Exhibit 10.17

 

Loan No. 101340

 

LOAN AGREEMENT

 

by and among

 

HH LC PORTFOLIO LLC,

 

HH TEXAS HOTEL ASSOCIATES, L.P.,

 

THE LENDERS PARTY HERETO

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Administrative Agent for the Lenders

 

and

 

PNC BANK, NATIONAL ASSOCIATION,

 

as Documentation Agent

 

Executed as of December 22, 2004

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

Table of Contents

 

    

ARTICLE 1. DEFINITIONS

   2

1.1  DEFINED TERMS

   2

1.2  EXHIBITS AND SCHEDULES INCORPORATED

   17

ARTICLE 2. LOAN

   17

2.1  LOAN

   17

2.2  LOAN FEES

   19

2.3  LOAN DOCUMENTS

   19

2.4  EFFECTIVE DATE

   19

2.5  MATURITY DATE

   19

2.6  INTEREST ON THE LOAN

   19

2.7  PAYMENTS

   23

2.8  AMORTIZATION PAYMENTS

   23

2.9  MINIMUM DSC HURDLE

   23

2.10  INCREASE OF LOAN AMOUNT

   24

2.11  FULL REPAYMENT AND RECONVEYANCE

   25

2.12  LENDERS’ ACCOUNTING

   25

2.13  OPTION TO EXTEND

   25

2.14  PARTIAL RELEASE

   27

2.15  MAXIMUM INTEREST RATE

   28

ARTICLE 3. DISBURSEMENT OF LOAN

   29

3.1  CONDITIONS PRECEDENT TO INITIAL ADVANCE

   29

3.2  CONDITIONS PRECEDENT TO ALL DISBURSEMENTS

   30

3.3  CONDITIONS PRECEDENT TO DISBURSEMENT OF ANY LOAN INCREASE

   30

3.4  FUNDS TRANSFER DISBURSEMENTS

   32

ARTICLE 4. INSURANCE

   33

4.1  TITLE INSURANCE

   33

4.2  PROPERTY INSURANCE

   33

4.3  FLOOD HAZARD INSURANCE

   33

4.4  LIABILITY INSURANCE

   33

4.5  GENERAL

   33

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

   34

5.1  AUTHORITY/ENFORCEABILITY

   34

5.2  BINDING OBLIGATIONS

   34

5.3   FORMATION AND ORGANIZATIONAL DOCUMENTS

   34

 

i

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

5.4  NO LEGAL BAR; NO CONSENT

   34

5.5  PERMITS

   35

5.6  LITIGATION

   35

5.7  FINANCIAL CONDITION

   35

5.8  NO MATERIAL ADVERSE CHANGE

   35

5.9  ACCURACY

   35

5.10  NO DEFAULTS

   35

5.11  MAJOR AGREEMENTS

   35

5.12  TITLE TO PROPERTIES

   36

5.13  TAX LIABILITY

   36

5.14  REIT STATUS

   36

5.15  PROPERTY LEASES

   36

5.16  AMERICANS WITH DISABILITIES ACT COMPLIANCE

   36

5.17  BUSINESS LOAN

   36

5.18  TAX SHELTER REGULATIONS

   36

ARTICLE 6. HAZARDOUS MATERIALS

   37

6.1  SPECIAL REPRESENTATIONS AND WARRANTIES

   37

6.2  HAZARDOUS MATERIALS COVENANTS

   38

6.3  INSPECTION BY ADMINISTRATIVE AGENT

   38

6.4  HAZARDOUS MATERIALS INDEMNITY

   38

6.5  LEGAL EFFECT OF SECTION

   39

ARTICLE 7. COVENANTS OF BORROWER

   39

7.1  EXPENSES

   39

7.2  ERISA COMPLIANCE

   40

7.3  LIENS

   40

7.4  REPLACEMENT RESERVE ACCOUNTS.

   41

7.5  OPERATING ACCOUNTS

   42

7.6  MANAGEMENT AGREEMENTS AND LICENSE AGREEMENTS.

   42

7.7  NO OTHER AGREEMENTS

   43

7.8  USE OF THE PROPERTIES; LEASES

   44

7.9  CASUALTY; CONDEMNATION

   44

7.10  REQUIRED NOTICES

   45

7.11  PERFORMANCE BY THIRD PARTIES

   46

7.12  BANK ACCOUNTS

   46

7.13  OPERATING LEASES

   46

7.14  FURTHER ASSURANCES

   46

7.15  ASSIGNMENT

   46

7.16  REQUIREMENTS OF LAW

   46

7.17  SPECIAL COVENANTS; SINGLE PURPOSE ENTITY

   47

7.18  LIMITATIONS ON DISTRIBUTIONS, ETC

   47

7.19  COVENANTS WITH RESPECT TO GUARANTOR AND REIT

   47

7.20  RENOVATIONS

   48

 

ii

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

7.21  PROPERTY LEASES

   49

7.22  SAVANNAH PROPERTY

   49

ARTICLE 8. REPORTING COVENANTS

   49

8.1  FINANCIAL INFORMATION

   49

8.2  BUDGETS

   50

8.3  BOOKS AND RECORDS

   51

8.4  KNOWLEDGE OF DEFAULT; ETC

   51

8.5  LITIGATION, ARBITRATION OR GOVERNMENT INVESTIGATION

   51

8.6  ENVIRONMENTAL NOTICES

   51

8.7  CERTIFICATE OF BORROWER

   51

ARTICLE 9. DEFAULTS AND REMEDIES

   52

9.1  DEFAULT

   52

9.2  ACCELERATION UPON DEFAULT; REMEDIES

   54

9.3  DISBURSEMENTS TO THIRD PARTIES

   54

9.4  REPAYMENT OF FUNDS ADVANCED

   54

9.5  RIGHTS CUMULATIVE, NO WAIVER

   54

ARTICLE 10. ADMINISTRATIVE AGENT; INTERCREDITOR PROVISIONS

   55

10.1  APPOINTMENT AND AUTHORIZATION

   55

10.2  WELLS FARGO AS LENDER

   56

10.3  LOAN DISBURSEMENTS

   56

10.4  DISTRIBUTION AND APPORTIONMENT OF PAYMENTS; DEFAULTING LENDERS

   57

10.5  PRO RATA TREATMENT

   59

10.6  SHARING OF PAYMENTS, ETC

   59

10.7  COLLATERAL MATTERS; PROTECTIVE ADVANCES.

   59

10.8  POST-FORECLOSURE PLANS

   61

10.9  APPROVALS OF LENDERS

   62

10.10  NOTICE OF DEFAULTS

   62

10.11  ADMINISTRATIVE AGENT’S RELIANCE, ETC

   62

10.12  INDEMNIFICATION OF ADMINISTRATIVE AGENT

   63

10.13  LENDER CREDIT DECISION, ETC

   64

10.14  SUCCESSOR ADMINISTRATIVE AGENT

   65

10.15  TITLED AGENTS

   65

10.16  NO SET-OFFS

   66

ARTICLE 11. MISCELLANEOUS PROVISIONS

   66

11.1  INDEMNITY

   66

11.2  FORM OF DOCUMENTS

   66

11.3  NO THIRD PARTIES BENEFITED

   67

 

iii

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

11.4  NOTICES

   67

11.5  ATTORNEY-IN-FACT

   67

11.6  ACTIONS

   67

11.7  INTENTIONALLY OMITTED

   67

11.8  RELATIONSHIP OF PARTIES

   67

11.9  DELAY OUTSIDE LENDER’S CONTROL

   67

11.10  ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT

   68

11.11  IMMEDIATELY AVAILABLE FUNDS

   68

11.12  AMENDMENTS AND WAIVERS.

   68

11.13  SUCCESSORS AND ASSIGNS

   70

11.14  CERTAIN ALLOWED DISCLOSURES

   72

11.15  CAPITAL ADEQUACY

   72

11.16  LENDER’S AGENTS

   73

11.17  EVIDENCE OF TAX PAYMENTS

   73

11.18  WAIVER OF RIGHT TO TRIAL BY JURY

   73

11.19  SEVERABILITY

   74

11.20  TIME

   74

11.21  HEADINGS

   74

11.22  GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS

   74

11.23  USA PATRIOT ACT NOTICE

   75

11.24  INTEGRATION; INTERPRETATION

   75

11.25  JOINT AND SEVERAL LIABILITY

   76

11.26  COUNTERPARTS

   77

 

SCHEDULES AND EXHIBITS

 

SCHEDULE 1.1

   - COMMITMENTS AND PRO RATA SHARES

SCHEDULE 5.6

   - LITIGATION

SCHEDULE 5.11

   - LEASES

SCHEDULE 6.1

   - ENVIRONMENTAL REPORTS

SCHEDULE 7.12

   - PLEDGED ACCOUNTS

EXHIBIT A-1

   - LEGAL DESCRIPTION OF THE SUGAR LAND PROPERTY (INCLUDING SUGAR LAND LEASE)

EXHIBIT A-2

   - LEGAL DESCRIPTION OF THE SAN ANTONIO PROPERTY (INCLUDING SAN ANTONIO LEASE)

EXHIBIT A-3

   - LEGAL DESCRIPTION OF THE VA BEACH PROPERTY

EXHIBIT A-4

   - LEGAL DESCRIPTION OF THE MT. LAUREL PROPERTY

EXHIBIT A-5

   - LEGAL DESCRIPTION OF THE OMAHA PROPERTY

EXHIBIT A-6

   - LEGAL DESCRIPTION OF THE TAMPA PROPERTY

EXHIBIT A-7

   - LEGAL DESCRIPTION OF THE SAVANNAH PROPERTY

EXHIBIT B

   - DOCUMENTS

EXHIBIT C

   - FORM OF ASSIGNMENT AND ASSUMPTION

EXHIBIT D

   - FIXED RATE NOTICE

EXHIBIT E

   - FORM OF LOAN INCREASE SUPPLEMENT

 

iv

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

EXHIBIT F

   - FORM OF NOTE

EXHIBIT G

   - SAN ANTONIO RENOVATIONS AND BUDGET

EXHIBIT H

   - MT. LAUREL RENOVATIONS AND BUDGET

EXHIBIT I

   - OMAHA RENOVATIONS AND BUDGET

EXHIBIT J

   - FORM OF BORROWER CERTIFICATE

EXHIBIT K

   - ITEMS NOT RECEIVED IN RESPECT OF SAN ANTONIO PROPERTY

 

v

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

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT (“Agreement”) is executed as of December 22, 2004, by and
among HH TEXAS HOTEL ASSOCIATES, L.P., a limited partnership formed under the
laws of the State of Delaware (“Texas Borrower”) and HH LC PORTFOLIO LLC, a
limited liability company formed under the laws of the State of Delaware (“Other
Borrower”) (Texas Borrower and Other Borrower being herein referred to,
individually and collectively, as “Borrower”), each of the financial
institutions initially a signatory hereto (or that becomes a party hereto
pursuant to a Loan Increase Supplement as herein defined) together with their
respective assignees under Section 11.13 (“Lenders”) and WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Wells Fargo”) as contractual representative of the
Lenders to the extent and in the manner provided in Article 10 (in such
capacity, “Administrative Agent”).

 

RECITALS:

 

A. Texas Borrower is (i) the owner of the property in Sugar Land, Texas legally
described on Exhibit A-1 hereto and of the Sugar Land Marriott Hotel located
thereon and is the holder of the leasehold estate (with respect to the
conference center and garage) under the lease (the “Sugar Land Lease”) also
described in Exhibit A-1 hereto (such property, leasehold estate and the hotel
and other improvements located thereon being hereinafter collectively referred
to as the “Sugar Land Property”) and (ii) the owner of the property located in
San Antonio, Texas legally described in Exhibit A-2 hereto and the holder of the
leasehold estate under the lease (the “San Antonio Lease”) also described in
Exhibit A-2 hereto and of the San Antonio Marriott Plaza Hotel located thereon
(such property, leasehold estate and the hotel and other improvements located
thereon being hereinafter collectively referred to as the “San Antonio
Property”).

 

B. Other Borrower is the owner of (i) the property located in Virginia Beach,
Virginia legally described in Exhibit A-3 hereto and the Virginia Beach Hilton
Garden Inn located thereon (such property, hotel and other improvements located
thereon being hereinafter collectively referred to as the “VA Beach Property”);
(ii) the property located in Mt. Laurel, New Jersey legally described in Exhibit
A-4 hereto and the Radisson Hotel Mt. Laurel located thereon (such property,
hotel and the other improvements located on such property being hereinafter
collectively referred to as the “Mt. Laurel Property”); (iii) the property
located in Omaha, Nebraska legally described in Exhibit A-5 hereto and the
Marriott Omaha Hotel thereon (such property, hotel and the other improvements
located on such property being hereinafter collectively referred to as the
“Omaha Property”); (iv) the property located in Tampa, Florida legally described
in Exhibit A-6 hereto and the Residence Inn Tampa located thereon (such
property, hotel and the other improvements located on such property being
hereinafter collectively referred to as the “Tampa Property”); and (v) the
property located in Savannah, Georgia legally described in Exhibit A-7 hereto
and the Courtyard by Marriott-Savannah Hotel located thereon (such property,
hotel and the other improvements located on such property being hereinafter
collectively referred to as the “Savannah Property”).

 

C. Borrower is a wholly-owned subsidiary of Highland Hospitality, L.P., a
Delaware limited partnership, is the lessor (either as the original lessor or as
assignee of the rights and

 

1

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

obligations of the original lessor thereunder) under operating leases leasing
each of the properties described in Paragraph A and Paragraph B above to HHC TRS
LC Portfolio LLC, a Delaware limited liability company (“Operating Lessee”),
which is also a wholly-owned subsidiary of Highland Hospitality, L.P.

 

D. Borrower desires to borrow from Lenders, and Lenders agree to loan to
Borrower, the amounts described below on the terms described below.

 

NOW, THEREFORE, Borrower, Administrative Agent and Lenders hereby agree as
follows:

 

ARTICLE 1. DEFINITIONS

 

1.1 DEFINED TERMS.

 

The following capitalized terms used in this Agreement shall have the meanings
defined or referenced below. Certain other capitalized terms used only in
specific sections of this Agreement are defined in such sections.

 

“ADA” – means the Americans with Disabilities Act, of July 26, 1990, Pub. L. No.
101-336, 104 Stat. 327, 42 U.S.C. § 12101, et. seq., as amended from time to
time.

 

“Additional Commitment” – means a new Commitment (in the case of an Additional
Lender that is not an existing Lender) or an increase of the Commitment of a
Lender (in the case of an Additional Lender that is an existing Lender), in
either case made pursuant to a Loan Increase Supplement to effect a Loan
Increase in accordance with this Agreement.

 

“Additional Lender” – means an Eligible Assignee approved by Borrower and
Administrative Agent that agrees to issue an Additional Commitment.

 

“Additional Property” – means each Proposed Property that is added to the
Collateral pursuant to a Loan Increase Supplement in accordance with the
provisions of this Agreement.

 

“Adjusted NOI” – means, for any period of time for any Property, the amount by
which (a) the Gross Operating Revenues of such Property for such period of time
exceed (b) the Gross Operating Expenses of such Property for such period of
time.

 

“Administrative Agent” – means Wells Fargo Bank, National Association, or any
successor Administrative Agent appointed pursuant to Section 10.14.

 

“Affiliate” – means, with respect to any Person, (a) in the case of any such
Person which is a partnership or limited liability company, any general partner
or managing member in such partnership or limited liability company,
respectively, (b) any other Person which is directly or indirectly Controlled
by, Controls or is under common Control with such Person or one or more of the
Persons referred to in the preceding clause (a), (c) any other Person who is an
officer, director, trustee or management-level employee of, or general partner
or managing member in, such Person or any Person referred to in the preceding
clauses (a) and (b), (d) any other Person

 

2

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

who is a member of the immediate family of such Person or of any Person referred
to in the preceding clauses (a) through (c), and (e) any other Person that is a
trust solely for the benefit of one or more Persons referred to in clause (d)
and of which such Person is sole trustee; provided, however, in no event shall
Administrative Agent or any Lender or any of their respective Affiliates be an
Affiliate of Borrower.

 

“Aggregate Adjusted NOI” – means, for any period of time, the amount by which
(a) the sum of the Gross Operating Revenues of all of the Properties for such
period of time exceeds (b) the sum of the Gross Operating Expenses of all of the
Properties for such period of time.

 

“Aggregate DSC” – means, as of any DSC Test Date, (a) the Aggregate Adjusted NOI
for the period of twelve (12) consecutive calendar months ending on such DSC
Test Date (excluding from the determination of the Aggregate Adjusted NOI any
Property that has been released from its Deed of Trust on or before such DSC
Test Date) divided by (b) Senior Debt Service determined as of such DSC Test
Date.

 

“Agreement” – means this Agreement, as it may hereafter be modified, amended or
restated.

 

“Allocated Loan Amount” – means with respect to each of the Properties, the
following amounts, respectively:

 

Property

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

   Amount

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

Sugar Land Property

   $ 18,700,000

VA Beach Property

   $ 12,010,000

San Antonio Property

   $ 18,150,000

Mt. Laurel Property

   $ 7,920,000

Omaha Property

   $ 18,000,000

Tampa Property

   $ 8,775,000

Savannah Property

   $ 16,445,000

 

In the case of any Additional Property, its Allocated Loan Amount shall be the
amount of the Loan Increase applicable thereto if such Additional Property is
the only Additional Property to which such Loan Increase applies. If such Loan
Increase applies to more than one Additional Property, the aggregate amount of
all such Allocated Loan Amounts for all such Additional Properties shall be the
amount of such Loan Increase and the Allocated Loan Amount for an individual
Additional Property shall be determined by Administrative Agent, based on the
approximate proportion of the respective appraised values of each Additional
Property to which such Loan Increase applies and shall be identified in the Loan
Increase Supplement.

 

3

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

“Alternate Rate” – is a rate of interest per annum five percent (5%) in excess
of the applicable Effective Rate in effect from time to time.

 

“Applicable LIBO Rate” is the rate of interest, rounded upward to the nearest
whole multiple of one-hundredth of one percent (.01%), equal to the sum of: (a)
two and one-half percent (2.5%) plus (b) the LIBO Rate, which rate is divided by
one (1.00) minus the Reserve Percentage:

 

Applicable LIBO Rate = 2.5%   +    LIBO Rate          (1 - Reserve Percentage)

 

“Appraisal” – means a written appraisal prepared by an independent MAI appraiser
acceptable to Administrative Agent and subject to Administrative Agent’s
customary independent appraisal requirements and prepared in compliance with all
applicable regulatory requirements, including the Financial Institutions
Recovery, Reform and Enforcement Act of 1989, as amended from time to time.

 

“Approved FF&E Budget” – means, with respect to each Property and subject to the
terms and provisions contained in the applicable Management Agreement, the
budget for the FF&E expenditures to be made at such Property. The budget for
such FF&E expenditures shall be in the form provided for in the Management
Agreement for such Property, and Administrative Agent shall have approval rights
over said budget (and changes to the budget) to the extent Borrower or the
applicable Operating Lessee has said rights under such Management Agreement.

 

“Assignee” – shall have the meaning given to such term in Section 11.13(c).

 

“Assignment and Assumption Agreement” – means an Assignment and Assumption
Agreement among a Lender, an Assignee and Administrative Agent, substantially in
the form of Exhibit C.

 

“Availability Hurdle” – means, at any date of determination, that the Aggregate
DSC as of the then most recent DSC Test Date equals or exceeds 1.35.

 

“Bankruptcy Code” – means the Bankruptcy Reform Act of 1978 (11 USC § 101-1330)
as now or hereafter amended or recodified.

 

“Base Management Fees” – means, with respect to a Property, fees payable under
the Management Agreement for such Property in the amount of a stated percentage
of the Gross Operating Revenues (or such comparable term as may be used in such
Management Agreement) of such Property.

 

“Borrower” – shall have the meaning given in the preamble hereto.

 

“Borrower GP” – means HHC Texas GP LLC, a Delaware limited liability company,
the general partner of Texas Borrower.

 

4

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

“Borrower Operating Account” – means (i) with respect to a Property, the account
or accounts so identified in Schedule 7.12 hereto, or (in the case of any
Additional Property) in the applicable Loan Increase Supplement, with respect to
such Property, and (ii) any account or accounts substituted for any one or more
of the foregoing accounts from time to time or any additional account or
accounts which Borrower may designate from time to time as a “Borrower Operating
Account,” subject to Administrative Agent’s approval of each such substitute or
additional account in Administrative Agent’s reasonable discretion.

 

“Business Day” – means a day of the week (but not a Saturday, Sunday or holiday)
on which the offices of Administrative Agent in San Francisco, California are
open to the public for carrying on substantially all of Administrative Agent’s
business functions. Unless specifically referenced in this Agreement as a
Business Day, all references to “days” shall be to calendar days.

 

“Change in Control” – means the occurrence of any one or more of the following
events:

 

(a) at any time Borrower or Operating Lessee shall cease to be wholly owned
(directly or indirectly) by Guarantor or the REIT; or

 

(b) (i) the acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the Securities and Exchange Commission thereunder
as in effect on the date hereof), of Equity Interests representing 10% or more
of the aggregate ordinary voting power represented by the issued and outstanding
Equity Interests of the REIT; (ii) occupation of a majority of the seats (other
than vacant seats) on the board of directors of the REIT by Persons who were
neither (A) nominated by the board of directors of the REIT nor (B) appointed by
directors so nominated; or (iii) the acquisition of direct or indirect Control
of the REIT by any Person or group, or

 

(c) (i) at any time the REIT shall cease to own 51% or more of the aggregate
Equity Interests of Guarantor; or (ii) the acquisition of direct or indirect
Control of Guarantor by any Person or group (other than the REIT); or

 

(d) at any time Borrower GP shall cease to be wholly owned (directly or
indirectly) by Guarantor or the REIT.

 

“Code” – means the Internal Revenue Code of 1986 and the rules and regulations
promulgated thereunder, as amended, modified, succeeded or replaced from time to
time. References to sections of the Code should be construed also to refer to
any successor sections.

 

“Collateral” – means the Properties and any personal property or other
collateral with respect to which a Lien or security interest is granted to
Administrative Agent, for the benefit of Lenders, pursuant to the Loan
Documents.

 

“Commitment” – means, as to each Lender, such Lender’s obligation to make
disbursements pursuant to Section 3.4 and Section 10.3, in an amount up to, but
not exceeding

 

5

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

the amount set forth for such Lender (i) on Schedule 1.1 attached hereto as such
Lender’s “Commitment Amount” or in the applicable Assignment and Assumption
Agreement and/or (ii) (in the case of an Additional Lender) in a Loan Increase
Supplement executed by it, as the same may be reduced from time to time pursuant
to the terms of this Agreement or as appropriate to reflect any assignments to
or by such Lender effected in accordance with Section 11.13.

 

“Control” – means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have the meanings correlative thereto.

 

“Debtor Relief Laws” – shall have the meaning given to such term in Section
9.1(f).

 

“Deed of Trust” – means, with respect to a Property, the deed of trust,
mortgage, or deed to secure debt with respect to such Property described in
Exhibit B hereto or (in the case of an Additional Property) in the applicable
Loan Increase Supplement, as the same may be modified, amended or restated.

 

“Default” – shall have the meaning given to such term in Section 9.1.

 

“Defaulting Lender” – means any Lender which fails or refuses to perform its
obligations under this Agreement within the time period specified for
performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of five (5) Business Days after notice
from Administrative Agent.

 

“DSC Shortfall” – means at any time an amount, determined as of the then most
recent DSC Test Date as of which Borrower has failed to satisfy the Minimum DSC
Hurdle, equal to the principal amount of the Loan that would be required to have
been repaid as of such DSC Test Date to cause the Minimum DSC Hurdle to be
satisfied as of such DSC Test Date.

 

“DSC Test Date” – means the last day of each calendar quarter beginning March
31, 2005.

 

“Dollars” and “$” – means the lawful money of the United States of America.

 

“Effective Date” – means the date on which the initial advance of the Loan is
made hereunder.

 

“Effective Rate” – shall have the meaning given to such term in Section 2.6(e).

 

“Eligible Assignee” – means any Person that is: (a) an existing Lender; (b) a
commercial bank, trust company, savings and loan association, savings bank,
insurance company, investment bank or pension fund organized under the laws of
the United States of America, any state thereof or the District of Columbia, and
having total assets in excess of $5,000,000,000; or (c) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Co-operation and Development, or a political
subdivision of any such country, and having total assets in excess of
$10,000,000,000, provided that such bank is

 

6

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

acting through a branch or agency located in the United States of America. If
such entity is not currently a Lender, such entity’s (or in the case of a bank
which is a subsidiary, such bank’s parent’s) senior unsecured long term
indebtedness must be rated BBB or higher by S&P, Baa2 or higher by Moody’s
Investor Service or the equivalent or higher of either such rating by another
rating agency acceptable to Administrative Agent.

 

“Equity Interests” – means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereto to purchase or acquire any such
equity interests.

 

“ERISA” – means the Employee Retirement Income Security Act of 1974, as in
effect from time to time.

 

“Extended Maturity Date” means the first anniversary of the Original Maturity
Date.

 

“Federal Funds Rate” – means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal Funds brokers
of recognized standing selected by Administrative Agent.

 

“FF&E” – means all furniture, fixtures, equipment and all other items of
personal property used in connection with the operation of the Properties.

 

“FF&E Reserve” – means, with respect to any Property for any period of time, an
amount that is equal to the amount of any type of reserve for FF&E that is
required under the Management Agreement or License Agreement for such Property.
If neither the Management Agreement nor the License Agreement for a Property
specifies a requirement for such reserve, the FF&E Reserve for such Property
shall be the product of (i) the Gross Operating Revenues of such Property for
said period of time, multiplied by (ii) four percent (4%).

 

“Fixed Rate” is the Applicable LIBO Rate as accepted by Borrower as an Effective
Rate for a particular Fixed Rate Period and Fixed Rate Portion.

 

“Fixed Rate Commencement Date” – means, with respect to a particular Fixed Rate
Portion, the date upon which the Fixed Rate Period commences with respect
thereto.

 

“Fixed Rate Notice” is a written notice in the form shown on Exhibit D hereto
which requests a Fixed Rate for a particular Fixed Rate Period and Fixed Rate
Portion.

 

7

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

“Fixed Rate Period” is the period or periods of one (1), two (2), three (3) or
six (6) months selected by Borrower and confirmed in a Fixed Rate Notice;
provided that no Fixed Rate Period shall extend beyond the Maturity Date.

 

“Fixed Rate Portion” is the portion or portions of the principal balance of the
Loan which Borrower selects to have subject to a Fixed Rate, each of which is an
amount: (a) equal to the unpaid principal balance of the Loan not subject to a
Fixed Rate; and (b) is not less than ONE MILLION DOLLARS ($1,000,000) and is an
even multiple of ONE HUNDRED THOUSAND DOLLARS ($100,000). In the event Borrower
is subject to a principal amortization requirements under the terms and
conditions of the Loan Documents, the Fixed Rate Portion(s) from time to time in
effect shall in no event exceed, in the aggregate, the maximum outstanding
principal balance which will be permissible on the last day of the Fixed Rate
Period selected.

 

“Fixed Rate Price Adjustment” – shall have the meaning given to such term in
Section 2.6(h).

 

“Fixed Rate Taxes” – are, collectively, all withholdings, interest equalization
taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by
any domestic or foreign governmental authority and related in any manner to a
Fixed Rate.

 

“GAAP” – means generally accepted accounting principles in effect from time to
time consistently applied.

 

“Governmental Authority” – means any and all courts, boards, agencies,
commissions, offices or authorities of any nature whatsoever for any
governmental unit (Federal, state, county, district, municipal, city or
otherwise), whether now or hereafter in existence.

 

“Gross Operating Expenses” – means, with respect to any Property for any period
of time (and as determined in accordance with GAAP), the normal and customary
expenses incurred operating such Property for said period of time.
Notwithstanding the foregoing, said expenses shall include, without limitation,
(a) management fees equal to the greater of (i) three percent (3%) of the Gross
Operating Revenues of such Property for such period of time and (ii) the Base
Management Fees incurred with respect to such Property for such period of time,
(b) a reserve for FF&E equal to the greater of (i) four percent (4%) of Gross
Operating Revenues of such Property for such period of time and (ii) the actual
reserves for FF&E required under the Management Agreement for such Property for
such period of time; (c) reasonable reserves for real estate taxes and insurance
for such Property for such period of time (as set forth in the operating budget
for such Property); (d) the actual franchise fee payable under the License
Agreement for such Property for such period of time; and (e) such other
adjustments to industry standards required by the Uniform System of Accounts For
The Lodging Industry – 9th Revised Edition (the “Uniform System”), as
Administrative Agent may determine. Notwithstanding the foregoing, “Gross
Operating Expenses” shall not include (A) amortization, depreciation or any
other similar expense of a noncash nature, (B) income taxes, (C) the payment of
principal and interest due on the Loan or (D) rent payable under the Operating
Leases.

 

8

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

“Gross Operating Revenues” – means, with respect to any Property for any period
of time (and as determined in accordance with GAAP), all receipts, revenues,
income and proceeds of sales of every kind actually received in connection with
the operation of such Property, and shall include, without limitation: room
rentals; amounts received in connection with the sale of food and liquor; rent
or other payments received from tenants, licensees, and occupants of commercial,
office and retail space; revenues received in connection with leases of space
for antennae, satellite dishes, microwave towers and other telecommunication
towers; the proceeds of insurance with respect to use and occupancy or business
interruption insurance; deposits forfeited and not refunded; and any net amount
recovered in any legal action or proceeding or settlement thereof pertaining to
room revenues or rents or other income which arose out of the operation of such
Property. Notwithstanding the foregoing, Gross Operating Revenues shall exclude
all sales and excise taxes and any similar taxes collected as direct taxes
payable to taxing authorities; credits or refunds to guests; complimentary
rooms; proceeds of insurance (except for proceeds of insurance with respect to
use and occupancy or business interruption insurance); proceeds of sales of
depreciable property; proceeds of condemnation; and rent paid under the
Operating Lease.

 

“Guaranties” – means, collectively, the Completion Guaranty and the Limited
Guaranty described in Exhibit B hereto.

 

“Guarantor” – means Highland Hospitality, L.P., a Delaware limited partnership.

 

“Guarantor GP” – means HHC GP Corporation, a Maryland corporation, the general
partner of Guarantor.

 

“Hazardous Materials” – shall have the meaning given to such term in Section
6.1(a).

 

“Hazardous Materials Claims” – shall have the meaning given to such term in
Section 6.1(c).

 

“Hazardous Materials Laws” – shall have the meaning given to such term in
Section 6.1(b).

 

“Incentive Management Fees” – means, with respect to a Property, fees (other
than Base Management Fees) payable under the Management Agreement for such
Property.

 

“Indebtedness” means, for any entity, without duplication: (a) all indebtedness
of such entity for borrowed money, for amounts drawn under a letter of credit,
or for the deferred purchase price of property for which such entity or its
assets is liable, (b) all unfunded amounts under a loan agreement, letter of
credit, or other credit facility for which such entity would be liable if such
amounts were advanced under the credit facility, (c) all amounts required to be
paid by such entity as a guaranteed payment to its partners and/or members or a
preferred or special dividend, including any mandatory redemption of shares or
interests, (d) all indebtedness guaranteed by such entity, directly or
indirectly, (e) all obligations under leases that constitute capital leases for
which such entity is liable, and (f) all obligations of such entity under
interest rate swaps, caps, floors, collars and other interest hedge agreements,
in each case whether such

 

9

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

entity is liable contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such entity otherwise assures a creditor
against loss.

 

“Indemnified Parties” – shall have the meaning given to such term in Section
6.4.

 

“Initial Advance” – means the advance of the Loan to be made on the Effective
Date in the amount of $50,000,000.

 

“Interest Law” – shall have the meaning given to such term in Section 2.15.

 

“Laws” means all federal, state or other statutes, codes, ordinances, decrees,
rules, regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, guidelines, or any provisions of the foregoing, including
general principles or common and civil law and equity, binding on or affecting
the Person or Property with respect to which such word is used; and “Law” means
any of such Laws.

 

“Lender” – means each financial institution from time to time party hereto as a
“Lender” (including any Additional Lender), together with its respective
successors and permitted assigns. With respect to matters requiring the consent
or approval of all Lenders at any given time, all then existing Defaulting
Lenders will be disregarded and excluded, and, for voting purposes only, “all
Lenders” shall be deemed to mean “all Lenders other than Defaulting Lenders.”

 

“LIBO Rate” – is the rate of interest, rounded upward to the nearest whole
multiple of one-sixteenth of one percent (.0625%), quoted by Administrative
Agent from time to time as the London Inter-Bank Offered Rate for deposits in
U.S. Dollars at approximately 9:00 a.m. California time, two (2) Business Days
prior to a Fixed Rate Commencement Date or a Price Adjustment Date, as
appropriate, for purposes of calculating effective rates of interest for loans
or obligations making reference thereto for an amount approximately equal to a
Fixed Rate Portion and for a period of time approximately equal to a Fixed Rate
Period or the time remaining in a Fixed Rate Period after a Price Adjustment
Date, as appropriate.

 

“License Agreement” – means with respect to a Property, the agreement identified
in Exhibit B hereto, or (in the case of any Additional Property) in the
applicable Loan Increase Supplement, with respect to such Property, as each such
agreement may hereafter be amended, supplemented, restated, replaced or
otherwise modified from time to time in accordance with the provisions of this
Agreement.

 

“Licensor” – means, with respect to a Property, the licensor or franchisor under
the License Agreement for such Property.

 

“Lien” – means any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance (including, but not limited
to, easements, rights-of-way, zoning restrictions and the like), lien (statutory
or other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including without limitation any
conditional sale or other title retention agreement, the interest of a lessor

 

10

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

under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement or document having similar effect (other than a financing statement
filed by a “true” lessor pursuant to Section 9408 (or a successor section) of
the Uniform Commercial Code) naming the owner of the asset to which such Lien
relates as debtor, under the Uniform Commercial Code or other comparable law of
any jurisdiction.

 

“Loan” – means the principal sum that Lenders agree to lend and Borrower agrees
to borrow pursuant to the terms and conditions of this Agreement: ONE HUNDRED
MILLION DOLLARS ($100,000,000) (subject to increase thereof in accordance with
Section 2.10 hereof).

 

“Loan Amount” – means One Hundred Million Dollars ($100,000,000) subject to the
increase thereof to an amount not to exceed One Hundred Fifty Million Dollars
($150,000,000) in accordance with the provisions of this Agreement, provided
that the Loan Amount (and the maximum increase thereof) shall be reduced by the
amount of any principal payment or prepayment of the Loan.

 

“Loan Availability” – means (a) until such time as the Availability Hurdle has
been and remains satisfied, the lesser of (i) the aggregate amount of the
Commitments and (ii) $90,000,000 and (b) after the Availability Hurdle has been
and as long as it remains satisfied, the lesser of (i) the aggregate amount of
the Commitments and (ii) the Loan Amount; provided, however, that, (A) the Loan
Availability shall be reduced by the Allocated Loan Amount for the Sugar Land
Property unless and until the conditions for the advance of such Allocated Loan
Amount provided for in Section 2.1(e) are satisfied and (B) the Loan
Availability shall be reduced by the Allocated Loan Amount for the San Antonio
Property unless and until the conditions for the advance of such Allocated Loan
Amount provided for in Section 2.1(f) are satisfied.

 

“Loan Documents” – means those documents, as hereafter amended, supplemented,
replaced or modified, properly executed and in recordable form, if necessary,
listed in Exhibit B, or identified in any Loan Increase Supplement, as Loan
Documents.

 

“Loan Increase” – shall have the meaning give to such term in Section 2.10(d).

 

“Loan Increase Supplement” – means a supplement to this Agreement, substantially
in the form of Exhibit E hereto, executed by the Borrower, Administrative Agent
and each Additional Lender, completed (as applicable) to reflect the terms of
the Loan Increase with respect to which such supplement is executed.

 

“Loan Party” – means Borrower, Guarantor, Operating Lessee, Borrower GP,
Guarantor GP, the REIT and any other Person that is an Affiliate of Borrower,
Guarantor or the REIT and that is obligated under the Loan Documents.

 

“Major Agreements” – means the License Agreements, the Management Agreements,
the Property Leases and any other agreements that are at any time material to
the ownership or operation of any of the Properties.

 

11

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

“Management Agreement” – means with respect to a Property, the agreement so
identified in Exhibit B hereto, or (in the case of any Additional Property) in
the applicable Loan Increase Supplement, with respect to such Property, as each
said agreement may hereafter be amended, supplemented, restated, replaced or
otherwise modified from time to time in accordance with the provisions of this
Agreement.

 

“Management Fees” – means, with respect to any Property, the fees and any other
amounts to be paid to the Manager under the Management Agreement for such
Property, including, without limitation, Base Management Fees and Incentive
Management Fees (if any) payable thereunder.

 

“Manager” – means, with respect to a Property, the manager under the Management
Agreement for such Property.

 

“Marriott” – means Marriott International, Inc.

 

“Maturity Date” – means the Original Maturity Date, as the same may be extended
to the Extended Maturity Date pursuant to Section 2.13 hereof.

 

“Maximum Interest Rate” – shall have the meaning given to such term in Section
2.15.

 

“Minimum DSC Hurdle” – means that, as of any DSC Test Date, the Properties have
achieved an Aggregate DSC as of such DSC Test Date that equals or exceeds the
applicable “Minimum DSC Hurdle” designated below:

 

DSC Test Date

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

  

Minimum DSC Hurdle

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

March 31, 2005

   1.25

June 30, 2005

   1.25

September 30, 2005

   1.25

December 31, 2005

   1.30

March 31, 2006

   1.30

June 30, 2006

   1.30

September 30, 2006

   1.30

December 31, 2006

   1.40

March 31, 2007

   1.40

June 30, 2007

   1.40

September 30, 2007

   1.40

 

If the Maturity Date is extended to the Extended Maturity Date as herein
provided, the Minimum DSC Hurdle for each DSC Test Date after the Original
Maturity Date shall be 1.45.

 

“Mt. Laurel Property” – shall have the meaning given to such term in Recital B
hereto.

 

“Non-Pro Rata Advance” – means a Protective Advance or a disbursement under the
Loan with respect to which fewer than all Lenders have funded their respective
Pro Rata Shares in breach of their obligations under this Agreement.

 

12

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

“Note” or “Notes” – means each Promissory Note (substantially in the form of
Exhibit F hereto), collectively in the Loan Amount, executed by Borrower and
payable to the order of a Lender, together with such other replacement notes as
may be issued from time to time pursuant to Section 11.13, as the same may be
amended, supplemented, replaced or modified.

 

“Obligee” – shall have the meaning given to such term in Section 8.1.

 

“Omaha Property” – shall have the meaning given to such term in Recital B
hereto.

 

“Operating Lease” – means with respect to a Property, the lease identified in
Exhibit B hereto, or (in the case of an Additional Property) in the applicable
Loan Increase Supplement, with respect to such Property, as each such lease may
hereafter be amended, supplemented, restated, replaced or otherwise modified
from time to time in accordance with the provisions of this Agreement.

 

“Operating Lessee” – shall have the meaning given to such term in Recital C
hereto.

 

“Operating Lessee’s Operating Account” – means (i) with respect to a Property,
the account or accounts so identified in Schedule 7.12 hereto, or (in the case
of an Additional Property) in the applicable Loan Increase Supplement, with
respect to such Property, and (ii) any account or accounts substituted for any
one or more of the foregoing accounts from time to time or any additional
accounts or accounts which Borrower may designate from time to time as an
“Operating Lessee’s Operating Account,” subject to Administrative Agent’s
approval of each such substitute or additional account in Administrative Agent’s
reasonable discretion.

 

“Option to Extend” – shall have the meaning given to such term in Section 2.13.

 

“Original Maturity Date” – means December 21, 2007.

 

“Other Borrower” – shall have the meaning given such term in the preamble
hereto.

 

“Other Related Documents” – means those documents, as hereafter amended,
supplemented, restated, replaced or otherwise modified from time to time,
properly executed and in recordable form, if necessary, listed in Exhibit B or
(in the case of an Additional Property) in the applicable Loan Increase
Supplement as Other Related Documents, all in form and substance acceptable to
Administrative Agent.

 

“Participant” – shall have the meaning given to such term in Section 11.13.

 

“Permit” – means any permit, approval, authorization, license, variance or
permission required from a Governmental Authority under an applicable
Requirement of Law.

 

“Permitted Liens” – means:

 

  (a) Liens (other than environmental Liens and any Lien imposed under ERISA)
for taxes, assessments or charges of any Governmental Authority for claims not
yet due;

 

13

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

  (b) Any laws, ordinances or regulations affecting the applicable Property;

 

  (c) Liens imposed by laws, such as mechanics’ liens and other similar liens,
arising in the ordinary course of business which secure payment of obligations
not more than thirty (30) days past due;

 

  (d) All matters shown on the applicable Title Policy as exceptions to coverage
thereunder;

 

  (e) Liens in favor of Administrative Agent, for the benefit of Lenders, under
the applicable Deed of Trust; and

 

  (f) Any other matters from time to time approved in writing by Administrative
Agent (but specifically excluding Liens securing monetary obligations which
shall require approval of the Requisite Lenders) or (provided they are
subordinate to the applicable Deed of Trust) other agreements that the Borrower
is not otherwise prohibited from entering into under the Loan Documents without
Administrative Agent’s consent or approval.

 

“Person” – means any natural person, corporation, limited partnership, general
partnership, joint stock company, limited liability company, limited liability
partnership, joint venture, association, company, trust, bank, trust company,
land trust, business trust or other organization, whether or not a legal entity,
or any other nongovernmental entity, or any Governmental Authority.

 

“Pledge Agreement” – means the Pledge Agreement executed by the Borrower and
Operating Lessee and identified in Exhibit B as amended and modified from time
to time.

 

“Pledged Accounts” – shall have the meaning given to such term in Section 7.12
hereof.

 

“Potential Default”—means an event, circumstance or condition which, with the
giving of notice or the lapse of time, or both, would constitute a Default.

 

“Price Adjustment Date” – shall have the meaning given to such term in Section
2.6(h).

 

“Prime Rate” – means a base rate of interest which Administrative Agent
establishes from time to time and which serves as the basis upon which the
effective rates of interest are calculated for those loans making reference
thereto. Any change in an effective rate due to a change in the Prime Rate shall
become effective on the day each such change is announced by Administrative
Agent at its principal office in San Francisco, California.

 

“Properties” – means, collectively, the Sugar Land Property, the San Antonio
Property, the VA Beach Property, the Mt. Laurel Property, the Omaha Property,
the Tampa Property, the Savannah Property and (upon the disbursement of the Loan
Increase with respect thereto) each Additional Property (if any); and “Property”
means any one of the Properties. If and when the Deed of Trust is released with
respect to an entire Property, such Property shall cease to be one of the
Properties hereunder.

 

14

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

“Property Leases” – means the Sugar Land Lease and the San Antonio Lease.

 

“Property Proceeds” – shall have the meaning given to such term in Section
7.9(a).

 

“Proposed Property” – shall have the meaning given to such term in Section
2.10(b).

 

“Pro Rata Share” – means, as to each Lender, the ratio, expressed as a
percentage, of (a) the amount of such Lender’s Commitment to (b) the aggregate
amount of the Commitments of all Lenders hereunder; provided, however, that if
at the time of determination the Commitments have terminated or been reduced to
zero, the “Pro Rata Share” of each Lender shall be the Pro Rata Share of such
Lender in effect immediately prior to such termination or reduction.
Notwithstanding the foregoing, solely for purposes of the disbursement of any
Loan Increase (but not for purposes of repayment thereof or for any other
purpose of this Agreement), “Pro Rata Share” shall mean, with respect to an
Additional Lender, the ratio (expressed as a percentage) of its Additional
Commitment to the amount of such Loan Increase.

 

“Protective Advance” – shall mean any advances made by Administrative Agent in
accordance with the provisions of Section 10.7(e) to protect the Collateral
securing the Loan.

 

“Regulatory Costs” – are, collectively, future, supplemental, emergency or other
changes in Reserve Percentages, assessment rates imposed by the Federal Deposit
Insurance Corporation, or similar requirements or costs imposed by any domestic
or foreign governmental authority and related in any manner to a Fixed Rate.

 

“REIT” – means Highland Hospitality Corporation, a Maryland corporation.

 

“Release Price” – means, with respect a Property, to the greater of (a) 105% of
the Allocated Loan Amount of such Property and (b) an amount equal to the
principal reduction of the Loan that would be required to cause the Aggregate
DSC, as of the DSC Test Date immediately preceding the requested release date
(but calculated solely with respect to the Properties that would continue to
secure the Loan following such release) to equal the greater of (i) the actual
Aggregate DSC for the Properties (including the Property to be released)
determined as of such DSC Test Date and (ii) 1.45.

 

“Renovations” – means the renovations of the Properties described in Section
7.20 hereof and includes, without limitation (as applicable), the renovation of
certain improvements and the acquisition and installation of certain furniture,
fixtures, equipment and other items of personal property.

 

“Replacement Reserve Account” – means (i) with respect to a Property, the
account so identified in Schedule 7.12 hereto, or (in the case of an Additional
Property) in the applicable Loan Increase Supplement, with respect to such
Property and (ii) any account or accounts substituted for any one or more of the
foregoing accounts from time to time or any additional accounts or accounts
which Borrower may designate from time to time as a “Replacement Reserve
Account,” subject to Administrative Agent’s approval of each such substitute or
additional account in Administrative Agent’s reasonable discretion.

 

15

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

“Requirements of Law” – means, as to any entity, the charter and by-laws,
partnership agreement or other organizational or governing documents of such
entity, and any law, rule or regulation, Permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such entity or any of its property or to which such entity or
any of its property is subject, including without limitation, applicable
securities laws and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or Permit or occupational safety or health
law, rule or regulation.

 

“Requisite Lenders” – means, as of any date, Lenders (which must include the
Lender then acting as Administrative Agent) having at least 66-2/3% of the
aggregate amount of the Commitments, or, if the Commitments have been terminated
or reduced to zero, Lenders holding at least 66-2/3% of the principal amount
outstanding under the Loan, provided that (a) in determining such percentage at
any given time, all then existing Defaulting Lenders will be disregarded and
excluded and such percentage will be determined solely with respect to Lenders
that are not Defaulting Lenders, and (b) at all times when two or more Lenders
are party to this Agreement, the term “Requisite Lenders” shall in no event mean
less than two Lenders.

 

“Reserve Percentage” – means at any time the percentage announced by
Administrative Agent as the reserve percentage under Regulation D for loans and
obligations making reference to an Applicable LIBO Rate for a Fixed Rate Period
or time remaining in a Fixed Rate Period on a Price Adjustment Date, as
appropriate. The Reserve Percentage shall be based on Regulation D or other
regulations from time to time in effect concerning reserves for Eurocurrency
Liabilities as defined in Regulation D from related institutions as though
Administrative Agent were in a net borrowing position, as promulgated by the
Board of Governors of the Federal Reserve System, or its successor.

 

“San Antonio Lease” – shall have the meaning given to such term in Recital A
hereto.

 

“San Antonio Property” – shall have the meaning given to such term in Recital A
hereto.

 

“Savannah Agreement” – means that certain Agreement Regarding Release of
Perpetual Parking Easement by and among Guarantor, McKibbon Hotel Group, Inc., a
Georgia corporation and McKibbon Hotel Group of Savannah, Georgia #3, L.P., a
Georgia limited partnership, dated as of August 2, 2004.

 

“Savannah Property” – shall have the meaning given to such term in Recital B
hereto.

 

“Senior Debt Service” – means, at any time, (i) an amount equal to the principal
amount of the Loan then outstanding, multiplied by (ii) the greater of (A) nine
percent (9%) and (B) the debt constant calculated using the then prevailing rate
on 10-year U.S. Treasury Bonds, plus two and one-half percent (2.5%), with a
principal amortization period of twenty-five (25) years.

 

“Sugar Land Lease” – shall have the meaning given to such term in Recital A
hereto.

 

“Sugar Land Property” – shall have the meaning given to such term in Recital A
hereto.

 

16

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

“Tampa Property” – shall have the meaning given to such term in Recital B
hereto.

 

“Tangible Net Worth” – means, as of any date, the total consolidated
stockholders’ equity of the REIT, plus increases in accumulated depreciation
accrued after the Effective Date, minus (to the extent reflected in determining
such stockholders’ equity): (a) the amount of any write-up in the book value of
any assets contained in any balance sheet resulting from revaluation thereof or
any write-up in excess of the cost of such assets acquired and (b) the aggregate
of all amounts appearing on the assets side of any such balance sheet for
franchises, licenses, permits, patents, patent applications, copyrights,
trademarks, trade names, goodwill, treasury stock, experimental or
organizational expenses and other like assets which would be classified as
intangible assets under GAAP, all determined on a consolidated basis for the
REIT and its consolidated subsidiaries.

 

“Title Policy” – means, with respect to a Property, an ALTA Lender’s Policy of
Title Insurance (i) issued by a title insurance company acceptable to
Administrative Agent, (ii) in the amount of 105% of the Allocated Loan Amount of
such Property, (iii) subject only to Liens and other matters approved by
Administrative Agent in writing, (iv) containing those endorsements required by
Administrative Agent (to the extent available in the applicable jurisdiction)
and (v) otherwise in form and substance acceptable to Administrative Agent.

 

“Uniform System” – shall have the meaning ascribed to such term in the
definition of “Gross Operating Expenses.”

 

“VA Beach Property” – shall have the meaning given to such term in Recital B
hereto.

 

“Variable Rate” – on any day means a floating rate of interest per annum
one-half percent (0.50%) in excess of the higher of (a) the Prime Rate then in
effect or (b) the Federal Funds Rate then in effect as announced by the Federal
Reserve Bank of New York plus one percent (1.00%).

 

“Wells Fargo” – shall have the meaning given to such term in the preamble
hereto.

 

1.2 EXHIBITS AND SCHEDULES INCORPORATED.

 

Exhibits A-1, A-2, A-3, A-4, A-5, A-6, A-7, B, C, D, E, F, G, H, I, J and K and
Schedules 1.1, 5.6, 5.11, 6.1 and 7.12 attached hereto are hereby incorporated
into this Agreement.

 

ARTICLE 2. LOAN

 

2.1 LOAN.

 

(a) Agree to Borrow and Lend. By and subject to the terms of this Agreement,
Lenders agree to lend to Borrower, and Borrower agrees to borrow from Lenders,
the principal sum not to exceed the Loan Amount, said sum to be evidenced by the
Notes. The Notes shall be secured, in part, by the Deeds of Trust encumbering
the Properties and other related property described therein. Amounts disbursed
to or on behalf of Borrower pursuant to the Notes shall be used for general
corporate purposes including but not limited to the repayment of indebtedness,

 

17

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

property acquisition and capital expenditures and for such other purposes and
uses as may be permitted under this Agreement and the other Loan Documents.

 

(b) Initial Advance. Upon and subject to the satisfaction of the conditions set
forth in Section 3.1, the Lenders shall disburse the Initial Advance on the
Effective Date.

 

(c) Subsequent Advances. Borrower may request, on not less than ten (10) days’
prior written notice to Administrative Agent, not more than two disbursements of
the Loan (excluding disbursements of any Loan Increase and any disbursement
provided for in Section 2.1(e)) subsequent to the Effective Date, which
disbursements, together with the Initial Advance, shall not exceed the Loan
Availability. Each such advance shall be subject to the conditions set forth in
Section 3.2.

 

(d) Loan Increase. Upon (i) approval of a Loan Increase by Administrative Agent
and all of the Lenders as provided in Section 2.10, (ii) the execution and
delivery by Borrower, Administrative Agent and each Lender (including each
Additional Lender) of a Loan Increase Supplement effecting such Loan Increase
and (iii) the satisfaction of the conditions set forth in Section 3.2 and 3.3,
such Loan Increase shall be disbursed (solely by such Additional Lender or
Additional Lenders). Notwithstanding that a Loan Increase shall be advanced
solely by such Additional Lenders, immediately upon the disbursement of such
Loan Increase, and without further action by any Person, each Additional Lender
shall be deemed to have purchased and acquired from the Lenders party to this
Agreement prior thereto interests in the Loan then outstanding, and such Lenders
party to this Agreement prior hereto shall be deemed to have purchased and
acquired from each of the Additional Lenders interests in the Loan Increase,
such that each Lender (including each Additional Lender) holds interests in the
entire outstanding amount of the Loan (including each Loan Increase) in the
proportion that its Commitment (including, if applicable, its Additional
Commitment) bears to all Commitments (including all Additional Commitments).
Each Fixed Rate Portion, outstanding on the date of any Loan Increase shall
either be converted to one or more new Fixed Rate Portions for a Fixed Rate
Period commencing on such date (as selected by Borrower prior thereto in
accordance with this Agreement) or converted to a Variable Rate, and Borrower
shall pay the Fixed Rate Price Adjustment resulting from any such conversion.

 

(e) Sugar Land Property. In the event that on or before the Effective Date the
lessor under the Sugar Land Lease or any condominium association for a
condominium development that includes the Sugar Land Property does not deliver
to Administrative Agent an estoppel certificate satisfactory to Administrative
Agent and the Initial Advance is nevertheless made, then, upon (i) receipt by
Administrative Agent of reasonably satisfactory estoppel certificates from such
lessor and from such condominium associations, and (ii) not less than ten (10)
days’ written notice from Borrower to Administrative Agent, the Allocated Loan
Amount for the Sugar Land Property shall be advanced to Borrower, subject to the
limitations on Loan Availability and to the conditions set forth in Section 3.2.

 

(f) San Antonio Property. In the event that on or before the Effective Date any
of the items identified in Exhibit K is not delivered to Administrative Agent
and the Initial Advance is nevertheless made, then, upon (i) receipt by
Administrative Agent of all such items (in form and

 

18

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

substance reasonably satisfactory to Administrative Agent) and (ii) not less
than ten (10) days’ written notice from Borrower to Administrative Agent, the
Allocated Loan Amount for the San Antonio Property shall be advanced to
Borrower, subject to the limitations on Loan Availability and the conditions set
forth in Section 3.2.

 

2.2 LOAN FEES. Borrower shall pay to Administrative Agent such fees as are set
forth in a separate letter agreement between Borrower and Administrative Agent.
From such fees paid to Administrative Agent, Administrative Agent shall pay to
each Lender that is party to this Agreement on the Effective Date the amounts
set forth in a separate letter agreement between Administrative Agent and such
Lender.

 

2.3 LOAN DOCUMENTS. Borrower shall execute and deliver to Administrative Agent
(or cause to be executed and delivered) concurrently with this Agreement each of
the documents, properly executed and in recordable form, as applicable,
described in Exhibit B as Loan Documents, together with those documents
described in Exhibit B as Other Related Documents.

 

2.4 EFFECTIVE DATE. The date of the Loan Documents is for reference purposes
only. The Effective Date of delivery and transfer to Administrative Agent of the
security under the Loan Documents and of Borrower’s and Lenders’ obligations
under the Loan Documents shall be the date the Initial Advance is made.

 

2.5 MATURITY DATE. All sums due and owing under this Agreement and the other
Loan Documents shall be repaid in full on or before the Maturity Date. All
payments due to Administrative Agent and Lenders under this Agreement, whether
at the Maturity Date or otherwise, shall be paid in Dollars in immediately
available funds.

 

2.6 INTEREST ON THE LOAN.

 

(a) Interest Payments. Interest accrued on the outstanding principal balance of
the Loan shall be due and payable, in the manner provided in Section 2.7, on the
first day of each month commencing with the first month after the Effective
Date.

 

(b) Default Interest. Notwithstanding the rates of interest specified in
Sections 2.6(e) below and the payment dates specified in Section 2.6(a), at any
time following the occurrence and during the continuance of any Default, the
principal balance of the Loan then outstanding and, to the extent permitted by
applicable law, any interest payments on the Loan not paid when due, shall
(unless waived by the Requisite Lenders) bear interest payable upon demand at
the Alternate Rate. All other amounts due Administrative Agent or Lenders
(whether directly or for reimbursement) under this Agreement or any of the other
Loan Documents if not paid when due, or if no time period is expressed, if not
paid within ten (10) days after demand, shall (unless waived by the Requisite
Lenders) likewise bear interest from and after demand at the Alternate Rate.

 

(c) Late Fee. Borrower acknowledges that late payment to Administrative Agent
will cause Administrative Agent and Lenders to incur costs not contemplated by
this Agreement.

 

19

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

Such costs include, without limitation, processing and accounting charges.
Therefore, if Borrower fails timely to pay any sum due and payable hereunder
through the Maturity Date (other than payment of the entire outstanding balance
of the Loan on the Maturity Date), unless waived by Administrative Agent (to the
extent it is permitted to do so pursuant to Section 11.12(a)) or the Requisite
Lenders, a late charge of four cents ($.04) for each dollar of any such
principal payment, interest or other charge due hereon and which is not paid
within fifteen (15) days after such payment is due, shall be charged by
Administrative Agent (for the benefit of Lenders) and paid by Borrower for the
purpose of defraying the expense incident to handling such delinquent payment.
Borrower and Administrative Agent agree that this late charge represents a
reasonable sum considering all of the circumstances existing on the date hereof
and represents a fair and reasonable estimate of the costs that Administrative
Agent and Lenders will incur by reason of late payment. Borrower and
Administrative Agent further agree that proof of actual damages would be costly
and inconvenient. Acceptance of any late charge shall not constitute a waiver of
the default with respect to the overdue installment, and shall not prevent
Administrative Agent from exercising any of the other rights available hereunder
or any other Loan Document. Such late charge shall be paid without prejudice to
any other rights of Administrative Agent.

 

(d) Computation of Interest. Interest shall be computed on the basis of the
actual number of days elapsed in the period during which interest or fees accrue
and a year of three hundred sixty (360) days on the principal balance of the
Loan outstanding from time to time. In computing interest on the Loan, the date
of the making of a disbursement under the Loan shall be included and the date of
payment shall be excluded. Notwithstanding any provision in this Section 2.6,
interest in respect of the Loan shall not exceed the Maximum Interest Rate.

 

(e) Effective Rate. The “Effective Rate” upon which interest shall be calculated
for the Loan shall, from and after the Effective Date of this Agreement, be one
or more of the following:

 

(i) Provided no Default exists under this Agreement:

 

(A) for those portions of the principal balance of the Notes which are not Fixed
Rate Portions, the Effective Rate shall be the Variable Rate.

 

(B) for those portions of the principal balance of the Notes which are Fixed
Rate Portions, the Effective Rate for the Fixed Rate Period thereof shall be the
Fixed Rate selected by Borrower and set in accordance with the provisions
hereof, provided, however, if any of the transactions necessary for the
calculation of interest at any Fixed Rate requested or selected by Borrower
should be or become prohibited or unavailable to Administrative Agent, or, if in
Administrative Agent’s good faith judgment, it is not possible or practical for
Administrative Agent to set a Fixed Rate for a Fixed Rate Portion and Fixed Rate
Period as requested or selected by Borrower, Administrative Agent shall so
notify Borrower and Lenders and the Effective Rate for such Fixed Rate Portion
shall remain at or revert to the Variable Rate.

 

20

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

(ii) During such time as a Default exists under this Agreement; or from and
after the date on which all sums owing under the Notes become due and payable by
acceleration or otherwise; or from and after the date on which the Collateral or
any portion thereof or interest therein, is sold, transferred, mortgaged,
assigned, or encumbered, whether voluntarily or involuntarily, or by operation
of law or otherwise, without Administrative Agent’s prior written consent
(whether or not the sums owing under the Notes become due and payable by
acceleration); or from and after the Maturity Date, then (unless waived by the
Requisite Lenders) in each case, the interest rate applicable to the then
outstanding principal balance of the Loan shall be the Alternate Rate.

 

(f) Selection of Fixed Rate. Provided no Default or Potential Default exists
under this Agreement, Borrower, at its option and upon satisfaction of the
conditions set forth herein, may request a Fixed Rate as the Effective Rate for
calculating interest on the portion of the unpaid principal balance and for the
period selected in accordance with and subject to the following procedures and
conditions, provided, however, that Borrower may not have in effect at any one
time more than five (5) Fixed Rates:

 

(i) Borrower shall deliver to Wells Fargo Bank, N.A., Disbursement and
Operations Center, 2120 East Park Place, Suite 100, El Segundo, California,
90245, Attention: Geraldine San Mateo, with a copy to Wells Fargo Bank, N.A.,
1750 H Street, Suite 400, Washington, DC 20006, Attention: Mark Monahan, or such
other addresses as Administrative Agent shall designate, an original or
facsimile Fixed Rate Notice no later than 9:00 A.M. (California time), and not
less than three (3) nor more than five (5) Business Days prior to the proposed
Fixed Rate Period for each Fixed Rate Portion. Any Fixed Rate Notice pursuant to
this subsection (i) is irrevocable. Administrative Agent is authorized to rely
upon the telephonic request and acceptance of Douglas Vicari or Sean Dell’Orto
as Borrower’s duly authorized agents, or such other and/or additional authorized
agents as Borrower shall designate in writing to Administrative Agent.
Borrower’s telephonic notices, requests and acceptances shall be directed to
such officers of Administrative Agent as Administrative Agent may from time to
time designate.

 

(ii) Borrower may elect (A) to convert Variable Rate advances to a Fixed Rate
Portion, or (B) to convert a matured Fixed Rate Portion into a new Fixed Rate
Portion, provided, however, that the aggregate amount of the advance being
converted into or continued as a Fixed Rate Portion shall comply with the
definition thereof as to Dollar amount. The conversion of a matured Fixed Rate
Portion back to a Variable Rate or to a new Fixed Rate Portion shall occur on
the last Business Day of the Fixed Rate Period relating to such Fixed Rate
Portion. Each Fixed Rate Notice shall specify (A) the amount of the Fixed Rate
Portion, (B) the Fixed Rate Period, and (C) the Fixed Rate Commencement Date.

 

(iii) Upon receipt of a Fixed Rate Notice in the proper form requesting a Fixed
Rate Portion advance under subsections (i) and (ii) above, Administrative Agent
shall determine the Fixed Rate applicable to the Fixed Rate Period for such
Fixed Rate Portion two (2) Business Days prior to the beginning of such Fixed
Rate Period. Each

 

21

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

determination by Administrative Agent of the Fixed Rate shall be conclusive and
binding upon the parties hereto in the absence of manifest error. Administrative
Agent shall deliver to Borrower and each Lender (by facsimile) an acknowledgment
of receipt and confirmation of the Fixed Rate Notice and the Fixed Rate
determined pursuant thereto; provided, however, that failure to provide such
acknowledgment of receipt and confirmation of the Fixed Rate Notice to Borrower
or any Lender shall not affect the validity of such rate.

 

(iv) If Borrower does not make a timely election to convert all or a portion of
a matured Fixed Rate Portion into a new Fixed Rate Portion in accordance with
this Section 2.6(f) above, such Fixed Rate Portion shall be automatically
converted to a Variable Rate upon the expiration of the Fixed Rate Period
applicable to such Fixed Rate Portion.

 

(g) Fixed Rate Taxes, Regulatory Costs and Reserve Percentages. Upon
Administrative Agent’s demand, Borrower shall pay to Administrative Agent for
the account of each Lender, in addition to all other amounts which may be, or
become, due and payable under this agreement and the other Loan Documents, any
and all Fixed Rate Taxes and Regulatory Costs, to the extent they are not
internalized by the calculation of a Fixed Rate. Further, at Administrative
Agent’s option, the Fixed Rate shall be automatically adjusted by adjusting the
Reserve Percentage, as determined by Administrative Agent in its prudent banking
judgment, from the date of imposition (or subsequent date selected by
Administrative Agent) of any such Regulatory Costs. Administrative Agent shall
give Borrower notice of any Fixed Rate Taxes and Regulatory Costs as soon as
practicable after their occurrence, but Borrower shall be liable for any Fixed
Rate Taxes and Regulatory Costs regardless of whether or when notice is so given

 

(h) Fixed Rate Price Adjustment. Borrower acknowledges that prepayment or
acceleration of a Fixed Rate Portion during a Fixed Rate Period shall result in
Lenders’ incurring additional costs, expenses and/or liabilities and that it is
extremely difficult and impractical to ascertain the extent of such costs,
expenses and/or liabilities. Therefore, on the date a Fixed Rate Portion is
prepaid or the date all sums payable hereunder become due and payable, by
acceleration or otherwise (“Price Adjustment Date”), Borrower will pay
Administrative Agent, for the account of each Lender (in addition to all other
sums then owing to Lenders) an amount (“Fixed Rate Price Adjustment”) equal to
the then present value of (i) the amount of interest that would have accrued on
the Fixed Rate Portion for the remainder of the Fixed Rate Period at the Fixed
Rate set on the Fixed Rate Commencement Date, less (ii) the amount of interest
that would accrue on the same Fixed Rate Portion for the same period if the
Fixed Rate were set on the Price Adjustment Date at the Applicable LIBO Rate in
effect on the Price Adjustment Date. The present value shall be calculated by
using as a discount rate the LIBO Rate quoted on the Price Adjustment Date.

 

By initialing this provision where indicated below, Borrower confirms that
Lenders’ agreement to make the Loan at the interest rates and on the other terms
set forth herein and in the other Loan Documents constitutes adequate and
valuable consideration, given individual weight by Borrower, for this agreement

 

22

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

Borrower Initials.                                 

 

(i) Purchase, Sale and Matching of Funds. Borrower understands, agrees and
acknowledges the following: (a) Lenders have no obligation to purchase, sell
and/or match funds in connection with the use of a LIBO Rate as a basis for
calculating a Fixed Rate or Fixed Rate Price Adjustment; (b) a LIBO Rate is used
merely as a reference in determining a Fixed Rate and Fixed Rate Price
Adjustment; and (c) Borrower has accepted a LIBO Rate as a reasonable and fair
basis for calculating a Fixed Rate and a Fixed Rate Price Adjustment. Borrower
further agrees to pay the Fixed Rate Price Adjustment, Fixed Rate Taxes and
Regulatory Costs, if any, whether or not any Lender elects to purchase, sell
and/or match funds.

 

2.7 PAYMENTS.

 

(a) Manner and Time of Payment. All payments of principal, interest and fees
hereunder payable to Administrative Agent or the Lenders shall be made without
condition or reservation of right and free of set-off or counterclaim, in
Dollars and by wire transfer (pursuant to Administrative Agent’s written wire
transfer instructions) of immediately available funds, to Administrative Agent,
for the account of each Lender as applicable, not later than 11:00 A.M. (Pacific
time) on the date due; and funds received by Administrative Agent after that
time and date shall be deemed to have been paid on the next succeeding Business
Day.

 

(b) Payments on Non-Business Days. Whenever any payment to be made by Borrower
hereunder shall be stated to be due on a day which is not a Business Day,
payments shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder
and of any fees due under this Agreement, as the case may be.

 

(c) Voluntary Prepayment. Borrower may, upon not less than three (3) Business
Days’ prior written notice to Administrative Agent not later than 11:00 A.M.
(Pacific time) on the date given, at any time and from time to time, prepay all
or any portion of the Loan without penalty, except as otherwise expressly set
forth in this Section 2.7(c). Any notice of prepayment given to Administrative
Agent under this Section 2.7(c) shall specify the date of prepayment and the
principal amount of the prepayment. In the event of a prepayment of any Fixed
Rate Portion, Borrower shall concurrently pay any Fixed Rate Price Adjustment
payable in respect thereof. Any principal balance reduction shall reduce
Lenders’ Commitment by a like amount, and any such amounts repaid by Borrower
may not be reborrowed.

 

2.8 AMORTIZATION PAYMENTS. If the Option to Extend is exercised and the Maturity
Date is extended to the Extended Maturity Date, Borrower shall make a principal
payment of the Loan in the amount of $400,000 on December 31, 2007, and on the
last day of each calendar quarter thereafter until the Extended Maturity Date.

 

2.9 MINIMUM DSC HURDLE. If, as of any two consecutive DSC Test Dates, the
Properties fail to achieve the Minimum DSC Hurdle, the Borrower shall pay to
Administrative Agent, within thirty (30) business days after the such second
Test Date, as a principal payment of the Loan, the amount of the DSC Shortfall
as of the such second DSC Test Date. The failure to

 

23

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

achieve the Minimum DSC Hurdle as of a third consecutive or subsequent
consecutive DSC Test Date shall in each case constitute a failure to achieve the
Minimum DSC Hurdle as of two consecutive DSC Test Dates. Along with any
prepayment required to be made under this Section 2.9, Borrower shall pay any
Fixed Rate Price Adjustment applicable thereto.

 

2.10 INCREASE OF LOAN AMOUNT.

 

(a) Subject to the terms, provisions and conditions of this Section 2.10 and
provided that the full Loan Amount of $100,000,000 has theretofore been
disbursed, the Borrower may from time to time, not later than six (6) months
prior to the Original Maturity Date, request that Administrative Agent and
Lenders agree to an increase of the Loan Amount by an amount not to exceed Fifty
Million Dollars ($50,000,000) in the aggregate for all such increases.

 

(b) Borrower may request an increase in the Loan Amount by written notice to
Administrative Agent, which notice shall (i) identify the amount of the
requested increase; (ii) identify the property or properties (each, a “Proposed
Property”) that Borrower intends to acquire to support the increase in the Loan
Amount, each of which Proposed Properties shall satisfy the criteria set forth
in paragraph (c) below; and (iii) include with respect to each such Proposed
Property such operating statements, financial information and information
regarding the proposed acquisition thereof by Borrower, information regarding
the construction and condition of the Proposed Property and the management and
license or franchise agreements for the Proposed Property and such other
information regarding the Proposed Property as Administrative Agent shall
reasonably request.

 

(c) Each Proposed Property shall be a hotel (i) located in the United States of
America (excluding Alaska or Hawaii), (ii) that has been fully completed and
operating for not less than two years under a franchise or license agreement
with a nationally recognized licensor or franchisor with a reputation and of a
quality comparable to those of the Properties and (iii) that is not then
undergoing and is not scheduled or required to undergo any material renovation
or remodeling other than renovations required under a product improvement plan
of the applicable licensor or franchisor at a cost not to exceed ten percent
(10%) of the then appraised value or purchase price of such Proposed Property.

 

(d) Upon Administrative Agent’s approval of such Proposed Property or Proposed
Properties and of the requested increase in the Loan Amount, Administrative
Agent shall request such approval from the Lenders. Neither Administrative
Agent’s approval nor any Lender’s approval thereof shall constitute an agreement
to lend any additional amount hereunder, but the written approval of
Administrative Agent and of all Lenders shall be required in order for any
Additional Lender to make an Additional Commitment to effect such increase. If
Administrative Agent and all of the Lenders approve in writing the requested
increase in the Loan Amount and the Proposed Property or Proposed Properties
proposed by Borrower to support such increase and provided an Additional Lender
or Additional Lenders agree to make Additional Commitments in an aggregate
amount equal to the increase in the Loan Amount, then, subject to the
satisfaction of the conditions set forth in Section 3.2 and 3.3, the Loan Amount
shall be increased by an amount not to exceed the least of (i) the increase in
the Loan Amount requested by Borrower, (ii) sixty percent (60%) of the “as-is”
appraised value of such Proposed Property or

 

24

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

Proposed Properties (in the aggregate) as determined pursuant to an Appraisal or
Appraisals thereof approved by Administrative Agent or (iii) an amount such
that, if such Proposed Property or Proposed Properties had been included in the
Properties as of the most recent DSC Test Date and the Loan Increase had been
outstanding as of the most recent DSC Test Date, the Aggregate DSC would have
equaled or exceeded the greater of (A) 1.35, (B) the Minimum DSC Hurdle
applicable to such DSC Test Date or (C) the actual Aggregate DSC as of such DSC
Test Date (the amount by which the Loan Amount is so increased being herein
referred to as a “Loan Increase”).

 

2.11 FULL REPAYMENT AND RECONVEYANCE. Upon receipt of all sums owing and
outstanding under the Loan Documents, Administrative Agent shall issue a full
reconveyance (or release) of the Properties from the lien of the Deeds of Trust
(or, if requested by Borrower, an assignment thereof, without recourse and
otherwise in form and substance reasonably satisfactory to Administrative
Agent); provided, however, that Administrative Agent, for the benefit of
Lenders, shall have received all escrow, closing and recording costs, the costs
of preparing and delivering such reconveyance (or release) and any sums then due
and payable under the Loan Documents. Lenders’ obligations to make further
disbursements under the Loan shall terminate as to any portion of the Loan
undisbursed as of the date of issuance of such full reconveyance (or release),
and any commitment of Lenders to lend any undisbursed portion of the Loan shall
be canceled.

 

2.12 LENDERS’ ACCOUNTING. Administrative Agent shall maintain a loan account
(the “Loan Account”) on its books in which shall be recorded (a) the names and
addresses and the Pro Rata Shares of the commitment of each of the Lenders, and
principal amount of the Loan owing to each Lender from time to time, and (b) all
repayments of principal and payments of accrued interest, as well as payments of
fees required to be paid pursuant to this Agreement. All entries in the Loan
Account shall be made in accordance with Administrative Agent’s customary
accounting practices as in effect from time to time. Monthly or at such other
interval as is customary with Administrative Agent’s practice, Administrative
Agent will render a statement of the Loan Account to Borrower and will deliver a
copy thereof to each Lender. Each such statement shall be deemed final, binding
and conclusive upon Borrower in all respects as to all matters reflected therein
(absent manifest error).

 

2.13 OPTION TO EXTEND. Borrower shall have the option to extend (“Option to
Extend”) the term of the Loan from the Original Maturity Date to the Extended
Maturity Date, upon satisfaction of each of the following conditions precedent:

 

(a) Borrower shall provide Administrative Agent with written notice of
Borrower’s request to exercise the Option to Extend not more than ninety (90)
days but not less than thirty (30) days prior to the Original Maturity Date;

 

(b) As of the date of Borrower’s delivery of notice of request to exercise the
Option to Extend, and as of the Original Maturity Date, no Default or Potential
Default shall have occurred and be continuing, and Borrower shall so certify in
writing;

 

25

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

(c) Borrower shall execute or cause the execution of all documents reasonably
required by Administrative Agent to exercise the Option to Extend and shall
deliver to Administrative Agent, at Borrower’s sole cost and expense, such
endorsements to the Title Policies as reasonably required by Administrative
Agent;

 

(d) On or before the Original Maturity Date, Borrower shall pay to
Administrative Agent, for the pro rata benefit of Lenders, an extension fee in
the amount of 0.20% of the total Commitments for the Loan (consisting of the
Loan plus any amount of the Commitments not yet disbursed), as determined on the
Original Maturity Date; provided, however, that Borrower may elect, by written
notice to Administrative Agent given at the time of or prior to the exercise of
the Option to Extend, to reduce the Commitments (on a pro rata basis among the
Lenders) to an aggregate amount that is not less than the outstanding principal
balance of the Loan;

 

(e) The Aggregate DSC as of the last day of the most recent DSC Test Date prior
to the Original Maturity Date shall equal or exceed 1.45; provided, however, in
the event such Aggregate DSC requirement is not met, Borrower shall either (i)
pay down the outstanding principal balance of the Loan prior to the Original
Maturity Date to the extent necessary to meet such Aggregate DSC requirement, in
which event the Commitments shall be reduced (on a pro rata basis) in the amount
of such principal payment or (ii) revoke its exercise of the Option to Extend by
written notice to Administrative Agent at least thirty (30) days prior to the
Original Maturity Date;

 

(f) At Administrative Agent’s option, Administrative Agent shall have received
an Appraisal or Appraisals confirming to the satisfaction of Administrative
Agent that the ratio of the Loan Amount to the “as is” appraised value of the
Properties (in the aggregate), determined as of a date not earlier than one
hundred twenty (120) days prior to the Original Maturity Date, does not exceed
sixty percent (60%); provided, however, in the event such ratio exceeds sixty
percent (60%), Borrower shall either (i) pay down the outstanding principal
balance of the Loan prior to the Original Maturity Date to the extent necessary
to reduce such ratio to sixty percent (60%), in which event the Commitments
shall be reduced (on a pro rata basis) in the amount of such principal payment
or (ii) revoke its exercise of the Option to Extend by written notice to
Administrative Agent at least thirty (30) days prior to the Original Maturity
Date;

 

(g) No material adverse change shall have occurred with respect to Borrower,
Guarantor or any Property (as determined by Administrative Agent in its sole
discretion);

 

(h) All of Borrower’s representations and warranties set forth in this Agreement
are true and correct in all material respects as of the Original Maturity Date,
and Borrower shall so certify in writing; and

 

(i) Borrower shall pay all reasonable out-of-pocket costs and expenses related
to the exercise of the Option to Extend.

 

Except as modified by the Option to Extend, the terms and conditions of this
Agreement and the other Loan Documents shall remain unmodified and in full force
and effect.

 

26

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

2.14 PARTIAL RELEASE.

 

Subject to the provisions of Section 2.7, Borrower may prepay (at its sole
option), without penalty, to Administrative Agent for the account of the Lenders
as a principal payment of the Loan, the Release Price as reasonably determined
by Administrative Agent in accordance with the provisions of this Agreement in
respect of any one or more Properties. If such payment is made, Administrative
Agent shall, at Borrower’s request (as hereinafter provided), release the Deed
of Trust (or, upon request by Borrower, an assignment thereof, without recourse
and otherwise in form and substance reasonably satisfactory to Administrative
Agent) in respect of an applicable Property (but not any of the other
Properties); provided, however, that the following conditions shall be
satisfied:

 

(a) Not less than thirty (30) days prior to the date of the requested release
(or assignment), Borrower shall deliver to Administrative Agent a written
request identifying the Property or Properties requested to be released (or with
respect to which the Deed of Trust is requested to be assigned), the requested
date of release (or assignment) and Borrower’s calculation of the Release Price
for each such Property in accordance with this Agreement, together with
operating statements and other appropriate information in support of such
calculation;

 

(b) Borrower shall furnish to Administrative Agent such additional information
as Administrative Agent may reasonably request from time to time with respect to
the determination of the Release Price;

 

(c) Following such release (or assignment) and the payment of the applicable
Release Price, the Adjusted NOI of each individual Property for the period of
twelve consecutive calendar months ending on the most recent DSC Test Date shall
be less than thirty percent (30%) of the Aggregate Adjusted NOI for such period;

 

(d) Prior to or at the time of such release (or assignment), Borrower shall have
paid to Administrative Agent, for the account of the Lenders as a principal
payment of the Loan, the Release Price as determined by Administrative Agent in
accordance with the provisions of this Agreement;

 

(e) No Default or Potential Default shall exist under the Loan Documents as of
the date of the request delivered by Borrower under paragraph (a) above or as of
the date of the release (or assignment); and

 

(f) On the date of such release (or assignment), Administrative Agent shall have
received (in addition to the Release Price) any and all sums then due and owing
under the Loan Documents (including without limitation any Fixed Rate Price
Adjustment provided for in Section 2.6(h)), together with all escrow, closing
and registration costs, and the costs of preparing and delivering such release
(or assignment).

 

Neither the acceptance of any payment nor the issuance of any release (or
assignment) by Administrative Agent pursuant to this Section 2.14 shall affect
any of Borrower’s obligations to

 

27

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

pay all other amounts from time to time payable, or Borrower’s or any other Loan
Party’s obligations, under the Loan Documents.

 

2.15 MAXIMUM INTEREST RATE.

 

As used herein, the term “Maximum Interest Rate” shall mean and refer to the
maximum rate of nonusurious interest, if any, that Lenders may from time to time
charge Borrower and in regard to which Borrower would be prevented successfully
from raising the claim or defense of usury under applicable Law as now, or to
the extent permitted by Law, as may hereafter be, in effect (said Law permitting
the highest rate being herein referred to as the “Interest Law”). It is the
intention of Borrower, Administrative Agent and Lenders to conform strictly to
the Interest Law applicable to this loan transaction. Accordingly, it is agreed
that notwithstanding any provision to the contrary in this Agreement, the Notes
or in any other Loan Document or in any instrument otherwise relating thereto,
the aggregate of all interest and any other charges or consideration
constituting interest under applicable Interest Law that is taken, reserved,
contracted for, charged or received under this Agreement, or under any of the
aforesaid agreements or otherwise on or in connection with the Loan shall under
no circumstances exceed the maximum amount of interest allowed by the Interest
Law applicable to this loan transaction or the Notes. If any usurious interest
in such respect is provided for, or shall be adjudicated to be so provided for,
in this Agreement, in the Notes or in any of the other Loan Documents or other
instruments otherwise relating thereto, or if the acceleration of the maturity
of the Notes or if any prepayment by Borrower results in Borrower having paid
any interest in excess of that permitted by applicable Law, then in such event
(a) the provisions of this Section 2.15 shall govern and control, (b) neither
Borrower nor Borrower’s successors or assigns or any other party liable for the
payment of the Notes shall be obligated to pay the amount of such interest to
the extent that it is in excess of the maximum amount of interest allowed by the
Interest Law applicable to this loan transaction, (c) any excess shall be deemed
a mistake and canceled automatically and, if theretofore paid, shall be refunded
to Borrower and (d) the effective rate of interest shall be automatically
subject to reduction to the Maximum Interest Rate allowed under such Interest
Law as now or hereafter construed by courts of appropriate jurisdiction. All
sums paid or agreed to be paid the Lenders for the use, forbearance, or
detention of the indebtedness shall, to the extent permitted by the Interest Law
applicable to this loan transaction, be amortized, prorated, allocated and
spread throughout the full term of said indebtedness until paid in full so that
the rate or amount of interest on account of said indebtedness does not exceed
the applicable usury ceiling. The right to accelerate the maturity of the
indebtedness does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and Lenders do not intend to
collect unearned interest in the event of acceleration. Notwithstanding any
provision contained in the Notes, this Agreement or any other Loan Document that
permits the compounding of interest, including without limitation any provision
by which any of the accrued interest is added to the principal amount of the
Notes, the total amount of interest that Borrower is obligated to pay and
Lenders are entitled to receive with respect to the Notes shall not exceed the
Maximum Interest Rate on principal amounts actually advanced to or for the
account of Borrower, including the initial advance under the Notes and any
advances made pursuant to this Agreement, the Notes or any other Loan Document
(such as for the principal amount of the Loan or the payment of taxes, insurance
premiums, and the like).

 

28

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

In consideration of the agreement of Lenders to advance sums hereunder, Borrower
has agreed to pay to Lenders certain loan fees (collectively, the “Fees”). Also,
in order to reimburse Lenders for certain costs that Lenders may incur in the
event of late payment or in the event the Loan is prepaid, Borrower has agreed
to pay Lenders the late payment charge and Fixed Rate Price Adjustment in
accordance with the terms of this Agreement. At the time the Notes are paid in
full, or the payment thereof matures, howsoever said payment or maturity shall
have been brought about, in no event shall the total of said Fees, late payment
charges and Fixed Rate Price Adjustment (but only to the extent said Fees, late
payment charges and Fixed Rate Price Adjustment are interest under the Interest
Law applicable to this loan transaction) and all interest and any other charges
or consideration constituting interest under applicable Interest Law that is
taken, reserved, contracted for, charged or received under the Notes or
otherwise in connection with this loan transaction (said total being hereinafter
referred to as the “Charges”) exceed the maximum amount of interest allowed by
the Interest Law applicable to this loan transaction, (a) the provisions of this
Section 2.15 shall govern and control, (b) neither Borrower nor Borrower’s
successors or assigns or any other party liable for the payment thereof shall be
obligated to pay the amount of such excess, and (c) any such excess shall be
canceled automatically and, if theretofore paid, shall be returned to Borrower.

 

ARTICLE 3. DISBURSEMENT OF LOAN

 

3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. Lenders’ obligation to disburse the
Initial Advance shall be subject to satisfaction of each of the following
conditions precedent:

 

(a) Administrative Agent shall have received all of the Loan Documents, the
Other Related Documents and all other documents, instruments, policies, and
forms of evidence or other materials required by Administrative Agent under the
terms of this Agreement or any of the other Loan Documents, all in form and
substance acceptable to Administrative Agent.

 

(b) Administrative Agent shall have received a Title Policy (or an irrevocable
commitment to issue a Title Policy) with respect to each Property.

 

(c) Administrative Agent shall have received and approved, with respect to each
Property, in form and substance satisfactory to Administrative Agent (i) an
environmental questionnaire, a Phase I environmental site assessment and any
further environmental site assessments requested by Administrative Agent, with
respect to the presence, if any, of Hazardous Materials, (ii) an Appraisal,
(iii) to the extent required by Administrative Agent, reports with respect to
the condition of such Property, (iv) a current Smith Travel Research STAR Report
and (v) operating statements for each month of the current year (through
October, 2004) and for such prior years as Administrative Agent may require.

 

(d) In Administrative Agent’s reasonable opinion, there has been no material
adverse change in (i) the condition of the Properties or (ii) the business
carried on at the Properties since August 31, 2004.

 

29

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

(e) Borrower shall have provided, at Borrower’s expense, an opinion of legal
counsel in form and content satisfactory to Administrative Agent to the effect
that: (i) upon due authorization, execution and recordation or filing as may be
specified in the opinion, each of the Loan Documents and Other Related Documents
shall be legal, valid and binding instruments, enforceable against the Loan
Parties party thereto in accordance with their respective terms; (ii) the Loan
Parties are duly formed and have all requisite authority to enter into the Loan
Documents and Other Related Documents; and (iii) such other matters, incident to
the transactions contemplated hereby, as Administrative Agent may reasonably
request.

 

(f) Borrower shall have paid all mortgage, intangible and other similar taxes as
are required in connection with recording of the Deeds of Trust. To the extent
that applicable law limits the amount secured by a Deed of Trust to the amounts
with respect to which such tax is paid, such tax shall be paid with respect to
not less than the fair market value of the applicable Property (as reflected in
the Appraisal provided for in Section 3.1(c)) or such lesser amount as
Administrative Agent may approve but in no event less than 105% of the Allocated
Loan Amount.

 

(g) Borrower and Guarantor shall have satisfied such other conditions as
Administrative Agent shall require.

 

Notwithstanding the foregoing, if all conditions to the Initial Advance (other
than (i) the delivery of satisfactory estoppel certificates from the lessor
under the Sugar Land Lease and from the condominium associations for the
condominium developments that include the Sugar Land Property and (ii) the
delivery of the documents with respect to the San Antonio Property identified in
Exhibit K) have been satisfied, the Initial Advance shall be made, subject to
the limitations on Loan Availability.

 

3.2 CONDITIONS PRECEDENT TO ALL DISBURSEMENTS. Lender’s obligations to disburse
any amount of the Loan (including the Initial Advance, any subsequent
disbursement requested under Section 2.1(c), 2.1(e) or 2.1(f) or any Loan
Increase) shall be subject to (in addition to any other conditions specified in
the Agreement) the satisfaction of each of the following conditions:

 

(a) There shall exist no Default or Potential Default under this Agreement or
under any of the other Loan Documents.

 

(b) All representations and warranties of Borrower and Guarantor under the Loan
Documents shall be true and correct in all material respects.

 

3.3 CONDITIONS PRECEDENT TO DISBURSEMENT OF ANY LOAN INCREASE. Each Loan
Increase and the applicable Additional Lender’s or Additional Lenders’
obligation to disburse such Loan Increase shall be subject to the satisfaction
of the following conditions precedent:

 

(a) Administrative Agent and all of the Lenders shall have approved such Loan
Increase pursuant to Section 2.10 hereof.

 

30

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

(b) Administrative Agent shall have received, with respect to such Loan Increase
and the Proposed Properties, the Loan Increase Supplement and such Loan
Documents and Other Related Documents and all other documents, instruments,
policies and forms of evidence and other interests required by Administrative
Agent under the terms of the Loan Increase Supplement or any of the other Loan
Documents, all in form and substance acceptable to Administrative Agent.

 

(c) Administrative Agent shall have received a Title Policy (or an irrevocable
commitment to issue a Title Policy) with respect to each Proposed Property.

 

(d) Administrative Agent shall have received and approved, with respect to each
Proposed Property, in form and substance satisfactory to Administrative Agent
(i) an environmental questionnaire, a Phase I environmental site assessment and
any further environmental site assessments requested by Administrative Agent,
with respect to the presence, if any, of Hazardous Materials, (ii) an Appraisal,
(iii) to the extent required by Administrative Agent, reports with respect to
the condition of such Proposed Property, (iv) a current Smith Travel Research
STAR Report and (v) operating statements for each month of the current year
(including the month preceding the disbursement of the Loan Increase, if then
available) and for such prior years as Administrative Agent may require.

 

(e) In Administrative Agent’s reasonable opinion, there has been no material
adverse change in (i) the condition of the Proposed Properties or (ii) the
business carried on at the Proposed Properties since the date of Borrower’s
request for approval of such Loan Increase pursuant to Section 2.10.

 

(f) Borrower shall have provided, at Borrower’s expense, an opinion of legal
counsel in form and content satisfactory to Administrative Agent to the effect
that: (i) upon due authorization, execution and recordation or filing as may be
specified in the opinion, the Loan Increase Supplement and each of the Loan
Documents and Other Related Documents delivered pursuant thereto or in
connection therewith shall be legal, valid and binding instruments, enforceable
against the Loan Parties party thereto in accordance with their respective
terms; (ii) the Loan Parties are duly formed and have all requisite authority to
enter into the Loan Increase Supplement and other Loan Documents and Other
Related Documents; and (iii) such other matters, incident to the transactions
contemplated hereby, as Administrative Agent may reasonably request.

 

(g) Borrower shall have paid all mortgage, intangible and other similar taxes as
are required in connection with recording of the Deed of Trust for each Proposed
Property. To the extent that applicable law limits the amount secured by a Deed
of Trust to the amounts with respect to which such tax is paid, such tax shall
be paid with respect to not less than the fair market value of the such Proposed
Property (as reflected in the Appraisal provided for in Section 3.3(d)) or such
lesser amount as the Administrative Agent may approve but in no event less 105%
of the Allocated Loan Amount.

 

31

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

(h) Each of the conditions precedent (if any) to the Additional Commitment of
each Additional Lender shall have been satisfied and all fees payable in
connection such Loan Increase shall have been paid.

 

3.4 FUNDS TRANSFER DISBURSEMENTS. Borrower hereby authorizes Administrative
Agent to disburse the proceeds of any Loan made by Lenders pursuant to the Loan
Documents as requested by an authorized representative of Borrower to an account
identified in writing by such authorized representative. Borrower agrees to be
bound by any transfer request: (a) authorized or transmitted by Borrower or (b)
made in Borrower’s name and accepted by Administrative Agent in good faith and
in compliance with these transfer instructions by a Person designated in writing
by Borrower to make such transfer request, even if not properly authorized by
Borrower. Borrower further agrees and acknowledges that Administrative Agent may
rely solely on any bank routing number or identifying bank account number or
name provided by Borrower to effect a wire or funds transfer even if the
information provided by Borrower identifies a different bank or account holder
than named by Borrower. Administrative Agent is not obligated or required in any
way to take any actions to detect errors in information provided by Borrower. If
Administrative Agent takes any actions in an attempt to detect errors in the
transmission or content of transfer, requests or takes any actions in an attempt
to detect unauthorized funds transfer requests, Borrower agrees that no matter
how many times Administrative Agent takes these actions Administrative Agent
will not in any situation be liable for failing to take or correctly perform
these actions in the future and such actions shall not become any part of the
transfer disbursement procedures authorized under this provision, the Loan
Documents, or any agreement between Administrative Agent and Borrower. Borrower
agrees to notify Administrative Agent of any errors in the transfer of any funds
or of any unauthorized or improperly authorized transfer requests within
fourteen (14) days after Administrative Agent’s confirmation to Borrower of such
transfer. Administrative Agent will, in its sole discretion, determine the funds
transfer system and the means by which each transfer will be made.
Administrative Agent may delay or refuse to accept a funds transfer request if
the transfer would: (a) violate the terms of this authorization (b) require use
of a bank unacceptable to Administrative Agent or prohibited by government
authority; (c) cause Administrative Agent to violate any Federal Reserve or
other regulatory risk control program or guideline, or (d) otherwise cause
Administrative Agent to violate any applicable law or regulation. Administrative
Agent shall not be liable to Borrower or any other parties for (a) errors, acts
or failures to act of others, including other entities, banks, communications
carriers or clearinghouses, through which Borrower’s transfers may be made or
information received or transmitted, and no such entity shall be deemed an agent
of Administrative Agent, (b) any loss, liability or delay caused by fires,
earthquakes, wars, civil disturbances, power surges or failures, acts of
government, labor disputes, failures in communications networks, legal
constraints or other events beyond Administrative Agent’s control, or (c) any
special, consequential, indirect or punitive damages, whether or not (i) any
claim for these damages is based on tort or contract or (ii) Administrative
Agent or Borrower knew or should have known the likelihood of these damages in
any situation. Administrative Agent makes no representations or warranties other
than those expressly made in this Agreement.

 

32

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

ARTICLE 4. INSURANCE

 

Borrower shall, while any obligation of Borrower or any Guarantor under any Loan
Document remains outstanding, maintain at Borrower’s sole expense, with licensed
insurers approved by Administrative Agent, the following policies of insurance
in form and substance satisfactory to Administrative Agent:

 

4.1 TITLE INSURANCE. In additional to the Title Policies, within ten (10) days
of Administrative Agent’s written request, such endorsements to the Title
Insurance Policies as Administrative Agent may reasonably require (to the extent
available in the applicable jurisdiction) in connection with (A) any advance of
the Loan, (B) any amendment or modification to the Loan Documents, (C) any
Protective Advance made by Administrative Agent or Lenders (of any type or
nature) or (D) any advance of funds made by Administrative Agent or Lenders
after the occurrence of a Default (whether as a Protective Advance, payment due
to third parties or otherwise).

 

4.2 PROPERTY INSURANCE. An “All Risk” Hazard Insurance policy for each Property,
including, without limitation, such endorsements as Administrative Agent may
require, insuring Administrative Agent, for the benefit of Lenders, against
damage to the Properties in an amount acceptable to Administrative Agent, which
policy must affirmatively cover losses sustained by acts of terrorism or seismic
activity. Administrative Agent, for the benefit of Lenders, shall be named on
the policy under a Lender’s Loss Payable Endorsement (form #438BFU or
equivalent).

 

4.3 FLOOD HAZARD INSURANCE. A policy of flood insurance for such Properties as
may be required by applicable governmental regulations, or deemed necessary by
Administrative Agent.

 

4.4 LIABILITY INSURANCE. A policy of comprehensive general liability insurance
with limits as required by Administrative Agent, insuring against liability for
injury and/or death to any person and/or damage to any property occurring on the
Properties, together with a policy of liquor liability insurance, with such
limits as required by Administrative Agent, insuring against liability in
connection with the service of liquor at the Properties.

 

4.5 GENERAL. Borrower shall provide to Administrative Agent certificates of
insurance acceptable to Administrative Agent. All insurance policies shall
provide that the insurance shall not be cancelable or materially changed without
ten (10) days prior written notice to Administrative Agent. Administrative
Agent, for the benefit of Lenders, shall be named under a Lender’s Loss Payable
Endorsement (form #438BFU or equivalent) on all insurance policies which
Borrower actually maintains with respect to the Property and Improvements. The
provisions of this Article 4 shall include any insurance required to be
maintained by a tenant under any lease of any Property or any portion thereof,
with Administrative Agent to be named an additional insured (or loss payee, as
applicable) in each case where Borrower is entitled to be so named. Borrower
shall provide to Administrative Agent evidence of any other hazard insurance
Lenders may deem necessary at any time during the Loan.

 

33

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

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

 

As a material inducement to Lenders’ entry into this Agreement, Borrower
represents and warrants to Administrative Agent and Lenders:

 

5.1 AUTHORITY/ENFORCEABILITY. Borrower and each other Loan Party is validly
existing, in good standing, has made all necessary filings under and is
otherwise in compliance with all Laws applicable to its organization, existence
and transaction of business, Borrower has the requisite power, capacity,
authority and legal right to own the Properties and to perform its obligations
hereunder and under the other Loan Documents and Other Related Documents to
which it is a party, and each other Loan Party has the requisite power,
capacity, authority and legal right to perform its obligations under the Loan
Documents and Other Related Documents to which it is a party.

 

5.2 BINDING OBLIGATIONS. Borrower and each other Loan Party is authorized to
execute, deliver and perform its obligations under the Loan Documents to which
it is a party, and such obligations are valid and binding obligations of
Borrower or the applicable other Loan Party enforceable in accordance with their
terms, except to the extent that enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors’ rights
generally and general principles of equity.

 

5.3 FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has delivered to
Administrative Agent all formation and organizational documents of Borrower, the
other Loan Parties and of such other entities as provided for on Exhibit B, and
all such formation and organizational documents remain in full force and effect
and have not been amended or modified since they were delivered to
Administrative Agent. Borrower shall promptly provide Administrative Agent with
copies of any amendments or modifications of such formation or organizational
documents.

 

5.4 NO LEGAL BAR; NO CONSENT. Neither the execution and delivery of this
Agreement by Borrower or of any of the Loan Documents by Borrower or any other
Loan Party nor the consummation of the transactions contemplated hereby or
thereby will, with or without notice and/or lapse of time: (a) constitute a
breach of any of the terms and provisions of, or constitute a default under, any
notice, contract, document, instrument, agreement or undertaking, whether
written or oral, to which Borrower or any Loan Party is a party or to which
Borrower’s or any Loan Party’s property is subject; (b) accelerate or constitute
an event entitling the holder of any indebtedness of Borrower or any Loan Party
to accelerate the maturity of any such indebtedness; (c) conflict with or result
in a breach of any writ, order, injunction or decree against Borrower or any
Loan Party of any court or governmental agency or instrumentality, whether
national, state, local or other; or (d) conflict with or be prohibited by any
federal, state, local or other governmental law, statute, rule or regulation. No
consent of any other Person not heretofore obtained and no consent, approval or
authorization of, or registration, declaration or filing with any court,
governmental body, governmental authority or other person or entity whatsoever
is required in connection with the valid execution, delivery or performance by
Borrower of this Agreement or by Borrower or any other Loan Party of any other
Loan Documents or any other documents required to be executed and delivered
hereunder or

 

34

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

thereunder, or in connection with any other transaction contemplated by this
Agreement or any other Loan Documents.

 

5.5 PERMITS. Borrower or the applicable Operating Lessee or Manager has all
material permits, licenses (including any hotel, liquor and restaurant
licenses), exemptions and approvals necessary for the current use and operation
of each Property.

 

5.6 LITIGATION. Except as disclosed on Schedule 5.6 attached hereto and made a
part hereof, there are no claims, actions, suits or proceedings pending, or to
the best of Borrower’s knowledge threatened, against any Loan Party or affecting
any Property (except for claims for personal injury or property damage that are
covered by insurance and, in the case of actions or proceedings that have been
commenced, have been tendered to the insurer for defense and with respect to
which the insurer has not denied coverage).

 

5.7 FINANCIAL CONDITION. All financial statements and information heretofore
delivered to Administrative Agent by Borrower or any other Loan Party,
including, without limitation, information relating to the financial condition
of Borrower, any Guarantor and the Properties, fairly and accurately represent
the financial condition of the subject thereof in all material respects and,
with respect to all financial statements, have been prepared in accordance with
GAAP. Borrower acknowledges and agrees that Administrative Agent or any Lender
may request and obtain additional information from third party credit reporting
agencies or any such similar service regarding any of the above, including,
without limitation, credit reports.

 

5.8 NO MATERIAL ADVERSE CHANGE. There has been no material adverse change in the
financial condition of Borrower or any other Loan Party since the dates of the
latest financial statements furnished to Administrative Agent and, except as
otherwise disclosed to Administrative Agent in writing, neither Borrower nor any
Operating Lessee has entered into any material transaction which is required to
be disclosed in such financial statements pursuant to GAAP and is not so
disclosed.

 

5.9 ACCURACY. To the best of Borrower’s knowledge, all reports, documents,
instruments, information and forms of evidence delivered to Administrative Agent
by Borrower or any other Loan Party concerning the Loan or security for the Loan
or required by the Loan Documents are, accurate and correct in all material
respects and sufficiently complete to give Lenders true and accurate knowledge
of their subject matter, and do not contain any misrepresentation or omission.

 

5.10 NO DEFAULTS. No Default or Potential Default exists and no Borrower or
other Loan Party is in default under any Major Agreement or any other material
contract, agreement or other document by which it or its property is bound.

 

5.11 MAJOR AGREEMENTS. Without limitation of any other provisions of this
Article 5, (a) to the best of Borrower’s knowledge, there is currently no
default by any party (nor any event that after the giving of notice or the
passage of time (or both) would constitute a default) under any of the Major
Agreements and (b) except for the Other Related Documents

 

35

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

heretofore furnished by Borrower to Administrative Agent and the leases
identified in Schedule 5.11, neither Borrower nor any Operating Lessee is party
to, nor is any Property subject to or bound by, (i) any lease or sublease of
more than 500 rentable square feet, (ii) any license or franchise agreement or
management agreement or (iii) any other contract or agreement that is material
to the ownership or operation of such Property.

 

5.12 TITLE TO PROPERTIES. Borrower has good, marketable and insurable title to
each Property (or, in the case of the leasehold estate under the Property
Leases, a good, valid and insurable leasehold estate), subject only to the
Permitted Liens, and Borrower or Operating Lessee has a good and sufficient
title to or a valid leasehold interest in all FF&E and other personal property
(except such as may be owned by the Manager as provided in the applicable
Management Agreement) used in the operation of the Properties.

 

5.13 TAX LIABILITY. To the extent required to do so by law, Borrower has filed
all required federal, state, county and municipal tax returns and has paid all
taxes and assessments owed and payable, and Borrower has no knowledge of any
basis for any additional payment with respect to any such taxes and assessments.

 

5.14 REIT STATUS. The REIT is a “qualified real estate investment trust” as
defined in Section 856 of the Code.

 

5.15 PROPERTY LEASES. Each of the Property Leases is in full force and effect
and has not been modified or amended in any manner whatsoever (except as set
forth in the definitions thereof and any amendments after the date hereof that
are approved in writing by Administrative Agent). There are no defaults under
either Property Lease by either party thereto, and no event has occurred that,
but for the passage of time, or notice, or both, would constitute a default
under either Property Lease. All rents, additional rent and other sums currently
due and payable under each Property Lease have been paid in full.

 

5.16 AMERICANS WITH DISABILITIES ACT COMPLIANCE. The Properties are in
compliance with all of the requirements of the ADA. Borrower shall be
responsible for all ADA compliance costs.

 

5.17 BUSINESS LOAN. The Loan is a business loan transaction in the stated amount
solely for the purpose of carrying on the business of Borrower and none of the
proceeds of the Loan will be used for the personal, family or agricultural
purposes of the Borrower.

 

5.18 TAX SHELTER REGULATIONS. Neither Borrower, Guarantor nor any subsidiary of
any of the foregoing intends to treat the Loan or the transactions contemplated
by this Agreement and the other Loan Documents as being a “reportable
transaction” (within the meaning of Treasury Regulation Section 1.6011-4). If
Borrower, or any other party to the Loan determines to take any action
inconsistent with such intention, Borrower will promptly notify Administrative
Agent and each Lender thereof. If Borrower so notifies Administrative Agent and
each Lender, Borrower acknowledges that each Lender may treat its Loan as part
of a transaction that is subject to Treasury Regulation Section 301.6112-1, and
such Lender will

 

36

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

maintain the lists and other records, including the identity of the applicable
party to the Loan as required by such Treasury Regulation.

 

ARTICLE 6. HAZARDOUS MATERIALS

 

6.1 SPECIAL REPRESENTATIONS AND WARRANTIES. Without in any way limiting the
other representations and warranties set forth in this Agreement, and after
reasonable investigation and inquiry, Borrower hereby specially represents and
warrants to the best of Borrower’s knowledge as of the date of this Agreement as
follows:

 

(a) Hazardous Materials. Except as set forth in those certain reports listed on
Schedule 6.1 attached hereto, none of the Properties is or has been a site for
the use, generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any oil, flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
hazardous wastes, toxic or contaminated substances or similar materials, or
fungus, mold, mildew, spores or other biological or microbial agents the
presence of which may adversely affect human health, impair occupancy or
materially adversely affect the value or utility of the applicable Property,
including, without limitation, any substances which are “hazardous substances,”
“hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,”
“regulated substances,” “industrial solid wastes,” or “pollutants” under the
Hazardous Materials Laws, as described below, and/or other applicable
environmental laws, ordinances and regulations (collectively, the “Hazardous
Materials”). “Hazardous Materials” shall not include commercially reasonable
amounts of such materials used in the ordinary course of operation of the
applicable Property which are used and stored in accordance with all applicable
environmental laws, ordinances and regulations.

 

(b) Hazardous Materials Laws. Each of the Properties is in compliance with all
laws, ordinances and regulations relating to Hazardous Materials (“Hazardous
Materials Laws”), including, without limitation: the Clean Air Act, as amended,
42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery
Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive
Environment Response, Compensation and Liability Act of 1980, as amended
(including the Superfund Amendments and Reauthorization Act of 1986, “CERCLA”),
42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15
U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended,
29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977,
as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. Section 300f et seq.; and all comparable state and local
laws, laws of other jurisdictions or orders and regulations.

 

(c) Hazardous Materials Claims. There are no claims or actions (“Hazardous
Materials Claims”) pending or threatened against Borrower or any Property by any
governmental entity or agency or by any other person or entity relating to
Hazardous Materials or pursuant to the Hazardous Materials Laws.

 

37

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

6.2 HAZARDOUS MATERIALS COVENANTS. Borrower agrees as follows:

 

(a) No Hazardous Activities. Borrower shall not cause or permit any Property to
be used as a site for the use, generation, manufacture, storage, treatment,
release, discharge, disposal, transportation or presence of any Hazardous
Materials.

 

(b) Compliance. Borrower shall comply and cause the Properties to comply with
all Hazardous Materials Laws.

 

(c) Notices. Borrower shall immediately notify Administrative Agent in writing
of: (i) the discovery of any Hazardous Materials on, under or about any
Property; (ii) any knowledge by Borrower that any Property does not comply with
any Hazardous Materials Laws; and (iii) any Hazardous Materials Claims.

 

(d) Remedial Action. In response to the presence of any Hazardous Materials on,
under or about any Property, Borrower shall immediately take, at Borrower’s sole
expense, all remedial action required by any Hazardous Materials Laws or any
judgment, consent decree, settlement or compromise in respect to any Hazardous
Materials Claims.

 

(e) Adverse Effect. In the event that Administrative Agent shall, in its
reasonable judgment, determine that the presence of any Hazardous Materials on,
under or above any Property has a material adverse effect on the value of such
Property and the remediation thereof is not substantially completed within 90
days of the discovery thereof (which 90-day period may be extended by not more
than an additional 90 days (i) to the extent the remediation is delayed by the
action, inaction, or purported action of any Governmental Authority, war,
rebellion, insurrection, strike, lock-out, boycott or blockade, any Act of God
or other cause or event beyond Borrower’s reasonable control (specifically
excluding, however, the lack of available funds), provided, that Borrower shall
promptly notify Administrative Agent of the nature and extent of any such delay,
or (ii) otherwise with the prior written approval of the Administrative Agent,
which approval shall not be unreasonably withheld, conditioned or delayed),
Borrower shall pay to Administrative Agent, within ten (10) days of demand
therefor by Administrative Agent at the direction of the Requisite Lenders, a
principal payment of the Loan in an amount equal to the Release Price for such
Property (determined as if such Property were to be released at the time of such
payment) and, provided no Default has occurred that is continuing, shall receive
a release of such Property from its Deed of Trust upon such payment.

 

6.3 INSPECTION BY ADMINISTRATIVE AGENT. Upon reasonable prior notice to
Borrower, Administrative Agent, its employees and agents, may from time to time
(whether before or after the commencement of a nonjudicial or judicial
foreclosure proceeding) enter and inspect any Property, at a time mutually
acceptable to Administrative Agent and Borrower, and, if requested by Borrower,
accompanied by a representative of Borrower, for the purpose of determining the
existence, location, nature and magnitude of any past or present release or
threatened release of any Hazardous Materials into, onto, beneath or from such
Property.

 

6.4 HAZARDOUS MATERIALS INDEMNITY. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY
AND HOLD HARMLESS ADMINISTRATIVE AGENT AND EACH LENDER, AND THEIR RESPECTIVE
DIRECTORS, OFFICERS,

 

38

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

EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL LOSSES,
DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES) WHICH
ADMINISTRATIVE AGENT AND/OR ANY LENDER MAY INCUR AS A DIRECT OR INDIRECT
CONSEQUENCE OF THE USE, GENERATION, MANUFACTURE, STORAGE, DISPOSAL, THREATENED
DISPOSAL, TRANSPORTATION OR PRESENCE OF HAZARDOUS MATERIALS IN, ON, UNDER OR
ABOUT ANY ONE OR MORE OF THE PROPERTIES. BORROWER SHALL IMMEDIATELY PAY TO
ADMINISTRATIVE AGENT AND/OR ANY LENDER, UPON DEMAND, ANY AMOUNTS OWING UNDER
THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES
UNTIL PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE
LOAN. BORROWER’S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS
ADMINISTRATIVE AGENT AND EACH LENDER SHALL SURVIVE THE CANCELLATION OF THE NOTES
AND THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF ANY ONE OR MORE OF THE
DEEDS OF TRUST.

 

6.5 LEGAL EFFECT OF SECTION. Borrower’s duty to indemnify Administrative Agent
and Lenders hereunder shall survive: (i) any judicial or non-judicial
foreclosure under one or more of the Deeds of Trust, or transfer of any one or
more of the Properties in lieu thereof; (ii) the release and reconveyance or
cancellation of any one or more of the Deeds of Trust; and (iii) the
satisfaction of all of Borrower’s obligations under the Loan Documents.

 

ARTICLE 7. COVENANTS OF BORROWER

 

7.1 EXPENSES. Borrower shall immediately pay Administrative Agent upon demand
all reasonable costs and expenses incurred by Administrative Agent in connection
with: (a) the preparation of this Agreement, all other Loan Documents and Other
Related Documents contemplated hereby; (b) the syndication of the Loan, (c) the
administration of this Agreement, the other Loan Documents and Other Related
Documents for the term of the Loan; and (d) the enforcement or satisfaction by
Administrative Agent or Lenders of any of Borrower’s obligations under this
Agreement, the other Loan Documents or the Other Related Documents. For all
purposes of this Agreement, Administrative Agent’s and Lenders’ costs and
expenses shall include, without limitation, all appraisal fees, cost engineering
and inspection fees, legal fees and expenses, accounting fees, environmental
consultant fees, auditor fees, UCC filing fees and/or UCC vendor fees,
Administrative Agent’s internal charges for review of appraisals and
environmental and structural reports (not to exceed $9,000 in the aggregate for
such reviews in connection with the Initial Advance) and the cost to
Administrative Agent of any title insurance premiums, title surveys, and
reconveyance and notary fees. Borrower recognizes and agrees that formal written
Appraisals of the Properties by a licensed independent appraiser may be required
by Administrative Agent’s or any Lender’s internal procedures and/or federal
regulatory reporting requirements on an annual and/or specialized basis. If any
of the services described above are provided by an employee of Administrative
Agent, Administrative Agent’s costs and

 

39

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

expenses for such services shall be calculated in accordance with Administrative
Agent’s standard charge for such services.

 

7.2 ERISA COMPLIANCE. Borrower shall at all times comply with the provisions of
ERISA with respect to any retirement or other employee benefit plan to which it
is a party as employer, and as soon as possible after Borrower knows, or has
reason to know, that any Reportable Event (as defined in ERISA) with respect to
any such plan of Borrower has occurred, it shall furnish to Administrative Agent
a written statement setting forth details as to such Reportable Event and the
action, if any, which Borrower proposes to take with respect thereto, together
with a copy of the notice of such Reportable Event furnished to the Pension
Benefit Guaranty Corporation.

 

7.3 LIENS. Borrower covenants and agrees that, except for the Permitted Liens
and as may otherwise be expressly permitted under the Loan Documents (and
subject to the limitations provided for therein), Borrower shall not create or
permit to exist any Lien upon or with respect to any one or more of the
Properties or any other Collateral. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, Borrower shall have the
right to contest by appropriate legal proceedings diligently prosecuted and in a
manner that shall prevent interference with the use of the applicable Property
for its intended purpose and foreclosure or other action adversely affecting
Administrative Agent’s or any Lender’s Lien thereon (i) any governmental
requirement, act or action affecting any Property, (ii) any taxes or assessments
imposed or assessed upon any Property or which may be or become a lien thereon,
and (iii) any mechanic’s, materialman’s or other liens or claims for lien
(including subordinate liens) upon any Property (all herein called “Contested
Items”), and the existence of a Contested Item shall not constitute a Default
hereunder, if all of the following conditions are satisfied:

 

(a) Borrower shall give notice of any Contested Item to Administrative Agent at
the time the same shall be asserted.

 

(b) If requested by Administrative Agent, Borrower shall deposit with the
appropriate governmental authority (if applicable) or with Administrative Agent
(to the extent not paid by Borrower when due) the full amount of such Contested
Item or which may be claimed by any governmental authority or which might result
from an adverse conclusion of such contest, together with such amount as
Administrative Agent may reasonably estimate as interest or penalties which
might arise during the period of contest; provided that in lieu of such payment
Borrower may furnish to Administrative Agent a bond or title indemnity in such
amount and form, and issued by a bond or title insurance company, as may be
reasonably satisfactory to Administrative Agent.

 

(c) Borrower shall diligently prosecute the contest of any Contested Item by
appropriate legal proceedings having the effect of staying the foreclosure or
forfeiture of any Property (and any interference with the use of such Property
for its intended purpose) and shall permit Administrative Agent to be
represented in any such contest and (unless the contested item has been paid in
full or the Properties are otherwise fully protected against loss or forfeiture
by reason thereof) shall pay all expenses incurred by Administrative Agent and
Lenders in so doing, including, but not limited to, reasonable fees and expenses
of Administrative Agent’s and

 

40

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

Lenders’ reasonable attorneys and paralegals (both internal and external) and
court costs (all of which shall bear interest at the rate of interest applicable
under the Notes until paid, payable upon demand).

 

(d) Borrower shall pay such Contested Item together with interest and penalties
thereon (A) if and to the extent that any such Contested Item shall be
determined adverse to Borrower, or (B) upon demand by Administrative Agent if,
in the reasonable opinion of Administrative Agent, and notwithstanding any such
contest, any Property shall be in jeopardy or in danger of being forfeited or
foreclosed; provided, that if Borrower shall fail to do so, Administrative Agent
and/or Lenders may, but shall not be required to, pay such Contested Item and
interest and penalties thereon and such other sums as may be necessary in the
judgment of Administrative Agent to obtain the release and discharge of such
item; and any amount expended by Administrative Agent and/or Lenders in so doing
shall bear interest at the rate of interest applicable under the Notes until
paid, payable upon demand; and provided further that Administrative Agent and
Lenders may in such case and for such purpose demand payment upon any bond or
title indemnity furnished as aforesaid.

 

7.4 REPLACEMENT RESERVE ACCOUNTS.

 

(a) Borrower shall deposit or cause to be deposited into the applicable
Replacement Reserve Account the FF&E Reserve in accordance with the terms of the
applicable Management Agreement. On or before the twenty-fifth (25th) day after
each calendar month, Borrower shall furnish or cause to be furnished to
Administrative Agent a written report, reasonably satisfactory to Administrative
Agent, setting forth a calculation of the amounts required to be deposited into
the applicable Replacement Reserve Account for such month, the withdrawals from
the account during such month, and a reconciliation of the balance in the
account.

 

(b) Borrower covenants and agrees that it shall use or shall cause the
applicable Manager to use the funds in the Replacement Reserve Accounts only for
the purposes provided for in the applicable Management Agreement or as otherwise
approved in writing by Administrative Agent, which approval shall not be
unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing,
upon the occurrence of a Default under Section 9.1(a), (f) or (g), neither
Borrower nor Manager shall be entitled to use any funds on deposit in any
Replacement Reserve Account but Administrative Agent may at its discretion (but
shall not be obligated to) permit the disbursement of any funds on deposit in
the applicable Replacement Reserve Account in the manner provided above.

 

(c) Administrative Agent shall have the right (to be exercised from time to time
at its election) to audit Borrower’s and Operating Lessees’ books and records in
order to determine whether or not the funds disbursed from the Replacement
Reserve Accounts have been spent only for the purpose for which they were
disbursed. Borrower shall cooperate, and shall cause Operating Lessees and
Managers to cooperate, with Administrative Agent in connection with any such
audit. The cost of the audit shall be borne by Borrower only if the audit
reveals that any funds were not used for the purposes intended but shall
otherwise be borne by the Lenders.

 

41

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

(d) To secure the payment and performance of the Loan, Borrower has, pursuant to
the Pledge Agreement, pledged and assigned to Administrative Agent, for itself
and for the benefit of the Lenders, all of Borrower’s right, title and interest
in the Replacement Reserve Accounts.

 

(e) Borrower shall not have any right to use any of the funds on deposit in the
Replacement Reserve Accounts, except as provided for herein.

 

(f) At any time that any FF&E is sold, the proceeds of such sale, net of the
reasonable and customary costs of such sale, shall be deposited into the
applicable Replacement Reserve Account.

 

7.5 OPERATING ACCOUNTS. Borrower covenants and agrees that all funds from
operations shall be maintained and applied in accordance with the terms of the
applicable Management Agreement. Borrower covenants and agrees to cause the
applicable Manager to make all payments to the Operating Lessee under the
applicable Management Agreement to the applicable Operating Lessee’s Operating
Account and to cause the applicable Operating Lessee to make all payments to
Borrower under the applicable Operating Lease into the applicable Borrower’s
Operating Account. To secure the payment and performance of the Loan, Borrower
and Operating Lessees have, pursuant to the Pledge Agreement, pledged and
assigned to Administrative Agent, for itself and for the benefit of the Lenders,
all of Borrower’s and Operating Lessees’ right, title and interest in the
Borrower’s Operating Accounts and the Operating Lessees’ Operating Accounts
subject to the terms of this Agreement and the Pledge Agreement. Neither
Borrower nor any Operating Lessee or Manager shall have any right to use any of
the funds on deposit in any Borrower’s Operating Account or Operating Lessees’
Operating Account in violation of the terms of this Agreement, the Pledge
Agreement, any other Loan Document, the Operating Leases, the Manager’s
Subordination Agreements or the Management Agreements.

 

7.6 MANAGEMENT AGREEMENTS AND LICENSE AGREEMENTS.

 

(a) Borrower shall duly perform and observe, or cause the Operating Lessee to
perform and observe, in all material respects all of the terms and conditions on
its part to be performed and observed under the Management Agreements and
License Agreements.

 

(b) Borrower shall use commercially reasonable efforts to cause each Manager to
manage and operate the applicable Property in accordance with the Management
Agreement and License Agreement therefor.

 

(c) Without the prior written consent of Administrative Agent (which consent
shall not be unreasonably withheld, conditioned or delayed), Borrower shall not
modify or amend, or permit the modification or amendment of, any Management
Agreement or License Agreement; provided, however, that, in the case of any
proposed amendment to a Management Agreement or License Agreement that is not
material (and that Borrower certifies is not material in its written request for
Administrative Agent’s consent thereto), such proposed amendment shall be deemed
to be consented to by Administrative Agent if Administrative Agent fails to give
notice to

 

42

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

Borrower that Administrative Agent does not consent thereto within ten (10)
Business Days of Administrative Agent’s receipt of such written request for
consent or (if the requirements of the applicable Licensor or Manager give
Borrower insufficient time to afford Administrative Agent such 10-Business Day
period) such reasonable lesser period (but not less than five (5) Business Days)
as Borrower may state in its written request for Administrative Agent’s consent.
Without the prior written consent of Requisite Lenders, Borrower shall not
terminate or permit the termination of any License Agreement (except as provided
in Section 7.7(b)) or any Management Agreement (except as provided in Section
7.7(c)).

 

(d) To the extent that any Management Agreement provides for the payment of
Incentive Management Fees, Borrower shall cause the Manager to subordinate the
payment of such Incentive Management Fees to payments of the Loan and interest
thereon and other amounts payable under the Loan Documents, to the satisfaction
of Administrative Agent.

 

7.7 NO OTHER AGREEMENTS.

 

(a) Except for the Management Agreements and License Agreements, Borrower
covenants and agrees not to enter into, and not to permit any Operating Lessee
to enter into, any license or franchise agreement with respect to any of the
Properties (except as provided in Section 7.7(b)) or any agreement for the
management of any of the Properties (except as provided in Section 7.7(c)), in
each case without first obtaining Administrative Agent’s prior written consent .

 

(b) Notwithstanding anything to the contrary contained herein, Borrower shall
convert the Mt. Laurel Property to a full-service Marriott Hotel not later than
June 30, 2006 and in connection therewith:

 

(i) Borrower shall, in a timely manner, exercise its right to terminate the
existing License Agreement for the Mt. Laurel Property so as to cause such
termination to be effective upon the effective date of the new Marriott License
Agreement.

 

(ii) Borrower and Marriott shall enter into a new License Agreement for the Mt.
Laurel Property reasonably satisfactory to Administrative Agent, and shall
satisfy all requirements to the effectiveness of such new License Agreement so
that the such new License Agreement shall be effective immediately upon the
termination of the existing License Agreement

 

(iii) Marriott shall deliver to Lender a comfort letter in a form substantially
similar to the comfort letter delivered by Marriott for the other Properties or
in such form as is then customarily delivered by Marriott with respect to
similar hotels.

 

(c) In the event that there shall occur any default by Manager (or any other
event) that permits Borrower to terminate a Management Agreement pursuant to the
terms thereof, Borrower may terminate such Management Agreement in accordance
with the terms of such Management Agreement, provided that, prior to terminating
such Management Agreement, Borrower shall have entered into a replacement
Management Agreement on terms and

 

43

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

conditions, and with a replacement Manager, approved in writing by the Requisite
Lenders, which approval shall not be unreasonably withheld, conditioned or
delayed.

 

7.8 USE OF THE PROPERTIES; LEASES. Borrower covenants and agrees (a) to use and
operate, or to cause the applicable Operating Lessee to use and operate, the
Sugar Land Property as a Marriott Hotel, the VA Beach Property as a Hilton
Garden Inn, the San Antonio Property as a Marriott Hotel, the Mt. Laurel
Property as a Radisson Hotel (subject to the provisions of Section 7.7(b)
hereof), the Omaha Property as a Marriott Hotel, the Tampa Property as a
Residence Inn, the Savannah Property as a Courtyard by Marriott Hotel, and each
Additional Property as a hotel under the franchise under which it is operated at
the time of the Loan Increase applicable thereto, (b) not to change, or permit
to be changed, the use of any of the Properties (except for changes in ancillary
uses that do not adversely impact the operation of the Properties as hotels in
accordance with the provisions of this Agreement) without the prior written
consent of the Requisite Lenders, (c) to operate, or to cause the applicable
Operating Lessee to operate, each Property in compliance with all applicable
Laws and in compliance (in all material respects) with the applicable Management
Agreement and License Agreement, (d) to maintain, or to cause the applicable
Operating Lessee or Manager to maintain, all of the licenses, permits and
approvals necessary for the use of the Properties and (e) not to enter into or
permit Operating Lessee or any Manager or Operating Lessee to enter into any
lease of space in any Property except (i) any lease of not more than 1,000
rentable square feet, or (ii) any lease or sublease that the applicable Manager
shall enter into that does not require the consent of Borrower or Operating
Lessee under the terms of the applicable Management Agreement; or (iii) any
other lease on such terms and with such tenant as Administrative Agent shall
approve in writing, which approval shall not be unreasonably withheld,
conditioned or delayed. Borrower shall promptly upon its receipt thereof furnish
to Administrative Agent a copy of any lease or sublease entered into by
Borrower, Operating Lessee or Manager (without regard to whether Administrative
Agent’s consent is required).

 

7.9 CASUALTY; CONDEMNATION.

 

(a) Borrower covenants and agrees that the following shall be paid directly to
Administrative Agent: (i) all awards of damages and all other compensation
payable directly or indirectly by reason of a condemnation affecting any of the
Properties, (ii) all other claims and awards for damages to, or decrease in
value of, any of the Properties, (iii) all proceeds of any insurance policies
payable by reason of a loss sustained to any of the Properties and (iv) all
interest which may accrue on any of the foregoing (collectively, the “Property
Proceeds”), provided, however, that as long as no Default has occurred that is
continuing, Property Proceeds of less than $500,000 may be paid directly to
Borrower. Borrower covenants and agrees to notify Administrative Agent within
five (5) Business Days of the occurrence of a fire or other casualty or other
event that may result in Property Proceeds. Subject to paragraph (b) below,
Administrative Agent may (at its discretion) apply all or any portion of the
Property Proceeds that it receives to its expenses in settling, prosecuting and
defending any claim related thereto and, at the direction of the Requisite
Lenders, shall either (x) apply the balance of the Property Proceeds to the Loan
and other sums payable under the Loan Documents in any order or (y) release all
or any part of the Property Proceeds to Borrower upon any conditions the
Requisite

 

44

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

Lenders may reasonably impose. Administrative Agent may commence, appear in,
defend and prosecute any action related to the Property Proceeds and may adjust,
compromise, settle and collect all Property Proceeds.

 

(b) Provided no Default or Potential Default exists, Administrative Agent shall,
in any case in which the cost of repair or restoration (as estimated by
Administrative Agent in its reasonable discretion) is less than twenty percent
(20%) of the “as is” appraised value of such Property (as determined in the
Appraisal of such Property obtained pursuant to Section 3.1(c)(ii) or (in the
case of an Additional Property) Section 3.3(d)(ii)), permit Property Proceeds
held by Administrative Agent to be used for repair or restoration but may
condition such use of the Property Proceeds upon such conditions as
Administrative Agent may reasonably require, including, without limitation: (i)
the deposit with Administrative Agent of such additional funds which
Administrative Agent reasonably determines are needed to pay all costs of the
repair or restoration (or, in lieu thereof, the delivery of a completion
guaranty from Guarantor, in form and substance reasonably satisfactory to
Administrative Agent), (ii) the establishment of an arrangement for lien
releases and disbursement of funds reasonably acceptable to Administrative
Agent, (iii) the delivery to Administrative Agent of plans and specifications
for the repair or restoration, a contract for the repair or restoration with a
contractor, a cost breakdown for the work and payment and performance bonds for
the work, all of which shall be subject to approval by Administrative Agent
(which approval shall not be unreasonably withheld, conditioned or delayed) and
(iv) the delivery to Administrative Agent of evidence acceptable to
Administrative Agent (A) that, other than such casualty or condemnation, there
has been no material adverse change in the financial condition or credit of
Borrower or Guarantor since the Effective Date, (B) that the work will be
completed on or before the date that is six (6) months prior to the Maturity
Date and (C) of the satisfaction of any additional conditions that
Administrative Agent may reasonably establish. Borrower acknowledges that the
conditions described above are reasonable.

 

(c) In the event (i) of the condemnation of an entire Property or a portion
thereof such that restoration of such Property to a condition substantially
equivalent to its condition prior to the condemnation is not reasonably
practicable or (ii) there shall occur a material casualty to a Property and the
same is not insured or the proceeds of insurance are insufficient to restore the
Property (and, in such case (if applicable), Borrower does not satisfy the
conditions set forth in Section 7.9(b)(i)), Borrower shall pay to Administrative
Agent, within ten (10) days of demand therefor by Administrative Agent at the
direction of the Required Lenders, a principal payment of the Loan in an amount
equal to the Release Price for such Property (determined as if such Property
were to be released at the time of such payment) and, provided no Default has
occurred that is continuing, shall receive a release of such Property from its
Deed of Trust upon such payment.

 

7.10 REQUIRED NOTICES. Borrower covenants and agrees to notify Administrative
Agent, within five (5) Business Days from the occurrence of any event known to
Borrower (or the receipt of any notice by Borrower) that could have a material
adverse effect on Borrower or any other Loan Party or any Property (or any
portion thereof), including, but not limited to (a) the occurrence of any
material damage to any Property, (b) any notice regarding

 

45

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

any material violation of any Law affecting Borrower or any other Loan Party or
any Property or (c) exercise of rights or remedies under any Major Agreement or
the occurrence of a condition that after the giving of notice, the passage of
time or both, could constitute a default (by any party thereto) under any Major
Agreement.

 

7.11 PERFORMANCE BY THIRD PARTIES. To the extent that any of the obligations of
Borrower hereunder (or under any of the other Loan Documents) are obligations
that need to be performed by (or with the assistance or cooperation of)
Operating Lessee or any Manager, Borrower covenants and agrees (to the extent it
has a right to do so under the applicable Management Agreement or Operating
Lease) to cause the Manager or Operating Lessee to perform said obligations,
provided, however, failure of the Manager or Operating Lessee to perform shall
not relieve Borrower of its obligations hereunder or under any other Loan
Document.

 

7.12 BANK ACCOUNTS. Neither Borrower nor Operating Lessee shall own or have any
direct or indirect interest in any bank account other than the Account, the
Replacement Reserve Accounts, the Borrower’s Operating Accounts, the Operating
Lessee’s Operating Accounts and any other accounts identified in Schedule 7.12
hereto (collectively, the “Pledged Accounts”), all of which Pledged Accounts
have been and shall at all times be pledged to Administrative Agent, for itself
and for the benefit of the Lenders, pursuant to the Pledge Agreement.

 

7.13 OPERATING LEASES. Borrower shall timely perform all of its obligations, and
cause the Operating Lessee to timely perform all of its obligations under the
Operating Leases, and the same shall not be terminated, surrendered, amended,
restated or otherwise modified without the prior consent of Administrative Agent
(which consent shall not be unreasonably withheld, conditioned or delayed).

 

7.14 FURTHER ASSURANCES. Upon Administrative Agent’s request and at Borrower’s
sole cost and expense, Borrower shall execute, acknowledge and deliver any other
instruments and perform any other acts necessary, desirable or proper, as
determined by Administrative Agent in its reasonable judgment, to carry out the
purposes of this Agreement and the other Loan Documents or to perfect and
preserve any Liens created by the Loan Documents.

 

7.15 ASSIGNMENT. Without the prior written consent of all Lenders, Borrower
shall not assign Borrower’s interest under any of the Loan Documents, or in any
monies due or to become due thereunder, and any assignment without such consent
shall be void. In this regard, Borrower acknowledges that Lenders would not make
this Loan except in reliance on Borrower’s (and Guarantor’s) expertise,
reputation and prior experience in owning and operating hotels, Lenders’
knowledge of Borrower (and Guarantor), and Lenders’ understanding that this
Agreement is more in the nature of an agreement involving personal services than
a standard loan where Lenders would rely on security which already exists.

 

7.16 REQUIREMENTS OF LAW. Borrower shall comply with all Requirements of Law and
shall use commercially reasonable and good faith efforts to cause other Persons
to

 

46

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

comply with same in a timely manner. Without limitation of the foregoing,
Borrower shall promptly apply for, and obtain not later than March 31, 2005, a
Certificate of Nonconforming Use from the San Antonio Board of Adjustments with
respect to the nonconforming setbacks and parking at the San Antonio Property.

 

7.17 SPECIAL COVENANTS; SINGLE PURPOSE ENTITY. Without the prior written consent
of Administrative Agent or (in the case of clause (c)) the Requisite Lenders,
which consents shall not be unreasonably withheld, conditioned or delayed,
Borrower shall not (a) make or permit any amendment to Borrower’s or Operating
Lessee’s operating agreement or other organizational documents; (b) engage in,
or permit Operating Lessee to engage in, any transaction with any affiliate of
Borrower, Operating Lessee or Guarantor on other than fair market, arms’-length
terms and conditions; (c) engage in, or permit Operating Lessee to engage in,
any business other than the ownership, leasing and operation of the Properties;
(d) directly or indirectly guaranty, or permit Operating Lessee to guaranty, the
obligations of any Person other than Borrower and Operating Lessee; or (e)
incur, or permit Operating Lessee to incur, any additional indebtedness or other
material obligation, other than ordinary course obligations (excluding, however,
any additional borrowed money other than unsecured loans from Guarantor that are
fully subordinated to the Loan pursuant to a written agreement satisfactory to
Administrative Agent) incurred in connection with Borrower’s (or Operating
Lessee’s) permitted scope of business as referred to above; provided, however,
that the consent of Requisite Lenders shall be required with respect to any
material amendment referred to in clause (a) of this Section 7.17.

 

7.18 LIMITATIONS ON DISTRIBUTIONS, ETC. Following the occurrence and during the
continuance of a known monetary or other material Potential Default or any
Default, Borrower shall not distribute any money or other property to any member
of Borrower, whether in the form of earnings, income or other proceeds from any
Property, nor shall Borrower repay any principal or interest on any loan or
other advance made to Borrower by any member, nor shall Borrower loan or advance
any funds to any such member.

 

7.19 COVENANTS WITH RESPECT TO GUARANTOR AND REIT.

 

(a) REIT Publicly Traded. The REIT shall at all times be a public-traded real
estate investment trust in good standing with the New York Stock Exchange, the
American Stock Exchange or NASDAQ.

 

(b) Principal Line of Business. The principal line of business of Guarantor and
the REIT shall at all times be the ownership and leasing of hotel properties.

 

(c) Minimum Tangible Net Worth. Guarantor shall maintain, as of the last day of
each calendar quarter, a Tangible Net Worth of not less than $250,000,000.

 

(d) REIT Shares. The REIT shall at all times maintain its status as a qualified
real estate under Section 856 of the Code.

 

47

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

7.20 RENOVATIONS.

 

(a) San Antonio Property. Borrower shall complete, no later than June 30, 2005
(subject to extension as provided in Section 7.20(f) below), the Renovations of
the San Antonio Property described in Exhibit G hereto.

 

(b) Mt. Laurel Property. Borrower shall complete, not later than June 30, 2006
(subject to extension as provided in Section 7.20(f) below), the Renovations of
the Mt. Laurel Property described in Exhibit H hereto, and any Renovations
required by Marriott in connection with the new License Agreement referred to in
Section 7.7(b)

 

(c) Omaha Property. Borrower shall complete, within the time periods provided
for in the Renovation Rider to the License Agreement for the Omaha Property as
described in Exhibit I hereto (subject to extension as provided in Section
7.20(f) below), the Renovations provided for in such Renovation Rider.

 

(d) Performance of Work. The Renovations of the Properties provided for in
Section 7.20(a), (b) and (c) above shall be performed at Borrower’s sole cost
and expense, free of liens, in a good and workmanlike manner, and in compliance
with applicable Laws and the requirements of the applicable Manager and
Licensor. In the case of the Renovations of the San Antonio Property and the Mt.
Laurel Property, Borrower shall, with reasonable promptness, notify
Administrative Agent of Borrower’s determination or discovery of any material
differences between the actual costs of any such Renovations and the budgets
therefor set forth in Exhibits G or H (as applicable)

 

(e) Failure to Complete. If Borrower shall fail to complete the Renovations
described in any of Section 7.20(a), (b) or (c) above within the appropriate
time period specified therein (which time period shall be extended to the extent
provided in Section 7.20(f) below), Borrower shall, within ten (10) days after
demand by Administrative Agent, deposit in a cash collateral account, pledged to
Administrative Agent as Collateral for the Loan and under the sole dominion and
control of Administrative Agent, a sum equal to the greater of (i) the budgeted
amount for such Renovations, less the actual expenditures to date or (ii) the
costs required to complete the applicable Renovations as reasonably estimated by
Administrative Agent. As long as no Default has occurred that is continuing,
Administrative Agent will, upon Borrower’s written request from time to time
(but not more frequently than once per calendar month), advance sums held in
such cash collateral account to pay the costs of such Renovations in amounts
then payable as certified by Borrower.

 

(f) Force Majeure. The time periods for completion of the Renovations under
Section 7.20(a), (b) or (c) above shall be extended to the extent delayed by the
action, inaction, or purported action of any Governmental Authority, war,
rebellion, insurrection, strike, lock-out, boycott or blockade, any Act of God
or other cause or event beyond Borrower’s reasonable control (specifically
excluding, however, the lack of available funds), provided, however, that (i)
Borrower shall promptly notify Administrative Agent of the nature and extent of
any such delay, (ii) the delays with respect to the Renovations of any Property
shall not exceed ninety (90) days in the aggregate unless otherwise approved in
writing by Administrative Agent and (iii) in no

 

48

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

event may the completion of the Renovations of the Omaha Property be delayed
except to the extent permitted under the License Agreement therefor.

 

7.21 PROPERTY LEASES. Borrower shall perform its obligations under the Property
Leases in accordance with the terms and provisions thereof. Borrower shall not
cause or permit (a) the amendment or other modification of either Property Lease
without the prior written approval of Administrative Agent (which approval shall
not be unreasonably withheld, conditioned or delayed), or (b) the termination of
either Property Lease without the prior written approval of all Lenders.
Borrower shall promptly give notice to Administrative Agent of any event or
occurrence that, with notice or passage of time or both, would constitute an
event of default under either Property Lease and shall promptly furnish to
Administrative Agent a copy of any notice given or received by Borrower pursuant
to either Property Lease alleging any breach or default by either party
thereunder.

 

7.22 SAVANNAH PROPERTY. Neither Borrower nor Guarantor shall enter into the
Lease (as defined in the Savannah Agreement) without the prior written approval
of Administrative Agent, which shall not be unreasonably withheld, conditioned
or delayed.

 

ARTICLE 8. REPORTING COVENANTS

 

8.1 FINANCIAL INFORMATION. Borrower shall furnish (or cause to be furnished) to
Administrative Agent, the following financial statements at the following times:

 

(a) Within twenty-five (25) days after the end of each calendar quarter, an
operating statement for each Property for the preceding calendar quarter
(prepared in accordance with GAAP), certified as true, correct and complete by
an authorized financial officer of the Borrower, together with: (i) a comparison
of the results for such quarter with (A) the projections for such quarter
contained in the budget and business plan and (B) the actual results for the
same calendar quarter in the immediately preceding calendar year; (ii) an
operating statement for the twelve-month period ending with such quarter,
together with a comparison of such operating statement with (A) the projections
for such twelve-month period contained in the budget and business plan and (B)
the actual results for the twelve-month period ending with the same calendar
quarter in the immediately preceding calendar year; (iii) an operating statement
showing year-to-date results for the period ending with such quarter, together
with a comparison of such operating statement with (A) the projections for such
year-to-date period contained in the budget and business plan and (B) the actual
results for the year-to-date period ending with the same calendar quarter in the
immediately preceding calendar year; (iv) the most recent Smith Travel Research
STAR report for each Property (showing such Property together with such
Property’s primary competitive set), the Borrower hereby agreeing to participate
in and subscribe to such report; (v) if prepared by Borrower, Operating Lessee
or Manager, budget reforecasts (showing year-to-date actual results and the
forecast for the remainder of the year); and (vi) a statement of the amount of
deposits into and withdrawals from the Replacement Reserve Accounts for such
quarter. The quarterly operating statement and the items referred to in clauses
(i), (ii) and (iii) shall include, for the applicable periods, a breakdown of
sales, revenues and operating expenses, the calculation of house profit, average
daily room rate, average occupancy, and revenue per available room.

 

49

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

(b) Within 90 days of the end of each fiscal year, profit and loss operating
statements for such fiscal year and budgets for the current fiscal year for each
property owned by the REIT or Guarantor or any of their subsidiaries.

 

(c) Within 45 days of the end of each calendar quarter, a certificate of an
authorized financial officer of the REIT for itself and as general partner of
Guarantor that the REIT continues to be qualified as a real estate investment
trust as defined under Section 856 of the Code, and demonstrating compliance
with the financial covenant set forth in Section 7.19(c).

 

(d) As soon as available, and in any event within 90 days after the close of
each fiscal year of the REIT, a consolidated balance sheet and income statement
of the REIT and its Subsidiaries, as of the end of such fiscal year, together
with a related consolidated statement of cash flows for such fiscal year,
setting forth in comparative form consolidated figures for the preceding fiscal
year, audited by independent certified public accountants of recognized national
standing reasonably acceptable to Administrative Agent and whose opinion shall
be to the effect that such financial statements have been prepared in accordance
with GAAP and shall not be limited as to the scope of the audit or qualified in
any manner, except for qualifications resulting from changes in GAAP and
required or approved by the REIT’s independent certified public accountants.

 

(e) As soon as available, and in any event within 45 days after the close of
each fiscal quarter of such fiscal year of the REIT, a consolidated balance
sheet and income statement of the REIT and its Subsidiaries, as of the end of
such quarter, together with a related consolidated statement of cash flows for
such fiscal quarter, in each case setting forth in comparative form consolidated
and consolidating figures for the corresponding period of the preceding fiscal
year, accompanied by a certificate of an authorized financial officer of the
REIT to the effect that such consolidated and consolidating statements are true
and correct and have been prepared in accordance with GAAP, subject to changes
resulting from audit and normal year-end audit adjustments.

 

(f) Within thirty (30) days after each DSC Test Date, a certificate of an
authorized officer of Borrower in the form attached hereto as Exhibit J.

 

(g) Within thirty (30) days of receipt of same by Borrower or Operating Lessee,
copies of all material reports of any Manager or Licensor with respect to any
Property.

 

(h) Such other financial information and reports with respect to Borrower, the
Properties, Guarantor and the REIT as Administrative Agent or any Lender may
from time to time reasonably require.

 

All of the foregoing financial statements, certificates and reports shall be in
form and detail reasonably acceptable to Administrative Agent.

 

8.2 BUDGETS. On or before December 31 of each year, Borrower shall provide
Administrative Agent with an operating budget, capital budget and business plan
for each Property, for the immediately following calendar year prepared in
accordance with the Uniform

 

50

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

System. All operating budgets and business plans (including, without limitation,
any budgets delivered pursuant to the Management Agreements) shall be subject to
Administrative Agent’s prior written approval (to the extent that the Borrower
or Operating Lessee has rights of approval under the applicable Management
Agreement), which approval shall not be unreasonably withheld, conditioned or
delayed. Subject to the terms and provisions contained in the Management
Agreement, Borrower covenants and agrees to operate each Property, or to cause
the Operating Lessee and Manager to operate such Property, substantially in
accordance with the applicable budget and business plan.

 

8.3 BOOKS AND RECORDS. Borrower shall maintain, or cause the Operating Lessee to
maintain, complete books of account and other records for each Property, and the
same shall be available for inspection and copying by Administrative Agent at
reasonable times and upon reasonable prior notice.

 

8.4 KNOWLEDGE OF DEFAULT; ETC. Borrower shall promptly, upon obtaining knowledge
thereof, report in writing to Administrative Agent the occurrence of any Default
or Potential Default. In the case of any Potential Default, such notice shall
include, as applicable, the affirmative steps which Borrower has taken or
intends to take during the applicable cure period in order to avoid the
occurrence of a Default with respect to the subject event, circumstance or
condition.

 

8.5 LITIGATION, ARBITRATION OR GOVERNMENT INVESTIGATION. Borrower shall
promptly, upon obtaining knowledge thereof, report in writing to Administrative
Agent, (i) the institution of, or threat of, any material proceeding against or
affecting Borrower, Guarantor or any Property, including any eminent domain or
other condemnation proceedings affecting any Property, or (ii) any material
development in any proceeding already disclosed, which, in either case, has a
material adverse effect on Borrower, Guarantor or any Property, which notice
shall contain such information as may be reasonably available to Borrower to
enable Administrative Agent and its counsel to evaluate such matters.

 

8.6 ENVIRONMENTAL NOTICES. Borrower shall notify Administrative Agent, in
writing, as soon as practicable, and in any event within ten (10) days after
Borrower’s learning thereof, of any notice required pursuant to Section 6.2(c).

 

8.7 CERTIFICATE OF BORROWER. Together with each delivery of the certificate
provided for in Section 8.1(f), Borrower shall provide the certificate of its
chief financial officer or other authorized signatory that such person has
reviewed the terms of this Agreement and the other Loan Documents, and has made
a review in reasonable detail of the transactions and condition of Borrower
during the accounting period covered by such financial statements or
certificate, and that such review has not disclosed the existence during or at
the end of such accounting period, and that such person does not have knowledge
of the existence as of the date of such certificate, of any condition or event
which constitutes a Default or a Potential Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence thereof
and what action has been taken, is being taken and is proposed to be taken with
respect thereto.

 

51

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

ARTICLE 9. DEFAULTS AND REMEDIES

 

9.1 DEFAULT.

 

The occurrence of any one or more of the following shall constitute an event of
default (hereinafter, “Default”) under this Agreement and the other Loan
Documents:

 

(a) Monetary. Borrower’s failure to pay any sums payable under the Notes or
under any of the other Loan Documents (i) at maturity (by acceleration or
otherwise) or (ii) within ten (10) days after any earlier date on which the same
is due; or

 

(b) Performance of Obligations. The failure of any Loan Party within thirty (30)
days after written notice to cure any non-monetary default hereunder (or under
any other Loan Document) for which no other grace period is specifically
provided herein or therein; provided, however, that: (i) if such default is not
susceptible of cure within such thirty (30) day period, such thirty (30) day
period shall be extended to a ninety (90) day period, but only if (A) such Loan
Party shall commence such cure within such thirty (30) day period and shall
thereafter prosecute such cure to completion, diligently and without delay, and
(B) no other Default or Potential Default shall have occurred; and (ii) the
grace period provided in this section shall in no event apply to any default
relating to (A) maintaining the insurance required hereunder, (B) the payment of
money to any Person, (C) the fraudulent or intentional misapplication of any
funds (including, but not limited to, insurance and condemnation proceeds, rents
and other revenues received by Borrower), (D) Sections 9.1(c) through 9.1(n) of
this Agreement or (E) any other Default for which this Agreement or the
applicable Loan Document specifically provides that no period of grace shall be
applicable; or

 

(c) Use. Subject to the provisions of Section 7.9, the prohibition, enjoining or
interruption of Borrower’s or any Operating Lessee’s right to occupy, operate,
use or rent any Property for a continuous period of more than thirty (30) days;
or

 

(d) Liens, Attachment. (i) The recording of any claim of Lien against any
Property or the service on Administrative Agent or any Lender of any bonded stop
notice relating to the Loan and the continuance of such claim of Lien or bonded
stop notice for thirty (30) days without discharge, satisfaction or provision
for payment being made by Borrower in a manner satisfactory to Administrative
Agent; or (ii) the sequestration or attachment of, or any levy or execution upon
any of any Property, any other collateral provided by Borrower under any of the
Loan Documents, any monies in any Pledge Account, or any substantial portion of
the other assets of Borrower, which sequestration, attachment, levy or execution
is not released, expunged or dismissed prior to the earlier of thirty (30) days
or the sale of the assets affected thereby; or

 

(e) Representations and Warranties. The material breach of any representation or
warranty of any Loan Party in any of the Loan Documents; or

 

(f) Voluntary Bankruptcy; Insolvency; Dissolution. (i) The filing of a petition
by Borrower for relief under the Bankruptcy Code, or under any other present or
future state or federal law regarding bankruptcy, reorganization or other debtor
relief law; (ii) the filing of any

 

52

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

pleading or an answer by Borrower in any involuntary proceeding under the
Bankruptcy Code or other debtor relief law which admits the jurisdiction of the
court or the petition’s material allegations regarding Borrower’s insolvency;
(iii) a general assignment by Borrower for the benefit of creditors; or (iv)
Borrower applying for, or the appointment of, a receiver, trustee, custodian or
liquidator of Borrower or any of its property; or

 

(g) Involuntary Bankruptcy. The failure of Borrower to effect a full dismissal
of any involuntary petition under the Bankruptcy Code or under any other debtor
relief law that is filed against Borrower or in any way restrains or limits
Borrower, Administrative Agent or Lenders regarding the Loan, the Property or
the Improvements, prior to the earlier of the entry of any court order granting
relief sought in such involuntary petition, or sixty (60) days after the date of
filing of such involuntary petition; or

 

(h) Partners; Guarantors. The occurrence of any of the events specified in
Section 9.1(f) or Section 9.1(g) as to Guarantor or any other Loan Party (other
than Borrower); or

 

(i) Encumbrances; Change in Control. If all or any portion of any direct or
indirect interest in Borrower or Operating Lessee (excluding (A) partnership
interests in Guarantor owned by any Person other than the REIT and (B) stock in
the REIT) is pledged, hypothecated or encumbered or any Change in Control
occurs, all whether voluntarily, involuntarily, by operation of law or
otherwise; or

 

(j) Loss of Priority. The failure at any time of any Deed of Trust to be a valid
first lien upon the applicable Property or any portion thereof (subject to
Permitted Liens), other than as a result of any release or reconveyance of such
Deed of Trust with respect to all or any portion of any Property pursuant to the
terms and conditions of this Agreement; or

 

(k) Management Agreements and License Agreements. (i) If at any time any
Management Agreement or License Agreement is terminated without Administrative
Agent’s prior written consent (except as provided in Section 7.7(c)); or (ii) a
default under any Management Agreement or License Agreement is not cured within
the applicable cure period thereunder; or

 

(l) Due on Sale. If at any time there occurs a conveyance, transfer, sale or
other disposition of any Property (or any portion thereof), whether voluntarily,
involuntarily, by operation of law or otherwise; or

 

(m) Property Lease. If at any time (i) either Property Lease is modified,
surrendered or terminated in violation of this Agreement or (ii) a default by
Borrower or the landlord shall occur under either Property Lease that is not
cured within the applicable cure period thereunder; or

 

(n) Additional Defaults. If at any time there is a violation of Section 7.6(c),
7.7(a), 7.12, 7.15, 7.18 or 7.19 of this Agreement.

 

53

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

9.2 ACCELERATION UPON DEFAULT; REMEDIES.

 

(a) Upon the occurrence of any Default specified in Section 9.1(f) or (g), all
sums owing to Lenders and Administrative Agent under the Notes, this Agreement
and the other Loan Documents shall be immediately due and payable and all
Commitments shall terminate. Upon the occurrence of any other Default specified
in this Article 9, Administrative Agent may, and upon the direction of the
Requisite Lenders shall, declare all sums owing to Lenders and Administrative
Agent under the Notes, this Agreement and the other Loan Documents immediately
due and payable and all Commitments shall terminate.

 

(b) Any principal amount repaid may not be reborrowed. Except as otherwise
provided in any Loan Document, Borrower waives: grace; presentment; demand;
notice of dishonor; notice of default or delinquency; notice of intent to
accelerate; notice of acceleration; notice of protest and nonpayment; notice of
costs, expenses or losses and interest thereon; notice of late charges; and
diligence in taking any action to collect any sums owing under the Notes or in
proceeding against any of the rights or interests in or to properties securing
payment of the Notes. Upon any such acceleration, Administrative Agent may, in
addition to all other remedies permitted under this Agreement and the other Loan
Documents and at law or equity (but subject to the terms and provisions
contained in the Manager’s Subordination Agreements), charge, set-off and
otherwise apply all or any part of the funds on deposit in any of the Pledged
Accounts against the obligations of Borrower under the Loan Documents.

 

9.3 DISBURSEMENTS TO THIRD PARTIES. Administrative Agent may from time to time,
before or after the occurrence of a Default, make such disbursements and
advances pursuant to the Loan Documents which Administrative Agent, in its sole
discretion, deems necessary or desirable to preserve or protect the Properties
or other Collateral to enhance the likelihood or maximize the amount of
repayment of the Liabilities (“Protective Advances”). Borrower agrees to pay
Administrative Agent, upon demand, the principal amount of all outstanding
Protective Advances, together with interest thereon at the rate set forth in the
Notes from the date of the disbursement of such Protective Advances until the
outstanding principal balance thereof is paid in full. Upon the making of a
Protective Advance, Administrative Agent shall be subrogated to any and all
rights, equal or superior titles, equities, owned or claimed by any owner or
holder of said outstanding Indebtedness, however remote, regardless of whether
said Indebtedness are acquired by assignment or have been released of record by
the holder thereof upon payment. All Protective Advances advanced under this
Section 9.3 shall be fully secured by the Loan Documents.

 

9.4 REPAYMENT OF FUNDS ADVANCED. Any funds expended by Administrative Agent or
any Lender in the exercise of its rights or remedies under this Agreement and
the other Loan Documents shall be Liabilities secured by the Properties and
other collateral under the Loan Documents, payable to Administrative Agent upon
demand, together with interest at the rate applicable to the principal balance
of the Notes from the date the funds were expended.

 

9.5 RIGHTS CUMULATIVE, NO WAIVER. All of Administrative Agent’s and Lenders’
rights and remedies provided in this Agreement and the other Loan Documents,

 

54

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

together with those granted by law or at equity, are cumulative and may be
exercised by Administrative Agent and Lenders at any time and from time to time.
Administrative Agent’s or any Lender’s exercise of any right or remedy shall not
constitute a cure of any Default unless all sums then due and payable to
Administrative Agent and Lenders under the Loan Documents are repaid and
Borrower has cured all other Defaults. No waiver shall be implied from any
failure of Administrative Agent or any Lender to take, or any delay by
Administrative Agent or any Lender in taking, action concerning any Default or
failure of condition under the Loan Documents, or from any previous waiver of
any similar or unrelated Default or failure of condition. Any waiver or approval
under any of the Loan Documents must be in writing and shall be limited to its
specific terms.

 

ARTICLE 10. ADMINISTRATIVE AGENT; INTERCREDITOR PROVISIONS

 

10.1 APPOINTMENT AND AUTHORIZATION.

 

(a) Each Lender hereby irrevocably appoints and authorizes Administrative Agent
to take such action as contractual representative on such Lender’s behalf and to
exercise such powers under this Agreement, the other Loan Documents and Other
Related Documents as are specifically delegated to Administrative Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto. Not in limitation of the foregoing, each Lender authorizes and directs
Administrative Agent to enter into the Loan Documents and Other Related
Documents for the benefit of the Lenders.

 

(b) Each Lender hereby agrees that, except as otherwise set forth herein, any
action taken by the Requisite Lenders in accordance with the provisions of this
Agreement, the Loan Documents or the Other Related Documents, and the exercise
by the Requisite Lenders of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be authorized
and binding upon all of the Lenders.

 

(c) Nothing herein shall be construed to deem Administrative Agent a trustee or
fiduciary for any Lender or to impose on Administrative Agent duties or
obligations other than those expressly provided for herein. Without limiting the
generality of the foregoing, the use of the terms “Administrative Agent”,
“Agent”, “agent” and similar terms in the Loan Documents or Other Related
Documents with reference to Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, use of such terms is merely a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.

 

(d) Administrative Agent shall deliver to each Lender, promptly upon receipt
thereof by Administrative Agent, copies of each of the financial statements,
certificates, notices and other documents delivered to Administrative Agent
pursuant to Article 8. Administrative Agent will also furnish to any Lender,
upon the request of such Lender, a copy (or, where appropriate, an original) of
any document, instrument, agreement, certificate or notice furnished to
Administrative Agent by the Borrower, any Loan Party or any other Affiliate of
the Borrower,

 

55

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

pursuant to this Agreement or any other Loan Document not already delivered to
such Lender pursuant to the terms of this Agreement or any such other Loan
Document.

 

(e) As to any matters not expressly provided for by the Loan Documents and Other
Related Documents (including, without limitation, enforcement or collection of
any of Borrower’s obligations hereunder), Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Requisite Lenders (or all
of the Lenders if explicitly required under any other provision of this
Agreement), and such instructions shall be binding upon all Lenders and all
holders of any of the obligations of Borrower; provided, however, that,
notwithstanding anything in this Agreement to the contrary, Administrative Agent
shall not be required to take any action which exposes Administrative Agent to
personal liability or which is contrary to this Agreement or any other Loan
Document or Requirements of Law. Not in limitation of the foregoing,
Administrative Agent shall exercise any right or remedy it or the Lenders may
have under any Loan Document upon the occurrence of a Potential Default or
Default unless the Requisite Lenders have directed Administrative Agent
otherwise. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Administrative Agent as a result of Administrative
Agent acting or refraining from acting under this Agreement, the other Loan
Documents, or the Other Related Documents in accordance with the instructions of
the Requisite Lenders, or where applicable, all the Lenders.

 

10.2 WELLS FARGO AS LENDER. Wells Fargo, as a Lender, shall have the same rights
and powers under this Agreement and any other Loan Document as any other Lender
and may exercise the same as though it were not Administrative Agent; and the
term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include
Wells Fargo in each case in its individual capacity. Wells Fargo and its
affiliates may each accept deposits from, maintain deposits or credit balances
for, invest in, lend money to, act as trustee under indentures of, serve as
financial advisor to, and generally engage in any kind of business with the
Borrower, any other Loan Party or any other affiliate thereof as if it were any
other bank and without any duty to account therefor to the other Lenders.
Further, Administrative Agent and any affiliate may accept fees and other
consideration from the Borrower for services in connection with this Agreement
and otherwise without having to account for the same to the other Lenders. The
Lenders acknowledge that, pursuant to such activities, Wells Fargo or its
affiliates may receive information regarding the Borrower, other loan parties,
other subsidiaries and other Affiliates (including information that may be
subject to confidentiality obligations in favor of such Person) and acknowledge
that Administrative Agent shall be under no obligation to provide such
information to them.

 

10.3 LOAN DISBURSEMENTS.

 

(a) Each Lender (or, in the case of any Loan Increase, each Additional Lender)
shall make available to Administrative Agent (or the funding bank or entity
designated by Administrative Agent), the amount of such Lender’s (or Additional
Lender’s) Pro Rata Share of such disbursement in immediately available funds not
later than the times designated in Section 10.3(b). Unless Administrative Agent
shall have been notified by any Lender not later

 

56

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

than the close of business (Pacific time) on the Business Day immediately
preceding the Funding Date in respect of any disbursement that such Lender does
not intend to make available to Administrative Agent such Lender’s Pro Rata
Share of such disbursement, Administrative Agent may assume that such Lender
shall make such amount available to Administrative Agent. If any Lender does not
notify Administrative Agent of its intention not to make available its Pro Rata
Share of such disbursement as described above, but does not for any reason make
available to Administrative Agent such Lender’s Pro Rata Share of such
disbursement, such Lender shall pay to Administrative Agent forthwith on demand
such amount, together with interest thereon at the Federal Funds Rate. In any
case where a Lender does not for any reason make available to Administrative
Agent such Lender’s Pro Rata Share of such disbursement, Administrative Agent,
in its sole discretion, may, but shall not be obligated to, fund to Borrower
such Lender’s Pro Rata Share of such disbursement. If Administrative Agent funds
to Borrower such Lender’s Pro Rata Share of such disbursement and if such Lender
subsequently pays to Administrative Agent such corresponding amount, such amount
so paid shall constitute such Lender’s Pro Rata Share of such disbursement.
Nothing in this Section 10.3(a) shall alter the respective rights and
obligations of the parties hereunder in respect of a Defaulting Lender or a
Non-Pro Rata Advance.

 

(b) Requests by Administrative Agent for funding by Lenders of disbursements
will be made by telecopy. Each Lender (or, in the case of any Loan Increase,
each Additional Lender) shall make the amount of its disbursement available to
Administrative Agent in Dollars and in immediately available funds, to such bank
and account, in El Segundo, California (to such bank and account in such other
place) as Administrative Agent may designate, not later than 9:00 A.M. (Pacific
time) on the Funding Date designated by Administrative Agent with respect to
such disbursement, but in no event earlier than two (2) Business Days following
Lender’s receipt of the applicable request for an advance of the Loan.

 

(c) Nothing in this Section 10.3 shall be deemed to relieve any Lender of its
obligation hereunder to make its Pro Rata Share of disbursements on any Funding
Date, nor shall Administrative Agent or any Lender be responsible for the
failure of any other Lender to perform its obligations to make any disbursement
hereunder, and the Commitment of any Lender shall not be increased or decreased
as a result of the failure by any other Lender to perform its obligation to make
a disbursement.

 

10.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS; DEFAULTING LENDERS.

 

(a) Subject to Section 10.4(b) below, payments actually received by
Administrative Agent for the account of Lenders shall be paid to them promptly
after receipt thereof by Administrative Agent, but in any event within one (1)
Business Day, provided that Administrative Agent shall pay to Lenders interest
thereon, at the lesser of (i) the Federal Funds Rate and (ii) the rate of
interest applicable to the Loan, from the Business Day following receipt of such
funds by Administrative Agent until such funds are paid in immediately available
funds to Lenders. All payments of principal, interest, and other payments under
the Loan Documents or Other Related Documents shall be allocated among such of
Lenders as are entitled thereto, in proportion to their respective Pro Rata
Shares in the Loan or otherwise as provided herein or as

 

57

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

separately agreed by Administrative Agent and any Lender. Administrative Agent
shall promptly distribute, but in any event within two (2) Business Days, to
each Lender at its primary address set forth on the appropriate signature page
hereof or on the Assignment and Assumption Agreement or Loan Increase
Supplement, or at such other address as a Lender may request in writing, such
funds as it may be entitled to receive, provided that Administrative Agent shall
in any event not be bound to inquire into or determine the validity, scope or
priority of any interest or entitlement of any Lender and may suspend all
payments and seek appropriate relief (including, without limitation,
instructions from Requisite Lenders or all Lenders, as applicable, or an action
in the nature of interpleader) in the event of any doubt or dispute as to any
apportionment or distribution contemplated hereby. The order of priority herein
is set forth solely to determine the rights and priorities of Lenders as among
themselves and may at any time or from time to time be changed by Lenders as
they may elect, in writing in accordance with this Agreement, without necessity
of notice to or consent of or approval by Borrower or any other Person. All
payments or other sums received by Administrative Agent for the account of
Lenders shall not constitute property or assets of Administrative Agent and
shall be held by Administrative Agent, solely in its capacity as agent for
itself and the other Lenders, subject to the Loan Documents and the Other
Related Documents.

 

(b) Notwithstanding any provision hereof to the contrary, until such time as a
Defaulting Lender has funded its Pro Rata Share of a Protective Advance or prior
Loan disbursements which was previously a Non-Pro Rata Advance, or all other
applicable Lenders have received payment in full (whether by repayment or
prepayment) of the amounts due in respect of such Non-Pro Rata Advance, all of
the indebtedness and obligations owing to such Defaulting Lender hereunder shall
be subordinated in right of payment, as provided in the following sentence, to
the prior payment in full of all principal, interest and fees in respect of all
Non-Pro Rata Advances in which the Defaulting Lender has not funded its Pro Rata
Share (such principal, interest and fees being referred to as “Senior Loans”).
All amounts paid by Borrower and otherwise due to be applied to the indebtedness
and obligations owing to the Defaulting Lender pursuant to the terms hereof
shall be distributed by Administrative Agent to the other Lenders in accordance
with their respective Pro Rata Shares of the Loan (recalculated for purposes
hereof to exclude the Defaulting Lender’s Pro Rata Share of the Loan), until all
Senior Loans have been paid in full. This provision governs only the
relationship among Administrative Agent, each Defaulting Lender, and the other
Lenders; nothing hereunder shall limit the obligations of Borrower under this
Agreement. The provisions of this section shall apply and be effective
regardless of whether a Default occurs and is then continuing, and
notwithstanding (i) any other provision of this Agreement to the contrary, (ii)
any instruction of Borrower as to its desired application of payments or (iii)
the suspension of such Defaulting Lender’s right to vote on matters which are
subject to the consent or approval of Requisite Lenders or all Lenders.
Administrative Agent shall be entitled to (A) withhold or setoff, and to apply
to the payment of the defaulted amount and any related interest, any amounts to
be paid to such Defaulting Lender under this Agreement, and (B) bring an action
or suit against such Defaulting Lender in a court of competent jurisdiction to
recover the defaulted amount and any related interest. In addition, the
Defaulting Lender shall indemnify, defend and hold Administrative Agent and each
of the other Lenders harmless from and against any and all liabilities and
costs, plus interest thereon at the Alternate Rate, which they may sustain or
incur

 

58

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

by reason of or as a direct consequence of the Defaulting Lender’s failure or
refusal to perform its obligations under this Agreement.

 

10.5 PRO RATA TREATMENT. Except to the extent otherwise provided herein: (a)
each borrowing from Lenders shall be made from the Lenders, each payment of the
fees shall be made for the account of the Lenders, and each termination or
reduction of the amount of the Commitments pursuant to this Agreement shall be
applied to the respective Commitments of the Lenders, pro rata according to the
amounts of their respective Commitments; (b) each payment or prepayment of
principal of the Loan by the Borrower shall be made for the account of the
Lenders pro rata in accordance with the respective unpaid principal amounts of
the Loan held by them, provided that if immediately prior to giving effect to
any such payment in respect of the Loan the outstanding principal amount of the
Loan shall not be held by the Lenders pro rata in accordance with their
respective Commitments in effect at the time the Loan was made, then such
payment shall be applied to the Loan in such manner as shall result, as nearly
as is practicable, in the outstanding principal amount of the Loan being held by
the Lenders pro rata in accordance with their respective Commitments; and (c)
each payment of interest on the Loan by the Borrower shall be made for the
account of the Lenders pro rata in accordance with the amounts of interest on
the Loan then due and payable to the respective Lenders.

 

10.6 SHARING OF PAYMENTS, ETC. Lenders agree among themselves that (i) with
respect to all amounts received by them which are applicable to the payment of
the obligations of Borrower or Guarantor under the Loan, equitable adjustment
will be made so that, in effect, all such amounts will be shared among them
ratably in accordance with their Pro Rata Shares in the Loan, whether received
by voluntary payment, by counterclaim or cross action or by the enforcement of
any or all of such obligations, (ii) if any of them shall by voluntary payment
or by the exercise of any right of counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of such obligations held by it which is
greater than its Pro Rata Share in the Loan of the payments on account of such
obligations, the one receiving such excess payment shall purchase, without
recourse or warranty, an undivided interest and participation (which it shall be
deemed to have done simultaneously upon the receipt of such payment) in such
obligations owed to the others so that all such recoveries with respect to such
obligations shall be applied ratably in accordance with such Pro Rata Shares;
provided, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to that party
to the extent necessary to adjust for such recovery, but without interest except
to the extent the purchasing party is required to pay interest in connection
with such recovery. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 10.6 may, to the
fullest extent permitted by law, exercise all its rights of payment with respect
to such participation as fully as if such Lender were the direct creditor of
Borrower in the amount of such participation.

 

10.7 COLLATERAL MATTERS; PROTECTIVE ADVANCES.

 

(a) Each Lender hereby authorizes Administrative Agent, without the necessity of
any notice to or further consent from any Lender, from time to time prior to a
Default, to take any action with respect to any Collateral, Loan Documents or
Other Related

 

59

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

Documents which may be necessary to perfect and maintain perfected the Liens
upon the Collateral granted pursuant to any of the Loan Documents or Other
Related Documents.

 

(b) The Lenders hereby authorize Administrative Agent, at its option and in its
discretion, to release any Lien granted to or held by Administrative Agent upon
any Collateral (i) upon termination of the Commitments and indefeasible payment
and satisfaction in full of all of obligations of Borrower hereunder; (ii) as
expressly permitted by, but only in accordance with, the terms of the applicable
Loan Document (including Sections 2.14, 6.2(e) and 7.9(e) hereof) and (iii)
otherwise only with the approval of all Lenders. Upon request by Administrative
Agent at any time, the Lenders will confirm in writing Administrative Agent’s
authority to release particular types or items of Collateral pursuant to this
Section.

 

(c) Upon any sale and transfer of Collateral which is expressly permitted
pursuant to the terms of this Agreement or any other Loan Document, and upon at
least five (5) Business Days’ prior written request by the Borrower,
Administrative Agent shall (and is hereby irrevocably authorized by the Lenders
to) execute such documents as may be necessary to evidence the release of the
Liens granted to Administrative Agent for the benefit of the Lenders herein or
pursuant hereto upon the Collateral that was sold or transferred; provided,
however, that (i) Administrative Agent shall not be required to execute any such
document on terms which, in Administrative Agent’s opinion, would expose
Administrative Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty
and (ii) such release shall not in any manner discharge, affect or impair the
obligations of Borrower or any Liens upon (or obligations of the Borrower or any
other Loan Party in respect of) all interests retained by the Borrower or any
other Loan Party, including (without limitation) the proceeds of such sale or
transfer, all of which shall continue to constitute part of the Collateral. In
the event of any sale or transfer of Collateral, or any foreclosure with respect
to any of the Collateral, Administrative Agent shall be authorized to deduct all
of the expenses reasonably incurred by Administrative Agent from the proceeds of
any such sale, transfer or foreclosure.

 

(d) Administrative Agent shall have no obligation whatsoever to the Lenders or
to any other Person to assure that the Collateral exists or is owned by the
Borrower or any other Loan Party or is cared for, protected or insured or that
the Liens granted to Administrative Agent herein or pursuant hereto have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise or to continue
exercising at all or in any manner or under any duty of care, disclosure or
fidelity any of the rights, authorities and powers granted or available to
Administrative Agent in this Section or in any of the Loan Documents or Other
Related Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, Administrative Agent
may act in any manner it may deem appropriate, in its sole discretion, given
Administrative Agent’s own interest in the Collateral as one of the Lenders and
that Administrative Agent shall have no duty or liability whatsoever to the
Lenders, except to the extent resulting from its gross negligence or willful
misconduct.

 

(e) Administrative Agent may make, and shall be reimbursed by the Lenders (in
accordance with their Pro Rata Shares) to the extent not reimbursed by the
Borrower for,

 

60

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

Protective Advances during any one calendar year with respect to any Property
that is Collateral up to the sum of (i) amounts expended to pay real estate
taxes, assessments and governmental charges or levies imposed upon such
Property; (ii) amounts expended to pay insurance premiums for policies of
insurance related to such Property; and (iii) $50,000 for other expenditures to
protect the Collateral. Protective Advances in excess of said sum during any
calendar year for any Property that is Collateral shall require the consent of
the Requisite Lenders. The Borrower agrees to pay on demand all Protective
Advances.

 

(f) Each Lender agrees that it will not take any action, nor institute any
actions or proceedings, against Borrower or any other obligor hereunder under
the Loan Documents or the Other Related Documents with respect to exercising
claims against or rights in the Collateral without the written consent of
Requisite Lenders.

 

10.8 POST-FORECLOSURE PLANS. If all or any portion of the Collateral is acquired
by Administrative Agent as a result of a foreclosure or the acceptance of a deed
or assignment in lieu of foreclosure, or is retained in satisfaction of all or
any part of the obligations of Borrower hereunder, the title to any such
Collateral, or any portion thereof, shall be held in the name of Administrative
Agent or a nominee or subsidiary of Administrative Agent, as agent, for the
ratable benefit of all Lenders. Administrative Agent shall prepare a recommended
course of action for such Collateral (a “Post-Foreclosure Plan”), which shall be
subject to the approval of the Requisite Lenders. In accordance with the
approved Post-Foreclosure Plan, Administrative Agent shall manage, operate,
repair, administer, complete, construct, restore or otherwise deal with the
Collateral acquired, and shall administer all transactions relating thereto,
including, without limitation, employing a management agent, leasing agent and
other agents, contractors and employees, including agents for the sale of such
Collateral, and the collecting of rents and other sums from such Collateral and
paying the expenses of such Collateral. Actions taken by Administrative Agent
with respect to the Collateral, which are not specifically provided for in the
approved Post-Foreclosure Plan or reasonably incidental thereto, shall require
the written consent of the Requisite Lenders by way of supplement to such
Post-Foreclosure Plan. Upon demand therefor from time to time, each Lender will
contribute its share (based on its Pro Rata Share) of all reasonable costs and
expenses incurred by Administrative Agent pursuant to the approved
Post-Foreclosure Plan in connection with the construction, operation,
management, maintenance, leasing and sale of such Collateral. In addition,
Administrative Agent shall render or cause to be rendered to each Lender, on a
monthly basis, an income and expense statement for such Collateral, and each
Lender shall promptly contribute its Pro Rata Share of any operating loss for
such Collateral, and such other expenses and operating reserves as
Administrative Agent shall deem reasonably necessary pursuant to and in
accordance with the approved Post-Foreclosure Plan. To the extent there is net
operating income from such Collateral, Administrative Agent shall, in accordance
with the approved Post-Foreclosure Plan, determine the amount and timing of
distributions to the Lenders. All such distributions shall be made to the
Lenders in accordance with their respective Pro Rata Shares. The Lenders
acknowledge and agree that if title to any Collateral is obtained by
Administrative Agent or its nominee, such Collateral will not be held as a
permanent investment but will be liquidated as soon as practicable.
Administrative Agent shall undertake to sell such Collateral, at such price and
upon such terms and conditions as the Requisite Lenders reasonably shall
determine to be most

 

61

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

advantageous to the Lenders. Any purchase money mortgage or deed of trust taken
in connection with the disposition of such Collateral in accordance with the
immediately preceding sentence shall name Administrative Agent, as agent for the
Lenders, as the beneficiary or mortgagee. In such case, Administrative Agent and
the Lenders shall enter into an agreement with respect to such purchase money
mortgage or deed of trust defining the rights of the Lenders in the same Pro
Rata Shares as provided hereunder, which agreement shall be in all material
respects similar to this Article insofar as the same is appropriate or
applicable.

 

10.9 APPROVALS OF LENDERS. All communications from Administrative Agent to any
Lender requesting such Lender’s determination, consent, approval or disapproval
(a) shall be given in the form of a written notice to such Lender, (b) shall be
accompanied by a description of the matter or issue as to which such
determination, approval, consent or disapproval is requested, or shall advise
such Lender where information, if any, regarding such matter or issue may be
inspected, or shall otherwise describe the matter or issue to be resolved, (c)
shall include, if reasonably requested by such Lender and to the extent not
previously provided to such Lender, written materials and a summary of all oral
information provided to Administrative Agent by the Borrower in respect of the
matter or issue to be resolved, and (d) shall include Administrative Agent’s
recommended course of action or determination in respect thereof. Unless a
Lender shall give written notice to Administrative Agent that it specifically
objects to the recommendation or determination of Administrative Agent (together
with a reasonable written explanation of the reasons behind such objection)
within ten (10) Business Days (or such lesser or greater period as may be
specifically required under the express terms of the Loan Documents or Other
Related Documents) of receipt of such communication, such Lender shall be deemed
to have conclusively approved of or consented to such recommendation or
determination.

 

10.10 NOTICE OF DEFAULTS. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or Potential Default unless
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing with reasonable specificity such Default or
Potential Default and stating that such notice is a “notice of default”. If any
Lender (excluding the Lender which is also serving as Administrative Agent)
becomes aware of any Default or Potential Default, it shall promptly send to
Administrative Agent such a “notice of default”. Further, if Administrative
Agent receives such a “notice of default,” Administrative Agent shall give
prompt notice thereof to the Lenders.

 

10.11 ADMINISTRATIVE AGENT’S RELIANCE, ETC. Notwithstanding any other provisions
of this Agreement, any other Loan Documents or the Other Related Documents,
neither Administrative Agent nor any of its directors, officers, agents,
employees or counsel shall be liable for any action taken or not taken by it
under or in connection with this Agreement or any other Loan Document, except
for its or their own gross negligence or willful misconduct in connection with
its duties expressly set forth herein or therein. Without limiting the
generality of the foregoing, Administrative Agent: may consult with legal
counsel (including its own counsel or counsel for the Borrower or any other Loan
Party), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts.
Neither

 

62

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

Administrative Agent nor any of its directors, officers, agents, employees or
counsel: (a) makes any warranty or representation to any Lender or any other
Person and shall be responsible to any Lender or any other Person for any
statement, warranty or representation made or deemed made by the Borrower, any
other Loan Party or any other Person in or in connection with this Agreement or
any other Loan Document; (b) shall have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement or any other Loan Document or the satisfaction of any conditions
precedent under this Agreement or any Loan Document on the part of the Borrower
or other Persons or inspect the property, books or records of the Borrower or
any other Person; (c) shall be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Loan Document, any other instrument or document furnished
pursuant thereto or any Collateral covered thereby or the perfection or priority
of any Lien in favor of Administrative Agent on behalf of the Lenders in any
such Collateral; (d) shall have any liability in respect of any recitals,
statements, certifications, representations or warranties contained in any of
the Loan Documents or Other Related Documents or any other document, instrument,
agreement, certificate or statement delivered in connection therewith; and (e)
shall incur any liability under or in respect of this Agreement or any other
Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telephone, telecopy or electronic mail)
believed by it to be genuine and signed, sent or given by the proper party or
parties. Administrative Agent may execute any of its duties under the Loan
Documents or Other Related Documents by or through agents, employees or
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects in the absence of gross
negligence or willful misconduct.

 

10.12 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Regardless of whether the
transactions contemplated by this Agreement, the other Loan Documents and Other
Related Documents are consummated, each Lender agrees to indemnify
Administrative Agent (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so) pro rata in accordance with
such Lender’s respective Pro Rata Share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by, or asserted against Administrative Agent
(in its capacity as Administrative Agent but not as a “Lender”) in any way
relating to or arising out of the Loan Documents or Other Related Documents, any
transaction contemplated hereby or thereby or any action taken or omitted by
Administrative Agent under the Loan Documents and Other Related Documents
(collectively, “Indemnifiable Amounts”); provided, however, that no Lender shall
be liable for any portion of such Indemnifiable Amounts to the extent resulting
from Administrative Agent’s gross negligence or willful misconduct as determined
by a court of competent jurisdiction in a final, non-appealable judgment
provided, however, that no action taken in accordance with the directions of the
Requisite Lenders shall be deemed to constitute gross negligence or willful
misconduct for purposes of this Section. Without limiting the generality of the
foregoing, each Lender agrees to reimburse Administrative Agent (to the extent
not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so) promptly upon demand for its ratable share of any
out-of-pocket expenses (including the reasonable fees and expenses of the
counsel to Administrative Agent) incurred by Administrative

 

63

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

Agent in connection with the preparation, negotiation, execution,
administration, or enforcement (whether through negotiations, legal proceedings,
or otherwise) of, or legal advice with respect to the rights or responsibilities
of the parties under, the Loan Documents and Other Related Documents, any suit
or action brought by Administrative Agent to enforce the terms of the Loan
Documents and Other Related Documents and/or collect any obligation of Borrower
hereunder, any “lender liability” suit or claim brought against Administrative
Agent and/or the Lenders, and any claim or suit brought against Administrative
Agent and/or the Lenders arising under any Hazardous Materials Laws. Such
out-of-pocket expenses (including counsel fees) shall be advanced by the Lenders
on the request of Administrative Agent notwithstanding any claim or assertion
that Administrative Agent is not entitled to indemnification hereunder upon
receipt of an undertaking by Administrative Agent that Administrative Agent will
reimburse the Lenders if it is actually and finally determined by a court of
competent jurisdiction that Administrative Agent is not so entitled to
indemnification. The agreements in this Section shall survive the payment of the
Loans and all other amounts payable hereunder or under the other Loan Documents
or Other Related Documents and the termination of this Agreement. If the
Borrower shall reimburse Administrative Agent for any Indemnifiable Amount
following payment by any Lender to Administrative Agent in respect of such
Indemnifiable Amount pursuant to this Section, Administrative Agent shall share
such reimbursement on a ratable basis with each Lender making any such payment.

 

10.13 LENDER CREDIT DECISION, ETC. Each Lender expressly acknowledges and agrees
that neither Administrative Agent nor any of its officers, directors, employees,
agents, counsel, attorneys-in-fact or other affiliates has made any
representations or warranties to such Lender and that no act by Administrative
Agent hereafter taken, including any review of the affairs of the Borrower, any
other Loan Party or Affiliate, shall be deemed to constitute any such
representation or warranty by Administrative Agent to any Lender. Each Lender
acknowledges that it has, independently and without reliance upon Administrative
Agent, any other Lender or counsel to Administrative Agent, or any of their
respective officers, directors, employees, agents or counsel, and based on the
financial statements of the Borrower, the other Loan Parties or Affiliates, and
inquiries of such Persons, its independent due diligence of the business and
affairs of the Borrower, the other Loan Parties and other Persons, its review of
the Loan Documents and the Other Related Documents, the legal opinions required
to be delivered to it hereunder, the advice of its own counsel and such other
documents and information as it has deemed appropriate, made its own credit and
legal analysis and decision to enter into this Agreement and the transactions
contemplated hereby. Each Lender also acknowledges that it will, independently
and without reliance upon Administrative Agent, any other Lender or counsel to
Administrative Agent or any of their respective officers, directors, employees
and agents, and based on such review, advice, documents and information as it
shall deem appropriate at the time, continue to make its own decisions in taking
or not taking action under the Loan Documents or Other Related Documents.
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower or any other Loan Party of the Loan
Documents or Other Related Documents or any other document referred to or
provided for therein or to inspect the properties or books of, or make any other
investigation of, the Borrower, any other Loan Party. Except for notices,
reports and other documents and information expressly required to be furnished
to the Lenders by Administrative Agent under this Agreement, any of the other
Loan

 

64

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

Documents or Other Related Documents, Administrative Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Borrower, any other Loan Party or any other Affiliate
thereof which may come into possession of Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or other Affiliates.
Each Lender acknowledges that Administrative Agent’s legal counsel in connection
with the transactions contemplated by this Agreement is only acting as counsel
to Administrative Agent and is not acting as counsel to such Lender.

 

10.14 SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may resign at any
time as Administrative Agent under the Loan Documents and Other Related
Documents by giving written notice thereof to the Lenders and the Borrower and
shall resign if at any time any other Lender has a Commitment in a greater
amount than the Commitment of the Administrative Agent. In addition, the
Requisite Lenders may remove Administrative Agent in the event that the
Administrative Agent commits gross negligence or willful misconduct in the
performance of its duties thereunder. Upon any such resignation or removal, the
Requisite Lenders shall have the right to appoint a successor Administrative
Agent which appointment shall, provided no Default or Potential Default exists,
be subject to the Borrower’s approval, which approval shall not be unreasonably
withheld or delayed (except that the Borrower shall, in all events, be deemed to
have approved each Lender and any of its Affiliates as a successor
Administrative Agent). If no successor Administrative Agent shall have been so
appointed in accordance with the immediately preceding sentence, and shall have
accepted such appointment, within thirty (30) days after the current
Administrative Agent’s giving of notice of resignation, then the current
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a Lender, if any Lender shall be willing to
serve, and otherwise shall be an Eligible Assignee. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the current
Administrative Agent, and the current Administrative Agent shall be discharged
from its duties and obligations under the Loan Documents and the Other Related
Documents. After any Administrative Agent’s resignation hereunder or removal as
Administrative Agent, the provisions of this Article 10 shall continue to inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under the Loan Documents and the Other Related Documents.
Notwithstanding anything contained herein to the contrary, Administrative Agent
may assign its rights and duties under the Loan Documents and the Other Related
Documents to any of its Affiliates by giving the Borrower and each Lender prior
written notice.

 

10.15 TITLED AGENTS. PNC Bank, National Association, in its capacity as
Documentation Agent, assumes no responsibility or obligation hereunder,
including, without limitation, for servicing, enforcement or collection of the
Loan, nor any duties as an agent hereunder for the Lenders. The title given to
the Documentation Agent is solely honorific and implies no fiduciary
responsibility on the part of the Documentation Agent to Administrative Agent,
any Lender, the Borrower or any other Loan Party and the use of such titles does
not impose on the Documentation Agent any duties or obligations greater than
those of any other

 

65

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

Lender or entitle the Documentation Agent to any rights other than those to
which any other Lender is entitled.

 

10.16 NO SET-OFFS. Each Lender hereby acknowledges that the exercise by any
Lender of offset, set-off, banker’s lien or similar rights against any deposit
account or other property or asset of Borrower, whether or not located in
California, could result under certain laws in significant impairment of the
ability of all Lenders to recover any further amounts in respect of the Loan.
Therefore, each Lender agrees not to charge or offset any amount owed to it by
Borrower against any of the accounts, property or assets of Borrower or any of
its affiliates held by such Lender without the prior written approval of
Administrative Agent and Requisite Lenders.

 

ARTICLE 11. MISCELLANEOUS PROVISIONS

 

11.1 INDEMNITY. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
ADMINISTRATIVE AGENT AND EACH LENDER, THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL LOSSES,
DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND
EXPENSES) WHICH ADMINISTRATIVE AGENT OR ANY LENDER MAY INCUR AS A DIRECT OR
INDIRECT CONSEQUENCE OF: (A) THE PURPOSE TO WHICH BORROWER APPLIES THE LOAN
PROCEEDS; (B) THE FAILURE OF BORROWER TO PERFORM ANY OBLIGATIONS AS AND WHEN
REQUIRED BY THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OTHER RELATED
DOCUMENT; (C) ANY FAILURE AT ANY TIME OF ANY OF BORROWER’S REPRESENTATIONS OR
WARRANTIES TO BE TRUE AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER,
CONSTITUENT PARTNER OR MEMBER OF BORROWER, ANY CONTRACTOR, SUBCONTRACTOR OR
MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO
ANY OF THE PROPERTY OR IMPROVEMENTS. BORROWER SHALL IMMEDIATELY PAY TO
ADMINISTRATIVE AGENT OR SUCH LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS
INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL
PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE LOAN.
BORROWER’S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS
ADMINISTRATIVE AGENT AND EACH LENDER SHALL SURVIVE CANCELLATION OF THE NOTES AND
THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE DEED OF TRUST.

 

11.2 FORM OF DOCUMENTS. The form and substance of all documents, instruments,
and forms of evidence to be delivered to Administrative Agent under the terms of
this Agreement, any of the other Loan Documents or Other Related Documents shall
be subject to Administrative Agent’s approval and shall not be modified,
superseded or terminated in any respect without Administrative Agent’s prior
written approval.

 

66

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

11.3 NO THIRD PARTIES BENEFITED. No person other than Administrative Agent,
Lenders and Borrower and their permitted successors and assigns shall have any
right of action under any of the Loan Documents or Other Related Documents.

 

11.4 NOTICES. All notices, demands, or other communications under this
Agreement, the other Loan Documents or the Other Related Documents shall be in
writing and shall be delivered to the appropriate party at the address set forth
on the signature page of this Agreement and as specified in Exhibit D (subject
to change from time to time by written notice to all other parties to this
Agreement). Notices shall be considered as properly given if mailed by first
class United States mail, postage prepaid, registered or certified with return
receipt requested, Federal Express or other overnight delivery service, or by
delivering same in person to the intended addressee. Notice so mailed shall be
effective on the earlier of its receipt or three (3) Business Days after its
deposit; notice given in any other manner shall be effective only if and when
received by the addressee; provided, however, that non-receipt of any notice as
the result of any change of address of which the sending party was not notified
or as the result of a refusal to accept delivery shall be deemed receipt of such
notice. Any party shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of fifteen (15) Business Days’ prior notice to the other parties in the
manner set forth hereinabove.

 

11.5 ATTORNEY-IN-FACT. Borrower hereby irrevocably appoints and authorizes
Administrative Agent, as Borrower’s attorney-in-fact, which agency is coupled
with an interest, to execute and/or record in Administrative Agent’s or
Borrower’s name any notices, instruments or documents that Administrative Agent
deems appropriate to confirm or perfect any lien or security interest intended
to be granted under any of the Loan Documents.

 

11.6 ACTIONS. Borrower agrees that Administrative Agent or any Lender, in
exercising the rights, duties or liabilities of Administrative Agent, Lenders or
Borrower under the Loan Documents or Other Related Documents, may commence,
appear in or defend any action or proceeding purporting to affect any Property,
the Loan Documents or the Other Related Documents and Borrower shall immediately
reimburse Administrative Agent or such Lender upon demand for all such
reasonable expenses so incurred or paid by Administrative Agent or such Lender,
including, without limitation, reasonable attorneys’ fees and expenses and court
costs.

 

11.7 INTENTIONALLY OMITTED.

 

11.8 RELATIONSHIP OF PARTIES. The relationship of Borrower, Administrative Agent
and Lenders under the Loan Documents and Other Related Documents is, and shall
at all times remain, solely that of borrower and lender, and Administrative
Agent and Lenders neither undertake nor assumes any responsibility or duty to
Borrower or to any third party with respect to any Property, except as expressly
provided in this Agreement, the other Loan Documents and the Other Related
Documents.

 

11.9 DELAY OUTSIDE LENDER’S CONTROL. No Lender or Administrative Agent shall be
liable in any way to Borrower or any third party for Administrative Agent’s or

 

67

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

such Lender’s failure to perform or delay in performing under the Loan Documents
(and Administrative Agent or any Lender may suspend or terminate all or any
portion of Administrative Agent’s or such Lender’s obligations under the Loan
Documents) if such failure to perform or delay in performing results directly or
indirectly from, or is based upon, the action, inaction, or purported action, of
any governmental or local authority, or because of war, rebellion, insurrection,
strike, lock-out, boycott or blockade (whether presently in effect, announced or
in the sole judgment of Administrative Agent or such Lender deemed probable), or
from any Act of God or other cause or event beyond Administrative Agent’s or
such Lender’s reasonable control (specifically excluding, however, the lack of
available funds).

 

11.10 ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged by
Administrative Agent or any Lender to enforce or defend any provision of this
Agreement, any of the other Loan Documents or Other Related Documents, or as a
consequence of any Default under the Loan Documents or Other Related Documents,
with or without the filing of any legal action or proceeding, and including,
without limitation, any reasonable fees and expenses incurred in any bankruptcy
proceeding of the Borrower, then Borrower shall immediately pay to
Administrative Agent or such Lender, upon demand, the amount of all reasonable
attorneys’ fees and expenses and all costs incurred by Administrative Agent or
such Lender in connection therewith, together with interest thereon from the
date of such demand until paid at the rate of interest applicable to the
principal balance of the Loan.

 

11.11 IMMEDIATELY AVAILABLE FUNDS. Unless otherwise expressly provided for in
this Agreement, all amounts payable by Borrower to Administrative Agent or any
Lender shall be payable only in United States Dollars, immediately available
funds.

 

11.12 AMENDMENTS AND WAIVERS.

 

(a) Generally. Except as otherwise expressly provided in this Agreement, (i) any
consent or approval required or permitted by this Agreement or in any Loan
Document to be given by the Lenders may be given, (ii) any term of this
Agreement or of any other Loan Document (other than any fee letter solely
between the Borrower and Administrative Agent) may be amended, (iii) the
performance or observance by the Borrower or any other Loan Party of any terms
of this Agreement or such other Loan Document (other than any fee letter solely
between the Borrower and Administrative Agent) may be waived, and (iv) the
continuance of any Default may be waived (either generally or in a particular
instance and either retroactively or prospectively) with, but only with, the
written consent of the Requisite Lenders (or Administrative Agent at the written
direction of the Requisite Lenders), and, in the case of an amendment to any
Loan Document, the written consent of each Loan Party which is party thereto.
Notwithstanding the previous sentence, Administrative Agent, shall be authorized
on behalf of all the Lenders, without the necessity of any notice to, or further
consent from, any Lender, to waive the imposition of the late fees provided in
Section 2.6(c), up to a maximum of twice per calendar year.

 

68

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

(b) Unanimous Consent. Notwithstanding the foregoing, no amendment, waiver or
consent shall, unless in writing, and signed by all of the Lenders (or
Administrative Agent at the written direction of the Lenders), do any of the
following:

 

(i) increase the Commitments of the Lenders (excluding any increase as a result
of an assignment of Commitments permitted under Section 11.13) or subject the
Lenders to any additional obligations (except, in each case, for any Additional
Commitment of a Lender pursuant to a Loan Increase Supplement);

 

(ii) reduce the principal of, or interest rates that have accrued or that will
be charged on the outstanding principal amount of, the Loan;

 

(iii) reduce the amount of any fees payable to the Lenders hereunder (except
that any change in fees payable to the Administrative Agent for its own account
shall not require the consent of any Lender other than Administrative Agent);

 

(iv) postpone any date fixed for any payment of principal of, or interest on,
the Loan (including, without limitation, the Maturity Date) or for the payment
of fees or any other obligations of Borrower or Guarantor;

 

(v) change the Pro Rata Shares (excluding any change as a result of an
assignment of Commitments permitted under Section 11.13 or pursuant to a Loan
Increase Supplement);

 

(vi) amend this Section or amend the definitions of the terms used in this
Agreement or the other Loan Documents insofar as such definitions affect the
substance of this Section;

 

(vii) modify the definition of the term “Requisite Lenders” or modify in any
other manner the number or percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof;

 

(viii) release any Guarantor from its obligations under a Guaranty;

 

(ix) waive a Default or Event of Default under Section 9.1(a);

 

(x) release or dispose of any Collateral unless released or disposed of as
permitted by, and in accordance with, Section 10.7; or

 

(xi) effect any change, approval or waiver that specifically requires the
consent of all Lenders under this Agreement (including Sections 7.15, 7.21(b),
7.22 and 11.13(a)).

 

(c) Amendment of Administrative Agent’s Duties, Etc. No amendment, waiver or
consent unless in writing and signed by Administrative Agent, in addition to the
Lenders required hereinabove to take such action, shall affect the rights or
duties of Administrative Agent under this Agreement, any of the other Loan
Documents or Other Related Documents. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon and any
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose set forth therein. No course of dealing or delay or
omission on the part of Administrative Agent or any Lender in exercising any
right shall operate as a

 

69

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

waiver thereof or otherwise be prejudicial thereto. Any Default occurring
hereunder shall continue to exist until such time as such Default is waived in
writing in accordance with the terms of this Section, notwithstanding any
attempted cure or other action by the Borrower, any other Loan Party or any
other Person subsequent to the occurrence of such Default. Except as otherwise
explicitly provided for herein or in any other Loan Document, no notice to or
demand upon the Borrower shall entitle the Borrower to other or further notice
or demand in similar or other circumstances.

 

11.13 SUCCESSORS AND ASSIGNS.

 

(a) Generally. The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any of is
rights under this Agreement without the prior written consent of all the Lenders
(and any such assignment or transfer to which all of the Lenders have not
consented shall be void).

 

(b) Participations. Any Lender may at any time grant to an affiliate of such
Lender, or one or more banks or other financial institutions (each a
“Participant” ) participating interests in its Commitment or the obligations
owing to such Lender hereunder. No Participant shall have any rights or benefits
under this Agreement or any other Loan Document. In the event of any such grant
by a Lender of a participating interest to a Participant, such Lender shall
remain responsible for the performance of it obligations hereunder, and the
Borrower and Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender’s rights and obligations under
this Agreement. Any agreement pursuant to which any Lender may grant such a
participating interest shall provide that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided however, such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase such Lender’s Commitment, (ii) extend the
date fixed for the payment of principal on the Loan or a portion thereof owing
to such Lender, or (iii) reduce the rate at which interest is payable thereon.
An assignment or other transfer which is not permitted by subsection (c) below
shall be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).

 

(c) Assignments. Any Lender may with the prior written consent of Administrative
Agent and the Borrower (which consent, in each case, shall not be unreasonably
withheld) at any time assign to one or more Eligible Assignees (each an
“Assignee”) all or a portion of its rights and obligations under this Agreement
and the Notes; provided, however, (i) no such consent by the Borrower shall be
required (x) if a Default or Potential Default shall exist or (y) in the case of
an assignment to another Lender or an affiliate of any Lender; (ii) any partial
assignment shall be in an amount at least equal to $10,000,000 and after giving
effect to such assignment the assigning Lender retains a Commitment, or if the
Commitments have been terminated, holds a Note having an outstanding principal
balance, of at least $10,000,000, and (iii) each such assignment shall be
effected by means of an Assignment and Assumption Agreement. Upon execution and
delivery of such instrument and payment by such Assignee to such transferor

 

70

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

Lender of an amount equal to the purchase price agreed between such transferor
Lender and such Assignee, such Assignee shall be deemed to be a Lender party to
this Agreement and shall have all the rights and obligations of a Lender with a
Commitment as set forth in such Assignment and Assumption Agreement, and the
transferor Lender shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Lender, Administrative Agent and the Borrower shall make
appropriate arrangements so the new Notes are issued to the Assignee and such
transferor Lender, as appropriate. In connection with any such assignment, the
transferor Lender shall pay to Administrative Agent an administrative fee for
processing such assignment in the amount of $3,500. Anything in this Section to
the contrary notwithstanding, no Lender may assign or participate any interest
in any Loan held by it hereunder to the Borrower, or any of its respective
Affiliates or subsidiaries.

 

(d) Tax Withholding. At least five (5) Business Days prior to the first day on
which interest or fees are payable hereunder for the account of any Lender, each
Lender that is not incorporated under the laws of the United States of America,
or a state thereof, shall furnish Administrative Agent and Borrower with a
properly completed executed copy of either Internal Revenue Service Form W-8ECI
or Internal Revenue Service Form W-8BEN and either Internal Revenue Service Form
W-8 or Internal Revenue Service Form W-9 and any additional form (or such other
form) as is necessary to claim complete exemption from United States withholding
taxes on all payments hereunder. At all times each Lender shall own or
beneficially own a Note, such Lender shall (i) promptly provide to
Administrative Agent and Borrower a new Internal Revenue Service Form W-8ECI or
Internal Revenue Service Form W-8BEN and Internal Revenue Service Form W-8 or
Internal Revenue Service Form W-9 and any additional form (or such other form)
(or any successor form or forms) upon the expiration or obsolescence of any
previously delivered form and comparable statements in accordance with
applicable United States laws and regulations and amendments duly executed and
completed by such Lender, and (ii) comply at all times with all applicable
United States laws and regulations, including all provisions of any applicable
tax treaty, with regard to any withholding tax exemption claimed with respect to
any payments on the Loan. If any Lender cannot deliver such form, then Borrower
may withhold from payments due under the Loan Documents such amounts as Borrower
is able to determine from accurate information provided by such Lender are
required by the Internal Revenue Code.

 

(e) Federal Reserve Bank Assignments. In addition to the assignments and
participations permitted under the foregoing provisions of the Section, and
without the need to comply with any of the formal or procedural requirements of
this Section, any Lender may at any time and from time to time, pledge and
assign all or any portion of its rights under all or any of the Loan Documents
and Other Related Documents to a Federal Reserve Bank; provided that no such
pledge of assignment shall release such Lender from its obligation thereunder.

 

(f) Information to Assignee, Etc. A Lender may furnish any information
concerning the Borrower, any subsidiary or any other Loan Party in the
possession of such Lender from time to time to Assignees and Participants
(including prospective Assignees and Participants but shall advise them that any
such information that is not publicly available is confidential). In

 

71

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

connection with such negotiation, execution and delivery, Borrower authorizes
Administrative Agent and Lenders to communicate all information and
documentation related to the Loan (whether to Borrower or to any Participant,
Assignee, legal counsel, appraiser or other necessary party) directly by e-mail,
fax, or other electronic means used to transmit information.

 

11.14 CERTAIN ALLOWED DISCLOSURES. Notwithstanding anything to the contrary set
forth herein or in any other written or oral understanding or agreement to which
the parties hereto are parties or by which they are bound, the parties hereto
acknowledge and agree that (i) any obligations of confidentiality contained
herein and therein do not apply and have not applied from the commencement of
discussions between the parties to the tax treatment and tax structure of the
transactions contemplated by the Loan Documents or Other Related Documents (and
any related transactions or arrangements), and (ii) each party (and each of its
employees, representatives, or other agents) may disclose to any and all parties
as required, without limitation of any kind, the tax treatment and tax structure
of the transactions contemplated by the Loan Documents and Other Related
Documents and all materials of any kind (including opinions or other tax
analyses) that are provided to such party relating to such tax treatment and tax
structure, all within the meaning of Treasury Regulations Section 1.6011-4;
provided, however, that each party recognizes that the privilege each has to
maintain, in its sole discretion, the confidentiality of a communication
relating to the transactions contemplated by the Loan Documents and Other
Related Documents, including a confidential communication with its attorney or a
confidential communication with a federally authorized tax practitioner under
Section 7525 of the Internal Revenue Code, is not intended to be affected by the
foregoing.

 

11.15 CAPITAL ADEQUACY.

 

(a) Borrower’s Obligation to Pay. If any Lender or any Participant or Assignee
in the Loan determines that compliance with any law or regulation or with any
guideline or request from any central bank or other governmental agency (whether
or not having the force of law) affects or would affect the amount of capital
required or expected to be maintained by such Lender, such Participant or such
Assignee, or any corporation controlling such Lender, such Participant or such
Assignee, as a consequence of, or with reference to, such Lender’s, such
Participant’s or such Assignee’s or such corporation’s commitments or its making
or maintaining advances below the rate which such Lender, such Participant or
such Assignee or such corporation controlling such Lender, such Participant or
such Assignee could have achieved but for such compliance (taking into account
the policies of such Lender, such Participant or such Assignee or corporation
with regard to capital), then (without duplication of any other obligation of
Borrower under the Loan Documents) Borrower shall, from time to time, within
thirty (30) calendar days after written demand by such Lender, such Participant
or such Assignee, pay to such Lender, such Participant or such Assignee
additional amounts sufficient to compensate such Lender, such Participant or
such Assignee or such corporation controlling such Lender, such Participant or
such Assignee to the extent that such Lender, such Participant or such Assignee
determines such increase in capital is allocable to such Lender’s, such
Participant’s or such Assignee’s obligations hereunder. A certificate as to such
amounts, submitted to Borrower by such Lender, such Participant or such
Assignee, shall be conclusive and binding for all purposes, absent manifest
error.

 

72

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

(b) Replacement of Lender. If any Lender or any Participant or Assignee requests
compensation under Section 11.15(a) that is not requested by other Lenders,
Participants or Assignees, then, provided no Default has occurred that is
continuing Borrower may, at its sole expense and effort, upon notice to the
applicable Lender or Assignee (or the Lender that has entered into the
Participation Agreement with such Participant) and to the Administrative Agent
(i) require the Lender or Assignee requesting such compensation to assign and
delegate, without recourse, in accordance with and subject to the limitations
contained in Section 11.13(c) (except that either Borrower or the Eligible
Assignee to which such assignment shall be made shall pay the fee provided for
therein) its rights and obligations hereunder to an Eligible Assignee approved
by Borrower and Administrative Agent (which approval shall not be unreasonably
withheld) that shall assume such rights and obligations and shall pay (or cause
to be paid) to such Lender or Assignee the outstanding principal amount of the
Loan then held by it hereunder and all other obligations owing to it under the
Loan Documents or (ii) in the case of a Participant requesting such
compensation, require the Participant to assign and delegate (without recourse)
its rights and obligations under its participant agreement to a replacement
Participant approved by the Lender party to such participation agreement, which
replacement Participant shall assume such rights and obligations and shall pay
(or cause to be paid) to the assigning Participant the outstanding principal
amount of its participation interest in the Loan and all other obligations owing
to it by reason of such participation interest. A Lender or Assignee or
Participant shall not be required to make such assignment and delegation if,
prior thereto, such Lender, Participant or Assignee shall waive its claim for
the compensation theretofore claimed.

 

11.16 LENDER’S AGENTS. Administrative Agent and/or any Lender may designate an
agent or independent contractor to exercise any of such Person’s rights under
this Agreement, any of the other Loan Documents and Other Related Documents. Any
reference to Administrative Agent or any Lender in any of the Loan Documents or
Other Related Documents shall include Administrative Agent’s and such Lender’s
agents, employees or independent contractors. Borrower shall pay the costs of
such agent or independent contractor either directly to such person or to
Administrative Agent or such Lender in reimbursement of such costs, as
applicable.

 

11.17 EVIDENCE OF TAX PAYMENTS. Borrower shall provide to Administrative Agent,
on or before the date when due, evidence of the payments in full of any taxes or
assessments levied against any Property. If Borrower shall fail to furnish
evidence of such payment, Administrative Agent, on behalf of Lenders, is
authorized to secure, at Borrower’s expense, a tax service contract with a third
party vendor which shall provide tax information on the Property satisfactory to
Administrative Agent.

 

11.18 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b)
IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO

 

73

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

THE LOAN DOCUMENTS OR OTHER RELATED DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE
HAVE TO TRIAL BY JURY.

 

11.19 SEVERABILITY. If any provision or obligation under this Agreement, the
other Loan Documents or Other Related Documents shall be determined by a court
of competent jurisdiction to be invalid, illegal or unenforceable, that
provision shall be deemed severed from the Loan Documents and the Other Related
Documents and the validity, legality and enforceability of the remaining
provisions or obligations shall remain in full force as though the invalid,
illegal, or unenforceable provision had never been a part of the Loan Documents
or Other Related Documents, provided, however, that if the rate of interest or
any other amount payable under the Notes or this Agreement or any other Loan
Document, or the right of collectibility therefor, are declared to be or become
invalid, illegal or unenforceable, Lenders’ obligations to make advances under
the Loan Documents shall not be enforceable by Borrower.

 

11.20 TIME. Time is of the essence of each and every term of this Agreement.

 

11.21 HEADINGS. All article, section or other headings appearing in this
Agreement, the other Loan Documents and Other Related Documents are for
convenience of reference only and shall be disregarded in construing this
Agreement, any of the other Loan Documents and Other Related Documents.

 

11.22 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS. This Agreement shall
be construed and interpreted in accordance with and shall be governed by the
laws of the District of Columbia except to the extent preempted by United States
federal law. Administrative Agent or Lenders may bring any action or proceeding
to enforce or arising out of this Agreement in any court of competent
jurisdiction. If Administrative Agent or Lenders commence such an action in a
court located in the District of Columbia, or the United States District Court
for the District of Columbia, Borrower hereby agrees that it will submit and
does hereby irrevocably submit to the personal jurisdiction of such courts and
will not attempt to have such action dismissed, abated, or transferred on the
ground of forum non conveniens or similar grounds; provided, however, that
nothing contained herein shall prohibit Borrower from seeking, by appropriate
motion, to remove an action brought in a District of Columbia court to the
United States District Court for the District of Columbia. If such action is so
removed, however, Borrower shall not seek to transfer to any other district any
action which Administrative Agent or Lenders originally commence in such federal
court. Any action or proceeding brought by Borrower arising out of this
Agreement shall be brought solely in a court of competent

 

74

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

jurisdiction located in the District of Columbia or in the United States
District Court for the District of Columbia.

 

Borrower agrees that a summons and complaint or equivalent documents commencing
an action or proceeding in any court shall be validly and properly served and
shall confer personal jurisdiction over Borrower if served to Corporation
Service Company, 1090 Vermont Ave. NW, Washington, DC 20005 or Carol Weld King,
Esq., Hogan & Hartson L.L.P., 555 Thirteenth Street, NW, Washington, DC 20004,
each of whom Borrower hereby designates and appoints as Borrower’s authorized
agent to accept and acknowledge on its behalf service of any and all process
which may be served in such action or proceeding in any such court. Borrower
shall be sent, by certified mail to Borrower’s notice address as provided
herein, a copy of such summons and complaint at the time of service upon either
of such agents; provided, however, that any such copy shall be sent solely as a
courtesy to Borrower and its failure to receive such copy shall in no way affect
the validity and propriety of the service made on Borrower through such agent.
Borrower waives any objection which it may now or hereafter have to venue of any
such action or proceeding and waives any right to seek removal of any action or
proceeding commenced in accordance herewith. Borrower agrees that if it desires
to make any change in its agents for service, such change shall be subject to
Administrative Agent’s written approval, which approval shall not be
unreasonably withheld.

 

11.23 USA PATRIOT ACT NOTICE. COMPLIANCE. The USA Patriot Act of 2001 (Public
Law 107-56) and federal regulations issued with respect thereto require all
financial institutions to obtain, verify and record certain information that
identifies individuals or business entities which open an “account” with such
financial institution. Consequently, Administrative Agent may from time to time
request, and Borrower shall provide to Administrative Agent, Borrower’s name,
address, tax identification number and/or such other identification information
as shall be necessary for Administrative Agent or any Lender to comply with
federal law. An “account” for this purpose may include, without limitation, a
deposit account, cash management service, a transaction or asset account, a
credit account, a loan or other extension of credit, and/or other financial
services product.

 

11.24 INTEGRATION; INTERPRETATION. The Loan Documents and Other Related
Documents contain or expressly incorporate by reference the entire agreement of
the parties with respect to the matters contemplated therein and supersede all
prior negotiations or agreements, written or oral, including without limitation
any application, term sheet or commitment letter. The Loan Documents shall not
be modified except by written instrument executed by all parties (except to the
extent that this Agreement provides that the same may be modified by less than
all of the Lenders). Any reference to the Loan Documents or Other Related
Documents includes any amendments, renewals or extensions now or hereafter
approved by Administrative Agent (or, to the extent this Agreement provides that
the same require approval of the Requisite Lenders or all Lenders, by the
Requisite Lenders or all Lenders (as applicable)) in writing.

 

75

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

11.25 JOINT AND SEVERAL LIABILITY.

 

(a) The liability of the parties identified as Borrower under this Agreement
shall be joint and several.

 

(b) If and to the extent that a Borrower is or is deemed to be acting as a
surety or guarantor for the other Borrower (as principal), each such Borrower
that is or is deemed to be acting as a surety or guarantor for any other
Borrower (as principal) hereby waives: (i) any defense based upon any legal
disability or other defense of the principal, any other guarantor or other
person, or by reason of the cessation or limitation of the liability of any
principal from any cause other than full payment of the Loan and other
obligations secured by the Loan Documents; (ii) any defense based upon any lack
of authority of the officers, directors, partners, members or agents acting or
purporting to act on behalf of any principal or any defect in the formation of
any principal; (iii) any defense based upon the application by any principal of
the proceeds of the Loan for purposes other than the purposes represented by
such principal to Administrative Agent or Lenders or intended or understood by
Administrative Agent or Lenders; (iv) any and all rights and defenses arising
out of an election of remedies by Administrative Agent or Lenders, even though
that election of remedies, such as a nonjudicial foreclosure with respect to
security for a guaranteed obligation, has destroyed a surety’s or guarantor’s
rights of subrogation and reimbursement against the principal; (v) any defense
based upon Administrative Agent’s or Lenders’ failure to disclose to any surety
or guarantor any information concerning any principal’s financial condition or
any other circumstances bearing on any principal’s ability to pay all sums
payable under the Notes or any of the other Loan Documents; (vi) any defense
based upon any statute or rule of law which provides that the obligation of a
surety or guarantor must be neither larger in amount nor in any other respects
more burdensome than that of a principal; (vii) any right to require
Administrative Agent or Lenders to proceed against a particular surety,
guarantor or any other Person, to proceed against, apply or exhaust any security
held in respect of such or any other Person for the Loan and other obligations
secured by the Loan Documents owed by any Borrower hereunder; (viii) any defense
arising by reason of the invalidity, illegality or lack of enforceability of any
of the Loan Documents or by reason of any limitation, postponement or
prohibition on Lender’s right to payment or performance of the Liabilities, or
by reason of any act or omission by Lender or others which directly or
indirectly results in the discharge or release of a Borrower or any other Person
or any other obligations or any security therefor, whether by operation of law
otherwise; (ix) any defense arising by reason of Administrative Agent’s or
Lenders’ failure to obtain, perfect or maintain a perfected or prior (or any)
security interest in or lien upon any property of a Borrower or any other
Person, or by reason of any interest of Administrative Agent or Lenders in any
property, whether as owner thereof or the holder of a security interest therein
or lien or other Encumbrance thereon, being invalidated, voided, declared
fraudulent or preferential or otherwise set aside, or by reason of any
impairment by Administrative Agent or Lenders or any of them of any right to
recourse or collateral; (x) any right to require Administrative Agent or Lenders
to marshall any assets in favor of a surety or guarantor; (xi) any defense based
upon any failure of Administrative Agent or Lenders to give any surety or
guarantor notice of any sale or other disposition of or realization in respect
of any property securing any or all of the Loan or any guarantee thereof, or any
defect in any notice that may be given in connection with any sale or other
disposition of or realization in respect of any such property or any failure of
Administrative Agent or Lenders to comply with any provision of applicable law
in enforcing any lien or security interest upon any such property,

 

76

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

including any failure by Administrative Agent or Lenders to dispose of any such
property in a commercially reasonable manner; (xii) any right of subrogation,
any right to enforce any remedy which Administrative Agent or Lenders may have
against any principal and any right to participate in, or benefit from, any
security for the Loans now or hereafter held by Administrative Agent or Lenders;
(xiii) presentment, demand, protest and notice of any kind; and (xiv) any and
all rights and defenses that a surety or guarantor may have because the
principal’s debt is secured by real property; this means, among other things,
that: (A) Administrative Agent or Lenders may collect from a surety or guarantor
without first foreclosing on any real or personal property collateral pledged by
any principal; (B) if Administrative Agent or Lenders foreclose on any real
property collateral pledged by a principal, then (1) the amount of the debt may
be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price, and
(2) Administrative Agent or Lenders may collect from the surety or guarantor
even if Administrative Agent or Lenders, by foreclosing on the real property
collateral, has destroyed any right such surety or guarantor may have to collect
from any principal.

 

11.26 COUNTERPARTS. To facilitate execution, this document may be executed in as
many counterparts as may be convenient or required. It shall not be necessary
that the signature of, or on behalf of, each party, or that the signature of all
persons required to bind any party, appear on each counterpart. All counterparts
shall collectively constitute a single document. It shall not be necessary in
making proof of this document to produce or account for more than a single
counterpart containing the respective signatures of, or on behalf of, each of
the parties hereto. Any signature page to any counterpart may be detached from
such counterpart without impairing the legal effect of the signatures thereon
and thereafter attached to another counterpart identical thereto except having
attached to it additional signature pages.

 

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

 

77

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

IN WITNESS WHEREOF, Borrower, Administrative Agent and Lenders have executed
this Agreement as of the date appearing on the first page of this Agreement.

 

“BORROWER”                

Borrower’s Address:

HH LC PORTFOLIO LLC, a

Delaware limited liability company

     

c/o Highland Hospitality Corporation

8405 Greensboro Drive, Suite 500

McLean, VA 22102

By:   /s/ Tracy M.J. Colden       Attention:   General Counsel    

Tracy M.J. Colden

Vice President

      And    

HH TEXAS HOTEL ASSOCIATES, L.P., a

Delaware limited partnership

     

c/o Highland Hospitality Corporation

8405 Greensboro Drive, Suite 500

McLean, VA 22102

By: HHC TEXAS GP LLC, a Delaware

limited liability company, its General Partner

      Attention:   Chief Financial Officer By:   /s/ Tracy M.J. Colden          
     

Tracy M.J. Colden

Vice President

                “ADMINISTRATIVE AGENT”            

WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Administrative Agent and Lender

      Administrative Agent’s Address:

By:

  /s/ Mark F. Monahan      

Wells Fargo Bank, N.A.

c/o Real Estate Group

1750 H Street, NW, Suite 400

   

Mark F. Monahan

Vice President

     

Washington, D.C. 20006

Attention: Manager, Loan

Administration Department

            With a copy to:            

Wells Fargo Bank, N.A.

Real Estate Group

420 Montgomery Street, Sixth Floor

San Francisco, CA 94111

Attention: Chief Credit Officer

                  Real Estate Group

 

78

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

“LENDER”        

PNC BANK, NATIONAL

ASSOCIATION

     

Lender’s Address:

PNC Bank, National Association

7200 Wisconsin Ave., Suite 314

Bethesda, MD 20814

By:   /s/ William R. Lynch III       Attention    William Lynch     William R.
Lynch III             Senior Vice President       With a copy to:            

PNC Bank, National Association

One PNC Plaza

P1-POPP-19-2

Pittsburgh, PA 15222

Attention: Real Estate Finance Loan

Administration – Becky Sheerin

 

79