--------------------------------------------------------------------------------

 
PREPARED BY AND UPON RECORDATION RETURN TO:
 
DLA Piper Rudnick Gray Cary US LLP
153 Townsend Street, Suite 800
San Francisco, CA 94107
Attention: Stephen A. Cowan
 

PH HOTEL PARTNERS, LP, as Borrower/mortgagor
(Borrower)
 
to
 
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as mortgagee/Lender
(Lender)
 
 
 
DEED OF TRUST, SECURITY AGREEMENT
AND FIXTURE FILING

THIS DOCUMENT CONSTITUTES A FIXTURE FILING
IN ACCORDANCE WITH ORS § 79.0502(3)
 
 
Dated and Effective: As of April 3, 2006
 
Location:  319 SW Pine Street, Portland, Oregon
 
Tax Lot #: R246063; R246064; R246069
 
County:  Multnomah
 
Loan Number: 70-6-106-306
 
 
 

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ARTICLE I
 
- OBLIGATIONS
 
 
Section 1.01
 
Obligations
 
3
 
Section 1.02
 
Documents
 
4
 
ARTICLE II
 
- REPRESENTATIONS AND WARRANTIES
 
 
Section 2.01
 
Title, Legal Status and Authority
 
4
 
Section 2.02
 
Validity of Documents
 
4
 
Section 2.03
 
Litigation
 
5
 
Section 2.04
 
Status of Property
 
5
 
Section 2.05
 
Tax Status of Borrower
 
5
 
Section 2.06
 
Bankruptcy and Equivalent Value
 
6
 
Section 2.07
 
Disclosure
 
6
 
Section 2.08
 
Illegal Activity
 
6
 
Section 2.09
 
Executive Order 13224
 
6
 
ARTICLE III
 
- COVENANTS AND AGREEMENTS
 
 
Section 3.01
 
Payment of Obligations
 
6
 
Section 3.02
 
Continuation of Existence
 
6
 
Section 3.03
 
Taxes and Other Charges
 
6
 
Section 3.04
 
Defense of Title, Litigation, and Rights under Documents
 
7
 
Section 3.05
 
Compliance with Laws and Operation and Maintenance of Property
 
8
 
Section 3.06
 
Insurance
 
9
 
Section 3.07
 
Damage and Destruction of Property
 
11
 
Section 3.08
 
Condemnation
 
13
 
Section 3.09
 
Liens and Liabilities
 
14
 
Section 3.10
 
Tax and Insurance Deposits
 
14
 
Section 3.11
 
ERISA
 
15
 
Section 3.12
 
Environmental Representations, Warranties, and Covenants
 
16
 
Section 3.13
 
Electronic Payments
 
17
 
Section 3.14
 
Inspection
 
18
 
Section 3.15
 
Records, Reports, and Audits
 
18
 

 

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Section 3.16
 
Borrower’s Certificates
 
19
 
Section 3.17
 
Full Performance Required; Survival of Warranties
 
19
 
Section 3.18
 
Additional Security
 
19
 
Section 3.19
 
Further Acts
 
20
 
Section 3.20
 
Capital Lease
 
20
 
Section 3.21
 
Other Leases
 
20
 
Section 3.22
 
Inventory Levels
 
21
 
Section 3.23
 
Single Purpose Entity
 
21
 
ARTICLE IV
 
- ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
 
 
Section 4.01
 
Expenses and Advances
 
22
 
Section 4.02
 
Subrogation
 
22
 
ARTICLE V
 
- SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
 
 
Section 5.01
 
Due-on-Sale or Encumbrance
 
22
 
Section 5.02
 
Permitted Transfer
 
23
 
Section 5.03
 
Permitted Admission
 
24
 
ARTICLE VI
 
- DEFAULTS AND REMEDIES
 
 
Section 6.01
 
Events of Default The following shall be an “Event of Default”:
 
25
 
Section 6.02
 
Remedies
 
27
 
Section 6.03
 
Expenses
 
28
 
Section 6.04
 
Rights Pertaining to Sales
 
29
 
Section 6.05
 
Applications of Proceeds
 
30
 
Section 6.06
 
Additional Provisions as to Remedies
 
30
 
Section 6.07
 
Waiver of Rights and Defenses
 
30
 
ARTICLE VII
 
- SECURITY AGREEMENT AND FIXTURE FILING
 
 
Section 7.01
 
Security Agreement
 
31
 
Section 7.02
 
Fixture Filing
 
31
 
ARTICLE VIII
 
- LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
 
 
Section 8.01
 
Recourse Liability
 
31
 

 
 
 
 

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Section 3.16
 
Borrower’s Certificates
 
19
 
Section 3.17
 
Full Performance Required; Survival of Warranties
 
19
 
Section 3.18
 
Additional Security
 
19
 
Section 3.19
 
Further Acts
 
20
 
Section 3.20
 
Capital Lease
 
20
 
Section 3.21
 
Other Leases
 
20
 
Section 3.22
 
Inventory Levels
 
21
 
Section 3.23
 
Single Purpose Entity
 
21
 
ARTICLE IV
 
- ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
 
 
Section 4.01
 
Expenses and Advances
 
22
 
Section 4.02
 
Subrogation
 
22
 
ARTICLE V
 
- SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
 
 
Section 5.01
 
Due-on-Sale or Encumbrance
 
22
 
Section 5.02
 
Permitted Transfer
 
23
 
Section 5.03
 
Permitted Admission
 
24
 
ARTICLE VI
 
- DEFAULTS AND REMEDIES
 
 
Section 6.01
 
Events of Default The following shall be an “Event of Default”:
 
25
 
Section 6.02
 
Remedies
 
27
 
Section 6.03
 
Expenses
 
28
 
Section 6.04
 
Rights Pertaining to Sales
 
29
 
Section 6.05
 
Applications of Proceeds
 
30
 
Section 6.06
 
Additional Provisions as to Remedies
 
30
 
Section 6.07
 
Waiver of Rights and Defenses
 
30
 
ARTICLE VII
 
- SECURITY AGREEMENT AND FIXTURE FILING
 
 
Section 7.01
 
Security Agreement
 
31
 
Section 7.02
 
Fixture Filing
 
31
 
ARTICLE VIII
 
- LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
 
 
Section 8.01
 
Recourse Liability
 
31
 

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Section 8.02
 
General Indemnity
 
31
 
Section 8.03
 
Transaction Taxes Indemnity
 
32
 
Section 8.04
 
ERISA Indemnity
 
32
 
Section 8.05
 
Environmental Indemnity
 
32
 
Section 8.06
 
Duty to Defend, Costs and Expenses
 
32
 
Section 8.07
 
Recourse Obligation and Survival
 
32
 
ARTICLE IX
 
- ADDITIONAL PROVISIONS
 
 
Section 9.01
 
Usury Savings Clause
 
32
 
Section 9.02
 
Notices
 
33
 
Section 9.03
 
Sole Discretion of Lender
 
34
 
Section 9.04
 
Applicable Law and Submission to Jurisdiction
 
34
 
Section 9.05
 
Construction of Provisions
 
35
 
Section 9.06
 
Transfer of Loan
 
35
 
Section 9.07
 
Miscellaneous
 
36
 
Section 9.08
 
Entire Agreement
 
37
 
Section 9.09
 
WAIVER OF TRIAL BY JURY
 
37
 
Section 9.10
 
Partial Release
 
38
 
Section 9.11
 
Property Substitutions
 
38
 
Section 9.12
 
Concerning the Trustee
 
38
 
Section 9.13
 
Attorneys’ Fees
 
38
 
Section 9.14
 
Standard of Approval; Covenant of Good Faith and Fair Dealing
 
38
 
ARTICLE X
 
- LOCAL LAW PROVISIONS
 
 
Section 10.01
 
State Specific Provisions
 
39
 
ARTICLE XI
 
- OPERATING LEASE PROVISIONS
 
 
EXHIBIT A
   
EXHIBIT B
   
EXHIBIT C
   
EXHIBIT D
   

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DEFINITIONS
 
The terms set forth below are defined in the following sections of this Deed of
Trust and Security Agreement:
 
Action
Section 9.04
Additional Funds
Section 3.07 (c)
Affecting the Property
Section 3.12 (a)
Affiliate Loan
Section 5.01
Affiliate Loan Lender
Section 5.01
All
Section 9.05 (m)
Any
Section 9.05 (m)
Assessments
Section 3.03 (a)
Assignment
Recitals, Section 2 (B)
Awards
Section 3.08 (b)
Bankruptcy Code
Recitals, Section 2 (A) (ix)
Borrower
Preamble
Costs
Section 4.01
Damage
Section 3.07 (a)
Default Rate
Section 1.01 (a)
Demand
Section 9.14 (n)
Deposits
Section 3.10
Documents
Section 1.02
Environmental Indemnity
Section 8.05
Environmental Law
Section 3.12 (a)
Environmental Liens
Section 3.12 (b)
Environmental Report
Section 3.12 (a)
ERISA
Section 3.11
Event of Default
Section 6.01
Flood Acts
Section 2.04 (a)
Foreign Person
Section 2.05
Full Replacement Cost
Section 3.06 (a)
Grace Period
Section 6.01(b)
Hazardous Materials
Section 3.12 (a)
Impositions
Section 3.10
Improvements
Recitals, Section 2 (A) (ii)
Include, Including
Section 9.05 (f)
Indemnified Parties
Section 8.02
Indemnify
Section 8.02
Instrument
Preamble
Insurance Premiums
Section 3.10
Investors
Section 9.06
Land
Recitals, Section 2 (A) (i)
Laws
Section 3.05(c)

 
 
 

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Lease
Section 9.05 (k)
Leases
Recitals, Section 2 (A) (ix)
Lender
Preamble
Lessee
Section 9.05 (k)
Lessor
Section 9.05 (k)
Liens
Section 3.09
Loan
Recitals, Section 1
Losses
Section 8.02
Major Tenants
Section 3.21
Microbial Matter
Section 3.12 (a)
Net Proceeds
Section 3.07 (d)
Note
Recitals, Section 1
Notice
Section 9.02
Obligations
Section 1.01
On Demand
Section 9.05 (n)
Operating Lessee
Recitals, Section 2 (A) (vi)
Operating Lease
Recitals, Section 2 (A) (ix)
Organization State
Section 2.01
Owned
Section 9.05 (l)
Permitted Encumbrances
Section 2.01
Person
Section 9.05 (i)
Personal Property
Section 6.02 (j)
Prepayment Premium
Section 1.01 (a)
Proceeding
Section 6.01 (b)
Property
Recitals, Section 2 (A)
Property State
Section 2.01
Provisions
Section 9.05 (j)
Rating Agency
Section 9.06
Release
Section 3.12 (a)
Rent Loss Proceeds
Section 3.07 (c)
Rents
Recitals, Section 2 (A) (x)
Restoration
Section 3.07 (a)
Securities
Section 9.06
Security Agreement
Section 7.01
Taking
Section 3.08 (a)
Tenant
Recitals, Section 2 (A) (vi)
Tenants
Section 9.05 (k)
Transaction Taxes
Section 3.03 (c)
Trustee
Preamble, Section 9.05 (o)
UCC
Section 2.02
Unsecured Obligations
Section 10.01 (b)
Upon Demand
Section 9.05 (n)
Violation
 
Section 3.11
 

 
 
 

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DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING
 
THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (this “Instrument”) is
dated and effective as of April 3, 2006, by PH HOTEL PARTNERS, LP, a Delaware
limited partnership, having its principal office and place of business at c/o
CNL Hospitality Corp., 420 South Orange Avenue, Suite 700, Orlando, Florida
32801-3313, as Borrower/mortgagor (“Borrower”), to FIRST AMERICAN TITLE COMPANY,
a California corporation, having an address at 222 SW Columbia, Fourth Floor,
Portland, Oregon 97201, as trustee (“Trustee”), for the benefit of THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having an
office at c/o Prudential Asset Resources, 2200 Ross Avenue, Suite 4900-E,
Dallas, Texas 75201, as mortgagee/Lender (“Lender”).
RECITALS:
 
1. Borrower, by the terms of its Promissory Note (“Note”) executed on the same
date as this Instrument and in connection with the loan (“Loan”) from Lender to
Borrower and other entities affiliated with Borrower, is indebted to Lender in
the principal sum of up to ONE HUNDRED TWENTY MILLION AND NO/100 U.S. DOLLARS
($120,000,000.00). The Maturity Date of the Loan set forth in the Note is April
5, 2011.
 
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01 hereof).
 
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Borrower
irrevocably:
 
A. Grants, bargains, sells, assigns, transfers, pledges, mortgages, warrants,
and conveys to Trustee and Lender, and grants Trustee/Lender, for the benefit of
Lender, a security interest in, the following property, rights, interests and
estates owned by Borrower (collectively, the “Property”):
 
(i) The real property in Multnomah County, State of Oregon, and described in
Exhibit “A” attached hereto (“Land”);
 
(ii) All buildings, structures and improvements (including fixtures) now or
later located in or on the Land (“Improvements”);
 
(iii) All easements, estates, and interests including hereditaments, servitudes,
appurtenances, tenements, mineral and oil/gas rights, water rights, (riparian,
appropriative or otherwise and whether or not appurtenant), water, water
courses, water stock, air rights, development power or rights, options,
reversion and remainder rights, and any other rights owned by Borrower and
relating to or usable in connection with or access to the Property (including,
without limitation, all party rights);

--------------------------------------------------------------------------------

 
(iv) All right, title, and interest owned by Borrower in and to all land lying
within the rights-of-way, roads, or streets, open or proposed, adjoining the
Land to the center line thereof, and all sidewalks, alleys, and strips and gores
of land adjacent to or used in connection with the Property;
 
(v) All right, title, and interest of Borrower in, to, and under all plans,
specifications, surveys, studies, reports, permits, licenses, agreements,
contracts, instruments, books of account, insurance policies, and any other
documents relating to the use, construction, occupancy, leasing, activity, or
operation of the Property;
 
(vi) All fixtures and personal property described in Exhibit B owned by Borrower
and replacements thereof; but excluding all personal property owned by any
tenant (a “Tenant”), including AH Tenant Corporation (“Operating Lessee”), of
the Property;
 
(vii) All of Borrower’s right, title and interest in the proceeds (including
conversion to cash or liquidation claims) of (A) insurance relating to the
Property and (B) all awards made for the taking by eminent domain (or by any
proceeding or purchase in lieu thereof) of the Property, including awards
resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
 
(viii) All tax refunds, including interest thereon, tax rebates, tax credits,
and tax abatements, and the right to receive the same, which may be payable to
Borrower or available to Borrower with respect to the Property;
 
(ix) All of Borrower’s right, title and interest in and to all leasehold
estates, ground leases, leases, (including, without limitation, that certain
Amended and Restated Lease Agreement dated as of April 3, 2006 respecting the
Property entered into with the Operating Lessee, as Tenant (the “Operating
Lease”) subleases, licenses, or other agreements, including, without limitation,
all reservations, security interests, contractual liens and security deposits,
affecting the use, enjoyment or occupancy of the Property now or later existing
(including any use or occupancy arrangements created pursuant to Title 7 or 11
of the United States Code, as amended from time to time, or any similar federal
or state laws now or later enacted for the relief of debtors (the “Bankruptcy
Code”) and all extensions and amendments thereto (collectively, the “Leases”),
including all guaranties thereof; and
 
(x) All of Borrower’s right, title and interest in and to all rents, issues,
profits, royalties, receivables, use and occupancy charges (including, without
limitation, all oil, gas or other mineral royalties and bonuses), room rents,
revenues, accounts and receivables derived from the use or occupancy of all or
any portion of the Improvements, all revenues and credit card receipts collected
from guest rooms, restaurants, bars, meeting rooms, banquet rooms and
recreational facilities, all receivables, customer obligations, installment
payment obligations and other obligations now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the use and occupancy of property or rendering of services by
Borrower or any operator or manager of the hotel or the commercial space located
in the Improvements or acquired from others (including, without limitation, from
the rental of any office space, retail space, guest rooms, conference rooms,
meeting rooms, or other space, halls, stores, and offices, and fees and deposits
securing reservations of such space), license, lease, sublease and concession
fees and rentals, parking fees and revenues, health club membership fees, food
and beverage wholesale and retail sales (including mini-bar revenues), service
charges, vending machine sales and proceeds, if any, from business interruption
or other loss of income insurance and other sums payable by the tenants, whether
evidenced by the Leases or other instruments), income and other benefits now or
later derived from any portion or use of the Property (including any payments
received with respect to any Tenant, any reservation party, or the Property
pursuant to the Bankruptcy Code) and all cash, security deposits, advance
rentals, or similar payments relating thereto (collectively, the “Rents”) and
all proceeds from the cancellation, termination, surrender, sale or other
disposition of any reservation and the Leases, and the right to receive and
apply the Rents and all such other amounts to the payment of the Obligations.

--------------------------------------------------------------------------------

 
B. Absolutely and unconditionally assigns, sets over, and transfers to Lender
all of Borrower’s right, title, interest and estates in and to the Leases and
the Rents, subject to the terms and license granted to the Borrower under that
certain Assignment of Leases and Rents made by Borrower to Lender dated the same
date as this Instrument (the “Assignment”), which document shall govern and
control the provisions of this assignment.
 
C. Absolutely and unconditionally assign, sets over, and transfers to Lender all
of Borrower’s right, title, interest and estates in and to all agreements,
leases, franchises and contracts pertaining to the operation of the Property,
subject to the terms and license granted to Borrower under that certain
Assignment of Agreements made by Borrower to Lender dated the same date as this
Instrument (the “Assignment of Agreements”), which document shall govern and
control the provisions of this assignment.
 
TO HAVE AND TO HOLD the Property unto the Lender and Trustee, and its/their
successors and assigns forever, subject only to the provisions of this
Instrument.
 
IN TRUST, WITH POWER OF SALE, to secure payment and performance of the
Obligations in the time and manner set forth in the Documents (defined below).
Notwithstanding the foregoing or any other term contained herein or in the
Documents, none of Borrower's obligations under or pursuant to the Environmental
Indemnity (defined below) shall be secured by the lien of this Instrument.
 
PROVIDED, HOWEVER, if and when Borrower shall fully pay and perform the
Obligations as provided for in the Documents (defined below) and shall comply
with and fully discharge all the provisions in the Documents, these presents and
the estates hereby granted (except for the obligations of Borrower set forth in
Sections 3.11 and 3.12 and Article VIII hereof) shall cease and terminate.
 
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
 
ARTICLE I  - OBLIGATIONS
 
Section 1.01   Obligations. This Instrument is executed, acknowledged, and
delivered by Borrower to secure and enforce the following obligations
(collectively, the “Obligations”):
 
(a)  Payment of all obligations, indebtedness and liabilities under the
Documents including, without limitation, (i) the Prepayment Premium (as defined
in the Note), (ii) interest at both the rate specified in the Note and at the
Default Rate (as defined in the Note), if applicable and to the extent not
prohibited by Laws (defined below), and (iii) renewals, extensions, and
amendments of the Documents;

--------------------------------------------------------------------------------

 
(b)  Performance of every obligation, covenant, and agreement under the
Documents (except any obligation, covenant, and agreement of Lender or Manager)
including renewals, extensions, and amendments of the Documents; and
 
(c)  Payment of all sums advanced (including costs and expenses) by Lender
pursuant to the Documents including renewals, extensions, and amendments of the
Documents.
 
Section 1.02   Documents. The “Documents” shall mean each and all of the
documents and agreements listed on Exhibit D attached hereto and by this
reference a part hereof, and every other written agreement executed in
connection with the Loan (but excluding the Loan application and Loan
commitment) and by the party against whom enforcement is sought, including those
given to evidence or further secure the payment and performance of any of the
Obligations, and any written renewals, extensions, and amendments of the
foregoing, executed by the party against whom enforcement is sought. All of the
provisions of the Documents are incorporated into this Instrument as if fully
set forth in this Instrument. All capitalized terms used herein that are not
otherwise defined herein shall have the meaning ascribed to such terms in the
Note.
 
ARTICLE II  - REPRESENTATIONS AND WARRANTIES
 
Borrower hereby represents and warrants to Lender as follows:
 
Section 2.01   Title, Legal Status and Authority. Borrower (i) is seised of the
Land and Improvements, and good and marketable fee title, to the Property, free
and clear of all liens, charges, encumbrances, and security interests, except
the matters listed in Exhibit C attached hereto (“Permitted Encumbrances”);
(ii) will forever warrant and defend its title to the Property and the validity,
enforceability, and priority of the lien and security interest created by this
Instrument against the claims of all persons; (iii) is a limited partnership
duly organized, validly existing, and in good standing and qualified to transact
business under the laws of its state of organization or incorporation
(“Organization State”) and the state where the Property is located (“Property
State”); and (iv) has all necessary approvals, governmental and otherwise, and
full power and authority to own its properties (including the Property) and
carry on its business.
 
Section 2.02   Validity of Documents. The execution, delivery and performance of
the Documents and the borrowing evidenced by the Note (i) are within the power
of Borrower; (ii) have been authorized by all requisite action; (iii) have
received all necessary approvals and consents; (iv) will not violate, conflict
with, breach, or constitute (with notice or lapse of time, or both) a default
under (1) any law, order or judgment of any court, governmental authority, or
the governing instrument of Borrower or (2) any indenture, agreement, or other
instrument to which Borrower is a party or by which it or any of its property is
bound or affected; (v) will not result in the creation or imposition of any
lien, charge, or encumbrance upon any of its properties or assets except for
those in this Instrument; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for the
recordation of this Instrument, the Assignment and Uniform Commercial Code
(“UCC”) filings). The Documents constitute legal, valid, and binding obligations
of Borrower.
 
Section 2.03   Litigation. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the knowledge of Borrower, threatened or contemplated against, or
affecting, Borrower or the Property which would have a material adverse effect
on either the Property or Borrower’s ability to perform its obligations.

--------------------------------------------------------------------------------

 
Section 2.04   Status of Property.
 
(a)  The Land and Improvements are not located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards pursuant to the National Flood Insurance Act of 1968, the
Flood Disaster Protection Act of 1973, or the National Flood Insurance Reform
Act of 1994, as each have been or may be amended, or any successor law
(collectively, the “Flood Acts”) or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
 
(b)  Borrower has all necessary (i) certificates, licenses, and other approvals,
governmental and otherwise, for the operation of the Property and the conduct of
its business and (ii) zoning, building code, land use, environmental and other
similar permits or approvals, all of which are currently in full force and
effect and not subject to revocation, suspension, forfeiture, or modification.
The Property and its use and occupancy is in full compliance with all Laws and
Borrower has received no notice of any violation or potential violation of the
Laws which has not been remedied or satisfied.
 
(c)  The Property is served by all utilities (including water and sewer)
required for its use.
 
(d)  All public roads and streets necessary to serve the Property for its use
have been completed, are serviceable, are legally open, and have been either
dedicated to and accepted by the appropriate governmental entities or granted by
a recorded easement or right of way.
 
(e)  The Property is free from damage caused by fire or other casualty.
 
(f)  All costs and expenses for labor, materials, supplies, and equipment used
in the construction of the Improvements have been paid in full.
 
(g)  Borrower or Operating Lessee owns and has paid in full for, or leases
pursuant to the Capital Leases, all furnishings, fixtures, and equipment (other
than Tenants’ property (which term “Tenant” shall not include Operating Lessee
for purposes of this section)) used in connection with the operation of the
Property, free of all security interests, liens, or encumbrances except the
Permitted Encumbrances, the Capital Leases, and those created by this
Instrument.
 
(h)  The Property is assessed for real estate tax purposes as one or more wholly
independent tax lot(s), separate from any adjoining land or improvements and no
other land or improvements is assessed and taxed together with the Property.
 
Section 2.05   Tax Status of Borrower. Borrower is not a “foreign person” within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
 
Section 2.06   Bankruptcy and Equivalent Value. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, or any general partner of Borrower. Borrower
has received reasonably equivalent value for granting this Instrument.
 
Section 2.07   Disclosure. Borrower has disclosed to Lender all material facts
and has not failed to disclose any material fact that could cause any
representation or warranty made herein to be materially misleading. There has
been no adverse change in any condition, fact, circumstance, or event that would
make any such information materially inaccurate, incomplete or otherwise
misleading.

--------------------------------------------------------------------------------

 
Section 2.08   Illegal Activity. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower’s knowledge, there are no illegal
activities at or on the Property.
 
Section 2.09   Executive Order 13224. Borrower and all persons or entities
holding any legal or beneficial interest whatsoever in Borrower, including,
without limitation any guarantor, are not included in, owned by, controlled by,
acting for or on behalf of, providing assistance, support, sponsorship, or
services of any kind to, or otherwise associated with any of the persons or
entities referred to or described in Executive Order 13224 - Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or
Support Terrorism, as amended. It shall constitute an Event of Default hereunder
if the foregoing representation and warranty shall ever become false.
 
ARTICLE III  - COVENANTS AND AGREEMENTS
 
Borrower covenants and agrees with Lender as follows:
 
Section 3.01   Payment of Obligations. Borrower shall timely pay and cause to be
performed the Obligations.
 
Section 3.02   Continuation of Existence. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of law,
all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender’s prior written consent; (c) change its name, address,
or the name under which Borrower conducts its business without promptly
notifying Lender; or (d) do anything to cause the representations in Section
2.02 to become untrue.
 
Section 3.03   Taxes and Other Charges
 
(a)  Payment of Assessments. Borrower shall pay when due (but in all events at
least one business day prior to the date any fine, penalty, interest or charge
for nonpayment may be imposed, referred to herein as the “Tax Payment Date”) all
taxes, liens, assessments, utility charges (public or private and including
sewer fees), ground rents, maintenance charges, dues, fines, impositions, and
public and other charges of any character (including penalties and interest)
assessed against, or which are liens or could become a lien against, the
Property (“Assessments”). Unless Borrower is making deposits per Section 3.10,
Borrower shall provide Lender with receipts evidencing such payments (except for
income taxes, franchise taxes, ground rents, maintenance charges, and utility
charges) within thirty (30) days after the Tax Payment Date.
 
(b)  Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower’s obligation to pay
the Assessment as required above unless (i) Borrower gives Lender prior written
notice of its intent to contest an Assessment; (ii) Borrower demonstrates to
Lender’s reasonable satisfaction that (1) the Property will not be sold to
satisfy the Assessment prior to the final determination of the legal
proceedings, (2) it has taken such actions as are required or permitted to
accomplish a stay of any such sale, or (3) it has furnished a bond or surety
(satisfactory to Lender in form and amount) sufficient to prevent a sale of the
Property; (iii) at Lender’s option, Borrower has deposited the full amount
necessary to pay any unpaid portion of the Assessments with Lender; and (iv)
such proceeding shall be permitted under any other instrument to which Borrower
or the Property is subject (whether superior or inferior to this Instrument);
provided, however, that the foregoing shall not apply to the contesting of any
income taxes, franchise taxes, ground rents, maintenance charges, and utility
charges.

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(c)  Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, and any similar
taxes)(collectively, the “Transaction Taxes”) required in connection with the
making and/or recording of any of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws. Notwithstanding anything to the
contrary in this Mortgage or any of the other Documents, this Section 3.03(c)
shall survive repayment of the Note and satisfaction of this Deed of Trust.
 
(d)  Changes in Laws Regarding Taxation. If any law (i) deducts from the value
of real property for the purpose of taxation any lien or encumbrance thereon,
(ii) taxes, deeds of trust, or debts secured by deeds of trust for federal,
state or local purposes or changes the manner of the collection of any such
existing taxes, and/or (iii) imposes a tax, either directly or indirectly, on
any of the Documents or the Obligations, Borrower shall, if permitted by law,
pay such tax within the statutory period or within twenty (20) days after demand
by Lender, whichever is less; provided, however, that if, in the reasonable
opinion of Lender, Borrower is not permitted by law to pay such taxes, Lender
shall have the option to declare the Obligations immediately due and payable
(without any Prepayment Premium) upon sixty (60) days’ notice to Borrower.
 
(e)  No Credits on Account of the Obligations. Borrower will not claim or be
entitled to any credit(s) on account of the Obligations for any part of the
Assessments and no deduction shall be made or claimed from the taxable value of
the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days’ notice to Borrower.
 
Section 3.04   Defense of Title, Litigation, and Rights under Documents.
Borrower shall forever warrant, defend and preserve Borrower’s title to the
Property, the validity, enforceability and priority of this Instrument and the
lien or security interest created thereby, and any rights of Lender and/or
Trustee under the Documents against the claims of all persons, and shall
promptly notify Lender and Trustee of any such claims. Lender and/or Trustee
(whether or not named as a party to such proceedings) is authorized and
empowered (but shall not be obligated) to take such additional steps as it may
reasonably deem necessary or proper for the defense of any such proceeding or
the protection of the lien, security interest, validity, enforceability, or
priority of this Instrument, title to the Property, or any rights of Lender
and/or Trustee under the Documents, including the employment of counsel, the
prosecution and/or defense of litigation, the compromise, release, or discharge
of such adverse claims, the purchase of any tax title, the removal of any such
liens and security interests, and any other actions Lender and/or Trustee deems
necessary to protect its/their interests. Borrower authorizes Lender and/or
Trustee to take any actions required to be taken by Borrower, or permitted to be
taken by Lender and/or Trustee, in the Documents in the name and on behalf of
Borrower. Borrower shall reimburse Lender and Trustee on demand for all expenses
(including attorneys’ fees) incurred by them/it in connection with the foregoing
and Lender’s exercise of its/their rights under the Documents. All such expenses
of Lender and/or Trustee, until reimbursed by Borrower, shall be part of the
Obligations, bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, and shall be
secured by this Instrument.

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Section 3.05   Compliance with Laws and Operation and Maintenance of Property.
 
(a)  Repair and Maintenance. Borrower will operate and maintain the Property in
good order, repair, and operating condition. Borrower will promptly make all
necessary repairs, replacements, additions, and improvements necessary to ensure
that the Property shall not in any way be materially diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land nor shall any
material part of the Improvements be removed, demolished, or structurally or
materially altered, without Lender’s prior written consent.
 
(b)  Replacement of Property. Borrower will keep the Property fully equipped and
will replace all worn out or obsolete Property (including fixtures) with
replacement Property that is new and/or of better quality than the replaced
Property. Borrower will not, without Lender’s prior written consent, remove any
Property covered by this Instrument unless the same is replaced by Borrower with
Property that is new and/or of better quality than the replaced Property and the
replacement Property (i) is owned by Borrower free and clear of any lien or
security interest (other than the Permitted Encumbrances and those created by
this Instrument) or (ii) is leased by Borrower (A) with Lender’s prior written
consent or (B) if the replaced Property was leased at the time of execution of
this Instrument.
 
(c)  Compliance with Laws. Borrower shall comply with and shall cause the
Property to be maintained, used, and operated in full compliance with all (i)
present and future laws, Environmental Laws (defined below), ordinances,
regulations, rules, orders and requirements (including zoning and building
codes) of any governmental or quasi-governmental authority or agency applicable
to Borrower or the Property (collectively, the “Laws”); (ii) orders, rules, and
regulations of any regulatory, licensing, accrediting, insurance underwriting or
rating organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that Borrower or the
Property is not in compliance with any of the foregoing, Borrower will promptly
send Lender notice and a copy of the proceeding or violation notice. Without
limiting Lender’s rights and remedies under Article VI or otherwise, if Borrower
or the Property is not in compliance with all Laws, Lender may impose additional
requirements upon Borrower including monetary reserves or financial equivalents.
 
(d)  Zoning and Title Matters. Borrower shall not, without Lender’s prior
written consent, (i) initiate or support any zoning reclassification of the
Property or variance under existing zoning ordinances; (ii) modify or supplement
any of the Permitted Encumbrances; (iii) impose any restrictive covenants or
encumbrances upon the Property; (iv) execute or file any subdivision plat
affecting the Property; (v) consent to the annexation of the Property to any
municipality; (vi) permit the Property to be used by the public or any person in
a way that might make a claim of adverse possession or any implied dedication or
easement possible; (vii) cause or permit the Property to become a non-conforming
use under zoning ordinances or any present or future non-conforming use of the
Property to be discontinued; or (viii) fail to comply or cause compliance with
the terms of the Permitted Encumbrances.
 
Section 3.06   Insurance.

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(a)  Property and Time Element Insurance. Borrower shall maintain or cause its
Manager to maintain insurance coverage of the types and minimum limits, during
the term of this Instrument, to keep the Property appropriately insured for the
benefit of Borrower and Lender (with Lender named as mortgagee) by (i) an “All
Risks of Physical Loss” property insurance policy with an agreed amount
endorsement for “full replacement cost” (defined below) without any coinsurance
provisions or penalties, or the broadest form of coverage available, in an
amount sufficient to prevent Lender from ever becoming a coinsurer under the
policy or Laws, and with a deductible not to exceed One Hundred Thousand Dollars
($100,000.00) for all perils and shall not exceed 5% of the insured value of the
Property with respect to non-Federal flood insurance; (ii) a policy or
endorsement insuring against acts of terrorism throughout the term of the Loan
(including any extension terms) on a per occurrence basis in an amount equal to
the Terrorism Insurance Amount (the “Terrorism Insurance Amount” shall mean an
amount equal to the full replacement cost of the Property); (iii) loss of rents
insurance and business income insurance, as applicable, (A) with loss payable to
Lender and Borrower as their interest may appear; (B) covering all risks
required to be covered by the insurance provided for in this section; and (C)
which provides that after the physical loss to the Property occurs, the loss of
rents and income, as applicable, will be insured until such rents or income, as
applicable, either return to the same level that existed prior to the loss, or
the expiration of twelve (12) months, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of such period; and
(D) which contains an extended period of indemnity endorsement which provides
that after the physical loss to the Improvements and Personal Property has been
repaired, the continued loss of income will be insured until such income either
returns to the same level it was at prior to the loss, or the expiration of
twelve (12) months from the date that such Property is repaired or replaced and
operations are resumed, whichever first occurs, and notwithstanding that the
policy may expire prior to the end of such period. The amount of such loss of
rents and business income insurance, as applicable, shall be determined prior to
the date hereof and at least once each year thereafter based on Borrower's
reasonable estimate of the gross income less non-continuing expenses from the
Property for the succeeding period of coverage required above.; (v) flood
insurance if any part of any structure or improvement comprising the Property is
located in an area identified by the Federal Emergency Management Agency as an
area federally designated a "100 year flood plain" and (a) flood insurance is
generally available at reasonable premiums and in such amount as generally
required by Lender for similar properties or (b) if not so available from a
private carrier, from the federal government at commercially reasonable premiums
to the extent available.; (vi) a policy or endorsement covering against damage
or loss from (A) sprinkler system leakage and (B) boilers, boiler tanks, HVAC
systems, heating and air-conditioning equipment, pressure vessels, auxiliary
piping, and similar apparatus, in an amount generally available at reasonable
premiums and generally required by Lender for similar properties; (vii) during
the period of any construction, repair, restoration, or replacement of the
Property, a standard builder’s risk policy with extended coverage in an amount
at least equal to the full replacement cost of such Property; and (viii) a
policy or endorsement covering against damage or loss by earthquake in the
amounts reasonably required by Lender; (ix) if the Property constitutes a legal
non-conforming use, an ordinance of law coverage endorsement which contains
coverage for the (A) undamaged portion of building, (B) demolition costs, and
(C) increased cost of construction, covering the Property in an amount not less
than coverage (A) value included to full building limit, and coverage (B) and
(C) a combined per occurrence limit of not less than $25 million. “Full
replacement cost” shall mean an amount equal to one hundred percent (100%) of
the actual replacement cost of each property without allowance for depreciation
(exclusive of the cost of excavations, foundations, footings underground
utilities, and value of land) subject to Borrower's best efforts to obtain such
limits at commercially reasonable pricing as approved by Lender and Borrower.
Full replacement cost will be determined, at Borrower’s expense, periodically
(but at least once every three (3) years) by or for the insurance company
conducted by an appraiser experienced in valuing properties of similar types,
engineer, architect, or contractor acceptable to Lender.

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(b)  Liability and Other Insurance. Borrower shall maintain or cause Manager to
maintain commercial general liability insurance with per occurrence limits of
$1,000,000, and a general aggregate limit of $2,000,000, with an excess/umbrella
liability policy of not less than $10,000,000 per occurrence and annual
aggregate covering Borrower, with Lender named as an additional insured, against
claims for bodily injury or death or property damage occurring in, upon, or
about the Property. In addition to any other requirements, such commercial
general liability and excess/umbrella liability insurance shall provide
insurance against acts of terrorism, or such coverages shall be provided by
separate policies or endorsements. The insurance policies shall also include
operations and blanket contractual liability coverage which insures contractual
liability under the indemnifications set forth in Section 8.02 below (but such
coverage or the amount thereof shall in no way limit such indemnifications).
Upon request, Borrower shall or cause Manager to also carry additional insurance
or additional amounts of insurance covering Borrower or the Property as Lender
shall reasonably require with thirty (30) days written notice to Borrower.
 
(c)  Form of Policy. All insurance required under this Section shall be fully
paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in the
Property State, approved by Lender, and must have and maintain a current
financial strength rating of “A-, VII” (or higher) from A.M. Best or equivalent
(or if a rating by A.M. Best is no longer available, a similar rating from a
similar or successor service). In addition, all policies shall (i) include a
standard mortgagee clause, without contribution, in the name of Lender, (ii)
provide that they shall not be canceled, amended, or materially altered
(including reduction in the scope or limits of coverage) without at least thirty
(30) days’ prior written notice to Lender except in the event of cancellation
for non-payment of premium, in which case only ten (10) days’ prior written
notice will be given to Lender, and (iii) include a waiver of subrogation clause
substantially equivalent to the following: “The Company may require from the
Insured an assignment of all rights of recovery against any party for loss to
the extent that payment therefor is made by the Company, but the Company shall
not acquire any rights of recovery which the Insured has expressly waived prior
to loss, nor shall such waiver affect the Insured’s rights under this policy”.
 
(d)  Original Policies. Borrower shall deliver to Lender on or prior to the
Closing Date and at the expiration date of the policy(ies) thereafter (i)
certificates evidencing coverage under all policies (and renewals) required
under this Section and (ii) satisfactory evidence of payment of all premiums on
such policies If original and renewal policies are unavailable or if coverage is
under a blanket policy, Borrower shall deliver to Lender certificates evidencing
coverage under all policy(ies) required under this Section and, upon request of
Lender, certified copies of the original policies.
 
(e)  General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. The insurance coverage required
under this Section may be effected under a blanket policy(ies) covering the
Property and other properties and assets not constituting a part of the
Property; provided that any such blanket policy shall specify, except in the
case of public liability insurance, the portion of the total coverage of such
policy that is allocated to the Property, and any sublimits in such blanket
policy applicable to the Property, which amounts shall not be less than amounts
required pursuant to this Section and which shall in any case comply in all
other respects with the requirements of this Section. No approval by Lender of
any insurer shall be construed to be a representation, certification, or
warranty of its solvency. No approval by Lender as to the amount, type, or form
of any insurance shall be construed to be a representation, certification, or
warranty of its sufficiency. Borrower shall comply with all insurance
requirements and shall not cause or permit any condition to exist which would be
prohibited by any insurance requirement or would invalidate the insurance
coverage on the Property.

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(f)  Waiver of Subrogation. A waiver of subrogation shall be obtained by
Borrower from its insurers and, consequently, Borrower for itself, and on behalf
of its insurers, hereby waives and releases any and all right to claim or
recover against Lender, its officers, employees, agents and representatives, for
any loss of or damage to Borrower, other Persons, the Property, Borrower’s
property or the property of other Persons from any cause required to be insured
against by the provisions of this Instrument or otherwise insured against by
Borrower.
 
Section 3.07   Damage and Destruction of Property
 
(a)  Borrower’s Obligations. If any damage to, loss, or destruction of the
Property occurs (any “Damage”), (i) Borrower shall promptly notify Lender and
take all necessary steps to preserve any undamaged part of the Property and (ii)
if the insurance proceeds are made available for Restoration (defined below)
(but regardless of whether any proceeds are sufficient for Restoration),
Borrower shall promptly commence and diligently pursue to completion the
restoration, replacement, and rebuilding of the Property as nearly as possible
to its value and condition immediately prior to the Damage or a Taking (defined
below) in accordance with plans and specifications approved by Lender
(“Restoration”). Borrower shall comply with other reasonable requirements
established by Lender to preserve the security under this Instrument.
 
(b)  Lender’s Rights. If any Damage occurs and (i) the Restoration costs for
which Damage equal or exceed $5,000,000 in Lender’s reasonable determination
(“Major Restoration”) or (ii) at any time following an Event of Default under
the Documents, and some or all of the Damage is covered by insurance, then (i)
Lender may, but is not obligated to, make proof of loss if not made promptly by
Borrower and Lender is authorized and empowered by Borrower to settle, adjust,
or compromise any claims for the Damage; (ii) each insurance company concerned
is authorized and directed to make payment directly to Lender for the Damage;
and (iii) Lender may apply the insurance proceeds in any order it determines (1)
to reimburse Lender for all Costs (defined below) related to collection of the
proceeds and (2) subject to Section 3.07(c) and at Lender’s option, to (A)
payment (without any Prepayment Premium) of all or part of the Obligations,
whether or not then due and payable, in the order determined by Lender (provided
that if any Obligations remain outstanding after this payment, the unpaid
Obligations shall continue in full force and effect and Borrower shall not be
excused in the payment thereof); (B) the cure of any default under the
Documents; or (C) the Restoration. Any insurance proceeds held by Lender shall
be held without the payment of interest thereon. If Borrower receives any
insurance proceeds for the Damage which constitutes a Major Restoration, or
promptly upon Lender’s request following on Event of Default under the
Documents, Borrower shall promptly deliver the proceeds to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the insurance proceeds paid to Lender shall be deemed trust
funds and Lender may dispose of these proceeds as provided in this Section.
Borrower expressly assumes all risk of loss from any Damage, whether or not
insurable or insured against.
 
(c)  Application of Proceeds to Restoration. All insurance proceeds received by
Borrower either directly or through Lender shall be used and applied by Borrower
in strict accordance with the requirements of this Instrument and the Documents.
Notwithstanding anything to the contrary herein, if at any time (i) Lender
reasonably determines Borrower has failed, for any reason, to use and apply any
insurance proceeds in strict according with the Indenture or (ii) an Event of
Default occurs under the Documents, then, at Lender’s sole election, Lender may
exercise all rights set forth in this Instrument with respect to any and all
Damage and insurance proceeds regardless of whether such Damage gives rise to a
Major Restoration, as defined above. Lender shall make the Net Proceeds (defined
below) available to Borrower for Restoration if:

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(i) there shall then be no Event of Default; (ii) Lender shall be satisfied, in
its reasonable determination, that Restoration can and will be completed within
one (1) year after the Damage occurs and at least one (1) year prior to the
maturity of the Note and Leases which are terminated or terminable as a result
of the Damage cover an aggregate of less than ten percent (10%) of the total
rentable square footage contained in the Property at the closing of the Loan or
such Tenants agree in writing to continue their Leases, as applicable; (iii)
Borrower shall have entered into a general construction contract acceptable in
all respects to Lender for Restoration, which contract must include provision
for retainage of not less than ten percent (10%) until final completion of the
Restoration; and (iv) in Lender’s reasonable judgment, after Restoration has
been completed, the net cash flow of the Property will be sufficient to cover
all costs and operating expenses of the Property, including payments due and
reserves required under the Documents. Notwithstanding any provision of this
Instrument to the contrary, Lender shall not be obligated to make any portion of
the Net Proceeds available for Restoration unless, at the time of the
disbursement request, Lender has determined in its reasonable discretion that
(y) Restoration can be completed at a cost which does not exceed the aggregate
of the remaining Net Proceeds and any funds deposited with Lender by Borrower
(“Additional Funds”) and (z) the aggregate of any loss of rental income
insurance proceeds which the carrier has acknowledged to be payable (“Rent Loss
Proceeds”) and any funds deposited with Lender by Borrower are sufficient to
cover all costs and operating expenses of the Property, including payments due
and reserves required under the Documents.
 
(d)  Disbursement of Proceeds. If Lender elects or is required to make insurance
proceeds available for Restoration, Lender shall, through a disbursement
procedure established by Lender, periodically make available to Borrower in
installments the net amount of all insurance proceeds received by Lender after
deduction of all costs and expenses incurred by Lender in connection with the
collection and disbursement of such proceeds (“Net Proceeds”) and, if any, the
Additional Funds. All insurance proceeds received directly by Borrower and all
amounts periodically disbursed to Borrower by Lender shall be applied by
Borrower to the amounts currently due under the construction contract for
Restoration and Lender’s receipt of (i) appropriate lien waivers, (ii) a
certification of the percentage of Restoration completed by an architect or
engineer acceptable to Lender, and (iii) title insurance protection against
materialmen’s and mechanic’s liens. At Lender’s election, the disbursement of
funds may be handled by a disbursing agent selected by Lender, and such agent’s
reasonable fees and expenses shall be paid by Borrower. The Net Proceeds, Rent
Loss Proceeds, and any Additional Funds shall constitute additional security for
the Loan and Borrower shall execute, deliver, file and/or record, at its
expense, such instruments as Lender requires to grant to Lender a perfected,
first-priority security interest in these funds. If the Net Proceeds are made
available for Restoration and (x) Borrower refuses or fails to complete the
Restoration, (y) an Event of Default occurs, or (z) the Net Proceeds or
Additional Funds are not applied to Restoration, then any undisbursed portion
may, at Lender’s option, be applied to the Obligations in any order of priority,
and any application to principal shall be deemed a voluntary prepayment subject
to the Prepayment Premium.
 
Section 3.08   Condemnation
 
(a)  Borrower’s Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise)(a “Taking”). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) with respect to any
condemnation in an amount equal to or greater than $5,000,000 (“Major
Condemnation”) and, upon Lender’s request, at any time following on Event of
Default under the Documents, consult and cooperate with Lender in the handling
of these proceedings. No settlement of any Major Condemnation or any proceeding
following on Event of Default under the Documents shall be made by Borrower
without Lender’s prior written consent, which consent shall not be unreasonably
withheld or delayed. Lender may participate in the proceedings (but shall not be
obligated to do so) respecting any Major Condemnation and respecting any Taking
at any time following an Event of Default under the Documents, and Borrower will
sign and deliver all instruments requested by Lender to permit this
participation.

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(b)  Lender’s Rights to Proceeds. All condemnation awards, judgments, decrees,
or proceeds of sale in lieu of condemnation (“Award”) are assigned and shall be
paid to Lender. Borrower authorizes Lender to collect and receive them, to give
receipts for them, to accept them in the amount received without question or
appeal, and/or to appeal any judgment, decree, or award. Borrower will sign and
deliver all instruments requested by Lender to permit these actions.
 
(c)  Application of Award. Lender shall have the right to apply any Award,
subject to Section 3.08(d), as per Section 3.07 for insurance proceeds held by
Lender, including the waiver of Prepayment Premium. If Borrower receives any
Award, Borrower shall promptly deliver them to Lender. Notwithstanding anything
in this Instrument or at law or in equity to the contrary, none of the Award
paid to Lender shall be deemed trust funds and Lender may dispose of these
proceeds as provided in this Section.
 
(d)  Application of Award to Restoration. With respect to any portion of the
Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty percent (20%) of the gross area of
the Improvements or (B) ten percent (10%) of the parking spaces is affected by
the Taking or, if more than ten percent (10%) of the parking spaces is affected
by the Taking, the parking nonetheless remains in compliance, in Lender’s
reasonable determination, with all zoning codes, other governmental regulations,
and applicable conditions, covenants, restrictions and/or easements affecting
the Property; (ii) the amount of the loss does not exceed twenty percent (20%)
of the original amount of the Note; (iii) the Taking does not affect access to
the Property from any public right-of-way; (iv) there is no Event of Default at
the time of application; (v) after Restoration, the Property and its use will be
in compliance with all Laws; (vi) in Lender’s reasonable judgment, Restoration
is practical and can be completed within one (1) year after the Taking and at
least one (1) year prior to the maturity of the Note; and (vii) the Major
Tenants (defined in Section 3.21(c) below) agree in writing to continue their
Leases without abatement of rent. Upon an Event of Default under the Documents
or if any portion of the Award that is (i) for loss of value or property or (ii)
in excess of the cost of any Restoration permitted above, Lender may, in its
sole discretion, be applied against the Obligations or paid to Borrower.
 
(e)  Effect on the Obligations. Notwithstanding any Taking, Borrower shall
continue to pay and perform the Obligations as provided in the Documents. Any
reduction in the Obligations due to application of the Award shall take effect
only upon Lender’s actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender’s actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.

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Section 3.09   Liens and Liabilities. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien or encumbrance on the Property or the
Rents (collectively, “Liens”) and Borrower shall, at its sole expense, do
everything necessary to preserve the lien and security interest created by this
Instrument and its priority. Nothing in the Documents shall be deemed or
construed as constituting the consent or request by Lender or Trustee, express
or implied, to any contractor, subcontractor, laborer, mechanic or materialman
for the performance of any labor or the furnishing of any material for any
improvement, construction, alteration, or repair of the Property. Borrower
further agrees that neither Lender nor Trustee stands in any fiduciary
relationship to Borrower. All contributions made, directly or indirectly, to
Borrower by or on behalf of any of its partners, members, principals or any
party related to such parties shall be treated as equity and shall be
subordinate and inferior to the rights of Lender under the Documents.
 
Section 3.10   Tax and Insurance Deposits. Upon Lender’s request, following an
Event of Default under any Document, Borrower shall make monthly deposits
(“Deposits”) with Lender equal to one-twelfth (1/12) of the annual Assessments
(except for income taxes, franchise taxes, ground rents, maintenance charges and
utility charges) and the premiums for insurance required under Section 3.06 (the
“Insurance Premiums”) together with amounts sufficient to pay these items thirty
(30) days before they are due (collectively, the “Impositions”). Lender shall
estimate the amount of the Deposits until ascertainable. At that time, Borrower
shall promptly deposit any deficiency. Borrower shall promptly notify Lender of
any changes to the amounts, schedules and instructions for payment of the
Impositions. Borrower authorizes Lender or its agent to obtain the bills for
Assessments directly from the appropriate tax or governmental authority. All
Deposits are pledged to Lender and shall constitute additional security for the
Obligations. The Deposits shall be held by Lender without interest (except to
the extent required under Laws) and may be commingled with other funds. If (i)
there is no Event of Default at the time of payment, (ii) Borrower has delivered
bills or invoices to Lender for the Impositions in sufficient time to pay them
when due, (iii) the Deposits are sufficient to pay the Impositions or Borrower
has deposited the necessary additional amount, then Lender shall pay the
Impositions prior to their due date. Any Deposits remaining after payment of the
Impositions shall, at Lender’s option, be credited against the Deposits required
for the following year or paid to Borrower. If an Event of Default occurs, the
Deposits may, at Lender’s option, be applied to the Obligations in any order of
priority. Any application to principal shall be deemed a voluntary prepayment
subject to the Prepayment Premium. Borrower shall not claim any credit against
the principal and interest due under the Note for the Deposits. Upon an
assignment or other transfer of this Instrument, Lender may pay over the
Deposits in its possession to the assignee or transferee and then it shall be
completely released from all liability with respect to the Deposits. Borrower
shall look solely to the assignee or transferee with respect thereto. This
provision shall apply to every transfer of the Deposits to a new assignee or
transferee. Subject to Article V, a transfer of title to the Property shall
automatically transfer to the new owner the beneficial interest in the Deposits.
Upon full payment and satisfaction of this Instrument or, at Lender’s option, at
any prior time, the balance of the Deposits in Lender’s possession shall be paid
over to the record owner of the Land and no other party shall have any right or
claim to the Deposits. Lender may transfer all its duties under this Section to
such servicer or financial institution as Lender may periodically designate and
Borrower agrees to make the Deposits to such servicer or institution.
 
Section 3.11   ERISA
 
(a)  Borrower understands and acknowledges that, as of the date hereof, the
source of funds from which Lender is extending the Loan will include one or more
of the following accounts: (i) an “insurance company general account,” as that
term is defined in Prohibited Transaction Class Exemption (“PTE”) 95-60 (60 Fed.
Reg. 35925 (Jul. 12, 1995)), as to which Lender meets the conditions for relief
in Sections I and IV of PTE 95-60; (ii) pooled and single client insurance
company separate accounts, which are subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”); and (iii) one or
more insurance company separate accounts maintained solely in connection with
fixed contractual obligations of the insurance company, under which the amounts
payable or credited to the plan are not affected in any manner by the investment
performance of the separate account.

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(b)  Borrower represents and warrants to Lender that (i) Borrower is not an
“employee benefit plan” as defined in Section 3(3) of ERISA, or a “governmental
plan” within the meaning of Section 3(32) of ERISA; (ii) Borrower is not a
“party in interest”, as defined in Section 3(14) of ERISA, other than as a
service provider or an affiliate of a service provider, to any employee benefit
plan that has invested in a separate account described in Section 3.11(a)(ii)
above, from which funds have been derived to make the Documents, or if so, the
execution of the Documents and making of the Loan thereunder do not constitute
nonexempt prohibited transactions under ERISA; (iii) Borrower is not subject to
state statutes regulating investments and fiduciary obligations with respect to
governmental plans, or if subject to such statutes, is not in violation thereof
in the execution of the Documents and the making of the Loan thereunder; (iv)
the assets of the Borrower do not constitute “plan assets” of one or more plans
within the meaning of 29 C.F.R. Section 2510.3-101; and (v) one or more of the
following circumstances is true: (1) equity interests in Borrower are publicly
offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);
(2) less than twenty-five percent (25%) of all equity interests in Borrower are
held by “benefit plan investors” within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or (3) Borrower qualifies as an “operating company,” a
“venture capital operating company” or a “real estate operating company” within
the meaning of 29 C.F.R. Section 2510.3-101(c), (d) or (e), respectively.
 
(c)  Borrower shall deliver to Lender such certifications and/or other evidence
periodically requested by Lender, in its sole discretion, to verify the
representations and warranties in Section 3.11(b) above. Failure to deliver
these certifications or evidence, breach of these representations and
warranties, or consummation of any transaction which would cause this Instrument
or any exercise of Lender’s rights under this Instrument to (i) constitute a
non-exempt prohibited transaction under ERISA or (ii) violate ERISA or any state
statute regulating governmental plans (collectively, a “Violation”), shall be an
Event of Default. Notwithstanding anything in the Documents to the contrary, no
sale, assignment, or transfer of any direct or indirect right, title, or
interest in Borrower or the Property (including creation of a junior lien,
encumbrance or leasehold interest) shall be permitted which would, in Lender’s
opinion, negate Borrower’s representations in this Section or cause a Violation.
At least fifteen (15) days before consummation of any of the foregoing, Borrower
shall obtain from the proposed transferee or lienholder (i) a certification to
Lender that the representations and warranties of this Section 3.11 will be true
after consummation and (ii) an agreement to comply with this Section 3.11.
 
Section 3.12   Environmental Representations, Warranties, and Covenants
 
(a)  Environmental Representations and Warranties. Borrower represents and
warrants, to the best of Borrower’s knowledge and additionally based upon the
environmental site assessment report of the Property (the “Environmental
Report”), that except as fully disclosed in the Environmental Report delivered
to and approved by Lender prior to the date hereof: (i) there are no Hazardous
Materials (defined below) or underground storage tanks affecting the Property
(“affecting the Property” shall mean “in, on, under, stored, used or migrating
to or from the Property”) except for (A) routine office, cleaning, janitorial
and other materials and supplies necessary to operate the Property for its
current use and (B) Hazardous Materials that are (1) in compliance with
Environmental Laws (defined below), (2) have all required permits, and (3) are
in only the amounts necessary to operate the
 

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Property; (ii) there are no past, present or threatened Releases (defined below)
of Hazardous Materials in violation of any Environmental Law affecting the
Property; (iii) there is no past or present non-compliance with Environmental
Laws or with permits issued pursuant thereto; (iv) Borrower does not know of,
and has not received, any written or oral notice or communication from any
person relating to Hazardous Materials affecting the Property; and (v) Borrower
has provided to Lender, in writing, all information relating to environmental
conditions affecting the Property known to Borrower or contained in Borrower’s
files. “Environmental Law” means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. “Hazardous Materials” shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls (“PCBs”) and compounds containing them;
lead and lead-based paint; Microbial Matter, infectious substances, asbestos or
asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any
substance; any substance the presence of which on the Property is prohibited by
any federal, state or local authority; any substance that requires special
handling; and any other material or substance now or in the future defined as a
“hazardous substance,” “hazardous material,” “hazardous waste,” “toxic
substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the meaning
of any Environmental Law. “Release” of any Hazardous Materials includes any
release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
pumping, pouring, escaping, dumping, disposing or other movement of Hazardous
Materials. “Microbial Matter” shall mean the presence of fungi or bacterial
matter which reproduces through the release of spores or the splitting of cells,
including, but not limited to, mold, mildew and viruses, whether or not such
Microbial Matter is living.
 
(b)  Environmental Covenants. Borrower covenants and agrees that: (i) all use
and operation of the Property shall be in compliance with all Environmental Laws
and required permits; (ii) there shall be no Releases of Hazardous Materials
affecting the Property; (iii) there shall be no Hazardous Materials affecting
the Property except (A) routine office, cleaning and janitorial supplies, (B) in
compliance with all Environmental Laws, (C) with all required permits, and (D)
(1) in only the amounts necessary to operate the Property or (2) fully disclosed
to and approved by Lender in writing; (iv) Borrower shall keep the Property free
and clear of all liens and encumbrances imposed by any Environmental Laws due to
any act or omission by Borrower or any person (the “Environmental Liens”); (v)
Borrower shall, at its sole expense, fully and expeditiously cooperate in all
activities in Section 3.12(c) including providing all relevant information and
making knowledgeable persons available for interviews; (vi) Borrower shall, at
its sole expense, (A) perform any environmental site assessment or other
investigation of environmental conditions at the Property upon Lender’s request
based on Lender’s reasonable belief that the Property is not in compliance with
all Environmental Laws, (B) share with Lender the results and reports and Lender
and the Indemnified Parties (defined below) shall be entitled to rely on such
results and reports, and (C) complete any remediation of Hazardous Materials
affecting the Property or other actions required by any Environmental Laws;
(vii) Borrower shall not allow any Tenant or other user of the Property to
violate any Environmental Law; (viii) Borrower shall promptly notify Lender in
writing after it becomes aware of (A) the presence, Release, or threatened
Release of Hazardous Materials affecting the Property, (B) any non-compliance of
the Property with any Environmental Laws, (C) any actual or potential
Environmental Lien, (D) any required or proposed remediation of environmental
conditions relating to the Property, or (E) any written or oral communication or
notice from any person relating to Hazardous Materials, and (ix) if at any time
Lender reasonably requires any or all of an Asbestos Operation and Maintenance
Plan, Lead Paint Abatement Plan, Storage Tank Closure and Removal Plan, Mold
Operation and Maintenance Plan, and any other Operation and Maintenance Plan
(collectively, the “O&M Plan”) be in effect (or required to be implemented by
Lender), then Borrower shall, at its sole expense, implement, continue, and
complete, as applicable, the O&M Plan (with any modifications required to comply
with applicable Laws) until payment and full satisfaction of the Obligations.
While any portion of the Loan is outstanding, upon the request of Lender, which
request shall be made upon Lender’s reasonable determination that the governing
law or applicable facts or circumstances respecting the Property warrant updated
lead paint, asbestos, tank and/or mold survey(s) of the Property, at Borrower’s
sole cost and expense, Borrower shall conduct such updated survey(s) of the
Property. Each such survey shall be conducted by a consultant reasonably
acceptable to Lender who shall determine the condition of the lead paint,
asbestos, tank and/or mold at the Property, and whether the applicable O&M Plan
should be revised or any other measures taken to ensure the continued safe
condition of the Property. Borrower shall deliver to Lender a copy of such
survey and shall enter into the revised O&M Plan, and Borrower shall certify to
Lender in writing, no later than thirty (30) days after Borrower’s receipt of
such survey, that Borrower has complied with all of the recommendations of the
consultant contained in the survey and the revised O&M Plan. Any failure of
Borrower to perform its obligations under this Section 3.12 shall constitute bad
faith waste of the Property.

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(c)  Lender’s Rights. Lender and any person designated by Lender may enter the
Property to assess the environmental condition of the Property and its use
including (i) conducting any environmental assessment or audit (the scope of
which shall be determined by Lender) and (ii) taking samples of soil,
groundwater or other water, air, or building materials, and conducting other
invasive testing at all reasonable times when (A) an Event of Default has
occurred and is continuing under the Documents, (B) Lender reasonably believes
that a Release has occurred or the Property is not in compliance with all
Environmental Laws, or (C) the Loan is being considered for sale. Borrower shall
cooperate with and provide access to Lender and such person, and Lender shall
endeavor to conduct such entry, inspections and tests in a manner that shall not
unreasonably interfere with the operation of the Property.
 
Section 3.13   Electronic Payments. Unless directed otherwise in writing by
Lender, all payments due under the Documents shall be paid, at Borrower’s
option, either (i) by wire transfer to the loan servicing account or accounts
selected by Lender, or (ii) by Electronic Fund Transfer debit entries to
Borrower’s account at an Automated Clearing House member bank satisfactory to
Lender or by similar electronic transfer process selected by Lender. If Borrower
elects to pay by Electronic Fund Transfer, the following additional provisions
shall apply: (a) each payment due under the Loan Documents shall be initiated by
Lender through the Automated Clearing House network (or similar electronic
process) for settlement on the due date for the payment, (b) Borrower shall, at
Borrower’s sole cost and expense, direct its bank in writing to permit such
Electronic Fund Transfer debit entries (or similar electronic transfer) to be
made by Lender, (c) prior to each payment due date under the Loan Documents,
Borrower shall deposit and/or maintain sufficient funds in Borrower’s account to
cover each debit entry, and (d) any charges or costs, if any, by Borrower’s bank
for the foregoing shall be paid by Borrower.
 
Section 3.14   Inspection. Borrower shall allow Lender and any person designated
by Lender to enter upon the Property and conduct tests or inspect the Property
at all reasonable times. Borrower shall assist Lender and such person in
effecting said inspection, and Lender shall endeavor to conduct such entry,
inspections and tests in a manner that shall not unreasonably interfere with the
operation of the Property.
 
Section 3.15   Records, Reports, and Audits

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(a)  Records and Reports. Borrower shall maintain complete and accurate books
and records with respect to all operations of or transactions involving the
Property. Annually, Borrower shall furnish Lender financial statements (which
financial statements may be consolidated statements, provided they set forth the
financial condition of Borrower and the operating information of the Property in
detail reasonably satisfactory to Lender) for the most current fiscal year
(including a schedule of all related Obligations and contingent liabilities) for
(i) Borrower, (ii) any general partner of Borrower, (iii) the Guarantors and any
other guarantors or sureties (if any) of the Note, to the extent not readily
available in the public domain, and (iv) any Major Tenants, to the extent
available through commercially reasonable efforts by Borrower. Annually (or
quarterly upon Lender’s reasonable request), Borrower shall furnish Lender (i)
operating statements showing cash flow and capital expenditures for the Property
including income and expenses (before and after Obligations service), major
capital improvements, a schedule showing tenant sales and percentage rent for
retail properties where sales are reported, and the average daily rate and
average daily occupancy for hotel properties; (ii) copies of paid tax receipts
for the Property; (iii) a certified rent roll including security deposits held,
the expiration of the terms of the Leases, and identification and explanation of
any Tenants in default; (iv) a budget showing projected income and expenses
(before and after Obligations service) for the next twelve (12) month budget
period; (v) any appraisals of the Property performed during the previous year,
and (vi) upon Lender’s request, (A) a schedule showing the Borrower’s tax basis
in the Property, (B) the distribution of economic interests in the Property, and
(C) copies of any other loan documents affecting the Property.
 
(b)  Delivery of Reports. All of the reports, statements, and items required
under this Section shall be (i) certified as being true, correct, and accurate
by an authorized person, partner, or officer of the delivering party or, at the
deliverer’s option, audited by a Certified Public Accountant; (ii) satisfactory
to Lender in form and substance; and (iii) delivered within (A) sixty (60) days
after the end of Borrower’s fiscal year for annual reports and (B) thirty (30)
days after the end of each calendar quarter for quarterly reports (if any are
reasonably requested by Lender). If any one report, statement, or item is not
received by Lender on its due date, a late fee of Five Hundred and No/100
Dollars ($500.00) per month shall be due and payable by Borrower. If any one
report, statement, or item is not received by Lender on or before its due date,
and Borrower fails to deliver the same to Lender within five (5) Business Days
following Lender’s written request therefore, then Lender may immediately
declare an Event of Default under the Documents. Borrower shall (i) provide
Lender with such additional financial, management, or other information
regarding Borrower, any general partner of Borrower, or the Property, as Lender
may reasonably request and (ii) upon Lender’s request, deliver all items
required by Section 3.15 in an electronic format (i.e. on computer disks) or by
electronic transmission acceptable to Lender.
 
(c)  Inspection of Records. Borrower shall allow Lender or any person designated
by Lender to examine, audit, and make copies of all such books and records and
all supporting data at the place where these items are located at all reasonable
times after reasonable advance notice; provided that no notice shall be required
after any Event of Default has occurred under the Documents and during the
continuance thereof. Borrower shall assist Lender in effecting such examination.
Upon five (5) days’ prior notice, Lender may inspect and make copies of
Borrower’s or any manager or managing member of Borrower’s income tax returns
with respect to the Property for the purpose of verifying any items referenced
in this Section.
 
Section 3.16   Borrower’s Certificates. Within ten (10) days after Lender’s
request, Borrower shall furnish a written certification to Lender and any
Investors (defined below) as to (a) the amount of the Obligations outstanding;
(b) the interest rate, terms of payment, and maturity date of the Note; (c) the
date to which payments have been paid under the Note; (d) whether any offsets or
defenses exist against the Obligations and a detailed description of any listed;
(e) whether all Leases are in full force and effect and have not been modified
(or if modified, setting forth all modifications); (f) the date to which the
Rents have been paid; (g) whether, to the best knowledge of Borrower, any
defaults exist under the Leases and a detailed description of any listed; (h)
the security deposit held by Borrower under each Lease and that such amount is
the amount required under such Lease; (i) whether there are any Events of
Default (or events which with the passage of time and/or notice would constitute
an Event of Default) under the Documents and a detailed description of any
listed; (j) whether the Documents are in full force and effect; and (k) any
other matters reasonably requested by Lender related to the Leases, the
Obligations, the Property, or the Documents. For all non-residential properties
and promptly upon Lender’s request, Borrower shall use its best efforts to
deliver a written certification to Lender and Investors from Tenants specified
by Lender that: (a) their Leases are in full force and effect; (b) there are no
defaults (or events which with the passage of time and/or notice would
constitute a default) under their Leases or a detailed description of any
listed; (c) none of the Rents have been paid more than one month in advance; (d)
there are no offsets or defenses against the Rents or a detailed description of
any listed; and (e) any other matters reasonably requested by Lender related to
the Leases; provided, however, that Borrower shall not have to pay money to a
Tenant to obtain such certification, but it will deliver a landlord’s
certification for any certification it cannot obtain.

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Section 3.17   Full Performance Required; Survival of Warranties. All
representations and warranties of Borrower in that certain First Mortgage Loan
Application between Lender and Borrower dated February 10, 2006 or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties, and representations of
Borrower.
 
Section 3.18   Additional Security. No other security now existing or taken
later to secure the Obligations shall be affected by the execution of the
Documents and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and lien of this
Instrument and shall not affect the liability or obligations of any maker or
guarantor. Neither the acceptance of the Documents nor their enforcement shall
prejudice or affect Lender’s or Trustee’s right to realize upon or enforce any
other security now or later held by Lender or Trustee. Lender and/or Trustee may
enforce the Documents or any other security in such order and manner as
it/either of them may determine in its/their discretion.
 
Section 3.19   Further Acts. Borrower shall take all necessary actions to (i)
keep valid and effective the lien and rights of Lender and Trustee under the
Documents and (ii) protect the lawful owner of the Documents. Promptly upon
request by Lender or Trustee, and at Borrower’s sole expense, Borrower shall
execute additional instruments and take such actions as Lender and/or Trustee
reasonably believes are necessary or desirable to (a) maintain or grant Lender
and Trustee a first-priority, perfected lien on the Property, (b) grant to
Lender and Trustee, to the fullest extent permitted by Laws, the right to
foreclose on, or transfer title to, the Property non-judicially, (c) correct any
error or omission in the Documents, and (d) effect the intent of the Documents,
including filing/recording the Documents, additional mortgages, or deeds of
trust, financing statements, and other instruments.
 
Section 3.20   Capital Lease. Borrower shall not, without first obtaining
Lender’s written consent in each case, enter into any lease for capital goods
and/or equipment (each, a “Capital Lease”) that, when aggregated with all other
Capital Leases for the Property, covers goods and/or equipment, which, if
purchased, would exceed $1,000,000.00 in value.

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Section 3.21   Other Leases.
 
(a)  With respect to all leases of the Property other than the Operating Lease
and occupancy agreements respecting guest rooms (such leases shall collectively
be referred to herein as “Leases”), Borrower may do the following without
Lender’s consent, provided Borrower delivers prior written notices thereof to
Lender:
 
(i)  terminate any Lease (other than the Lease of a Major Tenant); (ii) Borrower
may amend any Lease (other than the Lease of a Major Tenant); and (iii) Borrower
may enter into new Leases (or extend or renew existing Leases) with third-party
tenants for premises of 10,000 square feet or less provided each Lease (x)
satisfies the minimum leasing requirements in this Section 3.21(b), and (y) does
not give the tenant any rights (whether in the form of expansion rights,
purchase rights, rights of first refusal to lease or purchase, or otherwise)
relating to property which is not part of the Property and/or would require
Borrower and/or Lender to possess or control any property (other than the
Property) to honor such rights. Except as expressly provided in this Section
3.21(a) (or after obtaining Lender's prior written consent), Borrower shall not
(1) amend or modify any Lease, (2) extend or renew (except in accordance with
the existing Lease provisions, if any) any Lease (3) terminate or accept the
surrender of any Lease, (4) enter into any new Lease of the Property, or (5)
accept any prepayment of rent, termination fee, or any similar payment.
 
(b)  Minimum Leasing Requirements:
 
(i)  All Leases shall be third-party, arm's-length leases.
 
(ii)  All Leases shall satisfy the conditions, standards and requirements under
the applicable Hotel Management Agreement, which shall mean collectively, the
Management Agreement dated September 27, 2001, Owner Agreement dated September
27, 2001 and Recognition Agreement dated April 3, 2006 respecting the Property,
referred to herein as the “Management Agreement”; the applicable Hotel Franchise
Agreement, which shall mean any hotel franchise agreement, whether evidenced in
a separate franchise agreement or as part of a Management Agreement affecting
the Property and any related software and/or hardware licensing, communications
and technical support agreements, referred to herein collectively as the “Hotel
Franchise Agreement”; and the Operating Lease.
 
(c)  The tenants under any and all Leases for space consisting of over 10,000
square feet of rentable area shall be referred to herein as “Major Tenants.”
 
(d)  No portion of the Property shall be leased to a dry cleaner that uses dry
cleaning solvents on the Property.
 
Section 3.22   Inventory Levels. At all times during the term of the Loan,
Borrower shall maintain (or cause the Operating Lessee to maintain and to pledge
the same in full to Lender) inventory levels of linens; tableware; kitchen
utensils and equipment; and tables, chairs and equipment for the Property, which
are appropriate for a hotel similar to the hotel situate on the Property and
located in such hotel’s market, as determined by Lender in its reasonable
judgment, but in no event less than the levels required pursuant to the
Management Agreement and the Hotel Franchise Agreement (if any) respecting the
Property.
 
Section 3.23   Single Purpose Entity. Borrower hereby represents, warrants and
covenants to Lender that Borrower is a single-purpose entity whose sole asset is
the Property, and whose sole business and purpose is to acquire, refurbish,
operate, lease, maintain, market, finance, sell and otherwise use the Property,
and uses incidental thereto. Borrower covenants and agrees that, until payment
in full of the Obligations, Borrower will not, directly or indirectly, take any
actions in violation of the formation documents or that would otherwise
adversely affect the Borrower’s existence as a single purpose entity.
Specifically, except only to the extent required or permitted by the Documents,
Borrower has not and shall not do, cause, or permit any of the following: (a)
engage in any business or activity other than to own, operate, finance, develop,
manage, lease, maintain, market and sell the Property and activities incidental
thereto; (b) acquire or own any material assets other than the Property; (c)
except as otherwise permitted in Article V of this Instrument, merge into or
consolidate with any Person or dissolve, terminate or liquidate in whole or in
part, transfer or otherwise dispose of all or substantially all of its assets or
change its legal structure, without in each case Lender’s consent; (e) make any
investment in any Person without the consent of Lender; (f) commingle its assets
with the assets of any affiliate of Borrower or any other Person; (g) incur any
debt, secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than in the ordinary course of operating the Property, except
as provided herein; (h) fail to maintain its records, books of account and bank
accounts separate and apart from those of the affiliates of Borrower or any
other Person; (i) hold itself out to be
 

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responsible for the debts of another Person, except as provided in the
Documents; (j) make any loans or advances to any third party, including any
affiliate of Borrower, except for distributions; (k) fail to file its own tax
returns or file on a consolidated basis; (l) fail either to hold itself out to
the public as a legal entity separate and distinct from any other Person or to
conduct its business solely in its own name in order not (i) to mislead others
as to the identity with which such other party is transacting business, or
(ii) to suggest that Borrower is responsible for the debts of any third party
(including any affiliate of Borrower); (m) file or consent to the filing of any
petition, either voluntary or involuntary, to take advantage of any applicable
insolvency, bankruptcy, liquidation or reorganization statute, or make an
assignment for the benefit of creditors; (n) share any common logo with or hold
itself out as or be considered as a department or division of (i) any affiliate
of Borrower or (ii) any other Person or entity; (o) fail to preserve its
existence as an entity duly organized, validly existing and in good standing (if
applicable) under the laws of the jurisdiction of its organization or formation,
and qualification to do business in the states where the Property is located, if
applicable, or without the prior written consent of Lender, amend, modify or
fail to comply with (in any material respect), or terminate the provisions of
the formation documents or similar organizational documents, as the case may be;
(p) fail to pay its debts and liabilities from, and to the extent of, its assets
as the same shall become due and payable; (q) transact any business with
affiliates, except on an arm’s-length basis and pursuant to written agreements
that are terminable at will without the payment of a fee (except as otherwise
approved by Lender); and (r) fail to maintain adequate capital to the extent
available from revenues for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations.
 
ARTICLE IV  - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
 
Section 4.01   Expenses and Advances. Borrower shall pay all reasonable
appraisal, recording, filing, registration, brokerage, abstract, title insurance
(including premiums), title searches and examinations, surveys and similar data
and assurances with respect to title, UCC search, escrow, attorneys’ (both
in-house staff and retained attorneys), engineers’, environmental engineers’,
environmental testing, and architects’ fees, costs (including travel), expenses,
and disbursements incurred by Borrower or Lender and reasonable fees charged by
Lender or Trustee in connection with the granting, closing, servicing, and
enforcement of (a) the Loan and Documents or (b) attributable to Borrower as
owner of the Property. The term “Costs” shall mean any of the foregoing incurred
in connection with (a) any default by Borrower under the Documents, (b) the
servicing of the Loan, or (c) the exercise, enforcement, compromise, defense,
litigation, or settlement of any of Lender’s and Trustee’s rights or remedies
under the Documents or relating to the Loan or the Obligations. If Borrower
fails to pay any amounts or perform any actions required under the Documents,
Lender or Trustee may (but shall not be obligated to) advance sums to pay such
amounts or perform such actions. Borrower grants Lender or Trustee the right to
enter upon and take possession of the Property to prevent or remedy any such
failure and the right to take such actions in Borrower’s name. No advance or
performance shall be deemed to have cured a default by Borrower. All (a) sums
advanced by or payable to Lender or Trustee per this Section or under applicable
Laws, (b) except as expressly provided in the Documents, payments due under the
Documents which are not paid in full when due, and (c) all Costs, shall: (i) be
deemed demand obligations, (ii) bear interest at the applicable interest rate
specified in the Note, which shall be the Default Rate unless prohibited by
Laws, until paid if not paid on demand, (iii) be part of, together with such
interest, the Obligations , and (iv) be secured by the Documents. Lender or
Trustee, upon making any such advance, shall also be subrogated to rights of the
person receiving such advance.

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Section 4.02   Subrogation. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender and Trustee shall be subrogated to all rights, claims,
liens, titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and Trustee and (ii) are merged with the lien and security interest created by
the Documents as cumulative security for the payment and performance of the
Obligations.
 
ARTICLE V  - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
 
Section 5.01   Due-on-Sale or Encumbrance. It shall be an Event of Default and,
at the sole option of Lender, Lender may accelerate the Obligations and the
entire Obligations (including the Prepayment Premium) shall become immediately
due and payable, if, without Lender’s prior written consent (which may be
withheld for any or no reason, including the possibility of an ERISA violation
or the proposed transferee’s failure to agree in writing to Lender increasing
the interest payable on the Obligations to any rate, changing any other terms
(including maturity) of the Obligations or Documents, or requiring the payment
of a transfer fee) any of the following shall occur:
 
(a)  Borrower shall sell, convey, assign, transfer, dispose of or be divested of
its title to, convey security title to the Property, mortgage, encumber or cause
to be encumbered (except for the imposition of mechanics’ or materialmens’
liens) the Property or any interest therein, in any manner or way, whether
voluntary or involuntary (except only as expressly permitted pursuant to the
One-Time Transfer provision set forth in Section 13 of the Note); or
 
(b)  in the event of any merger, consolidation, sale, transfer, assignment, or
dissolution involving all or substantially all of the assets of Borrower, or any
general partner of Borrower, except only in connection with a Permitted Transfer
(defined in Section 5.02 below) or a One Time Transfer pursuant to Section 13 of
the Note; or
 
(c)  in the event of the assignment, transfer, pledge, voluntary or involuntary
sale, or encumbrance (or any of the foregoing at one time or over any period of
time), except only in connection with a Permitted Transfer or Permitted
Admission (as defined in Section 5.03 below), of:
 
(i)  of (1) the ownership interests in Borrower, regardless of the type or form
of entity of Borrower, (2) the voting stock or ownership interest of any
corporation or limited liability company which is, respectively, general partner
or managing member of Borrower or any corporation or limited liability company
directly or indirectly owning any such corporation or limited liability company,
(3) the ownership interests of any owner of the beneficial interests of Borrower
if Borrower is a trust; or

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(ii)  any general partner’s interest in (1) Borrower, (2) a partnership that is
in Borrower's chain of ownership and which is derivatively liable for the
obligations of Borrower, or (3) any general partner that has the legal right to
participate directly or indirectly in the control of the management or
operations of Borrower; or
 
(d)  in the event of the conversion of any general partnership interest in
Borrower to a limited partnership interest, if Borrower is a partnership; or
 
(e)  in the event of any change, removal, or resignation of any general partner
of Borrower; if Borrower is a partnership; or
 
(f)  in the event of any change, removal, addition or resignation of a managing
member (or if no managing member, any member) if Borrower is a limited liability
company; or
 
(g)  shall obtain any unsecured debt except for customary and reasonable
short-term trade payables obtained and repaid in the ordinary course of
business.
 
Section 5.02   Permitted Transfer. Notwithstanding the terms and conditions of
Section 5.01, provided Borrower satisfies each and all of the Transfer
Conditions (defined below), the following transfers shall be deemed “Permitted
Transfers” and Borrower shall not be required to obtain Lender’s prior written
consent to such transfers: (i) a transfer made in accordance with the buy-sell
provisions of the Limited partnership Agreement of CNL HHC Partners, LP,
provided the transferee shall be CNL (defined below), HHC (defined below), or a
CNL/HHC Affiliate (defined below) and provided that upon giving effect to the
transfer the Borrower shall continue to be a CNL/HHC Affiliate; (ii) a transfer
of direct or indirect interests in Borrower or in any entity owning a direct or
indirect interest in Borrower; provided the transferee shall be a CNL/HHC
Affiliate and provided that upon giving effect to the transfer the Borrower
shall continue to be a CNL/HHC Affiliate; (iii) a transfer of direct or indirect
interests in CNL or HHC in connection with a public offering or a
“privatization,” provided that upon giving effect to the transfer the Borrower
shall continue to be a CNL/HHC Affiliate, and (iv) a transfer of direct or
indirect interests in CNL or HHC Partners in connection with a publicly traded
stock or any public offering of equity ownership interests, provided that upon
giving effect to the transfer the Borrower shall continue to be a CNL/HHC
Affiliate.
 
For purposes hereof, the term “Transfer Conditions” means: (1) there shall be no
material adverse change in the financial condition of Borrower or any Key Party
(defined below) as a result of the transfer, (2) for each transfer made pursuant
to (i) and (ii) above, or by CNL pursuant to (iii) above in a listing on a
national stock exchange, not less than thirty (30) days prior to the transfer,
Borrower shall deliver to Lender (a) a written notice of the subject transfer,
including a representation and warranty that the transfer satisfies the
requirements of this Section, and (b) copies of all applicable amendments to the
organization documents of Borrower or any Key Party that is the subject of the
transfer, if any; (3) the Loan is current and there exists no Event of Default
under any Document, except only a non-monetary default that shall be fully cured
immediately upon the consummation of the transfer contemplated herein, and there
exists no other event, which, with the giving of notice or the passage of time
or both, would constitute an Event of Default under the Documents; (4) Borrower
pays Lender a fee equal to $10,000 for each transfer made pursuant to (i), (ii),
or (iii) above, and (5) Borrower pays all third-party costs (including
reasonable outside attorneys’ fees) incurred by Lender relating to the transfer
transaction, if any.

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For purposes hereof, the term “CNL” shall mean CNL Hotels & Resorts, Inc.
 
For purposes hereof, the term “HHC” shall mean Hilton Hotel Corporation.
 
For purposes hereof, the term “CNL/HHC Affiliate” shall mean an entity in which
(a) CNL and/or HHC owns 100% ownership interest, directly or indirectly, and (b)
CNL and/or HHC manages and controls, directly or indirectly, affairs and
decisions of the CNL/HHC Affiliate, including, without limitation, the
day-to-day and major/strategic management, business, operations, accounting and
investment affairs and decisions.
 
For purposes hereof, the term “Key Party” shall mean Borrower, any general
partner or managing member of Borrower, any general partner or managing member
of any general partner or managing member of Borrower, Guarantor, Manager (or
other manager) under the Management Agreement, and Operating Lessee (or other
tenant) under the Operating Lease.
 
Section 5.03   Permitted Admission. Notwithstanding the terms and conditions of
Section 5.01, provided Borrower satisfies each and all of the Admission
Conditions (defined below), the following shall be deemed a “Permitted
Admission”: the admission of any person or entity that is not CNL, HHC or a
CNL/HHC Affiliate into CNL HHC Partners, LP or into any entity that has a direct
or indirect interests in CNL HHC Partners, LP in connection with a publicly
traded stock transaction or any public or private offering of equity ownership
interests, provided that upon giving effect to the admission, HHC, CNL or
CNL/HHC Affiliate shall own a majority interest, directly or indirectly, in
Borrower and all Key Parties and HHC, CNL or CNL/HHC Affiliate shall manage and
control, directly or indirectly, the affairs and decisions of Borrower and all
Key Parties, including, without limitation, the day-to-day and major/strategic
management, business, operations, accounting and investment affairs and
decisions (without limiting the generality of the foregoing, the admitted party
may have consent rights over new or “elective” transactions, which consent
rights shall not pertain to the operation of the Property or any rights, duties,
or obligations under the Documents).
 
For purposes hereof, the term “Admission Conditions” means: (1) there shall be
no material adverse change in the financial condition Borrower or any Key Party
as a result of the admission, (2) the admitted party is a Person which has
financial capability, creditworthiness, and reputation reasonably approved by
Lender, (3) not less than thirty (30) days prior to the admission, Borrower
shall deliver to Lender (a) a written notice of the subject admission, and (b)
copies of all applicable amendments to the organization documents of Borrower or
any Key Party that is the subject of the admission, if any; (4) the Loan is
current, there exists no Event of Default under any Document except only a
non-monetary Event of Default that shall be fully cured immediately upon the
consummation of the admission contemplated in this section, and there exists no
other event, which, with the giving of notice or the passage of time or both,
would constitute an Event of Default under the Documents, except only an event
that shall be fully remedied or cured immediately upon the consummation of the
admission contemplated in this section; (5) Borrower pays Lender a fee equal to
$20,000 for each admission, and (6) Borrower pays all third-party costs incurred
by Lender relating to the admission transaction, if any.
 
ARTICLE VI  - DEFAULTS AND REMEDIES

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Section 6.01   Events of Default The following shall be an “Event of Default”:
 
(a)  any payment required under any of the Documents is not made when due and
such failure continues for five (5) days after written notice from Lender;
provided, however, that if Lender gives one (1) notice of a monetary default
within any twelve (12) month period, Borrower shall have no further right to any
notice of monetary default during that twelve (12) month period;
 
(b)  except for defaults listed in the other subsections of this Section 6.01,
any failure to perform or comply for any reason with any other provision
contained in any of the Documents and such failure is not cured within the
applicable grace period in that document (if any), or if no grace period is
provided in that document, within thirty (30) days of Lender providing written
notice thereof (the “Grace Period”); provided, however, the Grace Period shall
be extended for up to an additional sixty (60) days (for a total of ninety (90)
days from the date of default) if (i) a cure is immediately commenced and
diligently pursued, and Borrower delivers (within the Grace Period) to Lender a
written request for more time to cure and (ii) Lender determines in good faith
that (1) such default cannot be cured within the Grace Period but can be cured
within ninety (90) days after the default, (2) no lien or security interest
created by the Documents will be impaired prior to completion of such cure, and
(3) Lender’s or Trustee’s immediate exercise of any remedies provided hereunder
or by law is not necessary for the protection or preservation of the Property or
Lender’s security interest;
 
(c)  if any representation made (i) in connection with the Loan or Obligations
or (ii) in the Loan application executed by Borrower in connection with the Loan
or in any Documents shall be false or misleading in any material respect;
 
(d)  if any default under Article V occurs;
 
(e)  if any Borrower under the Documents shall (i) become insolvent, (ii) make a
transfer in fraud of creditors, (iii) make an assignment for the benefit of its
creditors, (iv) not be able to pay its debts as such debts become due, or (v)
admit in writing its inability to pay its debts as they become due;
 
(f)  if any bankruptcy, reorganization, arrangement, insolvency, or liquidation
proceeding, or any other proceedings for the relief of debtors, is instituted by
or against Borrower, and, if instituted against Borrower, is allowed, consented
to, or not dismissed within the earlier to occur of (i) ninety (90) days after
such institution or (ii) the filing of an order for relief;
 
(g)  if any of the events in Sections 6.01 (e) or (f) shall occur with respect
to any (i) managing member of Borrower, (ii) general partner of Borrower, or
(iii) guarantor of payment or performance of any of the Obligations;
 
(h)  if the Property shall be taken, attached, or sequestered on execution or
other process of law in any action against Borrower;
 
(i)  if any default occurs under the Environmental Indemnity (defined below) and
such default is not cured within any applicable grace period in that document;
 
(j)  if any default occurs under the Recourse Liabilities Guaranty by Guarantor
dated of even date herewith and such default is not cured within any applicable
grace period in that document;

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(k)  if any default occurs under the Lessee Security Agreement related to the
Property by Operating Lessee dated of even date herewith and such default is not
cured within any applicable grace period in that document;
 
(l)  if Borrower shall fail at any time to obtain, maintain, renew, or keep in
force the insurance policies required by Section 3.06 within ten (10) days after
written notice;
 
(m)  if Borrower shall be in default under any other mortgage or security
agreement covering any part of the Property, whether it be superior or junior in
lien to this Instrument, which default is not cured within any applicable grace
period (if any) set forth in such other mortgage or security agreement;
 
(n)  if any claim of priority (except based upon a Permitted Encumbrance) to the
Documents by title, lien, or otherwise shall be upheld by any court of competent
jurisdiction or shall be consented to by Borrower; or
 
(o)  (i) the consummation by Borrower of any transaction which would cause (A)
the Loan or any exercise of Lender’s rights under the Documents to constitute a
non-exempt prohibited transaction under ERISA or (B) a violation of a state
statute regulating governmental plans; (ii) the failure of any representation in
Section 3.11 to be true and correct in all respects; or (iii) the failure of
Borrower to provide Lender with the written certifications required under
Section 3.11.
 
It is expressly acknowledged and agreed by Borrower that any Event of Default
under any Document shall constitute an immediate Event of Default under this
Instrument, and Lender shall have no obligation to give and Borrower shall have
no right to receive, any additional notice and/or opportunity to cure said Event
of Default.
 
Section 6.02   Remedies. If an Event of Default occurs, Lender or any person
designated by Lender may (but shall not be obligated to) take any action
(separately, concurrently, cumulatively, and at any time and in any order)
permitted under any Laws, without notice, demand, presentment, or protest (all
of which are hereby waived), to protect and enforce Lender’s rights under the
Documents or Laws including the following actions:
 
(a)  accelerate and declare the entire unpaid Obligations immediately due and
payable, except for defaults under Section 6.01 (f), (g), or (h) which shall
automatically make the Obligations immediately due and payable;
 
(b)  judicially or otherwise, (i) completely foreclose this Instrument or (ii)
partially foreclose this Instrument for any portion of the Obligations due and
the lien and security interest created by this Instrument shall continue
unimpaired and without loss of priority as to the remaining Obligations not yet
due;
 
(c)  sell for cash or upon credit the Property and all right, title and interest
of Borrower therein and rights of redemption thereof, pursuant to power of sale;
 
(d)  recover judgment on the Note either before, during or after any proceedings
for the enforcement of the Documents and without any requirement of any action
being taken to (i) realize on the Property or (ii) otherwise enforce the
Documents;

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(e)  seek specific performance of any provisions in the Documents;
 
(f)  apply for the appointment of a receiver, custodian, substitute trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
 
(g)  with or without entering upon the Property, (i) exclude Borrower and any
person from the Property without liability for trespass, damages, or otherwise,
(ii) take possession of, and Borrower shall surrender on demand, all books,
records, and accounts relating to the Property, (iii) give notice to Tenants or
any person, make demand for, collect, receive, sue for, and recover in its own
name all Rents and cash collateral derived from the Property; (iv) use, operate,
manage, preserve, control, and otherwise deal with every aspect of the Property
including (A) conducting its business, (B) insuring it, (C) making all repairs,
renewals, replacements, alterations, additions, and improvements to or on it,
(D) completing the construction of any Improvements in manner and form as Lender
deems advisable, and (E) executing, modifying, enforcing, and terminating new
and existing Leases and reservations on such terms as Lender deems advisable and
evicting any Tenants in default; (v) apply the receipts from the Property to
payment of the Obligations, in any order or priority determined by Lender or
Trustee, after first deducting all Costs, expenses, and liabilities incurred by
Lender or Trustee in connection with the foregoing operations and all amounts
needed to pay the Impositions and other expenses of the Property, as well as
just and reasonable compensation for the services of Lender, Trustee and
its/their attorneys, agents, and employees; and/or (vi) in every case in
connection with the foregoing, exercise all rights and powers of Borrower,
Lender or Trustee with respect to the Property, either in Borrower’s name or
otherwise;
 
(h)  release any portion of the Property for such consideration, if any, as
Lender may require without, as to the remainder of the Property, impairing or
affecting the lien or priority of this Instrument or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
Obligations shall have been actually reduced, and Lender may accept by
assignment, pledge, or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder;
 
(i)  apply any Deposits to the following items in any order and in Lender’s or
Trustee’s sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender under the Documents, and/or (D) Impositions;
 
(j)  take all actions permitted under the UCC of the Property State including
(i) the right to take possession of all tangible and intangible personal
property now or hereafter included within the Property (“Personal Property”) and
take such actions as Lender or Trustee deems advisable for the care, protection
and preservation of the Personal Property; (ii) request Borrower at its expense
to assemble the Personal Property and make it available to Lender or Trustee at
a convenient place acceptable to Lender or Trustee; and (iii) deliver to Trustee
a written declaration of default and demand for sale, and a written notice of
default and election to cause the Property to be sold, which notice Trustee or
Lender shall cause to be duly filed for record. Any notice of sale, disposition
or other intended action by Lender with respect to the Personal Property sent to
Borrower at least ten (10) days prior to such action shall constitute
commercially reasonable notice to Borrower; or

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(k)  take any other action permitted under any Laws.
 
If Lender exercises any of its rights under Section 6.02(g), Lender shall not
(a) be deemed to have entered upon or taken possession of the Property except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose; (b) be deemed a Lender or mortgagee in possession by reason of
such entry or taking possession; nor (c) be liable (i) to account for any action
taken pursuant to such exercise other than for Rents actually received by
Lender, (ii) for any loss sustained by Borrower resulting from any failure to
lease the Property, or (iii) any other act or omission of Lender except for
losses caused by Lender’s willful misconduct or gross negligence. Borrower
hereby consents to, ratifies, and confirms the exercise by Lender of its rights
under this Instrument and appoints Lender as its attorney-in-fact, which
appointment shall be deemed to be coupled with an interest and irrevocable, for
such purposes.
 
Section 6.03   Expenses. All Costs, expenses, or other amounts paid or incurred
by Lender in the exercise of its rights under the Documents, together with
interest thereon at the applicable interest rate specified in the Note, which
shall be the Default Rate unless prohibited by Laws, shall be (a) part of the
Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, or other judgment
or decree enforcing Lender’s rights under the Documents.
 

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Section 6.04   Rights Pertaining to Sales.
 
(a)  Should Lender elect to foreclose by exercise of the power of sale herein
contained, Lender shall notify Trustee and shall deposit with Trustee this
Instrument and the Note and such receipts and evidence of expenditures made and
secured hereby as Trustee may require. Upon receipt of such notice from Lender,
Trustee shall cause to be recorded, published and delivered to Borrower such
notice of default and notice of sale as then required by law and by this
Instrument. Trustee shall, without demand on Borrower, after lapse of such time
as may then be required by law and after recordation of such notice of default
and after notice of sale having been given as required by law, sell the Property
at the time and place of sale fixed by it in said notice of sale, either as a
whole, or in separate lots or parcels or items as Lender shall determine, and in
such order as Lender may determine, at public auction to the highest bidder for
cash in lawful money of the United States payable at the time of sale. Trustee
shall deliver to such purchaser or purchasers thereof its good and sufficient
deed or deeds conveying the property so sold, but without any covenant or
warranty, express or implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any Person, including
Borrower, Trustee or Lender, may purchase at such sale and Borrower hereby
covenants to warrant and defend the title of such purchaser or purchasers. After
deducting all costs, fees and expenses of Trustee and of the trust created by
this Instrument, including costs of evidence of title in connection with sale,
Trustee shall apply the proceeds of sale in the following priority, to payment
of: (i) first, all sums expended under the terms hereof, not then repaid, with
accrued interest at the Default Rate; (ii) second, all other sums then secured
hereby; and (iii) the remainder, if any, to the person or persons legally
entitled thereto. Lender may, in its sole discretion, designate the order in
which the Property shall be offered for sale or sold through a single sale or
through two or more successive sales, or in any other manner Lender deems to be
in its best interest. If Lender elects more than one sale or other disposition
of the Property, Lender may at its option cause the same to be conducted
simultaneously or successively, on the same day or at such different days or
times and in such order as Lender may deem to be in its best interests, and no
such sale shall terminate or otherwise affect the lien of this Instrument on any
part of the Property not then sold until all Obligations secured hereby have
been fully paid. If Lender elects to dispose of the Property through more than
one sale, Borrower shall pay the costs and expenses of each such sale of its
interest in the Property and of any proceedings where the same may be made.
Trustee may postpone the sale of all or any part of the Property by public
announcement at such time and place of sale, and from time to time thereafter
may postpone such sale by public announcement at the time fixed by the preceding
postponement, and without further notice make such sale at the time fixed by the
last postponement; or Trustee may, in its discretion, give a new notice of sale.
Lender may rescind any such notice of default at any time before Trustee’s sale
by executing a notice of rescission and recording the same. The recordation of
such notice shall constitute a cancellation of any prior declaration of default
and demand for sale and of any acceleration of maturity of Obligations affected
by any prior declaration or notice of default. The exercise by Lender of the
right of rescission shall not constitute a waiver of any default then existing
or subsequently occurring, or impair the right of Lender to execute other
declarations of default and demand for sale, or notices of default and of
election to cause the Property to be sold, or otherwise affect the Note or this
Instrument, or any of the rights, obligations or remedies of Lender or Trustee
hereunder.
 
(b)  In the event of a sale of the Property, or any part thereof, and the
execution of a deed therefor, the recital therein of default, and of recording
the notice of default and notice of sale, and of the elapse of the required time
(if any) between the recording and the notice, and of the giving of notice of
sale, and of a demand by Lender, or its successors or assigns, that such sale
should be made, shall be conclusive proof of such default, recording, election,
elapse of time, and giving of such notice, and that the sale was regularly and
validly made on due and proper demand by Lender, its successors or assigns. Any
such deed or deeds with such recitals therein shall be effective and conclusive
against Borrower, its successors and assigns, and all other Persons. The receipt
for the purchase money recited or contained in any deed executed to the
purchaser as aforesaid shall be sufficient discharge to such purchaser from all
obligations to see to the proper application of the purchase money.

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Section 6.05   Applications of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender, shall, except as expressly provided to the contrary, be applied in the
order determined by Lender or Trustee to: (a) payment of all Costs and expenses
of any enforcement action or foreclosure sale, including interest thereon at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, (b) all taxes, Assessments, and other charges unless
the Property was sold subject to these items; (c) payment of the Obligations in
such order as Lender may elect; (d) payment of any other sums secured or
required to be paid by Borrower; and (e) payment of the surplus, if any, to any
person lawfully entitled to receive it. Borrower and Lender intend and agree
that during any period of time between any foreclosure judgment that may be
obtained and the actual foreclosure sale that the foreclosure judgment will not
extinguish the Documents or any rights contained therein including the
obligation of Borrower to pay all Costs and to pay interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws.
 
Section 6.06   Additional Provisions as to Remedies. No failure, refusal,
waiver, or delay by Lender or Trustee to exercise any rights under the Documents
upon any default or Event of Default shall impair Lender’s or Trustee’s rights
or be construed as a waiver of, or acquiescence to, such or any subsequent
default or Event of Default. No recovery of any judgment by Lender or Trustee
and no levy of an execution upon the Property or any other property of Borrower
shall affect the lien and security interest created by this Instrument and such
liens, rights, powers, and remedies shall continue unimpaired as before. Lender
or Trustee may resort to any security given by this Instrument or any other
security now given or hereafter existing to secure the Obligations, in whole or
in part, in such portions and in such order as Lender or Trustee may deem
advisable, and no such action shall be construed as a waiver of any of the
liens, rights, or benefits granted hereunder. Acceptance of any payment after
any Event of Default shall not be deemed a waiver or a cure of such Event of
Default and such acceptance shall be deemed an acceptance on account only. If
Lender or Trustee has started enforcement of any right by foreclosure, sale,
entry, or otherwise and such proceeding shall be discontinued, abandoned, or
determined adversely for any reason, then Borrower, Lender and Trustee shall be
restored to their former positions and rights under the Documents with respect
to the Property, subject to the lien and security interest hereof.
 
Section 6.07   Waiver of Rights and Defenses. To the fullest extent Borrower is
not prohibited from doing so under Laws, Borrower (a) will not at any time
insist on, plead, claim, or take the benefit of any statute or rule of law now
or later enacted providing for any appraisement, valuation, stay, extension,
moratorium, redemption, or any statute of limitations; (b) for itself, its
successors and assigns, and for any person ever claiming an interest in the
Property (other than Lender), waives and releases all rights of redemption,
reinstatement, valuation, appraisement, notice of intention to mature or declare
due the whole of the Obligations, all rights to a marshaling of the assets of
Borrower, including the Property, or to a sale in inverse order of alienation,
in the event of foreclosure (or extinguishment by transfer of title by power of
sale) of the liens and security interests created under the Documents; (c) shall
not be relieved of its obligation to pay the Obligations as required in the
Documents nor shall the lien or priority of the Documents be impaired by any
agreement renewing, extending, or modifying the time of payment or the
provisions of the Documents (including a modification of any interest rate),
unless expressly released, discharged, or modified by such agreement. Regardless
of consideration and without any notice to or consent by the holder of any
subordinate lien, security interest, encumbrance, right, title, or interest in
or to the Property, Lender may (a) release any person liable for payment of the
Obligations or any portion thereof or any part of the security held for the
Obligations or (b) modify any of the provisions of the Documents without
impairing or affecting the Documents or the lien, security interest, or the
priority of the modified Documents as security for the Obligations over any such
subordinate lien, security interest, encumbrance, right, title, or interest.

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ARTICLE VII  - SECURITY AGREEMENT AND FIXTURE FILING
 
Section 7.01   Security Agreement. This Instrument constitutes both a real
property deed of trust and a “security agreement” within the meaning of the UCC.
The Property includes real and personal property and all tangible and intangible
rights and interest of Borrower in the Property. Borrower grants to Lender and
Trustee, as security for the Obligations, a security interest in the Personal
Property to the fullest extent that it/the same may be subject to the UCC.
Borrower authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
 
Section 7.02   Fixture Filing. This Instrument covers certain goods which are or
are to be come fixtures related to the Land and for purposes of Article 9 of the
Uniform Commercial Code (Oregon Revised Statutes Chapter 79), this Instrument
constitutes a Security Agreement and Financing Statement with respect to such
goods executed by Borrower as debtor in favor of Lender as secured party.
 
ARTICLE VIII  - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
 
Section 8.01   Recourse Liability. The provisions of Paragraphs 9 and 10 of the
Note are incorporated into this Instrument as if such provisions were set forth
in their entirety in this Instrument.
 
Section 8.02   General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless (“indemnify”) the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term “Losses” shall mean any claims, suits, liabilities (including strict
liabilities), actions, proceedings, obligations, debts, damages, losses, Costs,
expenses, fines, penalties, charges, fees, judgments, awards, and amounts paid
in settlement of whatever kind including attorneys’ fees (both in-house staff
and retained attorneys) and all other costs of defense. The term “Indemnified
Parties” shall mean (a) Lender, (b) any prior owner or holder of the Note, (c)
any existing or prior servicer of the Loan, (d) Trustee, (e) the officers,
directors, shareholders, partners, members, employees and trustees of any of the
foregoing, and (f) the heirs, legal representatives, successors and assigns of
each of the foregoing.
 
Section 8.03   Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.

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Section 8.04   ERISA Indemnity. Borrower shall, at its sole expense, indemnify
the Indemnified Parties against all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties (a) as a result of a Violation, (b) in
the investigation, defense, and settlement of a Violation, (c) as a result of a
breach of the representations in Section 3.11 or default thereunder, (d) in
correcting any prohibited transaction or the sale of a prohibited loan, and (e)
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender’s sole discretion.
 
Section 8.05   Environmental Indemnity. Borrower and other persons, if any, have
executed and delivered the Environmental Indemnity Agreement dated the date
hereof to Lender (“Environmental Indemnity”).
 
Section 8.06   Duty to Defend, Costs and Expenses. Upon request, whether
Borrower’s obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower’s or the
Indemnified Parties’ names) by attorneys and other professionals reasonably
approved by the Indemnified Parties. Notwithstanding the foregoing, the
Indemnified Parties may, in their sole discretion, engage their own attorneys
and professionals to defend or assist them and, at their option, their attorneys
shall control the resolution of any claims or proceedings. Upon demand, Borrower
shall pay or, in the sole discretion of the Indemnified Parties, reimburse
and/or indemnify the Indemnified Parties for all Costs imposed on, incurred by,
or asserted against the Indemnified Parties by reason of any items set forth in
this Article VIII and/or the enforcement or preservation of the Indemnified
Parties’ rights under the Documents. Any amount payable to the Indemnified
Parties under this Section shall (a) be deemed a demand obligation, (b) be part
of the Obligations, (c) bear interest at the applicable interest rate specified
in the Note, which shall be the Default Rate unless prohibited by Laws, until
paid if not paid on demand, and (d) be secured by this Instrument.
 
Section 8.07   Recourse Obligation and Survival. Notwithstanding anything to the
contrary in the Documents and in addition to the recourse obligations in the
Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of Borrower, shall not be subject to any
limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, transfer of
title by power of sale, assignment or foreclosure of this Instrument, (c) the
acceptance by Lender (or any nominee) of a deed in lieu of foreclosure, (d) a
plan of reorganization filed under the Bankruptcy Code, or (e) the exercise by
the Lender of any rights in the Documents. Borrower’s obligations under Article
VIII shall not be affected by the absence or unavailability of insurance
covering the same or by the failure or refusal by any insurance carrier to
perform any obligation under any applicable insurance policy.
 
ARTICLE IX  - ADDITIONAL PROVISIONS
 
Section 9.01   Usury Savings Clause. All agreements in the Documents are
expressly limited so that in no event whatsoever shall the amount paid or agreed
to be paid under the Documents for the use, forbearance, or detention of money
exceed the highest lawful rate permitted by Laws. If, at the time of
performance, fulfillment of any provision of the Documents shall involve
transcending the limit of validity prescribed by Laws, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity. If
Lender shall ever receive as interest an amount which would exceed the highest
lawful rate, the receipt of such excess shall be deemed a mistake and (a) shall
be canceled automatically or (b) if paid, such excess shall be (i) credited
against the principal amount of the Obligations to the extent permitted by Laws
or (ii) rebated to Borrower if it cannot be so credited under Laws (in which
event, no Prepayment Premium shall be due with respect to the amount so
credited). Furthermore, all sums paid or agreed to be paid under the Documents
for the use, forbearance, or detention of money shall to the extent permitted by
Laws be amortized, prorated, allocated, and spread throughout the full stated
term of the Note until payment in full so that the rate or amount of interest on
account of the Obligations does not exceed the maximum lawful rate of interest
from time to time in effect and applicable to the Obligations for so long as the
Obligations are outstanding.

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Section 9.02   Notices. Any notice, request, demand, consent, approval,
direction, agreement, or other communication (any “notice”) required or
permitted under the Documents shall be in writing and shall be validly given if
sent by a nationally-recognized courier that obtains receipts, delivered
personally by a courier that obtains receipts, or mailed by United States
certified mail (with return receipt requested and postage prepaid) addressed to
the applicable person as follows, or by facsimile followed by a confirmation
delivered in the manner provided above:
 
If to Borrower:
 
PH Hotel Partners, LP
c/o CNL Hospitality Corp.
420 South Orange Avenue, Suite 700
Orlando, Florida 32801-3313
Attention: Chief General Counsel        Facsimile: (407) 540-2702
 
With a copy to:
Greenburg Traurig P.A.
450 S. Orange Avenue, Suite 650
Orlando, FL 32801
Attention: Michael J. Sullivan, Esq.
Facsimile: (407) 650-8425

And a copy to:
Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
215 N. Eola Drive
Orlando, FL 32802-2806
Attention: Richard J. Fildes, Esq.
Facsimile: (407) 843-4444

If to Lender:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Asset Resources
2200 Ross Avenue
Suite 4900-E

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Dallas, Texas 75201
Attention: Asset Management Department
Reference Loan No. 70-6-106-306

with a copy to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Asset Resources
2200 Ross Avenue
Suite 4900-E
Dallas, Texas 75201
Attention: Legal Department
Reference Loan No. 70-6-106-306

And a copy to:
DLA Piper Rudnick Gray Cary US LLP
153 Townsend Street, 8th Floor
San Francisco, CA 94107
Attention: Stephen A. Cowan, Esq.
Facsimile: (415) 836-2500

Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days’ prior notice.
 
Section 9.03   Sole Discretion of Lender. Except as otherwise expressly stated,
whenever Lender’s judgment, consent, or approval is required or Lender shall
have an option or election under the Documents, such judgment, the decision as
to whether or not to consent to or approve the same, or the exercise of such
option or election shall be in the sole and absolute discretion of Lender.
 
Section 9.04   Applicable Law and Submission to Jurisdiction. The validity and
interpretation of this Instrument and of all other documents evidencing or
securing the Obligations shall be construed in accordance with the laws of the
State of Florida, except that the laws of the State of Oregon shall govern any
question regarding the creation, perfection and priority of, or procedures for
enforcing the lien on, real property granted Lender under this Instrument.
Questions concerning the availability of a post-foreclosure deficiency, any
requirement to exhaust security, the availability of personal judgments against
and recourse to the Borrower, the order in which a creditor exercises its
remedies and the effect of exercising remedies are not questions concerning the
creation, perfection or priority of, or procedures for enforcing the lien on,
real property and shall be governed by the laws of Florida. Without limiting
Lender’s or Trustee’s right to bring any action or proceeding against Borrower
or the Property relating to the Obligations (an “Action”) in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any state
or federal court in Oregon and in Florida, (b) agrees that any Action may be
heard and determined in such court, and (c) waives, to the fullest extent
permitted by Laws, the defense of an inconvenient forum to the maintenance of
any Action in such jurisdiction.
 
Section 9.05   Construction of Provisions. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated
 

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into this Instrument as if fully set forth in the body of the Instrument; (b)
all Article, Section, and Exhibit captions are used for convenience and
reference only and in no way define, limit, or in any way affect this
Instrument; (c) words of masculine, feminine, or neuter gender shall mean and
include the correlative words of the other genders, and words importing the
singular number shall mean and include the plural number, and vice versa; (d) no
inference in favor of or against any party shall be drawn from the fact that
such party has drafted any portion of this Instrument; (e) all obligations of
Borrower hereunder shall be performed and satisfied by or on behalf of Borrower
at Borrower’s sole expense; (f) the terms “include,” “including,” and similar
terms shall be construed as if followed by the phrase “without being limited
to”; (g) the terms “Property”, “Land”, “Improvements”, and “Personal Property”
shall be construed as if followed by the phrase “or any part thereof”; (h) the
term “Obligations” shall be construed as if followed by the phrase “or any other
sums secured hereby, or any part thereof”; (i) the term “person” shall include
natural persons, firms, partnerships, corporations, governmental authorities or
agencies, and any other public or private legal entities; (j) the term
“provisions,” when used with respect hereto or to any other document or
instrument, shall be construed as if preceded by the phrase “terms, covenants,
agreements, requirements, and/or conditions”; (k) the term “lease” shall mean
“tenancy, subtenancy, lease, sublease, or rental agreement,” the term “lessor”
shall mean “landlord, sublandlord, lessor, and sublessor,” and the term
“Tenants” or “lessee” shall mean “tenant, subtenant, lessee, and sublessee”; (l)
the term “owned” shall mean “now owned or later acquired”; (m) the terms “any”
and “all” shall mean “any or all”; (n) the term “on demand” or “upon demand”
shall mean “within five (5) business days after written notice”; and (o) the
term “Trustee” shall mean “Trustee, its successors and assigns, and any
substitute or successor Trustee of the estates, properties, powers, trusts and
rights conferred upon Trustee pursuant to the Documents.”
 
Section 9.06   Transfer of Loan. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage or deed of trust pass-through
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement (collectively, the “Securities”).
Lender may forward to any purchaser, transferee, assignee, servicer,
participant, or investor in such Securities (collectively, “Investors”), to any
Rating Agency (defined below) rating such Securities and to any prospective
Investor, all documents and information which Lender now has or may later
acquire relating to the Obligations, Borrower, any guarantor, any indemnitor(s),
the Leases, and the Property, whether furnished by Borrower, any guarantor, any
indemnitor(s) or otherwise, as Lender determines advisable. Borrower, any
guarantor and any indemnitor agree to cooperate with Lender in connection with
any transfer made or any Securities created pursuant to this Section including
the delivery of an estoppel certificate in accordance with Section 3.16 and such
other documents as may be reasonably requested by Lender. Borrower shall also
furnish any consent of Borrower, any guarantor and any indemnitor in order to
permit Lender to furnish such Investors or such prospective Investors or such
Rating Agency with any and all information concerning the Property, the Leases,
the financial condition of Borrower, any Guarantor and any indemnitor, as may be
reasonably requested by Lender, any Investor, any prospective Investor or any
Rating Agency and which may be complied with without undue expense. Lender shall
require that such prospective Investors and Rating Agencies comply with
reasonable confidentiality restrictions respecting the financial information
concerning Guarantor and CNL HHC Partners, LP, provided the subject financial
information concerning Guarantor and CNL HHC Partners, LP, is not otherwise
available to Lender or the public by electronic or hard copy publications, and
Lender shall have no liability whatsoever for any claim or loss arising from and
such Investors or Rating Agencies failing to comply with the terms thereof.
“Rating Agency” shall mean any one ore more credit rating agencies approved by
Lender.

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Section 9.07   Miscellaneous. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provision shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender and Trustee may, without notice
to Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
Borrower’s liability under the Documents or being deemed to have consented to
the vesting. If both the lessor’s and lessee’s interest under any Lease ever
becomes vested in any one person, this Instrument and the lien and security
interest created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and Lender and Trustee shall continue to have and
enjoy all its rights and privileges as to each separate estate. Upon foreclosure
(or transfer of title by power of sale) of this Instrument, none of the Leases
shall be destroyed or terminated as a result of such foreclosure (or sale), by
application of the doctrine of merger or as a matter of law, unless Lender or
Trustee takes all actions required by law to terminate the Leases as a result of
foreclosure or sale. All of Borrower’s covenants and agreements under the
Documents shall run with the land and time is of the essence. Borrower appoints
Lender as its attorney-in-fact, which appointment is irrevocable and shall be
deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, filing or recording for and in the name of Borrower of
any of the documents reasonably required to give effect to the rights,
covenants, provisions and requirements set forth in Sections 3.04, 3.19, 4.01
and 6.02 of this Instrument. The Documents cannot be amended, terminated, or
discharged except in a writing signed by the party against whom enforcement is
sought. No waiver, release, or other forbearance by Lender will be effective
unless it is in a writing signed by Lender and then only to the extent expressly
stated. The provisions of the Documents shall be binding upon Borrower and its
heirs, devisees, representatives, successors, and assigns including successors
in interest to the Property and inure to the benefit of Lender and Trustee and
its/their heirs, successors, substitutes, and assigns. Where two or more persons
have executed the Documents, the obligations of such persons shall be joint and
several, except to the extent the context clearly indicates otherwise. The
Documents may be executed in any number of counterparts with the same effect as
if all parties had executed the same document. All such counterparts shall be
construed together and shall constitute one instrument, but in making proof
hereof it shall only be necessary to produce one such counterpart. Upon receipt
of an affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of any Document which is not of public record, and, in the case of
any mutilation, upon surrender and cancellation of the Document, Borrower will
issue, in lieu thereof, a replacement Document, dated the date of the lost,
stolen, destroyed or mutilated Document containing the same provisions. Any
reviews, inspections, reports, approvals or similar items conducted, made or
produced by or on behalf of Lender with respect to Borrower, the Property or the
Loan are for loan underwriting and servicing purposes only, and shall not
constitute an acknowledgment, representation or warranty of the accuracy
thereof, or an assumption of liability with respect to Borrower, Borrower's
contractors, architects, engineers, employees, agents or invitees, present or
future tenants, occupants or owners of the Property, or any other party.
 
Section 9.08   Entire Agreement. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower,
Lender and Trustee with respect to the Loan and supersede all prior written or
oral understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.

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Section 9.09   WAIVER OF TRIAL BY JURY. TO THE FULLEST EXTENT NOT PROHIBITED BY
LAW, BORROWER AND LENDER BY LENDER’S ACCEPTANCE OF THIS INSTRUMENT HEREBY AGREES
TO, AND DOES, WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THE LOAN, ANY DOCUMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT BETWEEN INDEMNITOR AND LENDER RELATING TO THE LOAN, THE
DOCUMENTS, THE PROPERTY OR ANY DEALINGS BETWEEN BORROWER AND LENDER RELATING TO
THE SUBJECT MATTER OF ANY OF THE DOCUMENTS. THE SCOPE OF THIS WAIVER IS INTENDED
TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES (EACH A “DISPUTE,” AND
COLLECTIVELY, ANY OR ALL, THE “DISPUTES”) OF ANY KIND WHATSOEVER THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THE LOAN, ANY
DOCUMENT OR ANY OTHER DOCUMENT OR INSTRUMENT BETWEEN BORROWER AND LENDER
RELATING TO THE LOAN, THE DOCUMENTS, THE PROPERTY OR ANY DEALINGS BETWEEN
BORROWER AND LENDER RELATING TO THE SUBJECT MATTER OF ANY OF THE DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, ANTITRUST CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON-LAW OR STATUTORY CLAIMS. BORROWER
AND LENDER EACH ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTERING INTO THIS INSTRUMENT AND ALL OTHER AGREEMENTS AND INSTRUMENTS PROVIDED
FOR HEREIN, AND THAT EACH WILL CONTINUE TO BE BOUND BY AND RELY ON THIS WAIVER
IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER EACH FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH LEGAL COUNSEL OF ITS OWN
CHOOSING, OR HAS HAD AN OPPORTUNITY TO DO SO, AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS HAVING HAD THE OPPORTUNITY TO CONSULT
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS
INSTRUMENT OR ANY OTHER
 

 
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DOCUMENT OR DOCUMENT ENTERED INTO BETWEEN BORROWER AND LENDER IN CONNECTION WITH
THIS INSTRUMENT OR ANY DOCUMENT. IN THE EVENT OF LITIGATION, THIS INSTRUMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT WITHOUT A JURY.
 
BORROWER’S INITIAL: __________
 
Section 9.10   Partial Release. This Instrument is subject to the Partial
Release provision set forth in Section 15 of the Note to which reference is
hereby made.
 
Section 9.11   Property Substitutions. This Instrument is subject to the
Property Substitutions provision set forth in Section 16 of the Note to which
reference is hereby made.
 
Section 9.12   Concerning the Trustee. By recording a written substitution in
the county where the Property is located or by any other means permitted by
Laws, Lender may (a) remove Trustee or any successor Trustee at any time (or
times) without notice or cause and (b) replace any Trustee who dies or resigns.
To the extent permitted by Laws, Trustee waives any statutory fee for its
services and agrees to accept reasonable compensation in lieu thereof. Trustee
may resign upon thirty (30) days notice to Lender and Borrower. If more than one
person is appointed Trustee, all rights granted to Trustee under this Instrument
may be exercised by any of them, without the others, with the same effect as if
exercised by all of them jointly. In addition to exercising all rights set forth
in this Instrument, Trustee may exercise all rights under Laws.
 
Section 9.13   Attorneys’ Fees. If any suit, action or proceeding of any kind
(an “action”) is brought by any party hereto to enforce, defend or interpret any
provision of this Instrument or any of the Documents (including an action for
declaratory relief), the prevailing party in such action shall recover from the
other non-prevailing parties to such action all reasonable costs and expenses
which the prevailing party may incur in bringing such action and/or enforcing
any judgment granted therein and/or incurred at or in preparation for any appeal
or review, all of which shall be deemed to have accrued upon the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment. The “prevailing party” means the party entitled to recover costs of
suit, whether or not any action proceeds to final judgment. Any judgment or
order entered in such action shall specifically provide for the recovery of all
reasonable costs and expenses incurred by the prevailing party in connection
therewith including costs and expenses incurred in enforcing such judgment. For
the purpose of this Section 9.13, “costs and expenses” include all court costs
and attorneys’ fees, such as court costs and attorneys’ fees incurred in
connection with any of the following: (i) post-judgment motions, (ii) contempt
proceedings, (ii) garnishment, levy and debtor and third party examinations,
(iv) discovery, (v) bankruptcy litigation and (vi) any appeal or review of the
foregoing. Lender shall have the right (but not the obligation) to commence,
appear in, or defend any action purporting to affect any of the interests,
rights, obligations or liabilities of Lender or Borrower in connection with this
Instrument or any of the Documents, and Borrower shall pay to Lender on demand
all costs and expenses reasonably incurred by Lender in connection therewith.
 
Section 9.14   Standard of Approval; Covenant of Good Faith and Fair Dealing.
Whenever Trustee or Lender has been specifically granted a right to exercise its
business judgment, or act, in a subjective manner, with respect to any matter,
or the right to act in its sole and absolute discretion or sole judgment,

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Section 9.15  or the right to make a subjective judgment under any provision of
this Instrument, whether or not “objectively” reasonable under the
circumstances, any such exercise shall not be deemed inconsistent with any
covenant of good faith and fair dealing otherwise implied by law to be part of
the Documents.
 
ARTICLE X  - LOCAL LAW PROVISIONS
 
Section 10.01   State Specific Provisions.
 
(a) Any reference herein to Borrower as Borrower shall also mean Borrower in its
capacity as Trustor under a deed of trust

(b) Notwithstanding anything to the contrary set forth herein or in any of the
Documents, this Instrument does not secure the following obligations (the
“Unsecured Obligations”): (i) any guarantee executed by any party in connection
with the Loan; (ii) any obligations evidenced by or arising under the Hazardous
Substances Indemnity; or (iii) any other obligations in this Instrument or in
any of the other Documents to the extent that such other obligations relate
specifically to the presence on the Property of Hazardous Materials (as defined
in the Hazardous Substances Indemnity) and are the same or have the same effect
as any of the obligations evidenced by or arising under the Hazardous Substances
Indemnity. Any breach or default not cured within any applicable grace or cure
period thereunder with respect to the Unsecured Obligations shall constitute an
Event of Default hereunder, notwithstanding the fact that such Unsecured
Obligations are not secured by this Instrument. Nothing in this section shall,
in itself, impair or limit Lender’s right to obtain a judgment in accordance
with applicable law after foreclosure for any deficiency in recovery of all
obligations that are secured by this Instrument following foreclosure.

(c) The property does not now and Borrower covenants that during the term of
this Instrument the Property will not contain any residential structure or unit
so that at no time will this Instrument be a residential trust deed as defined
in ORS §86.705(3). This Instrument secures and obligation incurred exclusively
for commercial , business or investment purposes. Borrower warrants to Lender
that the Loan proceeds shall be used exclusively for commercial, business or
investment purposes.

(d) As used herein, the term “Borrower” shall be deemed to refer to each and
every Borrower, both individually and collectively, when more than one Borrower
exists, and to the original Borrower, and its or their successors and assigns
(whether or not such assign assumed the Obligations hereunder); the term
“Lender” includes the Lender named herein or any future owner or holder,
including pledgee and participants, of the Note, or any other instrument secured
hereby, or any participation. References to “foreclosure” and related phrases
shall be deemed references to the appropriate procedure in connection with
Trustee’s private power of sale as well as any judicial foreclosure proceeding
or a conveyance in lieu of foreclosure.

(e) Notice Under ORS §746.201 - WARNING.
 
Unless Borrower provides Lender with evidence of the insurance coverage as
required herein, Lender may purchase insurance at Borrower’s expense to protect
Lender’s interest. This insurance may, but need not, also protect Borrower’s
interest. If the collateral becomes damaged, the coverage Lender purchases may
not pay any claim Borrower makes or any claim made against Borrower. Borrower
may later cancel this coverage by providing evidence that Borrower has obtained
property coverage elsewhere.
 
Borrower is responsible for the cost of any insurance purchased by Lender. The
cost of this insurance may be added to the indebtedness secured hereby. If the
cost is added to the indebtedness secured hereby, the interest rate on the
indebtedness secured hereby will apply to this added amount. The effective date
of coverage may be the date the prior coverage lapsed or the date Borrower
failed to provide proof of coverage.
 
The coverage Lender purchases may be considerably more expensive than insurance
Borrower can obtain on Borrower’s own and may not satisfy any need for property
damage coverage or any mandatory liability insurance requirements imposed by
applicable law."

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(f) ORS Chapter 93 Warning. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE
PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE ABOUT THE PERSON’S RIGHTS, IF ANY,
UNDER CHAPTER 1, OREGON LAWS 2005 (BALLOT MEASURE 37(2004)). THIS INSTRUMENT
WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS INSTRUMENT IN VIOLATION OF
APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE SIGNING OR ACCEPTING THIS
INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE
APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED USES AND TO
DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST PRACTICES AS DEFINED
IN ORS §30.930 AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING PROPERTY OWNERS,
IF ANY, UNDER CHAPTER 1, OREGON LAWS 2005 (BALLOT MEASURE 37 (2004))

(g). At the time of any foreclosure sale under the Instrument, or any deed in
lieu of foreclosure, the Borrower shall, at Borrower's expense and without
additional consideration to Borrower, immediately take all actions required
under applicable laws, regulations, rules, and policies to transfer the Liquor
Licenses to the person or entity which acquires title to the Mortgaged Property
pursuant to such foreclosure or deed in lieu of foreclosure. Such actions shall
include, without limitation, filing with the local division of the Oregon Liquor
Control Commission such affidavits, applications, declarations, documents and
other materials to be executed or provided by Borrower as may be necessary or
appropriate to effect such transfer, and Borrower shall thereafter diligently
pursue such transfer in order to consummate the same as soon as reasonably
possible. Borrower’s obligations under this Section 10.01(g) shall survive any
foreclosure of the Instrument or any deed in lieu of foreclosure.
 
ARTICLE XI  - OPERATING LEASE PROVISIONS
 
Borrower hereby covenants, represents and warrants to Lender with respect to the
Operating Lease as follows:
 
(a)  There is and has been no default in the performance of the Operating Lease
by Borrower nor, to the best of Borrower’s knowledge, by Operating Tenant with
respect to the Property, nor has any event occurred or condition arisen to the
best knowledge of Borrower which, with the passage of time, or the giving of
notice, or both, would constitute a default under or a breach of the Operating
Lease by the Borrower and or the Operating Tenant.

--------------------------------------------------------------------------------

 
(b)  All rents, additional rents, percentage rents and all other charges due and
payable under the Operating Lease have been fully paid to the extent same were
payable prior to the date hereof.
 
(c)  Except as otherwise previously disclosed in writing by Borrower to Lender,
the Operating Lease covers one hundred percent (100%) of the leasehold interest
in and to the Property demised thereby, and Borrower is the owner of the entire
tenant's interest in, to and under the Operating Lease and has the right and
authority under such Operating Lease to execute this Instrument and to encumber
Borrower's interest therein.
 
(d)  Borrower shall, at its sole cost and expense, promptly and timely perform
and observe all the terms, covenants and conditions required to be performed and
observed by Borrower as landlord under the Operating Lease, and shall use its
best efforts to cause the Operating Tenant thereunder to promptly and timely
perform and observe all the terms, covenants and conditions required to be
performed and observed by such Operating Tenant as tenant under the Operating
Lease (including, but not limited to, the payment of all rent, additional rent,
percentage rent and other charges required to be paid under the Operating
Lease). Any default by Borrower and/or the Operating Tenant under the Operating
Lease shall constitute a default by Borrower under this Investment.
 
(e)  If Borrower and/or the Operating Tenant shall violate any of the covenants
specified in (d) above, Borrower grants to Lender the right (but not the
obligation), without notice to Borrower, to take any action as may be necessary
to prevent or cure any default of Borrower and/or Operating Tenant under the
Operating Lease, if necessary to protect Lender's interest hereunder, and Lender
shall have the right to enter all or any portion of the Property at such times
and in such manner as Lender deems necessary, in order to prevent or to cure any
such default.
 
(f)  The curing by Lender of any default by Borrower and/or Operating Tenant
under the Operating Lease shall not remove or waive, as between Borrower and
Lender, the default which occurred hereunder by virtue of the default by
Borrower and/or Operating Tenant under such Operating Lease. All sums expended
by Lender in order to cure any such default shall be paid by Borrower to Lender,
upon demand, with interest thereon at the Default Rate unless prohibited by
Laws. All such indebtedness shall be deemed to be secured by this Instrument. No
action or payment taken or made by Lender to prevent or cure a default by
Borrower and/or Operating Tenant under the Operating Lease shall waive or cure
the corresponding default by Borrower under this Instrument.
 
(g)  Borrower shall notify Lender promptly in writing of (i) the occurrence of
any material default by the Operating Tenant under the Operating Lease or the
occurrence of any event which, with the passage of time or service of notice, or
both, would constitute a material default by the Operating Tenant under the
Operating Lease, and (ii) the receipt by Borrower of any notice (written or
otherwise) from the tenant under the Operating Lease noting or claiming the
occurrence of any default by Borrower under the Operating Lease or the
occurrence of any event which, with the passage of time or service of notice, or
both, would constitute a default by Borrower under the Operating Lease. Borrower
shall deliver to Lender a copy of any such written notice of default.
 
(h)  Promptly upon demand by Lender from time to time, Borrower shall use
reasonable efforts (other than payment to the landlord) to obtain from the
tenant under the Operating Lease and furnish to Lender the estoppel certificate
of such tenant stating the date through which rent has been paid and whether or
not there are any defaults under the Operating Lease and specifying the nature
of such claimed defaults, if any.

--------------------------------------------------------------------------------

 
(i)  Borrower shall promptly notify Lender, in writing, of any request made by
either party to the Operating Lease for arbitration or appraisal proceedings
pursuant to the Operating Lease, and of the institution of any arbitration or
appraisal proceedings, as well as of all proceedings thereunder, and shall
promptly deliver to Lender a copy of the determination of the arbitrators or
appraisers in each such arbitration or appraisal proceeding. Lender shall have
the right (but not the obligation), following the delivery of written notice of
Borrower, to participate in the appointment of any arbitrator or appraiser to be
appointed by Borrower and to participate in such arbitration or appraisal
proceedings in association with Borrower or on its own behalf as an interested
party. Borrower shall promptly notify Lender, in writing, of the institution of
any legal proceedings involving obligations under the Operating Lease. Lender
may intervene in any such legal proceedings and be made a party to them.
Borrower shall promptly provide Lender with a copy of any decisions rendered in
connection with such proceedings.
 
(j)  Borrower shall promptly execute, acknowledge and deliver to Lender such
instruments as may reasonably be required to permit Lender to cure any default
under the Operating Lease or permit Lender to take such other action required to
enable Lender to cure or remedy the matter in default and preserve the security
interest of Lender under this Instrument with respect to the Operating Lease.
Borrower hereby irrevocably appoints Lender as its true and lawful
attorney-in-fact to do, in its name or otherwise, any and all acts and to
execute any and all documents which are necessary to preserve any rights of
Borrower under or with respect to the Operating Lease, including, without
limitation, the right to effectuate any extension or renewal of the Operating
Lease, or to preserve any rights of Borrower whatsoever in respect of any part
of the Operating Lease (and the above powers granted to Lender are coupled with
an interest and shall be irrevocable).
 
(k)  Borrower shall not, without Lender's prior written consent, surrender,
terminate, forfeit, or suffer or permit the surrender, termination or forfeiture
of, or change, modify or amend, the Operating Lease. Consent to one amendment,
change, agreement or modification shall not be deemed to be a waiver of the
right to require consent to other, future or successive amendments, changes,
agreements or modifications.
 
(l)  Any acquisition of the tenant's interest in the Operating Lease by Borrower
or any affiliate of Borrower shall be accomplished by Borrower in such a manner
so as to avoid a merger of the interests of the landlord and tenant in the
Operating Lease. In the event both the landlord's and tenant's estate under the
Operating Lease or any portion thereof which constitutes a part of the Property,
shall at any time become vested in one owner, this Instrument and the lien
created hereby shall not be destroyed or terminated by application of the
doctrine of merger unless Lender so elects as evidenced by recording a written
declaration so stating and, unless and until Lender so elects, Lender shall
continue to have and enjoy all of the rights and privileges of Lender and
mortgagee as to the separate estates. In addition, upon the foreclosure of the
lien created by this Instrument on the Property pursuant to the provisions
hereof, any leases or subleases then existing and affecting all or any portion
of the Property shall not be destroyed or terminated by application of the law
of merger or as a matter of law or as a result of such foreclosure unless Lender
or any purchaser at such foreclosure shall so elect. No act by or on behalf of
Lender or any such purchaser shall constitute a termination of any lease or
sublease unless Lender or such purchaser shall give written notice thereof to
such tenant or subtenant.
 
(m)  Notwithstanding anything to the contrary herein contained with respect to
the Operating Lease:

--------------------------------------------------------------------------------

 
(i)  As security for the Obligations, Borrower hereby unconditionally assigns,
transfers and sets over to Lender all of Borrower’s claims and rights to the
payment of damages arising from any rejection by Operating Tenant of the
Operating Lease under the Bankruptcy Code. Lender and Borrower shall proceed
jointly or in the name of Borrower in respect of any claim, suit, action or
proceeding relating to the rejection of the Operating Lease, including, without
limitation, the right to file and prosecute any proofs of claim, complaints,
motions, applications, notices and other documents in any case in respect of
such tenant under the Bankruptcy Code. This assignment constitutes a present,
irrevocable and unconditional assignment of the foregoing claims, rights and
remedies, and shall continue in effect until all of the Obligations secured by
this Instrument shall have been satisfied and discharged in full. Any amounts
received by Lender or Borrower as damages arising out of the rejection of the
Operating Lease as aforesaid shall be applied first to all costs and expenses of
Lender (including, without limitation, attorneys’ fees and costs) incurred in
connection with the exercise of any of its rights or remedies under this Article
XI and then in accordance with the other applicable provisions of this
Instrument.
 
(ii)  If any action, proceeding, motion or notice shall be commenced or filed in
respect of any Operating Tenant under the Operating Lease in connection with any
case under the Bankruptcy Code, Lender and Borrower shall cooperatively conduct
and control any such litigation with counsel agreed upon between Borrower and
Lender in connection therewith. Borrower shall, upon demand, pay to Lender all
costs and expenses (including reasonable attorneys' fees and costs) paid or
incurred by Lender in connection with the cooperative prosecution or conduct of
any such proceedings. All such costs and expenses shall be secured by the lien
of this Instrument. Lender shall be deemed a party to the Operating Lease (but
shall not have any obligations thereunder) for purposes of Section 363 and 365
of the Bankruptcy Code, and shall have standing to appear and act as a party in
interest in relation to any matter arising out of or related to the Operating
Lease or the Property.
 
(iii)  Borrower shall promptly, after obtaining knowledge thereof, notify Lender
orally of any filing by or against any Operating Tenant of a petition under the
Bankruptcy Code. Borrower shall thereafter promptly give written notice of such
filing to Lender, setting forth any information available to Borrower as to the
date of such filing, the court in which such petition was filed, and the relief
sought therein. Borrower shall promptly deliver to Lender, following its receipt
thereof, any and all notices, summonses, pleadings, applications and other
documents received by Borrower in connection with any such petition and any
proceedings relating thereto.
 
(n)  Borrower hereby grants and assigns to Lender a security interest in all
prepaid rent and security deposits and all other security under the Operating
Lease which Borrower may hold now or later for the performance of Operating
Tenant’s obligations as the tenant under the Operating Lease.
 
(o)  Borrower shall ensure that all subleases entered into by any Operating
Tenant (and all existing subleases modified or amended by Operating Tenant)
shall provide that such subleases are subordinate to the lien of this Instrument
and any extensions, replacements and modifications of this Instrument and the
Obligations.
 
(p)  The Operating Lease has not been amended, modified, extended, renewed,
substituted or assigned, and Borrower has delivered to Lender true, accurate and
complete copy of the Operating Lease. Upon the request of Lender, Borrower shall
deposit with Lender an original fully executed counterpart of the Operating
Lease, as further security to the Lender, until all of the Obligations are fully
paid and performed. Borrower hereby represents that the Operating Lease or a
legally valid memorandum thereof has been properly filed or recorded in the
city, town, county or parish records (as appropriate) in which the Land covered
thereby is located and that the filing and recording data for the same is
accurately set forth in Exhibit A attached hereto.

--------------------------------------------------------------------------------

 
(q)  Borrower shall not waive, excuse, condone or in any way release or
discharge the Operating Tenant under the Operating Lease or such Operating
Tenant’s obligations, covenants and/or conditions under the Operating Lease
without the prior written consent of Lender.
 
The generality of the provisions of this Article XI relating to the Operating
Lease shall not be limited by other provisions of this Instrument setting forth
particular obligations of Borrower which are also required of Borrower with
respect to the Land.
 

 
(No further text on this page)
 
(Signature page follows)
 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned has executed this Instrument as of the day
first set forth above.      
 

 
PH HOTEL PARTNERS, LP,
 
a Delaware limited partnership
 
 
By:  PH HOTEL GP, LLC,
 
a Delaware limited liability company
 
Its: General Partner
 
 
 
 
By: /s / John X. Brady, Jr.    
 
Name: John X. Brady, Jr.
 
Title: Vice President
 

WITNESSED BY:

By: /s/ Cathleen A. Coffey
Print Name: Cathleen A. Coffey

WITNESSED BY:

By: /s/ Patti Cook
Print Name: Patti Cook

--------------------------------------------------------------------------------

ACKNOWLEDGMENT
STATE OF Florida    

COUNTY OF Orange    

The foregoing instrument was acknowledged before me this 23 day of March, 2006,
by John X. Brady, Jr.,  as Vice President of PH Hotel Gp, LLC, a Delaware LLC ,
on behalf of such entity. He/she is either personally known to me, or has
produced a ____________________________ driver’s license as identification.

 
 
/s/ Cathleen A. Coffey
Printed Name: Cathleen A. Coffey
NOTARY PUBLIC
State of  FL at Large
(Notarial Seal)
My Commission Expires: Semptember 24, 2009
 

 

 

--------------------------------------------------------------------------------

 

Exhibit A
 
LEGAL DESCRIPTION OF THE PROPERTY
 
All that certain real property located in the City of Portland, County of
Multnomah, State of Oregon described as follows:
 
 PARCEL I:

All of Block 44, CITY OF PORTLAND, in the City of Portland, County of Multnomah
and State of Oregon.

PARCEL II:

Lots 1, 2, 7 and 8, Block 45, CITY OF PORTLAND, in the City of Portland, County
of Multnomah and State of Oregon.

 

--------------------------------------------------------------------------------

Exhibit B
 
DESCRIPTION OF PERSONAL PROPERTY SECURITY
 
1. All existing and future machinery, apparatus, goods (including, without
limitation, consumables and inventory), equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, owned by Borrower, wherever situate, and now or hereafter located on,
attached to, contained in, or used or usable in connection with the real
property described in Exhibit A attached hereto and incorporated herein (the
“Land”), and all improvements located thereon (the “Improvements”) or placed on
any part thereof, though not attached thereto, including, without limitation,
all existing and future goods, materials, supplies, chattels, appliances,
furniture, furnishings, televisions, radios, fixtures, equipment (including,
without limitation, Borrower’s rights as lessee under leases of appliances,
furniture, furnishings, fixtures and equipment), building service equipment,
building materials and machinery, of every nature whatsoever now owned or later
to be owned by Borrower, and attached or to be attached or affixed to, placed in
or on or used in connection with the use, enjoyment, occupancy or operation of
all or any part of the Property or in any restaurant, bar, conference or retail
facilities thereon, whether stored on the Property or elsewhere, and including
any of the foregoing as may be held in storage, or in transit or otherwise
earmarked for the Property or any other such facilities, including, but not
limited to, all signs (whether detachable or affixed), pumping plants, engines,
pipes, ditches and flumes; also all gas, electric, power, cooking, heating,
cooling, air conditioning, lighting, laundry, refrigeration, incinerating and
plumbing fixtures and equipment; also all pumps, tanks, motors, conduits,
lifting, cleaning, fire prevention, fire extinguishing, ventilating,
switchboards and communications apparatuses; also all elevators, escalators and
related machinery and equipment; also all shades, awnings, blinds, curtains,
drapes and attached and unattached floor coverings, including rugs and
carpeting; also all television, radio and music cable antennae systems; also all
screens, storm doors and windows; also all stoves, refrigerators, dishwashers
and other appliances, attached cabinets, partitions, ducts and compressors; also
all trees, plants and other items of landscaping; also all shuttle buses and
vehicles of any nature whatsoever; also all visual and electronic surveillance
systems, beds, dressers, cabinets, tables, chairs, mirrors, desks, wall
coverings, clocks, lamps, televisions, radios, telephones, minibars, intercoms,
blankets, linens, towels, pillows and bedspreads; also all kitchen, restaurant
and other operating equipment, including, but not limited to, menus, dishes,
china, silverware, glassware, uniforms, aprons, cooking utensils, tables,
refrigerating units, stoves, microwave equipment, ovens, timers, cocktail lounge
supplies, bars and bottles; also all food and beverages, fuel, soap, shampoos
and lotions, all cleaning materials, matches, stationary and other crested or
similar items; also all chaise lounges, swimming pool heaters and equipment,
recreational equipment and maintenance supplies; and also all office supplies,
telephones, facsimile machines, all other electronic communication systems and
all security deposits relating to all of the foregoing.
 
2. All existing and future funds, accounts, deposits, instruments, drafts,
letters of credit, documents, contract rights including, without limitation, all
management agreements and franchise agreements, advance reservation contracts,
general intangibles, notes, letters of credit in favor of Lender, and chattel
paper arising from or by virtue of any transaction related to the Land, the
Improvements, or any of the personal property described in this Exhibit B,
including, without limitation, the FF&E Reserve that is established and funded
from and after the date of this Instrument pursuant to the Pledge Agreement,
operating accounts and reserve accounts, all checking accounts, time deposit
accounts, interest bearing demand deposit accounts, non-interest bearing demand
deposit accounts, management accounts, and all other accounts, and all now
existing or hereafter arising rights of Borrower associated with the operation
of the Property and any facilities on the Property or payment for rental of
rooms, banquet rooms, conference rooms or other space or for goods sold or
leased or for services rendered, whether or not yet earned by performance,
including, without limiting the generality of the foregoing, all account
receivables, all rights to payment from any third party, including, without
limitation, any consumer credit/charge card organization or entity (including,
without limitation, payments arising from use of the American Express Card, the
Visa Card, the Carte Blanche Card, the Diners Club Card, the MasterCard, the
Discover Card or any other credit, travel, and entertainment or similar card),
reserves, deferred payments, refunds, cost savings, payments and deposits, no
matter how evidenced and whether now or later to be received from third parties
(including all earnest money sales or rental deposits) or deposited by Borrower
with third parties (including all utility deposits), chattel paper, instruments,
documents, notes, drafts and letters of credit (other than letters of credit in
favor of Lender, if any), which arise from or relate to any business or
operations now or later to be conducted on the Property, or to the Property and
to all contracts and agreements which relate to the foregoing.

--------------------------------------------------------------------------------

 
3. All existing and future permits, licenses (including, but not limited to, any
operating licenses and liquor licenses), franchises, certificates, and other
rights and privileges now held or hereafter acquired by Borrower in connection
with the Land, the Improvements, or any of the personal property described in
this Exhibit B, including, without limitation, all existing and future general
intangibles relating to the entitlements, development, construction, ownership,
use, occupancy or operation of the Property thereon, including, but not limited
to, all governmental permits, licenses, applications, management agreements and
all, franchise agreements, governmental licenses, permits, variances, approvals,
agreements, authorizations and land use entitlements relating to construction on
the Property or relating to the use or operation of the Property or any
restaurant, bar, conference, retail and computer or computer related facilities
thereon (including, without limitation, any and all liquor licenses); all
warranties and guaranties for the Property; all contracts, contract rights,
agreements, commitments, undertakings and arrangements relating to the
construction, construction management, use, operation or management of the
Property or any business on the Property (including, without limitation, any
maintenance, repair or other service contracts relating to the Property, and any
modification, replacement, renewal or extension thereof); and all 1-800 and
other telephone numbers, as well as related intangible assets.
 
4. All existing and future right, title, and interest of Borrower in and to the
name and style by which the Land and/or the Improvements is known, including
trademarks and trade names relating thereto.
 
5. All existing and future right, title, and interest of Borrower in, to, and
under all architectural and engineering plans, specifications, drawings, maps,
surveys, reports, permits, licenses, architectural, engineering and construction
contracts, books of account, insurance policies, and other documents of whatever
kind or character, relating to the use, construction upon, occupancy, leasing,
sale, or operation of the Land and/or the Improvements.
 
6. All existing and future interests, estates, or other claims or demands, in
law and in equity, which Borrower now has or may hereafter acquire in the Land,
the Improvements, or the personal property described in this Exhibit B.
 
7. All existing and future right, title, and interest owned by Borrower in and
to all options to purchase or lease the Land, the Improvements, or any other
personal property described in this Exhibit B, or any portion thereof or
interest therein, and in and to any greater estate in the Land, the
Improvements, or any of the personal property described in this Exhibit B.

--------------------------------------------------------------------------------

 
8. All of the estate, interest, right, title, other claim or demand, both in law
and in equity, including claims or demands with respect to the proceeds of
insurance relating thereto, which Borrower now has or may hereafter acquire in
the Land, the Improvements, or any of the personal property described in this
Exhibit B, or any portion thereof or interest therein, and any and all awards
made for the taking by eminent domain, or by any proceeding or purchase in lieu
thereof, of the whole or any part of such property, including without
limitation, any award resulting from a change of any streets (whether as to
grade, access, or otherwise) and any award for severance damages.
 
9. All existing and future right, title, and interest of Borrower in and to all
contracts, permits, certificates, licenses, approvals, utility deposits, utility
capacity, and utility rights issued, granted, agreed upon, or otherwise provided
by any governmental or private authority, person or entity relating to the
ownership, development, construction, operation, maintenance, marketing, sale,
or use of the Land and/or the Improvements, including all of the Borrower’s
rights and privileges hereto or hereafter otherwise arising in connection with
or pertaining to the Land and/or the Improvements, including, without limiting
the generality of the foregoing, all water and/or sewer capacity, all water,
sewer and/or other utility deposits or prepaid fees, and/or all water and/or
sewer and/or other utility tap rights or other utility rights, any right or
privilege of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer’s Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
 
10.  All existing and future right, title and interest of Borrower in and to all
building materials, equipment, work in progress, and other personal property of
any kind, whether stored on the Land or elsewhere, which have been or later will
be acquired for the purpose of being delivered to, incorporated into, or
installed in or about the Land or Improvements.
 
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
 
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
 
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
 

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Exhibit C
 
PERMITTED ENCUMBRANCES
 
Those certain exceptions to title as specifically set forth in Schedule B, Part
I, of that certain Pro Forma Title Policy dated April 3, 2006 issued by First
American Title Insurance Company respecting the Property, Order/File No.
TCS-198384d-ORL.
 

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Exhibit D
 
DOCUMENTS
 

1.  
Promissory Note dated April 3, 2006, by PH Hotel Partners, LP, AH Hotel
Partners, LP, HMA Hotel Partners, LP, and CM Hotel Partners, LP

 

2.  
Deed of Trust and Security Agreement (PH) dated April 3, 2006, granted by PH
Hotel Partners, LP

 

3.  
Mortgage (AH) dated April 3, 2006, granted by AH Hotel Partners, LP

 

4.  
Mortgage and Security Agreement (HMA) dated April 3, 2006, granted by HMA Hotel
Partners, LP

 

5.  
Deed of Trust and Security Agreement (CM) dated April 3, 2006, granted by CM
Hotel Partners, LP

 

6.  
Assignment of Leases and Rents (PH) dated April 3, 2006, by PH Hotel Partners,
LP

 

7.  
Assignment of Leases and Rents (AH) dated April 3, 2006, by AH Hotel Partners,
LP

 

8.  
Assignment of Leases and Rents (HMA) dated April 3, 2006, by HMA Hotel Partners,
LP

 

9.  
Assignment of Leases and Rents (CM) dated April 3, 2006, by CM Hotel Partners,
LP

 

10.  
Assignment of Agreements (PH) dated April 3, 2006, by PH Hotel Partners, LP

 

11.  
Assignment of Agreements (AH) dated April 3, 2006, by AH Hotel Partners, LP

 

12.  
Assignment of Agreements (HMA) dated April 3, 2006, by HMA Hotel Partners, LP

 

13.  
Assignment of Agreements (CM) dated April 3, 2006, by CM Hotel Partners, LP

 

14.  
Pledge Agreement (PH) dated April 3, 2006, by AH Tenant Corporation and PH Hotel
Partners, LP

 

15.  
Pledge Agreement (AH) dated April 3, 2006, by AH Tenant Corporation and AH Hotel
Partners, LP

 

16.  
Pledge Agreement (HMA) dated April 3, 2006, by AH Tenant Corporation and HMA
Hotel Partners, LP

 

17.  
Pledge Agreement (CM) dated April 3, 2006, by AH Tenant Corporation and CM Hotel
Partners, LP

 

18.  
Environmental and ERISA Indemnity (PH) dated April 3, 2006, by PH Hotel
Partners, LP, CNL Hospitality Partners, LP, and Hilton Hotels Corporation

 

19.  
Environmental and ERISA Indemnity (AH) dated April 3, 2006, by AH Hotel
Partners, LP, CNL Hospitality Partners, LP, and Hilton Hotels Corporation

 

20.  
Environmental and ERISA Indemnity (HMA) dated April 3, 2006, by HMA Hotel
Partners, LP, CNL Hospitality Partners, LP, and Hilton Hotels Corporation

 

21.  
Environmental and ERISA Indemnity (CM) dated April 3, 2006, by CM Hotel
Partners, LP, CNL Hospitality Partners, LP, and Hilton Hotels Corporation

 

--------------------------------------------------------------------------------

 
 

22.  
Land Use Certification (PH) dated April 3, 2006, by PH Hotel Partners, LP

 

23.  
Land Use Certification (AH) dated April 3, 2006, by AH Hotel Partners, LP

 

24.  
Land Use Certification (HMA) dated April 3, 2006, by HMA Hotel Partners, LP

 

25.  
Land Use Certification (CM) dated April 3, 2006, by CM Hotel Partners, LP

 

26.  
ERISA Certification dated April 3, 2006, by PH Hotel Partners, LP

 

27.  
ERISA Certification dated April 3, 2006, by PH Hotel GP, LLC

 

28.  
ERISA Certification dated April 3, 2006, by AH Hotel Partners, LP

 

29.  
ERISA Certification dated April 3, 2006, by AH Hotel GP, LLC

 

30.  
ERISA Certification dated April 3, 2006, by AH Tenant Corporation

 

31.  
ERISA Certification dated April 3, 2006, by HMA Hotel Partners, LP

 

32.  
ERISA Certification dated April 3, 2006, by HMA Hotel GP, LLC

 

33.  
ERISA Certification dated April 3, 2006, by CM Hotel Partners, LP

 

34.  
ERISA Certification dated April 3, 2006, by CM Hotel GP, LLC

 

35.  
ERISA Certification dated April 3, 2006, by CNL HHC Partners, LP

 

36.  
ERISA Certification dated April 3, 2006, by CNL Hospitality Partners, LP

 

37.  
ERISA Certification dated April 3, 2006, by CNL HHC, LLC

 

38.  
ERISA Certification dated April 3, 2006, by CNL Hotels & Resorts, Inc.

 

39.  
ERISA Certification dated April 3, 2006, by CNL Hospitality GP Corp.

 

40.  
ERISA Certification dated April 3, 2006, by Hilton Hotels Corporation

 

41.  
UCC-1 Financing Statement (PH) PH Hotel Partners, LP (filed in Delaware)

 

42.  
UCC-1 Financing Statement (PH) PH Hotel Partners, LP (recorded in Oregon)

 

43.  
UCC-1 Financing Statement (PH) AH Tenant Corporation (filed in Delaware)

 

44.  
UCC-1 Financing Statement (PH) AH Tenant Corporation (recorded in Oregon)

 

45.  
UCC-1 Financing Statement (AH) AH Hotel Partners, LP (filed in Delaware)

 

46.  
UCC-1 Financing Statement (AH) AH Hotel Partners, LP (recorded in Michigan)

 

47.  
UCC-1 Financing Statement (AH) AH Tenant Corporation (filed in Delaware)

 

48.  
UCC-1 Financing Statement (AH) AH Tenant Corporation (recorded in Michigan)

 

49.  
UCC-1 Financing Statement (HMA) HMA Hotel Partners, LP (filed in Delaware)

 

50.  
UCC-1 Financing Statement (HMA) HMA Hotel Partners, LP (recorded in Florida)

 

51.  
UCC-1 Financing Statement(HMA) AH Tenant Corporation (filed in Delaware)

 

52.  
UCC-1 Financing Statement(HMA) AH Tenant Corporation (recorded in Florida)

 

53.  
UCC-1 Financing Statement (CM) CM Hotel Partners, LP (filed in Delaware)

 

54.  
UCC-1 Financing Statement (CM) CM Hotel Partners, LP (recorded in California)

 

--------------------------------------------------------------------------------

 
 

55.  
UCC-1 Financing Statement (CM) AH Tenant Corporation (filed in Delaware)

 

56.  
UCC-1 Financing Statement (CM) AH Tenant Corporation (recorded in California)

 

57.  
Recourse Liabilities Guaranty dated April 3, 2006, by Hilton Hotels Corporation
and CNL Hospitality Partners, LP

 

58.  
Estoppel Certificate Operating Lease (PH) dated April 3, 2006, by AH Tenant
Corporation and PH Hotel Partners, LP

 

59.  
Estoppel Certificate Operating Lease (AH) dated April 3, 2006, by AH Tenant
Corporation and AH Hotel Partners, LP

 

60.  
Estoppel Certificate Operating Lease (HMA) dated April 3, 2006, by AH Tenant
Corporation and HMA Hotel Partners, LP

 

61.  
Estoppel Certificate Operating Lease (CM) dated April 3, 2006, by AH Tenant
Corporation and CM Hotel Partners, LP

 

62.  
Subordination Agreement (PH) dated April 3, 2006, by AH Tenant Corporation and
PH Hotel Partners, LP

 

63.  
Subordination Agreement (AH) dated April 3, 2006, by AH Tenant Corporation and
AH Hotel Partners, LP

 

64.  
Subordination Agreement (HMA) dated April 3, 2006, by AH Tenant Corporation and
HMA Hotel Partners, LP

 

65.  
Subordination Agreement (CM) dated April 3, 2006, by AH Tenant Corporation and
CM Hotel Partners, LP

 

66.  
Manager’s Consent and Subordination (PH) dated April 3, 2006, by Promos Hotels,
Inc.

 

67.  
Manager’s Consent and Subordination (AH) dated April 3, 2006, by Hilton Suites,
Inc.

 

68.  
Manager’s Consent and Subordination (HMA) dated April 3, 2006, by Hilton Hotels
Corporation

 

69.  
Manager’s Consent and Subordination (CM) dated April 3, 2006, by Hilton Hotels
Corporation

 

70.  
Lessee Security Agreement (PH) dated April 3, 2006, by AH Tenant Corporation

 

71.  
Lessee Security Agreement (AH) dated April 3, 2006, by AH Tenant Corporation

 

72.  
Lessee Security Agreement (HMA) dated April 3, 2006, by AH Tenant Corporation

 

73.  
Lessee Security Agreement (CM) dated April 3, 2006, by AH Tenant Corporation

 

74.  
Embassy Suites Comfort Letter (PH) dated April 3, 2006 by Promos Hotels, Inc.

 

75.  
Partnership Certificate dated April 3, 2006, respecting PH Hotel Partners, LP

 

76.  
Partnership Certificate dated April 3, 2006, respecting AH Hotel Partners, LP

 

77.  
Partnership Certificate dated April 3, 2006, respecting HMA Hotel Partners, LP

 

78.  
Partnership Certificate dated April 3, 2006, respecting CM Hotel Partners, LP

 

79.  
Partnership Certificate dated April 3, 2006, respecting CNL Hospitality
Partners, LP

 

80.  
Partnership Certificate dated April 3, 2006, respecting CNL HHC Partners, LP

 

--------------------------------------------------------------------------------

 
 

81.  
Corporate Certificate dated April 3, 2006, respecting AH Tenant Corporation

 

82.  
Corporate Certificate dated April 3, 2006, respecting Hilton Hotels Corporation

 

83.  
Corporate Certificate dated April 3, 2006, respecting CNL Hospitality GP Corp.

 

84.  
LLC Certificate dated April 3, 2006, respecting CNL HHC, LLC

 

85.  
LLC Certificate dated April 3, 2006, respecting AH Hotel GP, LLC

 

86.  
LLC Certificate dated April 3, 2006, respecting PH Hotel GP, LLC

 

87.  
LLC Certificate dated April 3, 2006, respecting HMA Hotel GP, LLC

 

88.  
LLC Certificate dated April 3, 2006, respecting CM Hotel GP, LLC

 

89.  
Cash Management/Clearing Account Agreements (if any) (PH)

 

90.  
Cash Management/Clearing Account Agreements (if any) (AH)

 

91.  
Cash Management/Clearing Account Agreements (if any) (HMA)

 

92.  
Cash Management/Clearing Account Agreements (if any) (CM)

 

93.  
Anti-Coercion Statement (PH) dated April 3, 2006 by PH Hotel Partners, LP

 

94.  
Anti-Coercion Statement (AH) dated April 3, 2006 by AH Hotel Partners, LP

 

95.  
Anti-Coercion Statement (HMA) dated April 3, 2006 by HMA Hotel Partners, LP

 

96.  
Anti-Coercion Statement (CM) dated April 3, 2006 by CM Hotel Partners, LP