extent not Direct Costs, FF&E, OS&E, costs and expenses incurred by
Developer Manager and fees paid to the Developer Manager under the Development
Management Services Agreement, but not design build costs and expenses under the
Design/Build Agreement.

 

“Initial Advance” means the first Advance of the Junior Loan proceeds to be made
hereunder in the amount of $12,756,086.68.

 

“Information” shall have the meaning as set forth in Section 8.42.

 

“Insurance Proceeds” means the insurance claims under and the proceeds of any
and all policies of insurance covering the Property or any part thereof,
including all returned and unearned premiums with respect to any insurance
relating to such Property, in each case whether now or hereafter existing or
arising.

 

“Intercreditor Agreement” means the Intercreditor and Subordination Agreement
among the Junior Lender, Junior Lender and Subordinate Lender, as amended and
supplemented, and each Memorandum of Intercreditor Agreement with respect
thereto.

 

“Junior Lender” means Behringer Harvard PAL I, LLC.

 

“Junior Loan” means that certain loan from the Junior Lender to the Borrower in
the amount of $25,000,000 pursuant to the Junior Loan Agreement, which
indebtedness is evidenced by the Junior Note.

 

“Junior Loan Agreement” means this Agreement, as the same may be extended,
amended, restated, supplemented, superseded or otherwise modified from time to
time in accordance with the terms thereof.

 

“Junior Loan Documents” means this Agreement, the Junior Note, the Mortgages,
the Guaranty, the Environmental Agreement, Consent of Lessor, the Lock Box
Agreement, the Control Agreement, the Collateral Assignment, the Assignment of
Rents and Leases, Independent

 

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Construction Consultant Agreement, and the Collateral Assignment of Lodging
Management Agreement and any and all other documents which Borrower, or any
other party or parties, have executed and delivered, or may hereafter execute
and deliver, to evidence, secure or guarantee the Obligations, or any part
thereof, as the same may from time to time be extended, amended, restated,
supplemented or otherwise modified.

 

“Junior Note” shall mean that certain promissory note, dated as of the Effective
Date, made by the Borrower in favor of the Junior Lender in the original
principal balance of up to $25,000,000, as the same may be extended, amended,
restated, supplemented, superseded or otherwise modified from time to time in
accordance with the terms thereof.

 

“Land” means the land described in and encumbered by the Mortgages and land
conveyed to the Borrower under Ancillary Leases.

 

“Laws” means all federal, state and local laws, statutes, rules, ordinances,
regulations, codes, licenses, authorizations, decisions, injunctions,
interpretations, orders or decrees of any court or other Governmental Authority
having jurisdiction as may be in effect from time to time.

 

“Lease” means, collectively, (i) PAL Lease and (ii) Ancillary Leases.

 

“Letter of Intent” means that certain letter of interest from Behringer Harvard
Opportunity REIT II, Inc., Lender’s ultimate parent, dated June 25, 2009 and
accepted by Borrower and Actus Lend Lease Holdings LLC.

 

“Lien Waiver” means the lien waiver in the applicable form set forth in
Schedule 11 attached hereto and made a part hereof, or in such other form
approved by Lender in writing.

 

“Lock Box Account” means the account of such name, including the Restricted
Subaccounts, described in Article II of the Lock Box Agreement.

 

“Lock Box Agreement” means that certain Lock Box, Cash Management and
Disbursement Agreement, by and among the Borrower, the Lenders and the Cash
Management Agent, dated as of the Effective Date, as the same may be extended,
amended, restated, supplemented, superseded or otherwise modified from time to
time in accordance with the terms thereof.

 

“LSCR Phase” has the meaning ascribed thereto in the PAL Lease.

 

“Maturity Date,” with respect to the Junior Note, means the earlier of
(i) September 1, 2016 or (ii) such earlier maturity date as provided in the
Junior Note.

 

“Material Adverse Effect” means (1) a material adverse effect upon (a) the
business or financial position or results of operation of Borrower, (b) the
ability of Borrower to perform any material obligations and/or undertakings as
set forth in the Junior Loan Documents or (c) the value of the Property and/or
(2) such event or action would not lessen, impair, diminish or limit, in each
case to a material extent, any of Lender’s rights or remedies under any of the
Junior Loan Documents or result in a default or event of default under any of
the Project Documents (or a Termination Default, as such term is defined under
the PAL Lease).

 

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“Minimum Monthly Payment” has the meaning ascribed thereto in the Junior Note.

 

“Mortgage” means each certain Junior Construction Leasehold Mortgage or
Leasehold Deed of Trust, Assignment, Security Agreement and Fixture Filing from
the Borrower for the benefit of the Lender with respect to the Obligations, as
amended and supplemented from time to time.

 

“Municipal Agreement” means that certain Municipal Services and Utility Support
Agreement, by and between the Army and the Borrower, dated as of the Effective
Date, as the same may be extended, amended, restated, supplemented, superseded
or otherwise modified from time to time in accordance with the terms thereof.

 

“Net Award,” when used with respect to any Condemnation Awards or Insurance
Proceeds, means the entire award, compensation, insurance proceeds and/or other
payment, if any, on account of any Condemnation or Casualty, excluding proceeds
of business interruption and/or use and occupancy insurance and less any
reasonable expenses (including reasonable attorneys’ fees and expenses) actually
incurred by the Entitled Person, as defined in the Lock Box Agreement, in
collecting such award, compensation, insurance proceeds or other payment.

 

“Notice” means a notice, request, consent, demand or other communication given
in accordance with the provisions of Section 8.6 of this Agreement.

 

“Obligations” means all present and future debts, obligations and liabilities of
Borrower to Lender arising pursuant to the provisions of this Agreement, the
Junior Note or any of the other Junior Loan Documents, including the
obligations: (a) to pay all principal, interest, late charges and other amounts
due at any time under the Junior Note; (b) to pay all Expenses, indemnification
payments, reasonable fees and other amounts due at any time under the Mortgages
or any of the other Junior Loan Documents, together with interest thereon as
provided in the Mortgages or such Junior Loan Document; and (c) to perform,
observe and comply with all of the terms, covenants and conditions, expressed or
implied, which Borrower is required to perform, observe or comply with pursuant
to the terms of the Mortgages or any of the other Junior Loan Documents or any
of the Project Documents. Notwithstanding any language contained in the Junior
Loan Documents, the Obligations of Borrower to pay and perform under the
Environmental Agreement are unsecured.

 

“Operating Agreement” means the Amended and Restated Limited Liability Company
Operating Agreement of Borrower, as originally executed or as the same may be
amended from time to time in accordance with its terms and the terms of this
Agreement.

 

“OS&E” means (i) any supply items required for the operation of the Project,
including, without limitation, chinaware, glassware, silverware, utensils,
miscellaneous serving equipment, lines, towels, uniforms and similar items of
personal property; and (ii) food and beverages and other consumable items used
in the operation of a hotel, such as fuel, soap, cleaning materials, matches,
stationary, brochures, folios and all other items used in the routine operations
of a hotel which are consumable by nature.

 

“PAL Lease” means that certain Department of the Army Lease and Conveyance of
Improvements, Privatization of Army Lodging (PAL) Group A, by and between the
Army, as

 

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lessor, and the Borrower, as lessee, dated as of the Effective Date, as the same
may be extended, amended, restated, supplemented, superseded or otherwise
modified from time to time in accordance with the terms thereof (including,
without limitation, any lease which is intended to replace the PAL Lease, in
whole or in part, that is entered into in accordance with the terms of the PAL
Lease).

 

“Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT
ACT) of 2001, as the same may be amended from time to time, and corresponding
provisions of future laws.

 

“Patriot Act Offense” shall have the meaning set forth in Section 3.22 hereof.

 

“Payment Certificate” means those certain certificates delivered from time to
time by the Construction Consultant (in connection with any Draw Request) in
accordance with Section 9.2.2 of the Design/Build Agreement.

 

“Payment Date” means the 1st day of each calendar month, commencing on
October 1, 2009 and the Maturity Date of the Junior Note.

 

“Person” means an individual, a corporation, a partnership, a joint venture, a
limited liability company, a trust, an unincorporated association, any
Governmental Authority or any other entity.

 

“Plans and Specifications” means any and all plans and specifications prepared
in connection with the development of the Land and the Construction of the
Improvements in accordance with the Design/Build Agreement and, to the extent
required in the Design/Build Agreement, approved in writing by Lender, as the
same may from time to time be amended in accordance with the Design/Build
Agreement.

 

“Prepayment Premium” shall have the meaning given in the Junior Note.

 

“Project” means, collectively, the Site, as defined in the Lock Box Agreement,
the Improvements and the Personal Property, as defined in the Lock Box
Agreement.

 

“Project Costs” means, collectively, all costs and expenses relating to the
Improvements being paid from the Junior Loan that are not evidenced by the
Junior Note as are approved by Lender.

 

“Project Documents” means the Lease, the Design/Build Agreement (and each other
Construction Contract as defined in Appendix A to the Lock Box Agreement), the
Asset and Property Management Agreement, the Construction Guaranty, the
Development Management Services Agreement, the Municipal Agreement, the Hotel
Operating Agreement, Bill of Sale and all other material agreements entered into
by Borrower other than Junior Loan Documents relating to Borrower’s use,
development, construction, renovation or occupancy of the Project other than the
Debt Documents (as defined in the Lock Box Agreement).

 

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“Project Schedule” means the schedule for commencement and completion of the
development of the land and Construction of the Improvements attached hereto as
Schedule 4, as the same may be revised from time to time with the written
approval of Lender.

 

“Proper Form” means in form and substance reasonably satisfactory to Lender.

 

“Protective Advances” means any and all sums advanced or expended by Junior
Lender which Junior Lender deems necessary or appropriate (a) to advance or
complete construction of the Project and any Improvements and market the
Property, (b) to repair, maintain or otherwise protect the Project and any
Improvements or to prevent waste or destruction or to pay or prevent liens or to
defend Borrower’s title or Junior Lender’s lien priority, (c) to pay taxes,
assessments or insurance premiums in respect of the Project or any Improvements
or to otherwise protect Junior Lender’s security interest in the Project, any
Improvements and any other Collateral, or (d) in connection with Junior Lender’s
protection or exercise of its rights or remedies under the this Agreement and
the other Junior Loan Documents.

 

“Property” means the real and personal property conveyed and encumbered by the
Mortgages.

 

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, dumping or disposing of any Hazardous Material
(including the abandonment or discarding of barrels, drums, tanks, and other
similar containers, containing any Hazardous Material) into the indoor or
outdoor environment.

 

“RE-MM” means RE Managing Member LLC, a Delaware limited liability company.

 

“Rents” means all of the rents, royalties, issues, profits, revenues, earnings,
income and other benefits of the Property or any part thereof, or arising from
the use or enjoyment of the Property or any part thereof, including all such
amounts paid under or arising from any of the Leases and all fees, charges,
accounts or other payments for the use or occupancy of rooms or other public
facilities within the Property or any part thereof.

 

“Revenue” has the meaning ascribed thereto in the Lock Box Agreement.

 

“Senior Lender” means Bank of America, N.A.

 

“Senior Loan” means the Senior Loan from Lender to Borrower in the aggregate
maximum amount of $35,000,000, which is evidenced by the Senior Note and secured
by the Senior Mortgages.

 

“Senior Loan Amount” means an amount not to exceed Thirty-five Million and
No/100 Dollars ($35,000,000).

 

“Senior Loan Agreement” means that certain Senior Loan Agreement, dated as of
the Effective Date between the Borrower and the Senior Lender, as the same may
be extended, amended, restated, supplemented, superseded or otherwise modified
from time to time in accordance with the terms thereof.

 

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“Senior Loan Documents” means the documents evidencing and securing the Senior
Loan.

 

“Senior Loan Note” means the Senior Loan Note of even date herewith, in a
principal amount equal to the Senior Loan Amount, made by Borrower to the order
of Lender, as the same may from time to time be extended, amended, restated,
supplemented or otherwise modified.

 

“SPE Provisions” shall have the meaning set forth in Section 4.28 herein.

 

“State” means the State of New York.

 

“Stored Materials” means building materials or furnishings that have not yet
been incorporated into the Improvements.

 

“Subcontractors”; “Subcontract” means any Person engaged by the Borrower who has
performed work and/or supplied any labor and/or materials with respect to the
Improvements other than the Design/Build Contractor; any such contract or work
order.

 

“Subordinate Lender” means Lend Lease (US) Capital Inc.

 

“Subordinate Loan” means the loan in the amount of $21,500,000 from the
Subordinate Lender to the Borrower pursuant to the Subordinate Loan Agreement,
which indebtedness is evidenced by the Subordinate Loan Note, which is
subordinate to the Junior Loan and the Junior Loan.

 

“Subordinate Loan Agreement” means that certain loan agreement, dated as of the
Effective Date, by and between the Borrower and the Subordinate Lender, as the
same may be extended, amended, restated, supplemented, superseded or otherwise
modified from time to time in accordance with the terms thereof.

 

“Subordinate Loan Documents” means the documents evidencing and securing the
Subordinate Loan.

 

“Subordinate Loan Note” means that certain promissory note, dated as of the
Effective Date, made by the Borrower in favor of the Subordinate Lender in the
original principal balance of up to $21,500,000, as the same may be extended,
amended, restated, supplemented, superseded or otherwise modified from time to
time in accordance with the terms thereof.

 

“Subordination, Non-Disturbance and Attornment Agreement” means the agreement of
that name, among the Lender, Borrower and PML Services LLC, dated as of the
Effective Date, as it may be amended and supplemented.

 

“Survey” means a map or plat of survey of the Land which conforms with “Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys,” jointly
established and adopted by ALTA and NSPS in 2005 (excluding requirements 5(c),
5(g) and 5(i) thereof) and includes items 2, 3, 4, 10, 11(a) and 15 of Table A
thereof.

 

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“Swap Contract” means any agreement, whether or not in writing, relating to any
Swap Transaction, including, unless the context otherwise clearly requires, any
form of master agreement (the “Master Agreement”) published by the International
Swaps and Derivatives Association, Inc., or any other master agreement, entered
into prior to the date hereof or any time after the date hereof, between Swap
Counterparty and Borrower (or its Affiliate), together with any related schedule
and confirmation, as amended, supplemented, superseded or replaced from time to
time.

 

“Swap Counterparty” means Senior Lender, an Affiliate of Senior Lender, or such
other party as may be permitted under the Senior Loan Agreement, in its capacity
as the counterparty under any Swap Contract.

 

“Swap Obligations” means, with respect to any Person, the net liabilities of
such Person under any Swap Transaction.

 

“Swap Transaction” means any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap or option, bond option, note or bill option, interest rate option,
forward foreign exchange transaction, cap transaction, collar transaction, floor
transaction, currency swap transaction, cross-currency rate swap transaction,
swap option, currency option, credit swap or default transaction, T-lock, or any
other similar transaction (including any option to enter into the foregoing) or
any combination of the foregoing, entered into prior to the date hereof or any
time after the date hereof, between Swap Counterparty and Borrower (or its
Affiliate).

 

“Taxes” means all taxes and assessments whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, which at any time may be assessed,
levied, confirmed or imposed by any Governmental Authority or any communities
facilities or other private district on Borrower or on any of its properties or
assets or any part thereof or in respect of any of its franchises, businesses,
income or profits.

 

“Yearly Budget” has the meaning set forth in the Hotel Operating Agreement.

 

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