Exhibit 10.94









Exhibit 10.94







MEZZANINE LOAN AND SECURITY AGREEMENT

(Senior Mezzanine)

 










Dated as of February 9, 2005

 




 

Between

 




 

CNL HOTEL DEL SENIOR MEZZ PARTNERS, LP

as Mezzanine Borrower

 




 

and

 




 

GERMAN AMERICAN CAPITAL CORPORATION,

as Mezzanine Lender

 


























TABLE OF CONTENTS

Page


	
      I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
	 
	
      Section 1.1
	
      Definitions
	
      1

	
      Section 1.2
	
      Principles of Construction
	
      23

	 	 	 
	
      II. GENERAL TERMS
	 
	
      Section 2.1
	
      Loan; Disbursement to Mezzanine Borrower
	
      23

	
      Section 2.2
	
      Interest; Loan Payments; Late Payment Charge
	
      24

	
      Section 2.3
	
      Prepayments
	
      25

	
      Section 2.4
	
      Regulatory Change; Taxes
	
      27

	
      Section 2.5
	
      Conditions Precedent to Closing
	
      28

	 	 
	
      III. CASH MANAGEMENT
	 33
	
      Section 3.1
	
      Cash Management
	
      

	 	 
	
      IV. REPRESENTATIONS AND WARRANTIES
	 
	
      Section 4.1
	
      Mezzanine Borrower Representations
	
      42

	
      Section 4.2
	
      Survival of Representations
	
      50

	 	 
	
      V. MEZZANINE BORROWER COVENANTS
	 
	
      Section 5.1
	
      Affirmative Covenants
	
      51

	
      Section 5.2
	
      Negative Covenants
	
      61

	 	 
	
      VI. INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
	 
	
      Section 6.1
	
      Insurance Coverage Requirements
	
      65

	
      Section 6.2
	
      Condemnation and Insurance Proceeds
	
      66

	
      Section 6.3
	
      Certificates
	
      67

	 	 
	
      VII. INTENTIONALLY OMITTED
	 
	 	 
	
      VIII. TRANSFERS, INDEBTEDNESS AND SUBORDINATE LIENS
	 
	
      Section 8.1
	
      Restrictions on Transfers and Indebtedness
	
      67

	
      Section 8.2
	
      Sale of Building Equipment and Immaterial Transfers and
      Easements by Mortgage Borrower
	
      68

	
      Section 8.3
	
      Intentionally Omitted
	
      68

	
      Section 8.4
	
      Transfers of Interests in Mezzanine Borrower
	
      68

	
      Section 8.5
	
      Loan Assumption
	
      69





























	
      Section 8.6
	
      Notice Required; Legal Opinions
	
      72

	
      Section 8.7
	
      Leases
	
      72

	 	 
	
      IX. INTEREST RATE CAP AGREEMENT
	 
	
      Section 9.1
	
      Interest Rate Cap Agreement
	
      74

	
      Section 9.2
	
      Pledge and Collateral Assignment
	
      74

	
      Section 9.3
	
      Covenants
	
      75

	
      Section 9.4
	
      Representations and Warranties
	
      76

	
      Section 9.5
	
      Payments
	
      77

	
      Section 9.6
	
      Remedies
	
      77

	
      Section 9.7
	
      Sales of Rate Cap Collateral (Senior Mezzanine)
	
      80

	
      Section 9.8
	
      Public Sales Not Possible
	
      80

	
      Section 9.9
	
      Receipt of Sale Proceeds
	
      81

	
      Section 9.10
	
      Extension Interest Rate Cap Agreement (Senior
    Mezzanine)
	
      81

	 	 	 
	
      X. RESERVED
	 	 
	 
	
      XI. BOOKS AND RECORDS, FINANCIAL STATEMENTS, REPORTS AND OTHER
      INFORMATION

	
      Section 11.1
	
      Books and Records
	
      81

	
      Section 11.2
	
      Financial Statements
	
      82

	 	 
	
      XII. ENVIRONMENTAL MATTERS
	 
	
      Section 12.1
	
      Representations
	
      83

	
      Section 12.2
	
      Covenants
	
      83

	
      Section 12.3
	
      Environmental Reports
	
      84

	
      Section 12.4
	
      Environmental Indemnification
	
      84

	
      Section 12.5
	
      Recourse Nature of Certain Indemnifications
	
      85

	 	 	 
	
      XIII. RESERVED
	 
	 	 	 
	
      XIV. RESERVED
	 
	 	 
	
      XV. ASSIGNMENTS AND PARTICIPATIONS
	 
	
      Section 15.1
	
      Assignment and Acceptance
	
      86

	
      Section 15.2
	
      Effect of Assignment and Acceptance
	
      86

	
      Section 15.3
	
      Content
	
      86

	
      Section 15.4
	
      Register
	
      87

	
      Section 15.5
	
      Substitute Notes
	
      87

	
      Section 15.6
	
      Participations
	
      88





























	
      Section 15.7
	
      Disclosure of Information
	
      88

	
      Section 15.8
	
      Security Interest in Favor of Federal Reserve Bank
	
      89

	 	 	 
	
      XVI. RESERVED
	 
	 	 	 
	
      XVII. DEFAULTS
	 
	
      Section 17.1
	
      Event of Default
	
      89

	
      Section 17.2
	
      Remedies
	
      93

	
      Section 17.3
	
      Remedies Cumulative; Waivers
	
      95

	
      Section 17.4
	
      Costs of Collection
	
      95

	
      Section 17.5
	
      Distribution of Collateral Proceeds
	
      95

	 	 
	
      XVIII. SPECIAL PROVISIONS
	 
	
      Section 18.1
	
      Exculpation
	
      96

	 	 	 
	
      XIX. MISCELLANEOUS
	 
	
      Section 19.1
	
      Survival
	
      98

	
      Section 19.2
	
      Mezzanine Lender's Discretion
	
      99

	
      Section 19.3
	
      Governing Law
	
      99

	
      Section 19.4
	
      Modification, Waiver in Writing
	
      100

	
      Section 19.5
	
      Delay Not a Waiver
	
      100

	
      Section 19.6
	
      Notices
	
      101

	
      Section 19.7
	
      TRIAL BY JURY
	
      102

	
      Section 19.8
	
      Headings
	
      103

	
      Section 19.9
	
      Severability
	
      103

	
      Section 19.10
	
      Preferences
	
      103

	
      Section 19.11
	
      Waiver of Notice
	
      103

	
      Section 19.12
	
      Expenses; Indemnity
	
      104

	
      Section 19.13
	
      Exhibits and Schedules Incorporated
	
      106

	
      Section 19.14
	
      Offsets, Counterclaims and Defenses
	
      106

	
      Section 19.15
	
      Liability of Assignees of Mezzanine Lender
	
      106

	
      Section 19.16
	
      No Joint Venture or Partnership; No Third Party
      Beneficiaries
	
      107

	
      Section 19.17
	
      Publicity
	
      107

	
      Section 19.18
	
      Waiver of Marshalling of Assets
	
      107

	
      Section 19.19
	
      Waiver of Counterclaim and other Actions
	
      108

	
      Section 19.20
	
      Conflict; Construction of Documents; Reliance
	
      108





























	
      Section 19.21
	
      Prior Agreements
	
      108

	
      Section 19.22
	
      Counterparts
	
      109

	
      Section 19.23
	
      Disclosure
	
      109







EXHIBITS AND
SCHEDULES





	
      EXHIBIT A
	
      INTENTIONALLY OMITTED

	
      EXHIBIT B
	
      FORM OF PLEDGE ACKNOWLEDGEMENT

	
      EXHIBIT C
	
      SINGLE PURPOSE ENTITY PROVISIONS

	
      EXHIBIT D
	
      ENFORCEABILITY OPINION REQUIREMENTS

	
      EXHIBIT E
	
      NON-CONSOLIDATION OPINION REQUIREMENTS

	
      EXHIBIT F
	
      COUNTERPARTY OPINION REQUIREMENTS

	
      EXHIBIT G
	
      FORM OF TENANT ESTOPPEL LETTER

	
      EXHIBIT H
	
      BORROWER ORGANIZATIONAL STRUCTURE

	
      EXHIBIT I
	
      INTEREST RATE CAP AGREEMENT REQUIREMENTS

	
      EXHIBIT J
	
      FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

	
      EXHIBIT K
	
      INTENTIONALLY OMITTED

	
      EXHIBIT L
	
      INTENTIONALLY OMITTED

	
      EXHIBIT M
	
      COUNTERPARTY ACKNOWLEDGMENT

	
      EXHIBIT N
	
      INTENTIONALLY OMITTED

	
      EXHIBIT O
	
      FORM OF INDEPENDENT DIRECTOR CERTIFICATE

	
      EXHIBIT P
	
      INTENTIONALLY OMITTED

	
      EXHIBIT Q
	
      INTENTIONALLY OMITTED

	
      EXHIBIT R
	
      ARTICLE 8 OPT IN LANGUAGE

	 	 
	
      SCHEDULE I
	
      LITIGATION SCHEDULE

	
      SCHEDULE II
	
      INTENTIONALLY DELETED

	
      SCHEDULE III
	
      PRE-APPROVED TRANSFEREES

	
      SCHEDULE IV
	
      PRE-APPROVED MANAGERS



















































MEZZANINE LOAN AND SECURITY AGREEMENT

(Senior Mezzanine)

 

THIS MEZZANINE LOAN AND SECURITY AGREEMENT (Senior Mezzanine), dated
as of February 9, 2005 (as amended, restated, replaced, supplemented or
otherwise modified from time to time, this Agreement), between
CNL HOTEL DEL SENIOR MEZZ PARTNERS, LP, a Delaware limited partnership
(Mezzanine Borrower) having an office c/o CNL Hotels &
Resorts, Inc, Center at City Commons, 450 South Orange Avenue, Orlando, Florida
32801 and GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation, having an
address at 60 Wall Street, 10th Floor, New York, New York 10005 (together with
its successors and assigns, Mezzanine Lender).

 

W I T N E S S E T H:




WHEREAS, Mezzanine Borrower desires to obtain the Loan (as
hereinafter defined) from Mezzanine Lender;

 

WHEREAS, Mezzanine Lender is willing to make the Loan to Mezzanine
Borrower, subject to and in accordance with the terms of this Agreement and the
other Loan Documents (Senior Mezzanine) (as hereinafter defined).

 

NOW, THEREFORE, in consideration of the making of the Loan by
Mezzanine Lender and the covenants, agreements, representations and warranties
set forth in this Agreement, the parties hereto hereby covenant, agree,
represent and warrant as follows:

 


	I.  	
      DEFINITIONS; PRINCIPLES OF
      CONSTRUCTION




 

Section
1.1  Definitions

 

For all purposes of this Agreement, except as otherwise expressly
required or unless the context clearly indicates a contrary intent:

 

     Acceptable
Counterparty shall mean a bank or other
financial institution which has a long-term unsecured debt or counterparty
rating of "A+" or higher by S&P and its equivalent by Moody's and, if the
counterparty is rated by Fitch, by Fitch.

 

     Acceptable Management
Agreement shall mean, with respect to the
Property, a new or amended management agreement with the Manager which agreement
shall be upon terms and conditions no less favorable in all material respects to
the Mezzanine Borrower, Operating Lessee, and Mezzanine Lender than those
contained in the Management Agreement or any new or amended management agreement
entered into by Mortgage Borrower, Operating Lessee, and/or Manager with respect
to the Property in accordance with the terms of Section 5.2.14
hereof.

 






















      Acceptable
Manager shall mean (i) the current Manager as
of the Closing Date or any wholly owned Affiliate (whether direct or indirect)
of KSL DC Operating, LLC, or a member of KSL DC Operating LLC, or KSL II
Management Operations, LLC (ii) at any time after the Closing Date, any
Pre-approved Manager listed on Schedule IV hereto,
provided each such property manager continues to be Controlled by substantially
the same Persons Controlling such property manager as of the Closing Date (or if
such Manager is a publicly traded company, such Manager continues to be publicly
traded on an established securities market), (iii) any other hotel
management company that manages a system of at least six (6) hotels or resorts
of a class and quality at least as comparable to the Property (as reasonably
determined by Manager and Operating Lessee; provided, however Operating Lessee
shall obtain Mortgage Lender’s prior approval of such determination, not to be
unreasonably withheld), and containing not fewer than 1,500 hotel rooms in the
aggregate (including condominium units under management) in the aggregate, (iv)
any Close Affiliate of any of the foregoing Persons or (v) any other reputable
and experienced professional hotel management company (A) whose competence,
qualifications, and experience in managing properties of a quality equal to or
exceeding the quality of the Property are comparable to, or greater than that of
the current Manager as of the Closing Date, or a Close Affiliate thereof and (B)
with respect to which Mezzanine Lender has consented to in writing. 

 

Account Agreement (Mortgage) shall mean the
Account and Control Agreement, dated as of the date hereof, among Mortgage
Lender, Mortgage Borrower and Cash Management Bank (Mortgage).

 

Account Agreement (Senior Mezzanine) shall
mean the Account and Control Agreement (Senior Mezzanine), dated the date
hereof, among Mezzanine Lender, Mezzanine Borrower and Cash Management Bank
(Senior Mezzanine).

 

Account Collateral (Senior Mezzanine) shall
have the meaning set forth in Section 3.1.2.

 

Acknowledgment shall mean the Acknowledgment,
dated on or about the date hereof made by Counterparty, or as applicable,
Acceptable Counterparty in the form of Exhibit M.

 

Additional Non-Consolidation Opinion shall
have the meaning set forth in Section 4.1.20(b).

 

Affiliate shall mean, with respect to any
specified Person, any other Person directly or indirectly Controlling or
Controlled by or under direct or indirect common Control with, or any general
partner or managing member in, such specified Person. 

 

Agreement shall mean this Agreement, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.

 

Approved Bank shall have the meaning set
forth in the Account Agreement (Senior Mezzanine). 

 








2













Assignment and Acceptance shall mean an
assignment and acceptance entered into by Mezzanine Lender and an assignee, and
accepted by Mezzanine Lender in accordance with Article XV and in substantially
the form of Exhibit J or such other form customarily used by Mezzanine Lender in
connection with the participation or syndication of mortgage or mezzanine loans
at the time of such assignment. 

 

Assignment of Management Agreement (Senior
Mezzanine) shall mean that certain Manager's Consent, Subordination
of Management Agreement, and Non-disturbance Agreement (Senior Mezzanine), dated
the date hereof, among Mezzanine Lender, Mezzanine Borrower, Operating Lessee,
and Manager, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

 

Assignment of Management Agreement (Mortgage)
shall mean that certain Manager's Consent, Subordination of Management
Agreement, and Non-disturbance Agreement, dated the date hereof, among Mortgage
Lender, Mortgage Borrower and Manager, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

Bankruptcy Code shall mean Title 11,
U.S.C.A., as amended from time to time and any successor statute thereto.

 

Beneficial when used in the context of
beneficial ownership has the analogous meaning to that specified in Rule 13d-3
under the Securities Exchange Act of 1934, as amended.

 

Best of Mezzanine Borrower's Knowledge, shall
mean the actual (as opposed to imputed or constructive) present knowledge of:
Eric Resnick, Peter McDermott, John Brady, and Barry Bloom after due inquiry,
and without creating any personal liability on the part of any said individuals.
In the case where the term "Best of Mezzanine Borrower's Knowledge" is used in
the context of representations or warranties of Borrower to be made after the
date hereof, the term shall include the Person or Persons, as applicable, that
occupy the capacities of said individuals on the date such representation or
warranty is made to the extent that one or more of such individuals no longer
occupy their current capacities.

 

Budget shall have the meaning set forth in
the Loan Agreement (Mortgage).

 

Building Equipment shall have the meaning set
forth in the Security Instrument.

 

Business Day shall mean any day other than a
Saturday, Sunday or any other day on which national banks in New York,
California or in the state in which Servicer is located are not open for
business. When used with respect to an Interest Determination Date, Business Day
shall mean any day on which dealings in deposits in U.S. Dollars are transacted
in the London interbank market.

 








3













Capital Expenditures shall mean any amount
incurred in respect of capital items which in accordance with GAAP would not be
included in Mortgage Borrower’s annual financial statements for an applicable
period as an operating expense of the Property.

 

Cash Management Bank (Senior Mezzanine) shall
mean LaSalle Bank National Association or any successor Approved Bank acting as
Cash Management Bank (Senior Mezzanine) under the Account Agreement (Senior
Mezzanine) or other financial institution approved by the Mezzanine
Lender.

 

Cash Management Bank (Mortgage) shall have
the meaning set forth in the Loan Agreement (Mortgage).

 

Close Affiliate shall mean with respect to
any Person (the "First Person") any other Person (each, a "Second Person") which
is an Affiliate of the First Person and in respect of which any of the following
are true: (a) the Second Person owns, directly or indirectly, at least 75% of
all of the legal, Beneficial and/or equitable interest in such First Person, (b)
the First Person owns, directly or indirectly, at least 75% of all of the legal,
Beneficial and/or equitable interest in such Second Person, or (c) a third
Person owns, directly or indirectly, at least 75% of all of the legal,
Beneficial and/or equitable interest in both the First Person and the Second
Person.

 

Closing Date shall mean the date of this
Agreement set forth in the first paragraph hereof.

 

Closing Date NOI shall mean
$37,883,902.

 

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

 

Collateral shall mean collectively (i) all of
the Pledged Collateral and all proceeds thereof, (ii) all Receipts, (iii) any
stock certificates or other certificates, membership interest certificates or
instruments evidencing any of the foregoing property described in clauses (i)
and (ii) above, (iv) the Rate Cap Collateral (Senior Mezzanine), (v) the Account
Collateral (Senior Mezzanine) and (vi) all other rights appurtenant to the
property described in clauses (i) through (v) above.

 

Collateral Accounts shall have the meaning
set forth in the Loan Agreement (Mortgage).

 

Collateral Accounts (Intermediate Mezzanine)
shall have the meaning set forth in the Intermediate Mezzanine Loan
Agreement.

 

Collateral Accounts (Junior Mezzanine) shall
have the meaning set forth in the Junior Mezzanine Loan Agreement.

 








4













Collateral Accounts (Senior Mezzanine) shall
have the meaning set forth in Section 3.1.1.

 

Control shall mean (i) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise and (ii) the ownership, direct or indirect,
of no less than 51% of the voting securities of such Person, and the terms
Controlled, Controlling and Common Control shall have correlative
meanings.

 

Counterparty shall mean the counterparty to
the Interest Rate Cap Agreement (Senior Mezzanine) and any counterparty under a
Replacement Interest Rate Cap Agreement (Senior Mezzanine) or Extension Interest
Rate Cap Agreement and, if applicable, any credit support provider identified in
the Interest Rate Cap Agreement, Replacement Interest Rate Cap Agreement (Senior
Mezzanine) or Extension Interest Rate Cap Agreement.

 

Counterparty Opinion shall have the meaning
set forth in Section 9.3(f).

 

Debt shall mean, with respect to any Person
at any time, (a) indebtedness or liability of such Person for borrowed money
whether or not evidenced by bonds, debentures, notes or other instruments, or
for the deferred purchase price of property or services; (b) obligations of such
Person as lessee under leases which should have been or should be, in accordance
with GAAP, recorded as capital leases; (c) current liabilities of such Person in
respect of unfunded vested benefits under plans covered by Title IV of ERISA;
(d) obligations issued for, or liabilities incurred on the account of, such
Person; (e) obligations or liabilities of such Person arising under letters of
credit, credit facilities or other acceptance facilities; (f) obligations of
such Person under any guarantees or other agreement to become secondarily liable
for any obligation of any other Person, endorsements (other than for collection
or deposit in the ordinary course of business) and other contingent obligations
to purchase, to provide funds for payment, to supply funds to invest in any
Person or otherwise to assure a creditor against loss; (g) obligations of such
Person secured by any Lien on any property of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement. 

 

Debt Service (Senior Mezzanine) shall mean,
with respect to any particular period of time, scheduled interest payments under
the Mezzanine Note.

 

Default shall mean the occurrence of any
event hereunder or under any other Loan Document (Senior Mezzanine) which, but
for the giving of notice or passage of time, or both, would be an Event of
Default.

 

Default Rate shall have the meaning set forth
in the Note.

 

Disqualified Transferee shall mean any Person
or its Close Affiliate that, (i) has (within the past five (5) years) defaulted,
or is now in default, beyond any applicable cure period, of its material
obligations, under any material written agreement with Mezzanine Lender, any
Affiliate of Mezzanine Lender, or, unless approved by the 

 








5













Mezzanine Lender, any other financial institution or other person
providing or arranging financing; (ii) has been convicted in a criminal
proceeding for a felony or a crime involving moral turpitude or that is an
organized crime figure or is reputed (as determined by Mezzanine Lender in its
sole discretion) to have substantial business or other affiliations with an
organized crime figure; (iii) has at any time filed a voluntary petition under
the Bankruptcy Code or any other federal or state bankruptcy or insolvency law;
(iv) as to which an involuntary petition (which was not subsequently dismissed
within one hundred twenty (120) days) has at any time been filed under the
Bankruptcy Code or any other federal or state bankruptcy or insolvency law; (v)
has at any time filed an answer consenting to or acquiescing in any involuntary
petition filed against it by any other person under the Bankruptcy Code or any
other federal or state bankruptcy or insolvency law; (vi) has at any time
consented to or acquiesced in or joined in an application for the appointment of
a custodian, receiver, trustee or examiner for itself or any of its property;
(vii) has at any time made an assignment for the benefit of creditors, or has at
any time admitted its insolvency or inability to pay its debts as they become
due; or (viii) has been found by a court of competent jurisdiction or other
governmental authority in a comparable proceeding to have violated any federal
or state securities laws or regulations promulgated thereunder.

 

Downgrade shall have the meaning as set forth
in Section 9.3(c) hereof.

 

Eligibility Requirements means, with respect
to any Person, that such Person (i) has total assets (in name or under
management) in excess of $600,000,000 and (except with respect to a pension
advisory firm or similar fiduciary) capital/statutory surplus or shareholder's
equity of $250,000,000 and (ii) is regularly engaged in the business of making
or owning commercial real estate loans or operating commercial properties.

 

Eligible Account has the meaning set forth in
the Account Agreement (Senior Mezzanine). 

 

Environmental Certificate shall have the
meaning set forth in Section 12.2.1.

 

Environmental Claim shall have the meaning
set forth in the Loan Agreement (Mortgage).

 

Environmental Event shall have the meaning
set forth in Section 12.2.1.

 

Environmental Indemnity (Senior Mezzanine)
shall mean the Environmental Indemnity, dated the date hereof, made by Guarantor
in favor of Mezzanine Lender.

 

Environmental Law shall have the meaning
provided in the Environmental Indemnity (Senior Mezzanine).

 

Environmental Reports shall have the meaning
set forth in Section 12.1.

 








6













ERISA shall mean the United States Employee
Retirement Income Security Act of 1974, as amended from time to time, and the
regulations promulgated and the rulings issued thereunder.

 

ERISA Affiliate shall have the meaning set
forth in Section 4.1.9.

 

Event of Default shall have the meaning set
forth in Section 17.1(a).

 

Excess Cash Flow shall mean "Excess Cash
Flow" as defined in the Loan Agreement (Mortgage).

 

Exculpated Parties shall have the meaning set
forth in Section 18.1.1.

 

Excusable Delay shall men a delay due to acts
of god, governmental restrictions, stays, judgments, orders, decrees, enemy
actions, civil commotion, fire, casualty, strikes, work stoppages, shortages of
labor or materials or other causes beyond the reasonable control of Mezzanine
Borrower or Mortgage Borrower, but Mezzanine Borrower's or Mortgage Borrower's
lack of funds in and of itself shall not be deemed a cause beyond the control of
Mezzanine Borrower or Mortgage Borrower, as applicable.

 

Extension Interest Rate Cap Agreement shall
mean, following the Mezzanine Borrower's exercise of its option to extend the
Maturity Date pursuant to Section 5 of the Mezzanine Note, an Interest Rate Cap
Agreement or Agreements (together with the confirmations and schedules relating
thereto), each from an Acceptable Counterparty and satisfying the requirements
set forth on Exhibit I hereto; provided that, to the
extent any such interest rate cap agreement does not meet the foregoing
requirements, an "Extension Interest Rate Cap Agreement" shall be such interest
rate cap agreement as may be approved by each of the Mezzanine Lender in its
sole discretion). 

 

Fiscal Year shall mean the period commencing
on the Closing Date and ending on and including December 31 of the calendar year
in which the Closing Date occurs and thereafter each twelve month period
commencing on January 1 and ending on December 31 until the Debt is repaid in
full, or such other common fiscal year of Borrower as Borrower may select from
time to time with the prior consent of Lender, such consent not to be
unreasonably withheld.

 

GAAP shall mean the generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and
authority within the accounting profession), or in such other statements by such
entity as may be in general use by significant segments of the U.S. accounting
profession, to the extent such principles are applicable to the facts and
circumstances on the date of determination, as appropriately modified by the
Uniform System, and as further modified for purposes of calculating Net
Membership Cash Flow.

 

General Partner shall mean CNL Hotel Del
Senior Mezz Partners GP, LLC, a Delaware limited liability company.

 








7













Governmental Authority shall mean any court,
board, agency, commission, office or other authority of any nature whatsoever
for any governmental unit (federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence.

 

Guarantor shall mean, collectively, CNL
Hospitality Partners, LP, a Delaware limited partnership and KSL DC Operating,
LLC, a Delaware limited liability company.

 

Hazardous Materials shall have the meaning
provided in the Environmental Indemnity (Senior Mezzanine).

 

Holding Account shall mean the "Holding
Account" and various sub-accounts to the Holding Account established pursuant to
the Loan Agreement (Mortgage) as in effect on the date hereof.

 

Impositions shall have
the meaning set forth in the Loan Agreement (Mortgage).

 

Increased Costs shall have the meaning set
forth in Section 2.4.1.

 

Indebtedness shall mean, at any given time,
the Principal Amount, together with all accrued and unpaid interest thereon and
all other obligations and liabilities due or to become due to Mezzanine Lender
pursuant hereto, under the Mezzanine Note or in accordance with the other Loan
Documents (Senior Mezzanine) and all other amounts, sums and expenses paid by or
payable to Mezzanine Lender hereunder or pursuant to the Mezzanine Note or the
other Loan Documents (Senior Mezzanine).

 

Indemnified Parties shall have the meaning
set forth in Section 19.12(b).

 

Independent shall mean, when used with
respect to any Person, a Person who: (i) does not have any direct financial
interest or any material indirect financial interest in Mortgage Borrower,
Mezzanine Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower,
or in any of their Affiliates, (ii) is not connected with Mortgage Borrower,
Mezzanine Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower,
or any of their Affiliates, as an officer, employee, promoter, underwriter,
trustee, partner, member, manager, creditor, director, supplier, customer or
person performing similar functions and (iii) is not a member of the immediate
family of a Person defined in (i) or (ii) above.

 

Independent Architect shall mean an
architect, engineer or construction consultant selected by Mezzanine Borrower or
Mortgage Borrower, as applicable, which is Independent, licensed to practice in
the State and has at least five (5) years of architectural experience and which
is reasonably acceptable to Mezzanine Lender.

 








8













Independent Director,
Independent Manager, or
Independent Member shall mean a Person who is
not and will not be while serving and has never been (i) a member (other than an
Independent Member), manager (other than an Independent Manager), director,
(other than an Independent Director), employee, attorney, or counsel of
Mezzanine Borrower, Mezzanine Borrower, Intermediate Mezzanine Borrower, Junior
Mezzanine Borrower, or their Affiliates (provided that Mortgage Borrower,
Mezzanine Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower,
and each of their respective general partners, may not have the same Independent
Directors, Independent Managers or Independent Members), (ii) in the seven (7)
years prior to the Closing Date, a customer, supplier or other Person who
derives more than 1% of its purchases or revenues from its activities with
Mezzanine Borrower, Mortgage Borrower, Intermediate or their Affiliates, (iii) a
direct or indirect legal or beneficial owner in such entity or any of its
Affiliates, (iv) a member of the immediate family of any member, manager,
employee, attorney, customer, supplier or other Person referred to above, or (v)
a person Controlling or under the common Control of anyone listed in (i) through
(iv) above. A Person that otherwise satisfies the foregoing shall not be
disqualified from serving as an Independent Director or Independent Manager or
Independent Member if such individual is at the time of initial appointment, or
at any time while serving as such, is an Independent Director or Independent
Manager or Independent Member, as applicable, of a Single Purpose Entity
affiliated with Mezzanine Borrower, other than the Mortgage Borrower, Mezzanine
Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower, or each of
their respective general partners.

 

Initial LIBOR Cap Strike Rate shall mean
4%.

 

Insurance Requirements shall have the meaning
set forth in the Loan Agreement (Mortgage).

 

Interest Determination Date shall have the
meaning set forth in the Mezzanine Note.

 

Interest Period shall have the meaning set
forth in the Mezzanine Note.

 

Interest Rate Cap Agreement (Senior
Mezzanine) shall mean an Interest Rate Agreement or Agreements
(together with the confirmation and schedules relating thereto), or, with
Mezzanine Lender's prior written consent (which shall not be unreasonably
withheld or delayed), a swap or other interest rate hedging instrument, each
between a Counterparty and Mezzanine Borrower obtained by Mezzanine Borrower and
collaterally assigned to Mezzanine Lender pursuant to this Agreement, and each
satisfying the requirements set forth in Exhibit I and,
in the case of a swap or other interest rate hedging agreement consented to by
Mezzanine Lender, any additional requirements of the Rating Agencies). 

 

Intermediate Mezzanine Account shall mean
account number 722386.1 at LaSalle Bank National Association.

 








9













Intermediate Mezzanine Borrower shall mean
CNL Hotel Del Intermediate Mezz Partners, LP, a Delaware limited
partnership.

 

Intermediate Mezzanine Lender shall mean
German American Capital Corporation, a Maryland corporation, its successors and
assigns.

 

Intermediate Mezzanine Loan shall mean the
$20,000,000 mezzanine loan from Intermediate Mezzanine Lender to the
Intermediate Mezzanine Borrower.

 

Intermediate Mezzanine Loan Agreement shall
mean that certain Mezzanine Loan and Security Agreement (Intermediate
Mezzanine), dated as of the date hereof, between Intermediate Mezzanine
Borrower, as borrower, and Intermediate Mezzanine Lender, as lender, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.

 

Intermediate Mezzanine Loan Default Notice
shall mean a notice from Intermediate Mezzanine Lender (upon which Lender may
conclusively rely without any inquiry into the validity thereof) that an "Event
of Default" has occurred and is continuing under any of the Intermediate
Mezzanine Loan Documents.

 

Intermediate Mezzanine Loan Default Revocation
Notice shall shall have the meaning set forth in Section
3.1.6(f).

 

Junior Mezzanine Account shall mean an
account to be established at LaSalle Bank National Association in the event the
Junior Mezzanine Account is funded.

 

Junior Mezzanine Borrower shall mean CNL
Hotel Del Junior Mezz Partners, LP, a Delaware limited partnership.

 

Junior Mezzanine Lender shall mean German
American Capital Corporation, a Maryland corporation, its successors and
assigns.

 

Junior Mezzanine Loan shall mean the
$60,000,000 mezzanine loan from Junior Mezzanine Lender to the Junior Mezzanine
Borrower, to be funded on or after the date hereof, that will be evidenced and
secured by the Junior Mezzanine Loan Documents.

 

Junior Mezzanine Loan Agreement shall mean
that certain Mezzanine Loan and Security Agreement (Junior Mezzanine), to be
funded on or after the date hereof, between Junior Mezzanine Borrower, as
borrower, and Junior Mezzanine Lender, as lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

 

Junior Mezzanine Loan Default Notice shall
mean a notice from Junior Mezzanine Lender (upon which Lender may conclusively
rely without any inquiry into the validity thereof) that an "Event of Default"
has occurred and is continuing under any of the Junior Mezzanine Loan
Documents.

 








10













Junior Mezzanine Loan Default Revocation
Notice shall shall have the meaning set forth in Section
3.1.6(f).

 

Late Payment Charge shall have the meaning
set forth in Section 2.2.3.

 

Lease shall have the meaning set forth in the
Loan Agreement (Mortgage).

 

Legal Requirements shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

LIBOR shall have the meaning set forth in the
Mezzanine Note.

 

LIBOR Margin shall have the meaning set forth
in the Mezzanine Note.

 

LIBOR Rate shall have the meaning set forth
in the Mezzanine Note.

 

Lien shall mean any mortgage, deed of trust,
lien, pledge, hypothecation, assignment, security interest, or any other
encumbrance or charge on or affecting Mortgage Borrower, Mezzanine Borrower, the
Collateral, the Property, any portion thereof or any interest therein,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, the filing of any financing statement, and the filing of
mechanic's, materialmen's and other similar liens and encumbrances.

 

Loan shall mean the loan in the amount of
$90,000,000 made by Mezzanine Lender to Mezzanine Borrower pursuant to this
Agreement.

 

Loan (Mortgage) or Mortgage Loan shall mean
the loan in the amount of $230,000,000 made by Mortgage Lender to Mortgage
Borrower pursuant to the Loan Agreement (Mortgage).

 

Loan Agreement (Mortgage) shall mean the Loan
and Security Agreement, dated as of the date hereof, between Mortgage Borrower,
as borrower and Mortgage Lender, as lender.

 

Loan Documents (Senior
Mezzanine) shall mean, collectively, this
Agreement, the Mezzanine Note, the Account Agreement (Senior Mezzanine), the
Recourse Guaranty (Senior Mezzanine), the Environmental Indemnity (Senior
Mezzanine) and the Pledge and any and all other agreements, instruments or
documents executed by Mezzanine Borrower (or another Person) evidencing,
securing or delivered in connection with the Loan and the transactions
contemplated thereby, including, without limitation, any certificates or
representations delivered by or on behalf of Mezzanine Borrower, any Affiliate
of Mezzanine Borrower, Manager or any Affiliate of Manager (including, without
limitation, any certificates in connection with any legal opinions delivered on
the date hereof).

 








11













Loan Documents (Mortgage) shall mean,
collectively, the Loan Agreement (Mortgage), the Mortgage Note, the Security
Instrument, the Assignment of Leases, the Trademark Security Agreement
(Mortgage), the Environmental Indemnity (Mortgage), the Assignment of Management
Agreement (Mortgage), the Account Agreement (Mortgage), the Recourse Guaranty
(Mortgage) and all other documents executed and/or delivered by Mortgage
Borrower in connection with the Loan (Mortgage) including any certifications or
representations delivered by or on behalf of Mortgage Borrower, any Affiliate of
Mortgage Borrower, Manager, or any Affiliate of the Manager (including, without
limitation, any certificates in connection with any legal opinions delivered on
the date hereof), together with all of the Accommodation Security Documents
executed by the Operating Lessee. 

 

Low DSCR Period shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

Management Agreement shall have the meaning
set forth in the Loan Agreement (Mortgage).

 

Management Control shall mean, with respect
to any direct or indirect interest in the Mortgage Borrower or the Property (not
including Manager under an Approved Management Agreement), the power and
authority to make and implement or cause to be made and implemented all material
decisions with respect to the operation, management, financing and disposition
of the specified interest.

 

Management Fee shall mean an amount equal to
the monthly property management fees payable to the Manager pursuant to the
terms of the Management Agreement for management services, the Group Services
Fee (including, but not limited to, the Sales and Marketing Group Services
Expense payable monthly to Manager equal to up to one percent (1%) of Hotel
Revenues), incentive management fees and any other fees described in the
Management Agreement, and any allocated franchise fees.

 

Manager shall mean KSL DC Management LLC, or
any replacement "Manager" appointed in accordance with Section 5.2.14
hereof.

 

Manager Accounts shall mean the "Bank
Accounts" (as defined in the Management Agreement) maintained by Manager in the
name of Mortgage Borrower or Operating Lessee with respect to the Property and
in accordance with the terms of each Management Agreement.

 

Material Adverse Effect shall mean any event
or condition that has a material adverse effect on (i) the Property taken as a
whole, (ii) the use, operation, or value of the Property, (iii) the business,
profits, operations or financial condition of Mortgage Borrower or Mezzanine
Borrower, (iv) the ability of Mezzanine Borrower to repay the principal and
interest of the Loan as it becomes due or to satisfy any of Mezzanine Borrower's
obligations under the Loan Documents (Senior Mezzanine), (v) the ability of
Mortgage Borrower to repay the principal and interest of the Loan (Mortgage) as
it becomes due or to satisfy any of Mortgage Borrower's obligations under 

 








12













the Loan Documents (Mortgage), (vi) the validity or enforceability of
any of the Loan Documents (Senior Mezzanine) against any party thereto, (vii)
the Collateral taken as a whole or (viii) the priority of the Liens in favor of
Mezzanine Lender.

 

Material Lease shall mean any Lease (a)
demising a premises within the Property that is more than 10,000 net rentable
square feet or (b) that is for a term equal to or greater than sixty (60)
months.

 

Maturity Date shall have the meaning set
forth in the Mezzanine Note.

 

Maturity Date Payment shall have the meaning
set forth in the Mezzanine Note.

 

Maximum Legal Rate shall mean the maximum
non-usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the indebtedness
evidenced by the Mezzanine Note and as provided for herein or the other Loan
Documents (Senior Mezzanine), under the laws of such state or states whose laws
are held by any court of competent jurisdiction to govern the interest rate
provisions of the Loan.

 

Maximum Pay Rate shall mean, (A) the Initial
LIBOR Cap Strike Rate through the Initial Maturity Date and (B) during the term
of each Extension Option (as defined in the Mezzanine Note), the lesser of (i)
the product of (x) 6% and (y) a fraction, the numerator of which is trailing
twelve month Net Operating Income as of the end of the Initial Maturity Date (or
First Extended Maturity Date) and the denominator of which is Closing Date NOI
and (ii) the rate, which when added to the average of the LIBOR Margin
(Mortgage) and the LIBOR Margin applicable to each of the Mezzanine Loans (such
average weighted to reflect the size of the associated Loan or Mezzanine Loan,
as applicable, as a percentage of the total combined outstanding principal
balance of the Loan and Mezzanine Loans), equals 10.50%.

 

Mezzanine Borrower has the meaning set forth
in the first paragraph of this Agreement.

 

Mezzanine Borrower's Account shall mean
following account, or such other account with any Person subsequently identified
in a written notice from Mezzanine Borrower to Mezzanine Lender, which Mezzanine
Borrower's Account shall be under the sole dominion and control of Mezzanine
Borrower:

 

Bank: Bank of America, Los Angeles, CA

ABA#: 121000358

Attention: Haik Melkonyan

Account Name: Concentration Account

Account Number: 12355-57180




Mezzanine Debt Service Reserve Account shall
have the meaning set forth in Section 3.1.1.

 








13













Mezzanine Lender shall have the meaning set
forth in the first paragraph of this Agreement.

 

Mezzanine Lender Monthly Debt Service Notice
Letter shall have the meaning set forth in Section
3.1.6(e).

 

Mezzanine Note shall mean that certain
Mezzanine Note (Senior Mezzanine), dated as of the date hereof in the principal
amount of NINETY MILLION DOLLARS ($90,000,000), made by Mezzanine Borrower in
favor of Mezzanine Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

Mortgage Borrower shall mean CNL Hotel Del
Partners, LP, a Delaware limited partnership.

 

Mortgage Borrower General Partner shall mean
CNL Hotel Del Partners GP, LLC, a Delaware limited liability company, the
general partner of Mortgage Borrower.

 

Mortgage Default shall have the meaning
ascribed to "Default" in the Loan Agreement (Mortgage).

 

Mortgage Event of Default shall have the
meaning ascribed to "Event of Default" in the Loan Agreement (Mortgage).

 

Mortgage Lender shall mean German American
Capital Corporation, its successors and assigns.

 

Mortgage Loan shall mean the loan in the
amount of $230,000,000 made by Mortgage Lender to Mortgage Borrower pursuant to
the Loan Agreement (Mortgage).

 

Mortgage Note shall have the meaning ascribed
to "Note" in the Loan Agreement (Mortgage). 

 

Net Excess Cash Flow shall have the meaning
set forth in Section 3.1.6(a).

 

Net Excess Cash Flow Commencement Date shall
have the meaning set forth in Section 3.1.6(a).

 

Net Membership Cash Flow shall mean the net
cash flow (whether positive or negative) consisting of the following, to the
extent not otherwise accounted for in Hotel Revenue or Operating Expenses in
accordance with GAAP: (a) cash received from sales of new club memberships and
conversions of existing club memberships to new club memberships (including
deposits and ongoing dues relating thereto), plus (b) cash principal payments
received on membership notes evidencing the financing of the purchase of new
club memberships or the conversion of existing club 

 








14













memberships, less (c) cash paid to cancel or recall existing club
memberships and refunds of new club membership sales.

 

Net Operating Income shall mean, for any
specified period, the excess of Operating Income over Operating Expenses for the
trailing twelve (12) month period.

 

Non-Consolidation Opinion shall have the
meaning provided in Section 2.5.5. 

 

OFAC List means the list of specially
designated nationals and blocked persons subject to financial sanctions that is
maintained by the U.S. Treasury Department, Office of Foreign Assets Control and
accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

 

Notes shall mean, collectively, the Mortgage
Note and the Mezzanine Note.

 

Obligations shall mean, collectively, the
Obligations (Senior Mezzanine), Obligations (Intermediate Mezzanine),
Obligations (Junior Mezzanine), and the Obligations (Mortgage).

 

Obligations (Intermediate Mezzanine) shall
have the meaning set forth in the Intermediate Mezzanine Loan Agreement. 

 

Obligations (Junior Mezzanine) shall have the
meaning set forth in the Junior Mezzanine Loan Agreement. 

 

Obligations (Mortgage) shall have the meaning
ascribed to "Obligations" in the Loan Agreement (Mortgage).

 

Obligations (Senior Mezzanine) shall mean all
indebtedness, obligations and liabilities of Mezzanine Borrower, CNL Hospitality
Partners, LP, Guarantor and General Partner to Mezzanine Lender, under this
Agreement or any of the other Loan Documents (Senior Mezzanine) or in respect of
the Loan or the Mezzanine Note, or other instrument at any time evidencing any
of the foregoing, whether existing on the date of this Agreement or arising or
incurred hereafter, direct or indirect, joint or several, absolute or continent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise.

 

Officer's Certificate shall mean a
certificate executed by an authorized signatory of Mezzanine Borrower that is
familiar with the financial condition of Mezzanine Borrower, the Mortgage
Borrower and the operation of the Property or the particular matter which is the
subject of such Officer's Certificate.

 

Operating Expenses shall have the meaning set
forth in the Loan Agreement (Mortgage).

 








15













Operating Income shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

Operating Lessee shall mean Hotel Del
Coronado, LP, a Delaware limited partnership.

 

Opinion of Counsel shall mean opinions of
counsel of law firm(s) licensed to practice in California, New York, and
Delaware selected by Mezzanine Borrower and reasonably acceptable to Mezzanine
Lender.

 

Other Charges shall mean maintenance charges,
impositions other than Impositions, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Property, now or hereafter levied or assessed or
imposed against the Property or any part thereof by any Governmental Authority,
other than those required to be paid by a Tenant pursuant to its respective
Lease.

 

Other Taxes shall have the meaning set forth
in Section 2.4.3.

 

Payment Date shall have the meaning set forth
in the Mezzanine Note.

 

Permitted Borrower Transferee shall mean any
entity (i) that is experienced in owning and operating (including acting as
asset manager of) properties similar to the Property, (ii) that either (a) has a
net worth together with its Close Affiliates, as of a date no more than six (6)
months prior to the date of the transfer of at least $300 Million (exclusive of
the Property) and, immediately prior to such transfer, controls, together with
its Close Affiliates real estate equity assets of at least $1 Billion or (b)
together with its Close Affiliates owns or has under management or acts as the
exclusive fund manager or investment advisor, at the time of the transfer, not
fewer than 6 luxury resort hotels (excluding the Property) containing not fewer
than 3,000 hotel rooms in the aggregate and (iii) that is not a Disqualified
Transferee.

 

Permitted Debt shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

Permitted Debt (Senior Mezzanine) shall mean
the Mezzanine Note and other obligations, indebtedness and liabilities
specifically provided for in any Loan Document (Senior Mezzanine) and secured by
this Agreement and the Pledge and the other Loan Documents (Senior
Mezzanine).

 

Permitted Encumbrances shall have the meaning
set forth in the Loan Agreement (Mortgage).

 

Permitted Fund Manager means any Person that
on the date of determination is (i) a nationally-recognized manager of
investment funds investing in debt or equity interests relating to commercial
real estate, (ii) investing through a fund with committed capital of at least
$250,000,000 and (iii) not subject to a bankruptcy proceeding.

 








16













Permitted Investments shall have the meaning
set forth in the Account Agreement (Senior Mezzanine).

 

Permitted Loan Amendment shall have the
meaning set forth in Section 5.1.18(b).

 

Permitted Mezzanine Transfer shall mean (a) a
pledge of direct or indirect equity interests in Mezzanine Borrower,
Intermediate Mezzanine Borrower, or Junior Mezzanine Borrower to secure the
Intermediate Mezzanine Loan, Junior Mezzanine Loan, or Revolving Credit Loan,
and (b) any foreclosure (or transfer in lieu thereof) in respect of the
Intermediate Mezzanine Loan, Junior Mezzanine Loan, or Revolving Credit Loan,
provided that the acquirer at foreclosure (or transfer in lieu thereof)
(i) shall be a Qualified Transferee or (ii) shall have received Mezzanine
Lender's prior written consent prior to such foreclosure (or such transfer in
lieu of foreclosure), subject in the case of each of clauses (i) and (ii) to the
requirement that the Intermediate Mezzanine Borrower, Junior Mezzanine Borrower,
and Revolving Credit Borrower deliver to Mezzanine Lender, the Mortgage Lender
and the Rating Agencies a nonconsolidation opinion satisfactory to the Rating
Agencies with respect to any Person having more than a 49% direct or indirect
equity interest (either individually or together with any interests held by an
affiliate of such Person) in Borrower.

 

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

 

Physical Conditions
Report shall mean with respect to the
Property, collectively, the (i) seismic report and (ii) structural engineering
report (prepared by an Independent Architect), both of which have been (a)
addressed to Mezzanine Lender, (b) prepared based on a scope of work determined
by Mortgage Lender in Mortgage Lender’s reasonable discretion, and (c) in form
and content acceptable to Mortgage Lender in Mortgage Lender’s reasonable
discretion, together with any amendments or supplements thereto.

 

Plan shall have the meaning set forth in
Section 4.1.9(a).

 

Pledge shall mean that certain Pledge and
Security Agreement (Senior Mezzanine), dated as of the date hereof, from
Mezzanine Borrower to Mezzanine Lender pledging (i) Mezzanine Borrower's 99.5%
direct partnership interests in Mortgage Borrower and (ii) Mezzanine
Borrower’s 100% direct membership interest in Mortgage Borrower General
Partner.

 

Pledged Collateral shall have the meaning set
forth in the Pledge.

 

Pre-approved Manager shall mean any entity
set forth on Schedule IV hereof (which schedule is
identical to the schedule of "Qualified Managers" contained in the Management
Agreement).

 








17













Pre-approved Transferee shall mean any of the
entities set forth on Schedule III hereof, or any Close
Affiliates thereof, provided any of the foregoing entities or their Close
Affiliates shall only be a "Pre-approved Transferee" if (i) such entity
continues to be Controlled by substantially the same Persons Controlling such
entity as of the Closing Date or if such Pre-approved Transferee is a publicly
traded company, such Pre-approved Transferee continues to be publicly traded on
an established securities market, (ii) there has been no material adverse change
in the financial condition or results of operations of such entity since the
Closing Date, (iii) such entity is not a Disqualified Transferee and (iv) if
such entity as of the Closing Date is rated (a) "Investment Grade," there has
been no deterioration in such entity's long-term or short-term credit rating (if
any) since the Closing Date below "BBB-" or (b) below "Investment Grade", there
has been no deterioration in such entity's long-term or short-term credit rating
(if any) since the Closing Date.

 

Prepayment Fee shall have the meaning set
forth in the Mezzanine Note.

 

Principal Amount shall have the meaning set
forth in the Mezzanine Note.

 

Proceeds shall have the meaning set forth in
the Loan Agreement (Mortgage)

 

Prohibited Loan Amendment shall have the
meaning specified in Section 5.1.18(b).

 

Prohibited Person means any Person identified
on the OFAC List or any other Person with whom a U.S. Person may not conduct
business or transactions by prohibition of Federal law or Executive Order of the
President of the United States of America.

 

Property shall have the meaning set forth in
the Loan Agreement (Mortgage).

 

Qualified Transferee shall mean one or more
of the following:

 

(i) a real estate investment trust, bank, saving and loan
association, investment bank, insurance company, trust company, commercial
credit corporation, pension plan, pension fund or pension advisory firm, mutual
fund, government entity or plan that satisfies the Eligibility
Requirements;

 

(ii) an investment company, money management firm or "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, or an institutional "accredited investor" within the meaning
of Regulation D under the Securities Act of 1933, as amended, that satisfies the
Eligibility Requirements;

 

(iii) an institution substantially similar to any of the
foregoing entities described in clauses (i) or (ii) that satisfies the
Eligibility Requirements;

 








18













(iv) any entity Controlled (and only so long as such entity
continues at all times to be Controlled) by any of the entities described in
clauses (i) or (iii) above;

 

(vi) an investment fund, limited liability company, limited
partnership or general partnership where a Permitted Fund Manager or an entity
that is otherwise a Qualified Transferee under clauses (i), (ii), (iii) or (iv)
of this definition acts as the general partner, managing member or fund manager
and at least 50% of the equity interests in such investment vehicle are owned,
directly or indirectly, by one or more entities that are otherwise Qualified
Transferees under clauses (i), (ii), (iii) or (iv) of this definition.

 

Rate Cap Collateral (Senior Mezzanine) shall
have the meaning set forth in Section 9.2. 

 

Rating Agencies shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

Rating Agency Confirmation shall have the
meaning set forth in the Loan Agreement (Mortgage).

 

Recourse Guaranty (Mortgage) shall mean that
certain Guaranty of Recourse Obligations, dated as of the date hereof, by
Guarantor in favor of Mortgage Lender, as the same may be amended, supplemented,
restated or otherwise modified from time to time.

 

Recourse Guaranty (Senior
Mezzanine) shall mean that certain Guaranty of Recourse Obligations of
Mezzanine Borrower, dated as of the date hereof, by Guarantor in favor of
Mezzanine Lender, as the same may be amended, supplemented, restated or
otherwise modified from time to time.

 

Register shall have the meaning set forth in
Section 15.4.

 

Regulatory Change shall mean any change after
the date of this Agreement in federal, state or foreign laws or regulations or
the adoption or the making, after such date, of any interpretations, directives
or requests applying to Mezzanine Lender, or any Person Controlling Mezzanine
Lender or to a class of banks or companies Controlling banks of or under any
federal, state or foreign laws or regulations (whether or not having the force
of law) by any court or Governmental Authority or monetary authority charged
with the interpretation or administration thereof.

 

Replacement Interest Rate Cap Agreement (Senior
Mezzanine) shall mean, in connection with a replacement of an
Interest Rate Cap Agreement following a Downgrade of the Counterparty thereto,
an interest rate cap agreement (together with the confirmation and schedules
relating thereto) from an Acceptable Counterparty and satisfying the
requirements set forth on Exhibit I hereto; provided
that to the extent any such interest rate cap agreement does not meet the
foregoing requirements a "Replacement Interest Cap Agreement (Senior Mezzanine)"
shall be such interest rate cap agreement approved in writing by Mezzanine
Lender.

 








19













Revolving Credit Borrower shall mean CNL KSL
Partners, LP, a Delaware limited partnership.

 

Revolving Credit Lender shall mean Deutsche
Bank Trust Company Americas, its successors and assigns.

 

Revolving Credit Loan shall mean the
$10,000,000 revolving credit loan from Revolving Credit Lender to the Revolving
Credit Borrower that is evidenced and secured by the Revolving Credit Loan
Documents.

 

Revolving Credit Loan Documents shall mean,
collectively, the Revolving Credit Agreement, the Revolving Credit Note and any
and all other agreements, instruments or documents executed by Revolving Credit
Borrower evidencing, securing or delivered in connection with the Revolving
Credit Loan and the transactions contemplated thereby, including, without
limitation, officer's certificates.

 

Revolving Credit Note shall mean that certain
Note, dated the date hereof, made by Revolving Credit Borrower, as maker, in
favor of Revolving Credit Lender, as payee, in the principal amount of
$10,000,000.

 

S&P shall mean Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc.

 

Securitization shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

Senior Mezzanine Account shall have the
meaning set forth in Section 3.1.1.

 

Servicer shall mean such Person designated in
writing with an address for such Person by Mezzanine Lender, in its sole
discretion, to act as Mezzanine Lender's agent hereunder with such powers as are
specifically delegated to the Servicer by Mezzanine Lender, whether pursuant to
the terms of this Agreement, the Account Agreement (Senior Mezzanine) or
otherwise, together with such other powers as are reasonably incidental
thereto.

 

Single Purpose Entity shall mean a Person,
other than an individual, which (i) is formed or organized solely for the
purpose of owning, holding, developing, using, operating and financing the
Property, (ii) does not engage in any business unrelated to the Property and the
ownership, development, use, operation and financing thereof, (iii) does not
have any assets other than those related to its interest in the Property or the
operation, management and financing thereof or any indebtedness other than the
Permitted Debt, (iv) maintains its own separate books and records and its own
accounts, in each case which are separate and apart from the books and records
and accounts of any other Person, (v) holds itself out as being a Person,
separate and apart from any other Person, (vi) does not and will not commingle
its funds or assets with those of any other Person, (vii) conducts its own
business in its own name; (viii) maintains separate financial statements, (ix)
pays its own liabilities out of its own funds, (x) 

 








20













observes all partnership, corporate or limited liability company
formalities, as applicable, (xi) pays the salaries of its own employees, if any,
and maintains a sufficient number of employees, if any, in light of its
contemplated business operations, (xii) does not guarantee or otherwise obligate
itself with respect to the debts of any other Person or hold out its credit as
being available to satisfy the obligations of any other Person, (xiii) does not
acquire obligations or securities of its partners, members or shareholders,
(xiv) allocates fairly and reasonably shared expenses, including, without
limitation, any overhead for shared office space, if any, (xv) uses separate
stationary, invoices, and checks, (xvi) maintains an arms-length relationship
with its Affiliates, (xvii) does not pledge its assets for the benefit of any
other Person (other than as permitted under clauses (a) and (d) of the
definition of Permitted Encumbrances) or make any cash loans or advances to any
other Person, (xviii) uses commercially reasonable efforts to correct any known
misunderstanding regarding its separate identity, and (xix) maintains adequate
capital in light of its contemplated business operations. In addition, if such
Person is a partnership, (1) all general partners of such Person shall be Single
Purpose Entities; and (2) if such Person has more than one general partner, then
the organizational documents shall provide that such Person shall continue (and
not dissolve) for so long as a solvent general partner exists. In addition, if
such Person is a corporation, then, at all times: (a) such Person shall have at
least two (2) Independent Directors and (b) the board of directors of such
Person may not take any action requiring the unanimous affirmative vote of 100%
of the members of the board of directors unless all of the directors, including
the Independent Directors, shall have participated in such vote. In addition, if
such Person is a limited liability company, (a) such Person shall have at least
two (2) Independent Managers or Independent Members, (b) if such Person is
managed by a board of managers, the board of managers of such Person may not
take any action requiring the unanimous affirmative vote of 100% of the members
of the board of managers unless all of the managers, including the Independent
Managers, shall have participated in such vote, (c) if such Person is not
managed by a board of managers, the members of such Person may not take any
action requiring the affirmative vote of 100% of the members of such Person
unless all of the members, including the Independent Members, shall have
participated in such vote, (d) each managing member shall be a Single Purpose
Entity and (e) its articles of organization, certificate of formation and/or
operating agreement, as applicable, shall provide that until all of the
Indebtedness and Obligations are paid in full such entity will not dissolve. In
addition, the organizational documents of such Person shall provide that such
Person (1) without the unanimous consent of all of the partners, directors or
members, as applicable, shall not with respect to itself or to any other Person
in which it has a direct or indirect legal or beneficial interest (a) seek or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or other similar official for the benefit of the
creditors of such Person or all or any portion of such Person's properties, or
(b) take any action that might cause such Person to become insolvent, petition
or otherwise institute insolvency proceedings or otherwise seek any relief under
any laws relating to the relief from debts or the protection of debtors
generally, (2) will maintain its books, records, resolutions and agreements as
official records, (3) will hold its assets in its own name, (4) will maintain
its financial statements, accounting records and other organizational documents,
books and records separate and apart from any other Person, (5) will not
identify its partners, 

 








21













members or shareholders, or any Affiliates of any of them as a
division or part of it, (6) will maintain an arms-length relationship with its
Affiliates, and (7) will not enter into or be a party to any transaction with
its partners, members, shareholders, or its Affiliates except in the ordinary
course of business and on terms which are intrinsically fair and are no less
favorable to it than would be obtained in a comparable arms-length transaction
with a third party. Notwithstanding the foregoing, Mezzanine Lender hereby
consents to General Partner, CNL Hotel Del Intermediate Mezz Partners GP, LLC,
and CNL Hotel Del Junior Mezz Partners GP, LLC, having only one (1) Independent
Director on its board of directors, and CNL KSL Partners GP, LLC having no
Independent Directors on its board of directors.

 

SPE Entity shall mean Mezzanine Borrower,
General Partner, Mortgage Borrower, Intermediate Mezzanine Borrower, Junior
Mezzanine Borrower, Revolving Credit Borrower, Mortgage Borrower General
Partner, CNL Hotel Del Intermediate Mezz Partners GP, LLC, CNL Hotel Del Junior
Mezz Partners GP, LLC, CNL Hotel Del Tenant Corp., and Operating Lessee which
are each required to be a Single Purpose Entity.

 

Special Taxes shall mean any and all present
or future taxes, levies, imposts, deductions, charges or withholdings, or any
liabilities with respect thereto, including those arising after the date hereof
as result of the adoption of or any change in law, treaty, rule, regulation,
guideline or determination of a Governmental Authority or any change in the
interpretation or application thereof by a Governmental Authority but excluding,
in the case of Mezzanine Lender, such taxes (including income taxes, franchise
taxes and branch profit taxes) as are imposed on or measured by Mezzanine
Lender's net income by the United States of America or any Governmental
Authority of the jurisdiction under the laws under which Mezzanine Lender is
organized or maintains a lending office.

 

State shall mean the State in which the
Property or any part thereof is located.

 

Sub-Account(s) shall have the meaning set
forth in Section 3.1.1.

 

Taking shall have the meaning set forth in
Loan Agreement (Mortgage).

 

Tenant shall have the meaning set forth in
the Loan Agreement (Mortgage).

 

Title Company shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

Title Policy (Mortgage) shall have the
meaning ascribed to "Title Policy" in the Loan Agreement (Mortgage).

 

Transfer shall mean to, directly or
indirectly, sell, assign, convey, mortgage, transfer, pledge, hypothecate,
encumber, grant a security interest in, exchange or otherwise dispose of any
beneficial interest or grant any option or warrant with respect 

 








22













to, or where used as a noun, a direct or indirect sale, assignment,
conveyance, transfer, pledge or other disposition of any beneficial interest by
any means whatsoever whether voluntary, involuntary, by operation of law or
otherwise.

 

UCC or Uniform Commercial
Code shall mean the Uniform Commercial Code as in effect in the
State.

 

Uniform System shall have the meaning set
forth in the Loan Agreement (Mortgage).

 

Section
1.2  Principles of
Construction.

 

All references to sections and schedules are to sections and
schedules in or to this Agreement unless otherwise specified. All accounting
terms not specifically defined herein shall be construed in accordance with GAAP
as modified by the Uniform System. When used herein, the term "financial
statements" shall include the notes and schedules thereto. Unless otherwise
specified herein or therein, all terms defined in this Agreement shall have the
definitions given them in this Agreement when used in any other Loan Document
(Senior Mezzanine) or in any certificate or other document made or delivered
pursuant thereto. All uses of the word "including" shall mean including, without
limitation unless the context shall indicate otherwise. Unless otherwise
specified, the words hereof, herein and hereunder and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
meanings attributed to defined terms herein shall be equally applicable to both
the singular and plural forms of the terms so defined.

 


	II.  	
      GENERAL
TERMS




 

Section
2.1  Loan; Disbursement to Mezzanine
Borrower

 

2.1.1  The
Loan. Subject to and upon the terms and conditions
set forth herein, Mezzanine Lender hereby agrees to make and Mezzanine Borrower
hereby agrees to accept the Loan on the Closing Date.

 

2.1.2  Disbursement
to Borrower. Mezzanine Borrower may request and receive only one
borrowing hereunder in respect of the Loan and any amount borrowed and repaid
hereunder in respect of the Loan may not be reborrowed. Mezzanine Borrower
acknowledges and agrees that the full proceeds of the Loan have been disbursed
by Mezzanine Lender to Mezzanine Borrower on the Closing Date.

 

2.1.3  The
Mezzanine Note, Pledge and Loan Documents. The Loan shall be
evidenced by the Mezzanine Note and secured by the Pledge, this Agreement and
the other Loan Documents (Senior Mezzanine).

 

2.1.4  Use
of Proceeds. Mezzanine Borrower shall use the proceeds of the Loan
as an equity contribution to Mortgage Borrower to repay and discharge any
existing mezzanine loans and mortgage loans secured by the Property, to make
cash distributions to its partners, and as may be otherwise set forth on the
closing statement executed by Mezzanine Borrower at closing.

 

Section
2.2  Interest; Loan Payments; Late Payment
Charge

 

2.2.1  Payment
of Principal and Interest.

 

(i)  Except
as set forth in Section 2.2.1(ii), interest shall accrue on the Principal
Amount as set forth in the Mezzanine Note.

 

(ii)  Upon
the occurrence and during the continuance of an Event of Default and from and
after the Maturity Date if the entire Principal Amount is not repaid on the
Maturity Date, interest on the outstanding principal balance of the Loan and, to
the extent permitted by law, overdue interest and other amounts due in respect
of the Loan shall accrue at the Default Rate calculated from the date such
payment was due without regard to any grace or cure periods contained herein.
Interest at the Default Rate shall be computed from the occurrence of the Event
of Default until the actual receipt and collection of the Indebtedness (or that
portion thereof that is then due). To the extent permitted by applicable law,
interest at the Default Rate shall be added to the Indebtedness, shall itself
accrue interest at the same rate as the Loan and shall be secured by this
Agreement and the Pledge. This paragraph shall not be construed as an agreement
or privilege to extend the date of the payment of the Indebtedness, nor as a
waiver of any other right or remedy accruing to Mezzanine Lender by reason of
the occurrence of any Event of Default, and Mezzanine Lender retains its rights
under the Mezzanine Note to accelerate and to continue to demand payment of the
Indebtedness upon the happening of any Event of Default. 

 

2.2.2  Method
and Place of Payment. 

 

(a)  On
each Payment Date, Mezzanine Borrower shall pay or cause to be paid to Mezzanine
Lender interest accruing pursuant to the Mezzanine Note for the entire Interest
Period during which said Payment Date shall occur.

 

(b)  All
amounts advanced by Mezzanine Lender pursuant to the applicable provisions of
the Loan Documents (Senior Mezzanine), other than the Principal Amount, together
with any interest at the Default Rate or other charges as provided therein,
shall be due and payable hereunder as provided in the Loan Documents (Senior
Mezzanine). In the event any such advance or charge is not so repaid by
Mezzanine Borrower, Mezzanine Lender may, at its option and upon notice to
Mezzanine Borrower, first apply any payments received under the Mezzanine Note
to repay such advances, together with any interest thereon, or other charges as
provided in the Loan Documents (Senior Mezzanine), and the balance, if any,
shall be applied in payment of any installment of interest or principal then due
and payable.

 

(c)  The
Maturity Date Payment shall be due and payable in full on the Maturity Date.


 








23
















 

2.2.3  Late
Payment Charge. If any interest payment due under the Loan
Documents (Senior Mezzanine) is not paid by Mezzanine Borrower within five (5)
days after the date on which it is due (or, if such fifth (5th) day is not a
Business Day, then the Business Day immediately preceding such day) on or prior
to the date on which it is due, Mezzanine Borrower shall pay to Mezzanine Lender
upon demand an amount equal to the lesser of three percent (3%) of such unpaid
sum or the Maximum Legal Rate (the Late Payment Charge) in
order to defray the expense incurred by Mezzanine Lender in handling and
processing such delinquent payment and to compensate Mezzanine Lender for the
loss of the use of such delinquent payment. Any such amount shall be secured by
this Agreement, the Pledge and the other Loan Documents (Senior Mezzanine) to
the extent permitted by applicable law. Mezzanine Borrower acknowledges and
agrees that the five day grace period with respect to the applicability of the
Late Payment Charge (i) shall only apply to Mezzanine Borrower's first failure
to make a monthly interest payment in any calendar year and (ii) shall not
constitute a payment grace period and shall in no way limit Mezzanine Lender's
rights under Article XVII.

 

2.2.4  Usury
Savings. This Agreement and the Mezzanine Note are subject to the
express condition that at no time shall Mezzanine Borrower be obligated or
required to pay interest on the Principal Amount of the Loan at a rate which
could subject Mezzanine Lender to either civil or criminal liability as a result
of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement
or the other Loan Documents (Senior Mezzanine), Mezzanine Borrower is at any
time required or obligated to pay interest on the Principal Amount due under the
Mezzanine Note at a rate in excess of the Maximum Legal Rate, then the LIBOR
Rate or the Default Rate, as the case may be, shall be deemed to be immediately
reduced to the Maximum Legal Rate and all previous payments in excess of the
Maximum Legal Rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due under the Mezzanine Note. All
sums paid or agreed to be paid to Mezzanine Lender for the use, forbearance, or
detention of the sums due under the Loan, shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Loan until payment in full so that the rate or amount of
interest on account of the Loan does not exceed the Maximum Legal Rate of
interest from time to time in effect and applicable to the Loan for so long as
the Loan is outstanding.

 

Section
2.3  Prepayments

 

No prepayments of the Indebtedness shall be permitted except as set
forth in Section 2.3.1 hereof and Section 4 of the Mezzanine Note.

 

2.3.1  Mandatory
Prepayment.

 

(a)  Except
as described in Section 2.3.1(b) below and subject to Article
VIII, Mezzanine Borrower shall repay the Mezzanine Note, in full, together
with 

 








24













the Prepayment Fee (if applicable), in accordance with Section
4(b) and Section 4(d) (if applicable) of the Mezzanine Note upon the
occurrence of any of the following events:

 

(i)  if
the Property is Transferred;

 

(ii)  if
all or any portion of the Mortgage Borrower’s interest in the Property is
Transferred;

 

(iii)  if
all or any portion of the Mezzanine Borrower’s interest in the Mortgage Borrower
is Transferred;

 

(iv)  if
a Transfer or series of Transfers of any direct or indirect ownership interests
in the Mezzanine Borrower or any SPE Entity shall occur which either
individually or in the aggregate with all such Transfers violates the
requirements of Article VIII; or

 

(v)  if
the Loan (Mortgage) is repaid or refinanced.

 

(b)  If
there shall occur a casualty or Taking in respect of the Property and as a
result thereof the Loan (Mortgage) is prepaid in whole or in part, then, to the
extent that there shall be excess proceeds or awards available following the
application of the proceeds or awards to reconstruct or repair the Property or
to the payment of all or any portion of the Loan (Mortgage) pursuant to the
terms of the Loan Documents (Mortgage) (Excess Proceeds),
Mezzanine Borrower shall repay the Mezzanine Note, or a portion thereof, in the
amount of such available Excess Proceeds. All Excess Proceeds shall be deposited
directly into the Senior Mezzanine Account. 

 

2.3.2  Prepayments
After Event of Default. If, following an Event of Default,
Mezzanine Lender shall accelerate the Indebtedness and Mezzanine Borrower
thereafter tenders payment of all or any part of the Indebtedness, or if all or
any portion of the Indebtedness is recovered by Mezzanine Lender after such
Event of Default, (a) such payment may be made only on the next occurring
Payment Date together with all unpaid interest thereon as calculated through the
end of the Interest Period during which such Payment Date occurs (even if such
period extends beyond such Payment Date and calculated as if such payment had
not been made on such Payment Date), and all other fees and sums payable
hereunder or under the Loan Documents (Senior Mezzanine), including without
limitation, interest that has accrued at the Default Rate and any Late Payment
Charges), (b) such payment shall be deemed a voluntary prepayment by Mezzanine
Borrower, and (c) Mezzanine Borrower shall pay, in addition to the Indebtedness,
an amount equal to the Prepayment Fee, if applicable.

 

2.3.3  Release
of Collateral. Mezzanine Lender shall, upon the written request and
at the reasonable expense of Mezzanine Borrower, upon payment in full of the
Principal Amount and interest on the Loan and all other amounts due and payable
under the Loan Documents (Senior Mezzanine) in accordance with the terms and
provisions of the Mezzanine Note and this Agreement, release the Lien of (i)
this Agreement upon the Account Collateral (Senior Mezzanine) and the Rate Cap
Collateral (Senior Mezzanine) and (ii) the Pledge on the Collateral or assign
it, in whole or in part, 

 








25













to a new lender. In such event, Mezzanine Borrower shall submit to
Mezzanine Lender, on a date prior to the date of such release or assignment
sufficient to provide a reasonable period for review thereof, a release of lien
or assignment of lien, as applicable, for such Collateral for execution by
Lender. Such release or assignment, as applicable, shall be in a form
satisfactory to Mezzanine Lender in its reasonable discretion. In addition,
Mezzanine Borrower shall provide all other documentation Mezzanine Lender
reasonably requires to be delivered by Mezzanine Borrower in connection with
such release or assignment, as applicable.

 

Section
2.4  Regulatory Change; Taxes

 

2.4.1  Increased
Costs. If, as a result of any Regulatory Change or compliance of
Mezzanine Lender therewith, the basis of taxation of payments to Mezzanine
Lender or any company Controlling Mezzanine Lender of the principal of or
interest on the Loan is changed or Mezzanine Lender or the company Controlling
Mezzanine Lender shall be subject to (i) any tax, duty, charge or withholding of
any kind with respect to this Agreement (excluding federal taxation of the
overall net income of Mezzanine Lender or the company Controlling Mezzanine
Lender); or (ii) any reserve, special deposit or similar requirements relating
to any extensions of credit or other assets of, or any deposits with or other
liabilities, of Mezzanine Lender or any company Controlling Mezzanine Lender is
imposed, modified or deemed applicable; or (iii) any other condition affecting
loans to borrowers subject to LIBOR-based interest rates is imposed on Mezzanine
Lender or any company Controlling Mezzanine Lender and Mezzanine Lender
determines that, by reason thereof, the cost to Mezzanine Lender or any company
Controlling Mezzanine Lender of making, maintaining or extending the Loan to
Mezzanine Borrower is increased, or any amount receivable by Mezzanine Lender or
any company Controlling Mezzanine Lender hereunder in respect of any portion of
the Loan to Mezzanine Borrower is reduced, in each case by an amount deemed by
Mezzanine Lender in good faith to be material (such increases in cost and
reductions in amounts receivable being herein called Increased
Costs), then Mezzanine Lender shall provide notice thereof to Mezzanine
Borrower and Mezzanine Borrower agrees that it will pay to Mezzanine Lender upon
Mezzanine Lender's written request such additional amount or amounts as will
compensate Mezzanine Lender or any company Controlling Mezzanine Lender for such
Increased Costs to the extent Mezzanine Lender determines that such Increased
Costs are allocable to the Loan and provided that Mezzanine Lender is generally
exercising rights similar to those set forth in this Section 2.4.1
against other borrowers similarly situated to Mezzanine Borrower. Mezzanine
Lender will notify Mezzanine Borrower of any event occurring after the date
hereof which will entitle Mezzanine Lender to compensation pursuant to this
Section 2.4.1 as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation; provided, however, that, if
Mezzanine Lender fails to deliver a notice within 90 days after the date on
which an officer of Mezzanine Lender responsible for overseeing this Agreement
knows or has reason to know of its right to additional compensation under this
Section 2.4.1, Mezzanine Lender shall only be entitled to additional
compensation for any such Increased Costs incurred from and after the date that
is 90 days prior to the date Mezzanine Borrower received such notice. If
Mezzanine Lender requests compensation under this Section 2.4.1,
Mezzanine Borrower 

 








26













may, by notice to Mezzanine Lender, require that Mezzanine Lender
furnish to Mezzanine Borrower a statement setting forth the basis for requesting
such compensation and the method for determining the amount thereof, and a
description as to why Section 2.4.1 is not applicable.

 

2.4.2  Special
Taxes. Mezzanine Borrower shall make all payments hereunder free
and clear of and without deduction for Special Taxes. If Mezzanine Borrower
shall be required by law to deduct any Special Taxes from or in respect of any
sum payable hereunder or under any other Loan Document (Senior Mezzanine) to
Mezzanine Lender, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.4.2) Mezzanine Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Mezzanine Borrower shall make such deductions, and
(iii) Mezzanine Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

 

2.4.3  Other
Taxes. In addition, Mezzanine Borrower agrees to pay any present or
future stamp or documentary taxes or other excise or property taxes, charges, or
similar levies which arise from any payment made hereunder, or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the other Loan Documents (Senior Mezzanine), or the Loan (hereinafter
referred to as Other Taxes).

 

2.4.4  Indemnity.
Mezzanine Borrower shall indemnify Mezzanine Lender for the full amount of
Special Taxes and Other Taxes (including any Special Taxes or Other Taxes
imposed by any Governmental Authority on amounts payable under this Section
2.4.4) paid by Mezzanine Lender and any liability (including penalties,
interest, and expenses) arising therefrom or with respect thereto, whether or
not such Special Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date Mezzanine
Lender makes written demand therefor.

 

2.4.5  Change
of Office. To the extent that changing the jurisdiction of
Mezzanine Lender's applicable office would have the effect of minimizing Special
Taxes, Other Taxes or Increased Costs, Mezzanine Lender shall use reasonable
efforts to make such a change, provided that same would not otherwise be
disadvantageous to Mezzanine Lender.

 

2.4.6  Survival.
Without prejudice to the survival of any other agreement of Mezzanine Borrower
hereunder, the agreements and obligations of Mezzanine Borrower contained in
this Section 2.4 shall survive the payment in full of principal and
interest hereunder, and the termination of this Agreement.

 

Section
2.5  Conditions Precedent to
Closing

 








27













The obligation of Mezzanine Lender to make the Loan hereunder is
subject to the fulfillment by, or on behalf of, Mezzanine Borrower or waiver by
Mezzanine Lender of the following conditions precedent no later than the Closing
Date; provided, however, that unless a condition precedent shall expressly
survive the Closing Date pursuant to a separate agreement, by funding the Loan,
Mezzanine Lender shall be deemed to have waived any such conditions not
theretofore fulfilled or satisfied:

 

2.5.1  Representations
and Warranties; Compliance with Conditions. 

 

(a)  The
representations and warranties of Mezzanine Borrower contained in this Agreement
and the other Loan Documents (Senior Mezzanine) shall be true and correct in all
material respects on and as of the Closing Date with the same effect as if made
on and as of such date, and no Default or Event of Default shall have occurred
and be continuing; and Mezzanine Borrower shall be in compliance in all material
respects with all terms and conditions set forth in this Agreement and in each
other Loan Document (Senior Mezzanine) on its part to be observed or performed;
and 

 

(b)  The
representations and warranties of Mortgage Borrower contained in the Loan
Agreement (Mortgage) and the other Loan Documents (Mortgage) shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of such date, and no Mortgage Default or Mortgage
Event of Default shall have occurred and be continuing; and Mortgage Borrower
and Guarantor shall be in compliance in all material respects with all terms and
conditions set forth in the Loan Agreement (Mortgage) and in each other Loan
Document (Mortgage) on its part to be observed or performed.

 

2.5.2  Delivery
of Loan Documents (Senior Mezzanine); Title Policy; Reports;
Leases.

 

(a)  Loan
Documents (Senior Mezzanine). Mezzanine Lender shall have received
an original copy of this Agreement, the Mezzanine Note and all of the other Loan
Documents (Senior Mezzanine), in each case, duly executed (and to the extent
required, acknowledged) and delivered on behalf of Mezzanine Borrower and any
other parties thereto.

 

(b)  Certificates.
Mezzanine Lender shall have received originals of the Certificates together with
a partnership and membership power (as applicable) endorsed in blank.

 

(c)  UCC
Financing Statements. Mezzanine Lender shall have received evidence
that the UCC financing statements relating to the Pledge and this Agreement have
been delivered for filing in the applicable jurisdictions.

 

(d)  Interest
Rate Cap Agreement (Senior Mezzanine). Mezzanine Lender shall have
received the original Interest Rate Cap Agreement (Senior Mezzanine) which shall
be in form and substance satisfactory to Mezzanine Lender and a counterpart of
the Acknowledgment executed and delivered by the Counterparty.

 

(e)  Account
Agreement (Senior Mezzanine). Mezzanine Lender shall have received
the original of the Account Agreement (Senior Mezzanine) executed by each of
Cash Management Bank (Senior Mezzanine) and Mezzanine Borrower.

 

(f)  Title
Insurance. 

 

(i)  Mezzanine
Lender shall have received a copy of the Title Policy (Mortgage) or a marked-up
and signed commitment having the force and effect of a title policy, marked
"paid" by an authorized representatives of the Title Company) issued by the
Title Company with respect to the Loan (Mortgage) and dated as of the Closing
Date, together with a copy of the mezzanine loan endorsement to the owner's
title insurance policy obtained by Mortgage Borrower, in favor of Mezzanine
Lender, its sessors and assigns, dated as of the Closing Date, and reinsurance
and direct access agreements in form and substance acceptable to Mezzanine
Lender. Mezzanine Lender shall also have received evidence that all premiums in
respect of the Title Policy (Mortgage) have been paid; and

 

(ii)  Mezzanine
Lender shall have received an "Eagle 9" title policy in favor of Mezzanine
Lender, its successors and assigns, dated as of the Closing Date. Mezzanine
Lender also shall have received evidence that all premiums in respect of the
"Eagle 9" title policy have been paid.

 

(g)  Survey.
Mezzanine Lender shall have received a current Survey for the Property,
containing the survey certification required by the Loan Agreement
(Mortgage).

 

(h)  Insurance.
Mezzanine Lender shall have received valid certificates of insurance for the
policies of insurance required by the Loan Agreement (Mortgage) naming Mezzanine
Lender as an additional insured and containing a cross liability/severability
endorsement, satisfactory to Mezzanine Lender in its reasonable discretion, and
evidence of the payment of all insurance premiums currently due and payable for
the existing policy period.

 

(i)  Environmental
Reports. Mezzanine Lender shall have received an Environmental
Report in respect of the Property satisfactory to Mezzanine Lender.

 

(j)  Zoning.
Mezzanine Lender shall have received an ALTA 3.1 zoning endorsement for the
Title Policy (Mortgage).

 

(k)  Certificate
of Occupancy. Mezzanine Lender shall have received a copy of the
valid certificates of occupancy for the Property or evidence acceptable to
Mezzanine Lender that a certificate of occupancy is not required by applicable
law.

 

(l)  Encumbrances.
Mezzanine Borrower shall have taken or caused to be taken such actions in such a
manner so that Mezzanine Lender has a valid and perfected first Lien as of the
Closing Date on the Collateral and Mezzanine Lender shall have received
satisfactory evidence thereof.

 

(m)  Intentionally
Omitted. 

 

(n)  Assignment
of Management Agreement. Mezzanine Lender shall have received the
original of the Assignment of Management Agreement (Senior Mezzanine) executed
by each of Mezzanine Borrower and Manager; 

 

(o)  Pledgor
Acknowledgments. Mezzanine Lender shall have received an original
of the Acknowledgment in the form of Exhibit B executed by each Mezzanine
Borrower, Mortgage Borrower, and Mortgage Borrower General Partner, and dated as
of the Closing Date.

 

2.5.3  Related
Documents. Each additional document not specifically referenced
herein, but relating to the transactions contemplated herein, shall have been
duly authorized, executed and delivered by all parties thereto and Mezzanine
Lender shall have received and approved certified copies thereof.

 

2.5.4  Delivery
of Organizational Documents. On or before the Closing Date,
Mezzanine Borrower shall deliver, or cause to be delivered, to Mezzanine Lender
copies certified by an Officer's Certificate, of all organizational
documentation related to Mortgage Borrower, Operating Lessee, Mezzanine
Borrower, Guarantor, General Partner, each SPE Entity, Manager and certain of
its Affiliates as have been requested by Mezzanine Lender and/or the formation,
structure, existence, good standing and/or qualification to do business of
Mortgage Borrower, Operating Lessee, Mezzanine Borrower, Guarantor, General
Partner, each SPE Entity and such Affiliates, as Mezzanine Lender may request in
its sole discretion, including, without limitation, good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loan and incumbency certificates as may be
requested by Mezzanine Lender. Each of the organizational documents of any SPE
Entity shall contain provisions having a substantive effect materially similar
to that of the language set forth in Exhibit C or such other
language as approved by Lender. Mezzanine Lender hereby approves the
organizational documents delivered to Mezzanine Borrower pursuant to this
Section 2.5.4.

 

2.5.5  Opinions
of Mezzanine Borrower's Counsel. 

 

(a)  Mezzanine
Lender shall have received a Non-Consolidation Opinion substantially in
compliance with the requirements set forth in Exhibit E
or in such other form approved by the Mezzanine Lender (the
Non-Consolidation Opinion).

 

(b)  Mezzanine
Lender shall have received the Opinion of Counsel substantially in compliance
with the requirements set forth in Exhibit D or in such
other form approved by the Mezzanine Lender.

 

(c)  Mezzanine
Lender shall have received from Counterparty the Counterparty Opinion
substantially in compliance with the requirements set forth in
Exhibit F or in such other form approved by the
Mezzanine Lender.

 








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2.5.6  Budgets.
Mezzanine Borrower shall have delivered the Budget for the current Fiscal Year,
which Budget shall be certified by an Officer's Certificate.

 

2.5.7  Completion
of Proceedings. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated by this Agreement and
other Loan Documents (Senior Mezzanine) and all documents incidental thereto
shall be satisfactory in form and substance to Mezzanine Lender, and Mezzanine
Lender shall have received all such counterpart originals or certified copies of
such documents as Mezzanine Lender may reasonably request.

 

2.5.8  Independent
Director Certificate. Mezzanine Lender shall have received an
executed Independent Director certificate substantially in the form attached as
Exhibit O.

 

2.5.9  Material
Adverse Effect. No event or condition shall have occurred since the
date of Mortgage Borrower's and Mezzanine Borrower's most recent financial
statements previously delivered to Mezzanine Lender which has or could
reasonably be expected to have a Material Adverse Effect. The Operating Income
and Operating Expenses of the Property, and all other features of the
transaction shall be as represented to Mezzanine Lender without material adverse
change. None of Mezzanine Borrower, Intermediate Mezzanine Borrower, Junior
Mezzanine Borrower, Mortgage Borrower, Guarantor nor any of their constituent
Persons shall be the subject of any bankruptcy, reorganization, or insolvency
proceeding.

 

2.5.10  Leases
and Rent Roll. Mezzanine Lender shall have received copies of all
Leases, certified as requested by Mezzanine Lender. Mezzanine Lender shall have
received a certified rent roll of the Property dated within thirty (30) days
prior to the Closing Date.

 

2.5.11  Reserved.

 

2.5.12  Tax
Lot. Mezzanine Lender shall have received evidence that the
Property constitutes one (1) or more separate tax lots, which evidence shall be
reasonably satisfactory in form and substance to Mezzanine Lender.

 

2.5.13  Physical
Conditions Report. Mezzanine Lender shall have received a Physical
Conditions Report (or re-certified Physical Conditions Report) with respect to
the Property, which report shall be satisfactory in form and substance to
Mezzanine Lender.

 

2.5.14  Management
Agreement. Mezzanine Lender shall have received a certified copy of
the Management Agreement which shall be satisfactory in form and substance to
Mezzanine Lender.

 

2.5.15  Appraisal.
Mezzanine Lender shall have received an appraisal of the Property, which shall
be satisfactory in form and substance to Mezzanine Lender.

 

2.5.16  Financial
Statements. Mezzanine Lender shall have received certified copies
of financial statements with respect to the Property for the three most recent
Fiscal Years, each in form and substance satisfactory to Mezzanine Lender.

 

2.5.17  Transaction
Costs. Mezzanine Borrower shall have paid or reimbursed Mezzanine
Lender for all title insurance (or "Eagle 9") premiums, filing fees, costs of
reports, appraisals, reasonable fees and costs of Mezzanine Lender's counsel,
and all other third party out-of-pocket expenses incurred in connection with the
origination of the Loan.

 

2.5.18  Further
Documents. Mezzanine Lender or its counsel shall have received such
other and further approvals, opinions, documents and information as Mezzanine
Lender or its counsel may have reasonably requested including the Loan Documents
(Senior Mezzanine) in form and substance satisfactory to Mezzanine Lender and
its counsel.

 

Section
2.6  Filing of Financing Statements
Authorized

 

Mezzanine Borrower hereby authorizes the filing of a form UCC-1
financing statement naming the Mezzanine Borrower as debtor and the Mezzanine
Lender as secured party in any office (including the office of the Secretary of
State of the State of Delaware) covering all property of the Mezzanine Borrower
(including, but not limited to, the Account Collateral (Senior Mezzanine) and
the Rate Cap Collateral (Senior Mezzanine)).

 


	III.  	
      CASH
MANAGEMENT




 

Section
3.1  Cash Management

 

3.1.1  Establishment
of Account. Mezzanine Borrower hereby confirms that, simultaneously
with the execution of this Agreement, pursuant to the Account Agreement (Senior
Mezzanine), it has established with Cash Management Bank (Senior Mezzanine), in
the name of Mezzanine Borrower for the benefit of Mezzanine Lender, as secured
party, one (1) segregated account (the Senior Mezzanine
Account), which has been established as a securities account. The
Senior Mezzanine Account and the funds deposited therein and securities and
other assets credited thereto shall serve as additional security for the Loan.
Pursuant to the Account Agreement (Senior Mezzanine), Mezzanine Borrower shall
irrevocably instruct and authorize Cash Management Bank (Senior Mezzanine) to
disregard any and all orders for withdrawal from the Senior Mezzanine Account
made by, or at the direction of, Mezzanine Borrower. Mezzanine Borrower agrees
that, prior to the payment in full of the Indebtedness, the terms and conditions
of the Account Agreement (Senior Mezzanine) shall not be amended or modified
without the prior written consent of Mezzanine Lender (which consent Mezzanine
Lender may grant or withhold in its sole discretion). In 

 








29













recognition of Mezzanine Lender's security interest in the funds
deposited into the Senior Mezzanine Account, Mezzanine Borrower shall identify
the Senior Mezzanine Account with the name of Mezzanine Lender, as secured
party. The Senior Mezzanine Account shall be named as follows: "CNL Hotel Del
Senior Mezz Partners, LP f/b/o German American Capital Corporation, as secured
party, Senior Mezzanine Account" (Account Number 722385.1). Mezzanine Borrower
confirms that it has established with Cash Management Bank (Senior Mezzanine) a
sub-account for the retention of Account Collateral (Senior Mezzanine) in
respect of Debt Service (Senior Mezzanine) on the Loan with the account number
722385.1-1 (the Mezzanine Debt Service Reserve Account) (the
Sub-Account and, together with the Senior Mezzanine Account,
the Collateral Accounts (Senior Mezzanine)), which (i) may be a
ledger or book entry sub-account and need not be an actual sub-account, (ii)
shall be linked to the Senior Mezzanine Account, (iii) shall be a "Securities
Account" pursuant to Article 8 of the UCC, and (iv) shall be an Eligible Account
to which certain funds shall be allocated and from which disbursements shall be
made pursuant to the terms of this Agreement.

 

3.1.2  Pledge
of Account Collateral (Senior Mezzanine). To secure the full and
punctual payment and performance of the Obligations (Senior Mezzanine),
Mezzanine Borrower hereby collaterally assigns, grants a security interest in
and pledges to Mezzanine Lender, to the extent not prohibited by applicable law,
a first priority continuing security interest in and to the following property
of Mezzanine Borrower, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all of the same, collectively, the
Account Collateral (Senior Mezzanine)):

 

(a)  any
and all Excess Cash Flow from time to time available in the Holding Account and
required, by the terms of the Loan Agreement (Mortgage) as now in effect or
amended with the consent of Mezzanine Lender, to be deposited by the Mortgage
Lender or the Cash Management Bank (Mortgage) into the Senior Mezzanine
Account;

 

(b)  the
Collateral Accounts (Senior Mezzanine) and all cash, checks, drafts, securities
entitlements, certificates, instruments and other property, including, without
limitation, all deposits and/or wire transfers from time to time deposited or
held in, credited to or made to Collateral Accounts (Senior Mezzanine); 

 

(c)  any
and all amounts invested in Permitted Investments;

 

(d)  all
interest, dividends, cash, instruments, securities entitlements and other
property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any or all of the foregoing or purchased with funds from
the Collateral Accounts (Senior Mezzanine); and

 

(e)  to
the extent not covered by clauses (a), (b), (c) or (d) above, all proceeds (as
defined under the UCC) of any or all of the foregoing.

 








30













In addition to the rights and remedies herein set forth, Mezzanine
Lender shall have all of the rights and remedies with respect to the Account
Collateral (Senior Mezzanine) available to a secured party at law or in equity,
including, without limitation, the rights of a secured party under the UCC, as
if such rights and remedies were fully set forth herein.

 

This Agreement shall constitute a security agreement for purposes of
the Uniform Commercial Code and other applicable law. 

 

3.1.3  Maintenance
of Collateral Accounts. Mezzanine Borrower agrees that the Senior
Mezzanine Account and the Sub-Accounts are and shall each be maintained (i) as a
"securities account" (as such term is defined in Section 8-501(a) of the UCC),
(ii) in such a manner that Mezzanine Lender shall have control (within the
meaning of Section 8-106(d)(2) of the UCC) over the Senior Mezzanine Account and
any Sub-Account thereof, (iii) such that Mezzanine Borrower, and Manager shall
have no right of withdrawal from the Senior Mezzanine Account or the
Sub-Accounts and, except as provided herein, no Account Collateral (Senior
Mezzanine) shall be released to Mezzanine Borrower or Manager from the Senior
Mezzanine Account or the Sub-Accounts. Without limiting the Mezzanine Borrower's
obligations under the immediately preceding sentence, Mezzanine Borrower shall
only establish and maintain the Senior Mezzanine Account with a financial
institution that has executed an agreement substantially in the form of the
Account Agreement (Senior Mezzanine) or in such other form acceptable to
Mezzanine Lender in its sole discretion.

 

3.1.4  Eligible
Accounts. The Collateral Accounts (Senior Mezzanine) shall be
Eligible Accounts. The Collateral Accounts (Senior Mezzanine) shall be subject
to such applicable laws, and such applicable regulations of the Board of
Governors of the Federal Reserve System and of any other banking or governmental
authority, as may now or hereafter be in effect. Income and interest accruing on
the Collateral Accounts (Senior Mezzanine) or any investments held in such
accounts shall be periodically added to the principal amount of such account and
shall be held, disbursed and applied in accordance with the provisions of this
Agreement and the Account Agreement (Senior Mezzanine). Mezzanine Borrower shall
be the beneficial owner of the Collateral Accounts (Senior Mezzanine) for
federal income tax purposes and shall report all income on the Collateral
Accounts (Senior Mezzanine). 

 

3.1.5  Deposits
into Sub-Accounts. On the date hereof, Mezzanine Borrower has
deposited the following amounts into the Sub-Accounts:

 

(i)  $0.00
into the Mezzanine Debt Service Reserve Account.

 

3.1.6  Monthly
Funding. 

 

(a)  Mezzanine
Borrower hereby instructs Mezzanine Lender to transfer (and pursuant to the
Account Agreement (Senior Mezzanine) shall irrevocably authorize Cash Management
Bank (Senior Mezzanine) to execute any corresponding instructions of Mezzanine
Lender), and Mezzanine Lender shall transfer (or cause Cash 

 








31













Management Bank to transfer pursuant to disbursement instructions
from Mezzanine Lender) to the Mezzanine Debt Service Reserve Account, from the
Senior Mezzanine Account by 11:00 am New York time on the first (1st) calendar
day of each calendar month (and if such day is not a Business Day then on the
immediately preceding Business Day) or as soon thereafter as there shall be
sufficient collected funds on deposit in the Senior Mezzanine Account, and from
time to time (but no less frequently than weekly thereafter) funds in an amount
equal to the sum of any Protective Advances which may have been advanced by (and
not previously reimbursed to) the Mezzanine Lender pursuant to the terms of the
Loan Documents (Senior Mezzanine) to cure any Default or Event of Default, any
Mortgage Default or Mortgage Event of Default, or to protect the Collateral
together with any interest payable on such amounts pursuant to the Loan
Documents (Senior Mezzanine), plus (x) the unpaid Debt Service (Senior
Mezzanine) for the next occurring Payment Date, plus (y) an amount equal to such
payments for any prior month(s), to the extent not previously paid, plus (z) an
amount equal to the amount, if any, deducted from the Senior Mezzanine Account
in any preceding month to pay any other amounts then due under the Loan
Documents (Senior Mezzanine) (other than any Debt Service (Senior Mezzanine)).
Mezzanine Borrower acknowledges that Mezzanine Lender shall not be required to
make such withdrawal and deposit until such time as Mezzanine Lender is able to
calculate the amount of the Debt Service (Senior Mezzanine) for the next
occurring Payment Date. As used herein, the term Net Excess Cash
Flow means the amount available in the Senior Mezzanine Account after
the transfers to the Mezzanine Debt Service Reserve Account required under this
Section 3.1.6 have been made and the term Net Excess Cash Flow
Commencement Date shall mean the date such amounts have been fully
funded or reserved within the Senior Mezzanine Account in any given calendar
month.

 

(b)  If
for any reason there will be insufficient amounts in the Mezzanine Debt Service
Reserve Account on any Payment Date to pay the Debt Service (Senior Mezzanine)
due on such Payment Date, Mezzanine Borrower shall immediately deposit into the
Senior Mezzanine Account an amount equal to the shortfall of available funds in
the Mezzanine Debt Service Reserve Account. Any failure by Mezzanine Borrower to
deposit the full amount required by the preceding sentence shall constitute an
Event of Default hereunder. If Mezzanine Lender shall reasonably determine that
there will be insufficient amounts in the Senior Mezzanine Account to pay any
Protective Advances as and when the same are due and payable, Mezzanine Lender
shall provide written notice of same to Mezzanine Borrower setting forth the
basis for such determination. Within five (5) Business Days of receipt of said
notice, Mezzanine Borrower shall deposit into the Senior Mezzanine Account an
amount equal to the shortfall of available funds in the Senior Mezzanine
Account. Any failure by Mezzanine Borrower to deposit the full amount required
by the preceding sentence within said five (5) Business Day period shall
constitute an Event of Default hereunder.

 

(c)  Provided
that (i) no Event of Default shall have occurred and be continuing hereunder or
under any of the other Loan Documents (Senior Mezzanine), (ii) no Mortgage Event
of Default shall have occurred and be continuing, (iii) Mezzanine Borrower shall
have delivered to Mezzanine Lender an Officer's Certificate (which Mezzanine
Borrower shall not be obligated to deliver more frequently than once per 

 








32













calendar month) certifying that the signatories know of no Event of
Default or Mortgage Event of Default (as applicable) that has occurred and is
then outstanding hereunder or under any of the other Loan Documents (Senior
Mezzanine) or under any of the Loan Documents (Mortgage), and (iv) Mezzanine
Borrower shall have deposited into the Senior Mezzanine Account all funds then
required to have been so deposited, then Mezzanine Lender shall transfer the Net
Excess Cash Flow from the Senior Mezzanine Account to (A) the Intermediate
Mezzanine Account, or (B) following the repayment of the Intermediate Mezzanine
Loan, to the Junior Mezzanine Account, or (C) following the repayment of the
Intermediate Mezzanine Loan and the Junior Mezzanine Loan, to the Mezzanine
Borrower's Account. 

 

(d)  In
the event that an Event of Default shall have occurred and is then continuing,
then, without notice from Mezzanine Lender, all Net Excess Cash Flow shall be
applied to reduce the outstanding Principal Amount of the Mezzanine Note. At
such time that the Event of Default shall no longer be continuing and provided
no other Event of Default shall have occurred and be continuing under the
Mortgage Loan or Mezzanine Loan, then all Net Excess Cash Flow shall be
distributed in accordance with the provision of subsection (c) above.

 

(e)  Mezzanine
Lender (so long as Mezzanine Lender is not the same entity as Mortgage Lender)
agrees to deliver to Mortgage Lender a monthly notice letter (the
Mezzanine Lender Monthly Debt Service Notice Letter) at least
five (5) Business Days prior to each Payment Date setting forth the Debt Service
(Senior Mezzanine) payable by Mezzanine Borrower on the first Payment Date
occurring after the date such notice is delivered.

 

(f)  Mezzanine
Borrower hereby acknowledges that, pursuant to Section 3.1.5 of the Loan
Agreement (Mortgage), (i) to the extent the Mortgage Lender has received notice
from Mezzanine Lender that an Event of Default has occurred and is continuing
under the Loan Documents (Mezzanine) (a Mezzanine Loan Default
Notice) and until such time as Mortgage Lender receives a notice from
Mezzanine Lender that such Event of Default is no longer continuing (a
Mezzanine Loan Default Revocation Notice), the Mortgage
Borrower has irrevocably directed that Excess Cash Flow is to be deposited
directly into the Mezzanine Account for application as provided in this
Agreement (in lieu of transferring such funds to such accounts of the Mortgage
Borrower as the Mortgage Borrower may have so directed if the Mortgage Lender
had not received such notice from Mezzanine Lender), (ii) to the extent Mortgage
Lender has not received a Mezzanine Loan default notice but has received an
Intermediate Mezzanine Loan Default Notice and until such time as Mortgage
Lender receives an Intermediate Mezzanine Loan Default Revocation Notice,
Mortgage Borrower irrevocably directed that all Excess Cash Flow be deposited
directly into the Intermediate Mezzanine Account for application as provided in
the Intermediate Mezzanine Loan Agreement (in lieu of transferring such funds to
such accounts of Mortgage Borrower as Mortgage Borrower may have so directed if
Mortgage Lender had not received such notice from Intermediate Mezzanine
Lender), (iii) to the extent Mortgage Lender has not received a Mezzanine Loan
default notice but has received an Junior Mezzanine Loan Default Notice and
until such time as Mortgage Lender receives an Junior Mezzanine Loan Default
Revocation 

 








33













Notice, Mortgage Borrower irrevocably directed that all Excess Cash
Flow be deposited directly into the Junior Mezzanine Account for application as
provided in the Junior Mezzanine Loan Agreement (in lieu of transferring such
funds to such accounts of Mortgage Borrower as Mortgage Borrower may have so
directed if Mortgage Lender had not received such notice from Junior Mezzanine
Lender), and (iv) the directions described in the preceding clauses (i), (ii),
or (iii) shall not be changed or terminated without the written consent of the
Mezzanine Lender. Notwithstanding any provision herein to the contrary, provided
no Event of Default has occurred or is continuing, there shall be disbursed to
Mezzanine Borrower the Proceeds of a Condemnation or Casualty remaining after
payment of all amounts to which Mortgage Lender, Intermediate Mezzanine Lender
and Mezzanine Lender are entitled. Mezzanine Borrower agrees that Mezzanine
Lender shall not be required to deliver to Mortgage Lender a Mezzanine Loan
Default Notice prior to the deposit of Proceeds into the Mezzanine
Account.

 

3.1.7  Cash
Management Bank. 

 

(a)  For
the purposes of this Agreement, the Cash Management Bank (Senior Mezzanine)
named herein shall be deemed to be an Approved Bank; provided,
however, that the term "Approved Bank" shall be applicable for all other
purposes and shall be applicable to any successor or assign of Cash Management
Bank (Senior Mezzanine). Mezzanine Lender shall have the right at Mezzanine
Borrower's sold cost and expense to replace the Cash Management Bank (Senior
Mezzanine) with a financial institution reasonably satisfactory to Mezzanine
Borrower in the event that (i) the Cash Management Bank (Senior Mezzanine)
fails, in any material respect, to comply with the Account Agreement (Senior
Mezzanine), (ii) the Cash Management Bank (Senior Mezzanine) named herein is no
longer the Cash Management Bank (Senior Mezzanine) or (iii) the Cash Management
Bank (Senior Mezzanine) is no longer an Approved Bank. 

 

(b)  During
the term of the Loan, so long as no Event of Default shall have occurred and is
continuing, Mezzanine Borrower, at its sole cost and expense, shall have the
right to replace the Cash Management Bank (Senior Mezzanine) with a financial
institution that is an Approved Bank provided such institution shall execute and
deliver to Mezzanine Lender (with a copy to Mortgage Lender) the Account
Agreement (Senior Mezzanine) (and Mezzanine Lender shall reasonably cooperate
with Mezzanine Borrower in connection with such transfer). Upon the occurrence
and during the continuance of an Event of Default, Mezzanine Lender shall have
the right at Mezzanine Borrower's sole cost and expense to replace Cash
Management Bank at any time, without notice to Mezzanine Borrower. Mezzanine
Borrower shall cooperate with Mezzanine Lender in connection with the
appointment of any replacement Cash Management Bank and the execution by the
Cash Management Bank and the Mezzanine Borrower of an Account Agreement and
delivery of same to Mezzanine Lender.

 

(c)  So
long as no Event of Default shall have occurred and be continuing, Mezzanine
Borrower shall have the right at its sole cost and expense to replace the Cash
Management Bank (Senior Mezzanine) with a financial institution that is an
Approved Bank provided that such financial institution and Mezzanine Borrower


 








34













shall execute and deliver to Mezzanine Lender an Account Agreement
substantially similar to the Account Agreement (Senior Mezzanine) executed as of
the Closing Date. 

 

3.1.8  Mezzanine
Borrower's Account Representations, Warranties and Covenants.
Mezzanine Borrower represents, warrants and covenants that:

 

(a)  Pursuant
to the Loan Agreement (Mortgage), Mortgage Borrower has directed that, after
Mortgage Lender receives notice of a Default hereunder (and provided no Mortgage
Event of Default exists), all Excess Cash Flow is to be deposited into the
Senior Mezzanine Account;

 

(b)  Neither
Mortgage Borrower nor Mezzanine Borrower nor any other Person will have any
right, title or interest in or to any Excess Cash Flow from and after the time
at which the Mortgage Lender becomes obligated under the Loan Agreement
(Mortgage) to transfer such Excess Cash Flow to the Senior Mezzanine Account,
except any rights Mezzanine Borrower shall have to allocations of such funds
following the disbursement to Mezzanine Borrower of any Net Excess Cash Flow as
provided in Section 3.1.5(a);

 

(c)  There
are no accounts other than the Collateral Accounts, Collateral Accounts (Senior
Mezzanine), Collateral Accounts (Intermediate Mezzanine), and Collateral
Accounts (Junior Mezzanine), maintained by Mortgage Borrower, Mezzanine Borrower
or any other Person with respect to the collection of rents, revenues, proceeds
or other income from the Property or for the collection of Receipts, except for
the Collection Account (as defined in the Loan Agreement (Mortgage)), the
Holding Account (as defined in the Loan Agreement (Mortgage)) the Manager
Accounts, and the Senior Mezzanine Account and any accounts held by Mezzanine
Borrower, Intermediate Mezzanine Borrower, or Junior Mezzanine Borrower in which
they are permitted to receive transfers of Net Excess Cash Flow as provided in
Section 3.1.5(c);

 

(d)  Mezzanine
Borrower shall cause Mortgage Borrower to deposit or cause to be deposited all
Distributions into the Senior Mezzanine Account as required by the Pledge and
this Agreement or any other Loan Document (Senior Mezzanine); and 

 

(e)  so
long as the Loan shall be outstanding, neither Mortgage Borrower, Operating
Lessee, Manager, Mezzanine Borrower, nor any of their Affiliates shall open any
other operating accounts with respect to the collection of rents, revenues,
proceeds or other income from the Property or for the collection of Receipts.


 

3.1.9  Account
Collateral (Senior Mezzanine) and Remedies. 

 

(a)  Upon
the occurrence and during the continuance of an Event of Default, without
additional notice from Mezzanine Lender to Mezzanine Borrower, (i) Mezzanine
Lender may, in addition to and not in limitation of Mezzanine Lender's other
rights, make any and all withdrawals from, and transfers between and among, the
Collateral Accounts (Senior Mezzanine) as Mezzanine Lender shall determine in
its sole and absolute discretion to pay any Obligations (Senior Mezzanine),
Operating Expenses 

 








35













and/or Capital Expenditures for the Property; (ii) all Excess Cash
Flow shall be retained in the Senior Mezzanine Account or applicable
Sub-Accounts, (iii) all payments to the Mezzanine Borrower's Account pursuant to
Section 3.1.5 shall immediately cease and (iv) Mezzanine Lender may
liquidate and transfer any amounts then invested in Permitted Investments to the
Collateral Accounts (Senior Mezzanine) to which they relate or reinvest such
amounts in other Permitted Investments as Mezzanine Lender may reasonably
determine is necessary to perfect or protect any security interest granted or
purported to be granted hereby or to enable Mezzanine Lender to exercise and
enforce Mezzanine Lender's rights and remedies hereunder with respect to any
Account Collateral (Senior Mezzanine) or to preserve the value of the Account
Collateral (Senior Mezzanine).

 

(b)  Upon
the occurrence and during the continuance of an Event of Default, Mezzanine
Borrower hereby irrevocably constitutes and appoints Mezzanine Lender as
Mezzanine Borrower's true and lawful attorney-in-fact, with full power of
substitution, to execute, acknowledge and deliver any instruments and to
exercise and enforce every right, power, remedy, option and privilege of
Mezzanine Borrower with respect to the Account Collateral (Senior Mezzanine),
and do in the name, place and stead of Mezzanine Borrower, all such acts, things
and deeds for and on behalf of and in the name of Mezzanine Borrower, which
Mezzanine Borrower could or might do or which Mezzanine Lender may deem
necessary or desirable to more fully vest in Mezzanine Lender the rights and
remedies provided for herein and to accomplish the purposes of this Agreement.
The foregoing powers of attorney are irrevocable and coupled with an interest.
Upon the occurrence and during the continuance of an Event of Default, Mezzanine
Lender may perform or cause performance of any such agreement, and any
reasonable expenses of Mezzanine Lender incurred in connection therewith shall
be paid by Mezzanine Borrower as provided in Section 5.1.12.

 

(c)  Mezzanine
Borrower hereby expressly waives, to the fullest extent permitted by law,
presentment, demand, protest or any notice of any kind (except as expressly
required under the Loan Documents (Senior Mezzanine)) in connection with this
Agreement or the Account Collateral (Senior Mezzanine). Mezzanine Borrower
acknowledges and agrees that ten (10) Business Days' prior written notice of the
time and place of any public sale of the Account Collateral (Senior Mezzanine)
or any other intended disposition thereof shall be reasonable and sufficient
notice to Mezzanine Borrower within the meaning of the UCC.

 

3.1.10  Transfers
and Other Liens. Mezzanine Borrower agrees that it will not (i)
sell or otherwise dispose of any of the Account Collateral (Senior Mezzanine)
except as may be expressly permitted under the Loan Documents (Senior
Mezzanine), or (ii) create or permit to exist any Lien upon or with respect to
all or any of the Account Collateral (Senior Mezzanine), except for the Lien
granted to Mezzanine Lender under this Agreement.

 

3.1.11  Reasonable
Care. Beyond the exercise of reasonable care in the custody
thereof, Mezzanine Lender shall have no duty as to any Account Collateral
(Senior Mezzanine) in its possession or control as agent therefor or bailee
thereof or any 

 








36













income thereon or the preservation of rights against any person or
otherwise with respect thereto. Mezzanine Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Account
Collateral (Senior Mezzanine) in its possession if the Account Collateral
(Senior Mezzanine) is accorded treatment substantially equal to that which
Mezzanine Lender accords its own property, it being understood that Mezzanine
Lender shall not be liable or responsible for any loss or damage to any of the
Account Collateral (Senior Mezzanine), or for any diminution in value thereof,
by reason of the act or omission of Mezzanine Lender, its Affiliates, agents,
employees or bailees, except to the extent that such loss or damage results from
Mezzanine Lender's gross negligence or willful misconduct. In no event shall
Mezzanine Lender be liable either directly or indirectly for losses or delays
resulting from any event which may be the basis of an Excusable Delay, computer
malfunctions, interruption of communication facilities, labor difficulties or
other causes beyond Mezzanine Lender's reasonable control or for indirect,
special or consequential damages except to the extent of Mezzanine Lender's
gross negligence or willful misconduct. Notwithstanding the foregoing, Mezzanine
Borrower acknowledges and agrees that (i) Mezzanine Lender does not have custody
of the Account Collateral (Senior Mezzanine), (ii) Cash Management Bank (Senior
Mezzanine) has custody of the Account Collateral (Senior Mezzanine), (iii) the
initial Cash Management Bank (Senior Mezzanine) was chosen by Mezzanine
Borrower, and (iv) Mezzanine Lender has no obligation or duty to supervise Cash
Management Bank (Senior Mezzanine) or to see to the safe custody of the Account
Collateral (Senior Mezzanine).

 

3.1.12  Mezzanine
Lender's Liability. 

 

(a)  Mezzanine
Lender shall be responsible for the performance only of such duties with respect
to the Account Collateral (Senior Mezzanine) as are specifically set forth in
this Section 3.1 or elsewhere in the Loan Documents (Senior Mezzanine),
and no other duty shall be implied from any provision hereof. Mezzanine Lender
shall not be under any obligation or duty to perform any act with respect to the
Account Collateral (Senior Mezzanine) which would cause it to incur any expense
or liability or to institute or defend any suit in respect hereof, or to advance
any of its own monies. Mezzanine Borrower shall indemnify and hold Mezzanine
Lender, its employees and officers harmless from and against any loss, cost or
damage (including, without limitation, reasonable attorneys' fees and
disbursements) incurred by Mezzanine Lender in connection with the transactions
contemplated hereby with respect to the Account Collateral (Senior Mezzanine)
(excluding losses on Permitted Investments) except as such may be caused by the
gross negligence or willful misconduct of Mezzanine Lender, its employees,
officers or agents. 

 

(b)  Mezzanine
Lender shall be protected in acting upon any notice, resolution, request,
consent, order, certificate, report, opinion, bond or other paper, document or
signature believed by it in good faith to be genuine, and, in so acting, it may
be assumed that any person purporting to give any of the foregoing in connection
with the provisions hereof has been duly authorized to do so. Mezzanine Lender
may consult with counsel, and the opinion of such counsel shall be full and
complete authorization 

 








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and protection in respect of any action taken or suffered by it
hereunder and in good faith in accordance therewith.

 

3.1.13  Continuing
Security Interest. This Agreement shall create a continuing
security interest in the Account Collateral (Senior Mezzanine) and shall remain
in full force and effect until payment in full of the Indebtedness; provided,
however, such security interest shall automatically terminate with respect to
funds which were duly deposited into Mezzanine Borrower’s Account in accordance
with the terms hereof. Upon payment in full of the Indebtedness, this security
interest shall automatically terminate without further notice from any party and
Mezzanine Borrower shall be entitled to the return, upon its request, of such of
the Account Collateral (Senior Mezzanine) as shall not have been sold or
otherwise applied pursuant to the terms hereof and Mezzanine Lender shall
execute such instruments and documents as may be reasonably requested by
Mezzanine Borrower to evidence such termination and the release of the Account
Collateral (Senior Mezzanine).

 


	IV.  	
      REPRESENTATIONS AND
    WARRANTIES




 

Section
4.1  Mezzanine Borrower
Representations

 

Mezzanine Borrower represents and warrants as of the Closing Date
that:

 

4.1.1  Organization.
Each of Mezzanine Borrower and CNL Hospitality Partners, LP is a limited
partnership that has been duly organized and is validly existing and in good
standing pursuant to the laws of the State of Delaware with requisite power and
authority to own its properties and to transact the businesses in which it is
now engaged. Each of KSL DC Operating LLC, Operating Lessee, and Manager is a
limited liability company that has been duly organized and is validly existing
and in good standing pursuant to the laws of the State of Delaware with
requisite power and authority to own its properties and to transact the
businesses in which it is now engaged. Each of Mezzanine Borrower, Mortgage
Borrower, Guarantor, Operating Lessee, and Manager has duly qualified to do
business and is in good standing in each jurisdiction where it is required to be
so qualified in connection with its properties, businesses and operations. Each
of Mezzanine Borrower, Mortgage Borrower, Guarantor, Operating Lessee, and
Manager possesses all rights, licenses, permits and authorizations, governmental
or otherwise, necessary to entitle it to own its properties and to transact the
businesses in which it is now engaged, (provided, however, with respect to
Guarantor only, those rights, licenses, permits and authorizations that would
cause a Material Adverse Effect), and the sole business of Mezzanine Borrower is
the ownership of the Property. The organizational structure of Mortgage
Borrower, Mezzanine Borrower, and their Affiliates is accurately depicted by the
schematic diagram attached hereto as Exhibit H. Mezzanine
Borrower shall not itself, and shall not permit Mortgage Borrower or any SPE
Entity, Operating Lessee, or Manager to, change its name, identity, corporate
structure or jurisdiction of organization unless it shall have given Mezzanine
Lender thirty (30) days prior written notice of any such change and shall have
taken all steps reasonably requested by Mezzanine Lender to grant, perfect,
protect and/or preserve the security interest granted hereunder to Mezzanine
Lender.

 








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4.1.2  Proceedings.
Each of Mezzanine Borrower, Guarantor, Operating Lessee, and Manager has full
power to and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement and the other Loan Documents (Senior
Mezzanine). This Agreement and the other Loan Documents (Senior Mezzanine) have
been duly executed and delivered by, or on behalf of, Mezzanine Borrower,
Guarantor, Operating Lessee, and Manager, as applicable, and constitute legal,
valid and binding obligations of Mezzanine Borrower, Guarantor, Operating
Lessee, and Manager, as applicable, enforceable against Mezzanine Borrower,
Guarantor, Operating Lessee, and Manager, as applicable, in accordance with
their respective terms, subject only to applicable bankruptcy, insolvency and
similar laws affecting rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

 

4.1.3  No
Conflicts. The execution, delivery and performance of this
Agreement and the other Loan Documents (Senior Mezzanine) by Mezzanine Borrower,
Guarantor, Operating Lessee, and Manager, as applicable, will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents (Senior Mezzanine)) upon
any of the property or assets of Mezzanine Borrower, Guarantor, Operating
Lessee, and Manager pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, partnership agreement or other agreement or instrument to
which Mezzanine Borrower, Guarantor, Operating Lessee, and Manager is a party or
by which any of Mezzanine Borrower's, Guarantor's, Operating Lessee's, and
Manager's property or assets is subject (unless consents from all applicable
parties thereto have been obtained), nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority, and any consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority required for
the execution, delivery and performance by Mezzanine Borrower, Guarantor,
Operating Lessee, and Manager of this Agreement or any other Loan Documents
(Senior Mezzanine) has been obtained and is in full force and effect.

 

4.1.4  Litigation.
There are no lawsuits, administrative proceedings, arbitration proceedings, or
other such legal proceedings that have been filed and served upon Mezzanine
Borrower (or with respect to which Mezzanine Borrower has otherwise received
proper notice) or, to the Best of Mezzanine Borrower's Knowledge, otherwise
pending or threatened against or affecting Mortgage Borrower, Mezzanine
Borrower, Operating Lessee, Manager, or the Property whose outcome, if
determined against Mortgage Borrower, Mezzanine Borrower, Manager, Operating
Lessee, or the Property, would have a Material Adverse Effect. To the Best of
Mezzanine Borrower's Knowledge, Schedule I includes each
pending action against Mortgage Borrower, Mezzanine Borrower, Operating Lessee,
Manager or otherwise affecting the Property that involves a claim or claims for
either (a) monetary damages exceeding $25,000, or (b) injunctive relief or other
equitable remedy that could have a Material Adverse Effect, excluding: (i)
actions for monetary damages only that have been tendered to, and accepted
without reservation of rights by, the liability insurance carrier for the
Property, (ii) worker's compensation claims, and (iii) any proceedings by
employees working at the Property where the amount claimed in such proceeding is
less than $25,000; to the Best of Mezzanine Borrower's Knowledge, the aggregate
amount of such claims described in subclause (iii) of this sentence is less than
$200,000. There are no arbitration proceedings, governmental investigations,
actions, suits or proceedings at law or in equity by or before any Governmental
Authority now pending or, to the Best of Mezzanine Borrower's Knowledge,
threatened against or affecting Guarantor which, if determined against Guarantor
would have a Material Adverse Effect.

 

4.1.5  Agreements.
Mezzanine Borrower is not a party to any agreement or instrument or subject to
any restriction which is reasonably likely to have a Material Adverse Effect.
Mezzanine Borrower is not in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party or by which
Mezzanine Borrower or the Property is bound, which default is reasonably likely
to have a Material Adverse Effect. Mezzanine Borrower has no material financial
obligation (contingent or otherwise) under any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which Mezzanine
Borrower is a party or by which Mezzanine Borrower or the Property is otherwise
bound, other than (a) obligations incurred in the ordinary course of the
operation of the Property, including membership programs disclosed in writing to
Mezzanine Lender on or prior to the date hereof, and (b) obligations under the
Loan Documents (Senior Mezzanine).

 

4.1.6  Title.
Mezzanine Borrower owns all of the assets reflected in the proforma balance
sheet of Mezzanine Borrower as of the date of such proforma balance sheet,
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances,
except for the Permitted Encumbrances. 

 

4.1.7  No
Bankruptcy Filing. None of Mezzanine Borrower, Intermediate
Mezzanine Borrower, Junior Mezzanine Borrower, Guarantor, Mortgage Borrower,
General Partner, any SPE Entity, Operating Lessee, or Manager is contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of such entity's
assets or property, and Mezzanine Borrower has no knowledge of any Person
contemplating the filing of any such petition against it or against Mezzanine
Borrower, Intermediate Mezzanine Borrower, Junior Mezzanine Borrower, Guarantor,
Mortgage Borrower, General Partner, any SPE Entity, Operating Lessee, or
Manager.

 

4.1.8  Full
and Accurate Disclosure. To the Best of Mezzanine Borrower's
Knowledge, no statement of fact made by Mezzanine Borrower in this Agreement or
in any of the other Loan Documents (Senior Mezzanine) contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained herein or therein not misleading. There is no fact
presently known to Mezzanine Borrower which has not been disclosed which has a
Material Adverse 

 








39













Effect, or to the Best of Mezzanine Borrower's Knowledge could
reasonably be expected to have a Material Adverse Effect.

 

4.1.9  ERISA.


 

(a)  Mezzanine
Borrower does not maintain or contribute to and is not required to contribute
to, an "employee benefit plan" as defined by Section 3(3) of ERISA, which is
subject to Title IV of ERISA (other than a "multiemployer plan" as defined by
Section 3(37) of ERISA), and Mezzanine Borrower (i) has no knowledge of any
material liability which has been incurred or is expected to be incurred by
Mezzanine Borrower which is reasonably likely to result in a Material Adverse
Effect and is or remains unsatisfied for any taxes or penalties or unfunded
contributions with respect to any "employee benefit plan" or any "plan," within
the meaning of Section 4975(e)(1) of the Internal Revenue Code or any other
benefit plan (other than a "multiemployer plan") maintained, contributed to, or
required to be contributed to by Mezzanine Borrower or by any entity that is
under common control with Mezzanine Borrower within the meaning Section
4001(a)(14) of ERISA (each, an ERISA Affiliate) (each, a
Plan) or any plan that would be a Plan but for the fact that it
is a multiemployer plan within the meaning of ERISA Section 3(37); and (ii) has
made and shall continue to make when due all required contributions to all such
Plans (other than Plans relating to ERISA Affiliates), if any, where the failure
to so contribute is reasonably likely to result in a Material Adverse Effect.
Each such Plan (other than Plans relating to ERISA Affiliates), if any, has been
and will be administered in material compliance with its terms and the
applicable provisions of ERISA, the Internal Revenue Code, and any other
applicable federal or state law; and no action shall be taken or fail to be
taken that would result in the disqualification or loss of tax-exempt status of
any such Plan intended to be qualified and/or tax exempt; and

 

(b)  With
respect to any "multiemployer plan," (i) Mezzanine Borrower has not, since
September 26, 1980, made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203 and 4205 of
ERISA, (ii) Mezzanine Borrower has made and shall continue to make when due all
required contributions to all such "multiemployer plans" and (iii) no ERISA
Affiliate has, since September 26, 1980, made or suffered a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively defined in
Sections 4203 and 4205 of ERISA which withdrawal is reasonably expected to have
a Material Adverse Effect. 

 

(c)  Mezzanine
Borrower is not an employee benefit plan, as defined in Section 3(3) of ERISA,
whether or not subject to Title I of ERISA, none of the assets of Mezzanine
Borrower, Guarantor or Mortgage Borrower constitutes or will constitute plan
assets of one or more such plans within the meaning of 29 C.F.R. Section
2510.3-101 and transactions by or with any of Mezzanine Borrower, Guarantor, and
Mortgage Borrower are not subject to similar laws regulating investment of, and
fiduciary obligations with respect to, plans similar to the provisions of
Section 406 of ERISA or Section 4975 of the Code currently in effect which
prohibit or otherwise restrict the transactions contemplated by this
Agreement.

 








40
















 

4.1.10  Compliance.
Mezzanine Borrower, Guarantor, Mortgage Borrower, General Partner and the
Property and the use thereof comply in all material respects with all applicable
Legal Requirements, including, without limitation, building and zoning
ordinances and codes except where the failure to so comply is not reasonably
expected to result in a Material Adverse Effect. To the Best of Mezzanine
Borrower's Knowledge, none of Mezzanine Borrower, Guarantor, Mortgage Borrower,
or General Partner is in default or in violation of any order, writ, injunction,
decree or demand of any Governmental Authority. To the Best of Mezzanine
Borrower's Knowledge, there has not been committed by Mezzanine Borrower,
Guarantor, Mortgage Borrower or General Partner any act or omission affording
the federal government or any other Governmental Authority the right of
forfeiture as against the Property, the Collateral or any part thereof or any
monies paid in performance of Mezzanine Borrower's obligations under any of the
Loan Documents (Senior Mezzanine).

 

4.1.11  Financial
Information. To the Best of Mezzanine Borrower's Knowledge, all
financial data of Mezzanine Borrower, Guarantor and Mortgage Borrower,
including, without limitation, the statements of cash flow and income and
operating expense, that have been delivered by or on behalf of Mezzanine
Borrower or Mortgage Borrower to Mezzanine Lender in respect of the Property (i)
are true, complete and correct in all material respects, (ii) fairly represent
the financial condition of the Property, the Mezzanine Borrower, Guarantor and
Mortgage Borrower as of the date of such reports, and (iii) to the extent
prepared or audited by an independent certified public accounting firm, have
been prepared in accordance with GAAP throughout the periods covered, except as
disclosed therein. None of Mezzanine Borrower, Guarantor, Mortgage Borrower, or
General Partner has any material contingent liabilities, liabilities for
delinquent taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to Mezzanine
Borrower and could reasonably be expected to have a Material Adverse Effect,
except as referred to or reflected in said financial statements and operating
statements. Since the date of such financial statements, there has been no
material adverse change in the financial condition, operations or business of
Mezzanine Borrower, Guarantor, Mortgage Borrower or General Partner from that
set forth in said financial statements.

 

4.1.12  Absence
of UCC Financing Statements, Etc. Except with respect to the
Permitted Encumbrances, the Loan Documents (Mortgage), the Intermediate
Mezzanine Loan Documents, the Junior Mezzanine Loan Documents, the Revolving
Credit Loan Documents, and the Loan Documents (Senior Mezzanine), there is no
financing statement, security agreement, chattel mortgage, real estate mortgage
or other document filed or recorded with any filing records, registry, or other
public office, that purports to cover, affect or give notice of any present or
possible future lien on, or security interest or security title in the interest
in the Property or any of the Collateral.

 

4.1.13  Federal
Reserve Regulations. None of the proceeds of the Loan will be used
for the purpose of purchasing or carrying any "margin stock" as 

 








41













defined in Regulation U, Regulation X or Regulation T or for the
purpose of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry "margin stock" or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulation
U or Regulation X. As of the Closing Date, Mezzanine Borrower does not own any
"margin stock."

 

4.1.14  Setoff,
Etc. The Collateral and the rights of Mezzanine Lender with respect
to the Collateral are not subject to any setoff, claims, withholdings or other
defenses. 

 

4.1.15  Not
a Foreign Person. None of Mezzanine Borrower, Guarantor or Mortgage
Borrower is a foreign person within the meaning of § 1445(f)(3) of the
Code.

 

4.1.16  Enforceability.
The Loan Documents (Senior Mezzanine) are not subject to any existing right of
rescission, set-off, counterclaim or defense by Mezzanine Borrower or Guarantor,
as applicable, including the defense of usury, nor would the operation of any of
the terms of the Loan Documents (Senior Mezzanine), or the exercise of any right
thereunder, render the Loan Documents (Senior Mezzanine) unenforceable (subject
to applicable bankruptcy, insolvency and similar laws affecting rights of
creditors generally, and subject as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law)), and neither Mezzanine Borrower nor Mortgage Borrower has asserted any
right of rescission, set-off, counterclaim or defense with respect
thereto.

 

4.1.17  Insurance.
Mezzanine Borrower has obtained and has delivered to Mezzanine Lender certified
copies or original certificates of all insurance policies required under this
Agreement, reflecting the insurance coverages, amounts and other requirements
set forth in this Agreement. Mezzanine Borrower has not, and to the Best of
Mezzanine Borrower's Knowledge no Person has, done by act or omission anything
which would impair the coverage of any such policy.

 

4.1.18  Physical
Condition. To the Best of Mezzanine Borrower's Knowledge and except
as expressly disclosed in the Physical Conditions Report, the Property,
including, without limitation, all buildings, Improvements, parking facilities,
sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire
protection systems, electrical systems, equipment, elevators, exterior sidings
and doors, landscaping, irrigation systems and all structural components, are in
good condition, order and repair in all material respects; to the Best of
Mezzanine Borrower's Knowledge and except as disclosed in the Physical
Conditions Report, there exists no structural or other material defects or
damages in or to the Property, whether latent or otherwise, and Mezzanine
Borrower has not received any written notice from any insurance company or
bonding company of any defects or inadequacies in the Property, or any part
thereof, which would adversely affect the insurability of the same or cause the
imposition of extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.

 








42
















 

4.1.19  Leases.
The Property is not subject to any Leases other than the Leases described in the
certified rent roll delivered in connection with the origination of the Loan.
Such certified rent roll is true, complete and correct in all material respects
as of the date set forth therein. No Person has any possessory interest in the
Property or right to occupy the same (other than typical short-term occupancy
rights of hotel guests which are not the subject of a written agreement) except
under and pursuant to the provisions of the Leases. The current Leases are in
full force and effect and to the Best of Mezzanine Borrower's Knowledge, there
are no material defaults thereunder by either party (other than as expressly
disclosed on the certified rent roll delivered to Mezzanine Lender or the Tenant
estoppel certificates delivered to Mezzanine Lender in connection with the
closing of the Loan) and there are no conditions that, with the passage of time
or the giving of notice, or both, would constitute material defaults thereunder.
No Rent has been paid more than one (1) month in advance of its due date, except
as disclosed in the Tenant estoppel certificates delivered to Mezzanine Lender
in connection with the closing of the Loan. There has been no prior sale,
transfer or assignment, hypothecation or pledge by Mortgage Borrower of Mortgage
Borrower's interest in any Lease or of the Rents received therein, which will be
outstanding following the funding of the Loan, other than those being assigned
to Mortgage Lender concurrently herewith. No Tenant under any Lease has a right
or option pursuant to such Lease or otherwise to purchase all or any part of the
property of which the leased premises are a part. 

 

4.1.20  Single
Purpose Entity/Separateness.

 

(a)  Mezzanine
Borrower hereby represents, warrants and covenants that each of Mezzanine
Borrower, Mortgage Borrower and each SPE Entity is, and has been since the date
of its respective formation, a Single Purpose Entity, except that (i) other than
the general partners of Mortgage Borrower and Operating Lessee (each of which
have two Independent Directors) and (ii) other than CNL KSL Partners GP, LLC
(which does not have an Independent Director), each of Mezzanine Borrower GP,
CNL Hotel Del Intermediate Mezz Partners GP, LLC, CNL Hotel Del Junior Mezz
Partners GP, LLC, and Revolving Credit Borrower has a single Independent
Director.

 

(b)  All
of the assumptions made in the Non-Consolidation Opinion, including, but not
limited to, any exhibits attached thereto and any certificates delivered by
Mezzanine Borrower in connection with the issuance of the Non-Consolidation
Opinion, are true and correct in all respects and any assumptions made in any
subsequent non-consolidation opinion delivered in connection with the Loan
Documents (Senior Mezzanine) (an Additional Non-Consolidation
Opinion), including, but not limited to, any exhibits attached
thereto, are true and correct in all material respects. Mezzanine Borrower,
Mortgage Borrower and each SPE Entity have complied with all of the assumptions
made with respect to it in the Non-Consolidation Opinion. To the Best of
Mezzanine Borrower's Knowledge, each entity other than Mezzanine Borrower with
respect to which an assumption shall be made in any Additional Non-Consolidation
Opinion will have complied and will comply with all of the assumptions made with
respect to it in any Additional Non-Consolidation Opinion.

 

4.1.21  Management
Agreement. The Management Agreement is in full force and effect and
there is no default thereunder by any party thereto and no event has occurred
that, with the passage of time and/or the giving of notice would constitute a
default thereunder. The Manager is not an Affiliate of Mezzanine Borrower.

 

4.1.22  Compliance
with Anti-Terrorism, Embargo and Anti-Money Laundering Laws. (i)
None of Mezzanine Borrower, Guarantor or any Person who owns any equity interest
in or Controls Mezzanine Borrower or, to the Best of Borrower's Knowledge,
Guarantor, currently is identified on the OFAC List or otherwise qualifies as a
Prohibited Person, and Mezzanine Borrower has implemented procedures to ensure
that no Person who now or hereafter owns any equity interest in Mezzanine
Borrower or Guarantor is a Prohibited Person or Controlled by a Prohibited
Person, and (ii) none of Mezzanine Borrower or Guarantor is in violation of any
Legal Requirements relating to anti-money laundering or anti-terrorism,
including, without limitation, Legal Requirements related to transacting
business with Prohibited Persons or the requirements of the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related
regulations issued thereunder, including temporary regulations, all as amended
from time to time. 

 

4.1.23  Tax
Filings. Mezzanine Borrower has filed (or has obtained effective
extensions for filing) all federal, state and local tax returns required to be
filed and has paid or made adequate provision for the payment of all federal,
state and local taxes, charges and assessments payable by Mezzanine
Borrower.

 

4.1.24  Solvency/Fraudulent
Conveyance. Mezzanine Borrower (a) has not entered into the
transaction contemplated by this Agreement or any Loan Document (Senior
Mezzanine) with the actual intent to hinder, delay, or defraud any creditor and
(b) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents (Senior Mezzanine). After giving effect to the Loan,
the fair saleable value of Mezzanine Borrower's assets exceeds and will,
immediately following the making of the Loan, exceed Mezzanine Borrower's total
liabilities, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities. The fair saleable value of Mezzanine Borrower's
assets is and will, immediately following the making of the Loan, be greater
than Mezzanine Borrower's probable liabilities, including the maximum amount of
its contingent liabilities on its Debts as such Debts become absolute and
matured. Mezzanine Borrower's assets do not and, immediately following the
making of the Loan will not, constitute unreasonably small capital to carry out
its business as conducted or as proposed to be conducted. Mezzanine Borrower
does not intend to, and does not believe that it will, incur Debt and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such Debt and liabilities as they mature (taking into account the
timing and amounts of cash to be received by Mezzanine Borrower and the amounts
to be payable on or in respect of obligations of Mezzanine Borrower).

 








43
















 

4.1.25  Investment
Company Act. Mezzanine Borrower is not (a) an investment company or
a company Controlled by an investment company, within the meaning of the
Investment Company Act of 1940, as amended, (b) a holding company or a
subsidiary company of a holding company or an affiliate of either a holding
company or a subsidiary company within the mean of the Public Utility Holding
Company Act of 1935, as amended or (c) subject to any other federal or state law
or regulation which purports to restrict or regulate its ability to borrow
money.

 

4.1.26  Interest
Rate Cap Agreement. The Interest Rate Cap Agreement (Senior
Mezzanine) is in full force and effect and enforceable against Mezzanine
Borrower in accordance with its terms, subject to applicable bankruptcy,
insolvency or similar laws generally affecting the enforcement of creditors'
rights and subject as to enforceability to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).

 

4.1.27  Brokers.
Neither Mezzanine Borrower nor, to the Best of Mezzanine Borrower's Knowledge,
Mezzanine Lender has dealt with any broker or finder with respect to the
transactions contemplated by the Loan Documents (Senior Mezzanine) and neither
party has done any acts, had any negotiations or conversations, or made any
agreements or promises which will in any way create or give rise to any
obligation or liability for the payment by either party of any brokerage fee,
charge, commission or other compensation to any Person with respect to the
transactions contemplated by the Loan Documents (Senior Mezzanine). Mezzanine
Borrower covenants and agrees that it shall pay as and when due any and all
brokerage fees, charges, commissions or other compensation or reimbursement due
to any broker of Mezzanine Borrower with respect to the transactions
contemplated by the Loan Documents (Senior Mezzanine). Mezzanine Borrower and
Mezzanine Lender shall each indemnify and hold harmless the other from and
against any loss, liability, cost or expense, including any judgments,
attorneys' fees, or costs of appeal, incurred by the other party and arising out
of or relating to any claim for brokerage commissions or finder's fees alleged
to be due as a result of the indemnifying party's agreements or actions. The
provisions of this Section 4.1.27 shall survive the expiration and termination
of this Agreement and the payment of the Indebtedness.

 

4.1.28  No
Other Debt. Neither Mezzanine Borrower nor General Partner has
borrowed or received debt financing that has not been heretofore repaid in full,
other than the Permitted Debt.

 

4.1.29  Taxpayer
Identification Number. Mezzanine Borrower's Federal taxpayer
identification number is 20-0494073.

 

4.1.30  Knowledge
Qualifications. Mezzanine Borrower represents that Eric Resnick,
Peter McDermott, John Barry and/or Barry Bloom are in a position to have
meaningful knowledge with respect to the matters set forth in the Loan 

 








44













Documents (Senior Mezzanine) which have been qualified to the
knowledge of such Persons.

 

4.1.31  Representations
and Warranties. Mezzanine Borrower represents and warrants that
each of the representations and warranties contained in the Loan Documents
(Mortgage) (which are hereby incorporated by reference as if fully set forth
herein) is true and correct in all material respects, as of the Closing Date and
to the best of its knowledge, after reasonable inquiry, there is no Mortgage
Event of Default thereunder.

 

Section
4.2  Survival of
Representations

 

Mezzanine Borrower agrees that all of the representations and
warranties of Mezzanine Borrower set forth in Section 4.1 and elsewhere
in this Agreement and in the other Loan Documents (Senior Mezzanine) shall be
deemed given and made as of the date of the funding of the Loan and survive for
so long as any amount remains owing to Mezzanine Lender under this Agreement or
any of the other Loan Documents (Senior Mezzanine) by Mezzanine Borrower or
Guarantor unless a longer survival period is expressly stated in a Loan Document
(Senior Mezzanine) with respect to a specific representation or warranty, in
which case, for such longer period. All representations, warranties, covenants
and agreements made in this Agreement or in the other Loan Documents (Senior
Mezzanine) by Mezzanine Borrower shall be deemed to have been relied upon by
Mezzanine Lender notwithstanding any investigation heretofore or hereafter made
by Mezzanine Lender or on its behalf.

 


	V.  	
      MEZZANINE BORROWER
  COVENANTS




 

Section
5.1  Affirmative Covenants

 

From the Closing Date and until payment and performance in full of
all obligations of Mezzanine Borrower under the Loan Documents (Senior
Mezzanine), Mezzanine Borrower hereby covenants and agrees with Mezzanine Lender
that:

 

5.1.1  Performance
by Mezzanine Borrower. 

 

(a)  Mezzanine
Borrower shall in a timely manner observe, perform and fulfill each and every
covenant, term and provision of each Loan Document (Senior Mezzanine) executed
and delivered by, or applicable to, Mezzanine Borrower and shall not enter into
or otherwise suffer or permit any amendment, waiver, supplement, termination or
other modification of any Loan Document (Senior Mezzanine) executed and
delivered by, or applicable to, Mezzanine Borrower without the prior written
consent of Mezzanine Lender.

 

(b)  Mezzanine
Borrower shall cause Mortgage Borrower in a timely manner to observe, perform
and fulfill each and every covenant, term and provision of each Loan Document
(Mortgage) executed and delivered by, or applicable to, Mortgage Borrower.


 








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5.1.2  Existence;
Compliance with Legal Requirements; Insurance. Subject to Mortgage
Borrower's right of contest pursuant to Section 7.3, of the Loan
Agreement (Mortgage), Mezzanine Borrower shall comply and cause the Mortgage
Borrower, any SPE Entity and the Property to be in compliance with all Legal
Requirements applicable to the Mezzanine Borrower, Mortgage Borrower, any SPE
Entity and Manager and the Property and the uses permitted upon the Property.
Mezzanine Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence, rights,
licenses, permits and franchises necessary to comply with all Legal Requirements
applicable to it and the Property. There shall never be committed by Mezzanine
Borrower, and Mezzanine Borrower shall not knowingly permit Mortgage Borrower or
any other Person in occupancy of or involved with the operation or use of the
Property to commit, any act or omission affording the federal government or any
state or local government the right of forfeiture as against the Property or any
part thereof or any monies paid in performance of Mezzanine Borrower's
obligations under any of the Loan Documents (Senior Mezzanine). Mezzanine
Borrower hereby covenants and agrees not to commit, knowingly permit or suffer
to exist any act or omission affording such right of forfeiture. Mezzanine
Borrower shall at all times maintain, preserve and protect (and shall cause
Mortgage Borrower to at all times maintain, preserve and protect) all franchises
and trade names and preserve all the remainder of its property used in the
conduct of its business and shall keep the Property in good working order and
repair, and from time to time make, or cause to be made, all reasonably
necessary repairs, renewals, replacements, betterments and improvements thereto,
as required by the Loan Agreement (Mortgage). Mezzanine Borrower shall keep or
shall cause Mortgage Borrower to keep the Property insured at all times to such
extent and against such risks, and maintain liability and such other insurance,
as is more fully set forth in this Agreement and the Loan Agreement
(Mortgage).

 

5.1.3  Litigation.
Mezzanine Borrower shall give prompt written notice to Mezzanine Lender of any
litigation or governmental proceedings pending or threatened in writing against
Mezzanine Borrower, Mortgage Borrower, the Collateral or the Property which, if
determined adversely to Mezzanine Borrower, Mortgage Borrower, the Collateral or
the Property would have a Material Adverse Effect.

 

5.1.4  Single
Purpose Entity. 

 

(a)  Each
of Mezzanine Borrower, General Partner, Mortgage Borrower, and each SPE Entity
has been since the date of its respective formation and shall remain a Single
Purpose Entity.

 

(b)  Each
of Mezzanine Borrower, Mortgage Borrower and each SPE Entity shall continue to
maintain its own account or accounts, separate from those of any Affiliate, with
commercial banking institutions. None of the funds of Mezzanine Borrower, will
be commingled with the funds of any other Affiliate.

 








46
















 

(c)  To
the extent that Mezzanine Borrower, Mortgage Borrower or any SPE Entity shares
the same officers or other employees as any of their Affiliates, the salaries of
and the expenses related to providing benefits to such officers and other
employees shall be fairly allocated among such entities, and each such entity
shall bear its fair share of the salary and benefit costs associated with all
such common officers and employees.

 

(d)  To
the extent that Mezzanine Borrower, Mortgage Borrower or any SPE Entity jointly
contracts with any of Mezzanine Borrower, Mortgage Borrower, any SPE Entity or
any of their Affiliates, as applicable, to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so doing shall be
allocated fairly among such entities, and each such entity shall bear its fair
share of such costs. To the extent that Mezzanine Borrower, Mortgage Borrower or
any SPE Entity contracts or does business with vendors or service providers
where the goods and services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly allocated to or among
such entities for whose benefit the goods and services are provided, and each
such entity shall bear its fair share of such costs. All material transactions
between (or among) Mezzanine Borrower, Mortgage Borrower or each SPE Entity and
any of their respective Affiliates shall be conducted on substantially the same
terms (or on more favorable terms for Mezzanine Borrower, Mortgage Borrower or
any SPE Entity, as applicable) as would be conducted with third parties.

 

(e)  To
the extent that Mezzanine Borrower, Mortgage Borrower, any SPE Entity or any of
their Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses.

 

(f)  Mezzanine
Borrower, Mortgage Borrower and each SPE Entity shall conduct its affairs
strictly in accordance with its organizational documents, and observe all
necessary, appropriate and customary corporate, limited liability company or
partnership formalities, as applicable, including, but not limited to, obtaining
any and all members' consents necessary to authorize actions taken or to be
taken, and maintaining accurate and separate books, records and accounts,
including, without limitation, payroll and intercompany transaction
accounts.

 

(g)  In
addition, Mezzanine Borrower, Mortgage Borrower and each SPE Entity shall each:
(i) maintain books and records separate from those of any other Person; (ii)
maintain its assets in such a manner that it is not more costly or difficult to
segregate, identify or ascertain such assets; (iii) hold regular meetings of its
board of directors, shareholders, partners or members, as the case may be, and
observe all other corporate, partnership or limited liability company, as the
case may be, formalities; (iv) hold itself out to creditors and the public as a
legal entity separate and distinct from any other entity; (v) prepare separate
tax returns and financial statements, or if part of a consolidated group, then
it will be shown as a separate member of such group; (vi) transact all business
with its Affiliates on an arm's-length basis and pursuant to 

 








47













enforceable agreements; (vii) conduct business in its name and use
separate stationery, invoices and checks; (viii) not commingle its assets or
funds with those of any other Person; and (ix) not assume, guarantee or pay the
debts or obligations of any other Person.

 

5.1.5  Consents.
If Mezzanine Borrower, Mortgage Borrower or any SPE Entity is a corporation, the
board of directors of such Person may not take any action requiring the
unanimous affirmative vote of 100% of the members of the board of directors
unless all of the directors, including the Independent Directors, shall have
participated in such vote. If Mezzanine Borrower, Mortgage Borrower or any SPE
Entity is a limited liability company, (a) if such Person is managed by a board
of managers, the board of managers of such Person may not take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
managers unless all of the managers, including the Independent Managers, shall
have participated in such vote, (b) if such Person is not managed by a board of
managers, the members of such Person may not take any action requiring the
affirmative vote of 100% of the members of such Person unless all of the
members, including the Independent Members, shall have participated in such
vote. An affirmative vote of 100% of the directors, board of managers or
members, as applicable, of Mezzanine Borrower, Mortgage Borrower and any SPE
Entity shall be required to (i) file a bankruptcy or insolvency petition or
otherwise institute insolvency proceedings or to authorize Mezzanine Borrower,
Mortgage Borrower or any SPE Entity to do so or (ii) file an involuntary
bankruptcy petition against any Close Affiliate, Manager, or any Close Affiliate
of Manager. Furthermore, Mezzanine Borrower's, Mortgage Borrower's or each SPE
Entity's formation documents shall expressly state that for so long as the Loan
is outstanding, none of Mezzanine Borrower, Mortgage Borrower nor any SPE Entity
shall be permitted to (i) dissolve, liquidate, consolidate, merge or sell all or
substantially all of Mezzanine Borrower's, Mortgage Borrower's or any SPE
Entity's assets other than in connection with the repayment of the Loan or (ii)
engage in any other business activity and such restrictions shall not be
modified or violated for so long as the Loan is outstanding.

 

5.1.6  Notice
of Default. Mezzanine Borrower shall promptly advise Mezzanine
Lender (a) of any event or condition that has or is likely to have a Material
Adverse Effect and (b) of the occurrence of any Default, Event of Default,
Mortgage Default or Mortgage Event of Default of which Mezzanine Borrower has
knowledge.

 

5.1.7  Cooperate
in Legal Proceedings. Mezzanine Borrower shall cooperate (and shall
cause Mortgage Borrower to cooperate) fully with Mezzanine Lender with respect
to any proceedings before any court, board or other Governmental Authority which
would reasonably be expected to affect in any material adverse way the rights of
Mezzanine Lender hereunder or under any of the other Loan Documents (Senior
Mezzanine) and, in connection therewith, permit Mezzanine Lender, at its
election, to participate in any such proceedings which may have a Material
Adverse Effect.

 

5.1.8  Perform
Loan Documents (Senior Mezzanine). Mezzanine Borrower shall
observe, perform and satisfy all the terms, provisions, 

 








48













covenants and conditions of, and shall pay when due all costs, fees
and expenses to the extent required, under the Loan Documents (Senior Mezzanine)
executed and delivered by, or applicable to, Mezzanine Borrower.

 

5.1.9  Further
Assurances; Separate Notes.

 

(a)  Mezzanine
Borrower shall execute and acknowledge (or cause to be executed and
acknowledged) and deliver to Mezzanine Lender all documents, and take all
actions, reasonably required by Mezzanine Lender from time to time to confirm
the rights created or now or hereafter intended to be created under this
Agreement and the other Loan Documents (Senior Mezzanine) and any security
interest created or purported to be created thereunder, to protect and further
the validity, priority and enforceability of this Agreement and the other Loan
Documents (Senior Mezzanine), to subject to the Loan Documents (Senior
Mezzanine) any property of Mezzanine Borrower intended by the terms of any one
or more of the Loan Documents (Senior Mezzanine) to be encumbered by the Loan
Documents (Senior Mezzanine), or otherwise carry out the purposes of the Loan
Documents (Senior Mezzanine) and the transactions contemplated thereunder.
Mezzanine Borrower agrees that it shall, upon request, reasonably cooperate with
Mezzanine Lender in connection with any request by Mezzanine Lender to sever the
Mezzanine Note into two (2) or more separate substitute or component notes in an
aggregate principal amount equal to the Principal Amount and to reapportion the
Loan among such separate substitute notes, including, without limitation, by
executing and delivering to Mezzanine Lender new substitute or component notes
to replace the Mezzanine Note, amendments to or replacements of existing Loan
Documents (Senior Mezzanine) to reflect such severance and/or Opinions of
Counsel with respect to such substitute or component notes, amendments and/or
replacements, provided that Mezzanine Borrower shall bear no costs or expenses
in connection therewith (other than administrative costs and expenses of
Mezzanine Borrower), and the holders of such substitute or component notes shall
designate a lead lender or agent for such holders to whom Mezzanine Borrower may
direct all communications with respect to the Loan. Any such substitute or
component notes may have varying principal amounts and economic terms, provided,
however, that (i) the maturity date of any such substitute or component notes
shall be the same as the scheduled Maturity Date of the Mezzanine Note
immediately prior to the issuance of such substitute notes, (ii) the substitute
notes shall provide for amortization of the Principal Amount on a weighted
average basis over a period not less than the amortization period provided under
the Mezzanine Note, if any, immediately prior to the issuance of the substitute
notes, (iii) the weighted average LIBOR Margin for the term of the substitute
notes shall not exceed the LIBOR Margin under the Mezzanine Note immediately
prior to the issuance of such substitute notes; and (iv) the economics of the
Loan, taken as a whole, shall not change in a manner which is adverse to
Mezzanine Borrower. Upon the occurrence and during the continuance of an Event
of Default, Mezzanine Lender may apply payment of all sums due under such
substitute notes in such order and priority as Mezzanine Lender shall elect in
its sole and absolute discretion.

 

(b)  Mezzanine
Borrower further agrees that if, in connection with the Securitization, it is
determined by the Rating Agencies that a portion of the Securitization 

 








49













would not receive an "investment grade" rating unless the principal
amount of the Mortgage Loan were to be decreased and, as a result, the principal
amount of the Mortgage Loan is decreased, then (i) the Mezzanine Borrower shall
take all actions as are necessary to effect the "resizing" of the Loan and the
Mortgage Loan, (ii) the Mezzanine Borrower shall cause the Mortgage Borrower to
comply with its agreements to effect a "resizing", and (iii) Mezzanine Lender
shall on the date of the "resizing" of the Loan lend to the Mezzanine Borrower
(by way of a reallocation of the principal amount of the Mortgage Loan and the
Loan) such additional amount equal to the amount of the principal reduction of
the Loan provided that Mortgage Borrower and Mezzanine Borrower execute and
deliver any and all necessary amendments or modifications to the Loan Documents
(Mortgage) and the Loan Documents (Senior Mezzanine). In addition, Mezzanine
Borrower and Mezzanine Lender agree that if, in connection with the
Securitization, it is determined by the Rating Agencies that, if the principal
amount of the Loan were to be decreased and, as a result the principal amount of
the Mortgage Loan were increased, more "investment grade" rated securities could
be issued, then (i) if "resizing" to increase the size of the Mortgage Loan and
decrease the size of the Loan is provided for in the Loan Documents (Mortgage),
each of them shall take all actions provided for in the documentation for the
Loan as are necessary to effect the "resizing" of the Loan and the Mortgage
Loan, (ii) Mezzanine Borrower shall cause the Mortgage Borrower to comply with
its agreements to effect a "resizing" and (iii) Mortgage Lender shall on the
date of the "resizing" of the Loan lend to the Mortgage Borrower (by way of a
reallocation of the principal amount of the Mortgage Loan and the Loan) an
additional amount equal to the amount of principal reduction of the Loan,
provided that Mortgage Borrower and Mezzanine Borrower execute and deliver any
and all necessary modifications to the Loan Documents (Mortgage) and Loan
Documents (Senior Mezzanine). In connection with the foregoing, Mezzanine
Borrower agrees, at Mezzanine Borrower's sole cost and expense, to execute and
deliver such documents and other agreements reasonably required by Mortgage
Lender and/or Mezzanine Lender to "re-size" the Loan and the Mortgage Loan,
including, without limitation, an amendment to this Agreement, the Mezzanine
Note, the Pledge and the other Loan Documents (Mortgage) and, if the principal
amount of the Mortgage Loan is increased, an endorsement to the Title Policy
reflecting an increase in the insured amount thereunder. Mezzanine Borrower
agrees to reimburse Mezzanine Lender for all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred by
Mezzanine Lender in connection with any "resizing" of the Loan and to pay for
any additional "Eagle 9" or other UCC insurance coverage reasonably required by
Mezzanine Lender in connection with any increase in the principal amount of any
Mezzanine Loan, and shall deliver opinions of counsel similar to those delivered
on the date hereof with respect to Mezzanine Borrower and the Mezzanine Loans.
Notwithstanding the foregoing, Mezzanine Lender agrees that any "resizing" of
the Mortgage Loan and the Loan shall not change the economics of the Mortgage
Loan, Intermediate Mezzanine Loan, Junior Mezzanine Loan, and the Loan taken as
a whole in a manner which is adverse to Mezzanine Borrower.

 

(c)  In
addition, Mezzanine Borrower shall, at Mezzanine Borrower's sole cost and
expense:

 








50
















 

(i)  furnish
to Mezzanine Lender, to the extent not otherwise already furnished to Mezzanine
Lender and reasonably acceptable to Mezzanine Lender, all instruments,
documents, boundary surveys, footing or foundation surveys, certificates, plans
and specifications, appraisals, title and other insurance reports and
agreements, and each and every other document, certificate, agreement and
instrument required to be furnished by Mortgage Borrower pursuant to the terms
of the Loan Documents (Mortgage); 

 

(ii)  execute
and deliver, from time to time, such further instruments (including, without
limitation, delivery of any financing statements under the UCC) as may be
reasonably requested by Mezzanine Lender to confirm the lien of the Pledge and
this Agreement or any Collateral;

 

(iii)  execute
and deliver to Mezzanine Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary to evidence,
preserve and/or protect the collateral at any time securing or intended to
secure the obligations of Mezzanine Borrower under the Loan Documents (Senior
Mezzanine), as Mezzanine Lender may reasonably require; 

 

(iv)  do
and execute all and such further lawful and reasonable acts, conveyances and
assurances for the carrying out of the terms and conditions of this Agreement
and the other Loan Documents (Senior Mezzanine), as Mezzanine Lender shall
reasonably require from time to time; and

 

(v)  cause
its New York counsel to re-issue the New York opinion delivered on the date
hereof (in identical form and without updating) in favor of any purchaser of the
Loan or an interest therein.

 

5.1.10  Business
and Operations. Mortgage Borrower, Mezzanine Borrower, and
Operating Lessee shall continue to engage in the businesses presently conducted
by it as and to the extent the same are necessary for the ownership,
maintenance, management and operation of the Property and the Collateral, as
applicable. Mezzanine Borrower shall and shall cause Mortgage Borrower to,
qualify to do business and shall remain in good standing under the laws of all
applicable jurisdictions and to the extent required for the ownership,
maintenance, management and operation of the Property and, as applicable, the
ownership of the Collateral.

 

5.1.11  Title
to the Collateral. Mezzanine Borrower shall warrant and defend (a)
its title to the Collateral and every part thereof, subject only to Liens
permitted hereunder (including Permitted Encumbrances) and (b) the validity and
priority of the Lien of the Pledge and this Agreement on the Collateral, subject
only to Liens permitted hereunder (including Permitted Encumbrances), in each
case against the claims of all Persons whomsoever. Mezzanine Borrower shall
reimburse Mezzanine Lender for any losses, costs, damages or expenses (including
reasonable attorneys' fees and court 

 








51













costs) incurred by Mezzanine Lender if an interest in the Collateral,
other than as permitted hereunder, is claimed by another Person.

 

5.1.12  Costs
of Enforcement. In the event (a) that this Agreement or the Pledge
is foreclosed upon in whole or in part or that this Agreement or the Pledge is
put into the hands of an attorney for collection, suit, action or foreclosure,
(b) of the foreclosure of any security agreement prior to or subsequent to this
Agreement or the Pledge in which proceeding Mezzanine Lender is made a party, or
a Pledge prior to or subsequent to the Pledge in which proceeding Mezzanine
Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or
other similar proceeding in respect of Mezzanine Borrower or any of its
constituent Persons or an assignment by Mezzanine Borrower or any of its
constituent Persons for the benefit of its creditors, Mezzanine Borrower, its
successors or assigns, shall be chargeable with and agrees to pay all costs of
collection and defense, including reasonable attorneys' fees and costs, incurred
by Mezzanine Lender or Mezzanine Borrower in connection therewith and in
connection with any appellate proceeding or post-judgment action involved
therein, together with all required service or use taxes.

 

5.1.13  Estoppel
Statement.

 

(a)  Mezzanine
Borrower shall, from time to time, upon thirty (30) days' prior written request
from Mezzanine Lender, execute, acknowledge and deliver to the Mezzanine Lender
(and shall cause Mortgage Borrower to execute, acknowledge and deliver to
Mezzanine Lender), an Officer's Certificate, stating that this Agreement and the
other Loan Documents (Senior Mezzanine) (or as applicable, the Loan Documents
(Mortgage)) are unmodified and in full force and effect (or, if there have been
modifications, that this Agreement and the other Loan Documents (Senior
Mezzanine) or, as applicable, Loan Documents (Mortgage) are in full force and
effect as modified and setting forth such modifications), stating the amount of
accrued and unpaid interest and the outstanding principal amount of the
Mezzanine Note (or, as applicable, the Mortgage Note) and containing such other
information, qualified to the Best of Mezzanine Borrower's Knowledge, with
respect to the Mezzanine Borrower, Guarantor, Mortgage Borrower, the Property,
the Loan and the Mortgage Loan as Mezzanine Lender shall reasonably request. The
estoppel certificate shall also state either that no Event of Default or
Mortgage Event of Default exists hereunder or thereunder or, if any Event of
Default or Mortgage Event of Default shall exist hereunder or thereunder,
specify such Event of Default or Mortgage Event of Default and the steps being
taken to cure such Event of Default or Mortgage Event of Default.

 

(b)  Mezzanine
Borrower shall use commercially reasonable efforts to deliver to Mezzanine
Lender, within thirty (30) days of Mezzanine Lender's request, tenant estoppel
certificates from each Tenant under Leases entered into after the Closing Date
in substantially the form and substance of the estoppel certificate set forth in
Exhibit G provided that Mezzanine Borrower shall not be
required to deliver such certificates more frequently than one time in any
calendar year; provided, however, that there shall be no limit on the number of
times Mezzanine Borrower may be required to 

 








52













obtain such certificates if a Default hereunder or under any of the
Loan Documents (Senior Mezzanine) has occurred and is continuing.

 

5.1.14  Loan
Proceeds. Mezzanine Borrower shall use the proceeds of the Loan
received by it on the Closing Date only for the purposes set forth in Section
2.1.4.

 

5.1.15   No
Joint Assessment. Mezzanine Borrower shall not suffer, permit or
initiate the joint assessment of the Property (a) with any other real property
constituting a tax lot separate from the Property and (b) which constitutes real
property with any portion of the Property which may be deemed to constitute
personal property, or any other procedure whereby the lien of any taxes which
may be levied against such personal property shall be assessed or levied or
charged to such real property portion of the Property.

 

5.1.16  No
Further Encumbrances. Mezzanine Borrower shall do, or cause to be
done, all things necessary to keep and protect the Property and the Collateral
and all portions thereof unencumbered from any Liens, easements or agreements
granting rights in or restricting the use or development of the Property, except
for (a) with respect to the Property, Permitted Encumbrances, (b) Liens
permitted pursuant to the Loan Documents (Senior Mezzanine), or the Loan
Documents (Mortgage), (c) Liens for Impositions prior to the imposition of any
interest, charges or expenses for the non-payment thereof and (d) any Liens
permitted pursuant to Leases.

 

5.1.17  Leases
and REAs. Mezzanine Borrower shall cause Mortgage Borrower,
promptly after receipt thereof, to deliver to Mezzanine Lender a copy of any
notice received with respect to the REAs and the Leases claiming that Mortgage
Borrower is in default in the performance or observance of any of the material
terms, covenants or conditions of any of the REAs or the Leases.

 

5.1.18  Loan
(Mortgage) Covenants. 

 

(a)  Mezzanine
Borrower hereby covenants that it shall cause Mortgage Borrower to fully keep,
perform and comply with (or cause to be kept, performed and complied with) each
of the covenants set forth in the Loan Agreement (Mortgage) and the Security
Instrument, which are hereby incorporated by reference as if fully set forth
herein, notwithstanding any waiver or future amendment of such covenants by
Mortgage Lender (other than a Permitted Loan Amendment). Mezzanine Borrower
acknowledges that the obligation to comply with such covenants is separate from,
and may be enforced independently from, the obligations of the Mortgage Borrower
under the Loan Documents (Mortgage). 

 

(b)  Mezzanine
Borrower shall not, and shall cause Mortgage Borrower not to, (i) amend or
modify (by agreement on the part of the Mortgage Borrower or Mezzanine Borrower)
or (ii) affirmatively permit the modification or amendment of (by operation of
law or otherwise) the Loan Documents (Mortgage) in effect as of the Closing Date
that would be a Prohibited Loan Amendment (as hereinafter defined) except 

 








53













for those amendments or modifications (Permitted Loan
Amendments) that are (i) required under the Loan Documents (Mortgage)
or that Mortgage Borrower is required to consent to thereunder pursuant to the
express terms of the Loan Documents (Mortgage), (ii) which do not constitute a
Prohibited Loan Amendment, or (iii) are otherwise consented to
by Mezzanine Lender. As used herein, a Prohibited Loan Amendment shall mean an
amendment or modification to the Loan Documents (Mortgage) that (A) is
reasonably likely to have a Material Adverse Effect, or (B) which (1) increases
the principal amount of the Loan (Mortgage) (exclusive of protective advances),
(2) increases the interest rate payable under the Loan (Mortgage), (3) provides
for the payment of any additional interest, additional fees, increases the
amount of or adds additional reserve payments or increases the amount of or adds
additional escrows, or otherwise increases the amount payable under the Loan
(Mortgage), (4) increases the frequency or payment amount of the periodic
principal installments under the Loan (Mortgage), (5) modifies the recourse
carveout obligations under the Loan Documents (Mortgage) in a manner which
increases or expands recourse liability, (6) modifies the due-on-sale,
due-on-encumbrance, or collateral release provisions of the Loan Documents
(Mortgage), (7) modifies the provisions governing requirements with respect to
the Independent Managers under the Loan Documents (Mortgage) in a manner
materially adverse to Mortgage Lender, (8) adds material additional obligations,
liabilities or indemnities on the part of Mortgage Borrower, Guarantor, General
Partner or Mezzanine Borrower, (9) shortens any default cure periods or adds any
additional defaults under the Loan Documents (Mortgage), (10) extends the
maturity date of the Loan (Mortgage) beyond the initially scheduled maturity
date (except in connection with any work-out or other surrender, compromise,
release, renewal, or indulgence relating to the Loan (Mortgage), (11) modifies
any provisions related to the Management Agreement, (12) waives or modifies any
provisions related to the use of proceeds under the Loan Documents (Mortgage),
(13) modifies any provisions of the Loan Documents (Mortgage) related to the
funding of escrows or cash management or any provision of the Account Agreement
(Mortgage) or (14) decreases or materially modifies any insurance requirements
under the Loan Documents (Mortgage). Any amendment or modification to the Loan
Documents (Mortgage) in violation of this Section shall be ineffective as
between Mezzanine Borrower and Mezzanine Lender, and, if not cured by Mezzanine
Borrower within thirty (30) days after written notice from Mezzanine Lender
shall constitute an Event of Default hereunder, unless Mezzanine Lender consents
thereto in writing in its sole discretion. 

 

(c)  In
the event the Loan (Mortgage) shall at any time be repaid, or the Liens securing
the Loan (Mortgage) at any time be released in full, then unless and until the
Mezzanine Note shall have been repaid in full and all obligations of Mezzanine
Borrower to Mezzanine Lender hereunder and under the other Loan Documents
(Senior Mezzanine) shall have been satisfied, then Mezzanine Borrower and
Manager shall nevertheless comply or cause the Mortgage Borrower to comply with
each of the terms and provisions of the Loan Documents (Mortgage) (other than
payment of principal, interest and premium (if any)) and the Loan Documents
(Mortgage) shall nevertheless be deemed to remain in full force and effect as
between Mezzanine Borrower and Mezzanine Lender with Mezzanine Lender being
deemed in such context to possess exclusively all of the rights and remedies of
the Mortgage Lender thereunder including 

 








54













without limitation, all rights of consent and approval, rights to
receive and control the disposition of casualty insurance proceeds and
condemnation awards, and the right to collect rents through a lockbox and make
waterfall distributions (but expressly excluding any rights and remedies
relating to payment of the indebtedness under the Loan Documents (Mortgage) and
evidenced by the Mortgage Note and Mezzanine Borrower shall nevertheless comply
or cause the Mortgage Borrower to comply with each of the terms and provisions
of the Loan Documents (Mortgage) (and any Permitted Loan Amendments or amendment
or modification consented to in writing by Mezzanine Lender) (other than the
payment of principal, interest and premium, if any). Mezzanine Borrower shall,
and shall cause Mortgage Borrower to, execute any and all documents reasonably
requested by Mezzanine Lender for the implementation or furtherance of the
foregoing provided that the same shall be at Mezzanine Lender’s sole cost and
expense. Mezzanine Borrower shall deliver to Mezzanine Lender copies of any and
all modifications to the Loan Documents (Mortgage) within five (5) Business Days
after execution thereof.

 

(d)  Mezzanine
Borrower covenants and agrees to cause Mortgage Borrower to deliver any and all
financial information delivered or required to be delivered to Mortgage Lender
pursuant to the terms of the Loan Documents (Mortgage) to be delivered
simultaneously to Mezzanine Lender.

 

5.1.19  Impositions.
Mezzanine Borrower shall cause Mortgage Borrower to pay all Impositions, to
timely pay all claims for labor, material or supplies that if unpaid or unbonded
might by law become a lien or charge upon any of its property (including the
Property), and to keep the Property free from any Lien (other than the lien of
the Loan Documents (Mortgage) and the Permitted Encumbrances), and shall in any
event cause the prompt, full and unconditional discharge of all Liens imposed
upon the Property or any portion thereof within thirty (30) days after receiving
written notice (whether from Mezzanine Lender, the lienholder or any other
Person) of the filing thereof; subject in each case to Mortgage Borrower's right
to contest the same as permitted in but subject to the conditions set forth in
the Loan Agreement (Mortgage) so long as no Event of Default has occurred. In
the event that Mortgage Borrower elects to commence any contest or similar
proceeding with respect to any such Imposition, Lien or other claim described
herein, Mezzanine Borrower shall provide prompt written notice thereof to
Mezzanine Lender together with such evidence as Mezzanine Lender may reasonably
require showing Mortgage Borrower’s satisfaction of the requirements set forth
in Section 7.3 of the Loan Agreement (Mortgage) to Mortgage Borrower
conducting such contest. Notwithstanding the foregoing, Mezzanine Borrower shall
cause Mortgage Borrower promptly to pay any contested Imposition, Lien or claim
and the payment thereof shall not be deferred, if Mezzanine Lender or Mortgage
Borrower may be subject to civil or criminal damages as a result thereof. If
such action or proceeding is terminated or discontinued adversely to Mortgage
Borrower, then Mezzanine Borrower shall cause Mortgage Borrower to deliver to
Mezzanine Lender reasonable evidence of payment of such contested Imposition or
Lien.

 

5.1.20  Leases.
Mezzanine Borrower shall promptly after receipt thereof (or receipt by Mortgage
Borrower) deliver to Mezzanine Lender a copy of any 

 








55













notice received with respect to the Leases claiming that Mortgage
Borrower is in default in the performance or observance of any of the material
terms, covenants or conditions of any of the Leases, if such default is
reasonably likely to have a Material Adverse Effect.

 

5.1.21  Membership
Programs. Mezzanine Borrower shall receive Mezzanine Lender's prior
written consent to make any material modifications to (or permit Mortgage
Borrower to make any material modifications to) any existing membership program
or similar program at the Property or enter into any new membership or similar
program at the Property to the extent such modification or new program (i) would
allow any member to redeem a membership deposit prior to Mortgage Borrower
obtaining at least one new membership deposit in an amount at least equal to the
existing deposit to be redeemed (i.e., a 1:1 redemption program), or (ii) could
adversely affect the value of Mezzanine Lender's security for the Loan.
Mezzanine Borrower shall cause Mortgage Borrower to cause any membership
deposits which are not subject to a minimum of 1:1 redemption program to be held
in a separate interest bearing account and if requested by Lender, shall, at its
sole cost and expense promptly cause any such deposits to be held in an account
under the control of Lender. If Lener consents to any membership or similar
program that does not have a minimum 1:1 redemption method, Borrower agrees at
its sole cost and expense to promptly establish any reserves with Lender and
make any corresponding modifications to the Loan Documents as are requested by
the Rating Agencies.

 

5.1.22  Article
8 "Opt In" Language. Each organizational document of Mezzanine
Borrower, General Partner, each SPE Entity and Mortgage Borrower shall be
modified to include the language set forth on Exhibit R
and such language shall remain in each such organizational document for so long
as the Obligations are outstanding.

 

Section
5.2  Negative Covenants

 

From the Closing Date until payment and performance in full of all
Obligations of Mezzanine Borrower under the Loan Documents (Senior Mezzanine) or
the earlier release of the Lien of this Agreement or the Pledge in accordance
with the terms of this Agreement and the other Loan Documents (Senior
Mezzanine), Mezzanine Borrower covenants and agrees with Mezzanine Lender that
it will not do (and will not permit Operating Lessee to do), or permit to be
done, directly or indirectly, any of the following (and in such connection,
references in this Article V to Mortgage Borrower shall alternatively mean
Operating Lessee, as the context may require):

 

5.2.1  Incur
Debt. Incur, create or assume any Debt other than Permitted Debt
(Senior Mezzanine) or Transfer all or any part of the Collateral or any interest
therein, except as permitted in the Loan Documents (Senior Mezzanine);

 

5.2.2  Encumbrances.
Other than in connection with the Loan Documents (Senior Mezzanine), the Loan
Documents (Mortgage), the Loan Documents (Intermediate Mezzanine), the Loan
Documents (Junior Mezzanine), and the Revolving Credit Loan Documents, incur,
create or assume or permit the incurrence, creation or 

 








56













assumption of any Debt secured by an interest in Mortgage Borrower,
Mezzanine Borrower, Operating Lessee, CNL Hotel Del Tenant Corp., or Manager,
and shall not Transfer or permit the Transfer of any interest in Mortgage
Borrower, Mezzanine Borrower, Operating Lessee, or Manager, except as permitted
pursuant to Article VIII;

 

5.2.3  Engage
in Different Business. Engage, directly or indirectly, in any
business other than that of entering into this Agreement and the other Loan
Documents (Senior Mezzanine) to which Mezzanine Borrower is a party and
ownership of interests in the Mortgage Borrower and activities related
thereto;

 

5.2.4  Make
Advances. Make advances or make loans to any Person, or hold any
investments, except as expressly permitted pursuant to the terms of this
Agreement or any other Loan Document (Senior Mezzanine);

 

5.2.5  Partition.
Permit Mortgage Borrower to partition the Property;

 

5.2.6  Commingle.
Commingle its assets with the assets of any of its Affiliates;

 

5.2.7  Guarantee
Obligations. Guarantee any obligations of any Person;

 

5.2.8  Transfer
Assets. Transfer any asset other than in the ordinary course of
business or Transfer any interest in the Property except as may be permitted
hereby or in the other Loan Documents (Senior Mezzanine);

 

5.2.9  Amend
Organizational Documents. Amend or modify any of its organizational
documents without Mezzanine Lender's consent, other than in connection with any
Transfer permitted pursuant to Article VIII or to reflect any change in capital
accounts, contributions, distributions, allocations or other provisions that do
not and could not reasonably be expected to have a Material Adverse Effect and
provided that Mezzanine Borrower and each SPE Entity each remain a Single
Purpose Entity;

 

5.2.10  Dissolve.
Dissolve, wind-up, terminate, liquidate, merge with or consolidate into another
Person, except following or simultaneously with a repayment of the Loan in full
or as expressly permitted pursuant to this Agreement;

 

5.2.11  Bankruptcy.
(i) File a bankruptcy or insolvency petition or otherwise institute insolvency
proceedings, (ii) dissolve, liquidate, consolidate, merge or sell all or
substantially all of Mezzanine Borrower's assets other than in connection with
the repayment of the Loan, (iii) engage in any other business activity or (iv)
file or solicit the filing of an involuntary bankruptcy petition against
Mezzanine Borrower, Mortgage Borrower, Manager or any Close Affiliate of
Mezzanine Borrower or Manager, without obtaining the prior consent of all of the
directors of Mezzanine Borrower, including, without limitation, the Independent
Directors;

 








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5.2.12  ERISA.
Engage in any activity that would subject it to regulation under ERISA or
qualify it as an "employee benefit plan" (within the meaning of Section 3(3) of
ERISA) to which ERISA applies and Mezzanine Borrower's assets do not and will
not constitute plan assets within the meaning of 29 C.F.R. Section
2510.3-101;

 

5.2.13  Distributions.
From and after the occurrence and during the continuance of an Event of Default,
make any distributions to or for the benefit of any of its shareholders,
partners or members, as the case may be, or its or their Affiliates;

 

5.2.14  Manager.

 

(a)  Except
as provided in this Section 5.2.14, Mezzanine Borrower shall not, without
the prior written consent of Mezzanine Lender, which consent shall not be
unreasonably withheld or delayed, permit Mortgage Borrower to: amend, modify,
supplement, alter or waive any right under the Management Agreement without
Mezzanine Lender's prior written consent, not to unreasonably withheld. Without
the receipt of Mezzanine Lender's prior written consent, Mezzanine Borrower may
permit Mortgage Borrower to make any nonmaterial modification, change,
supplement, alteration or amendment to the Management Agreement and to waive any
nonmaterial rights thereunder, provided that no such modification, change,
supplement, alteration, amendment or waiver shall affect the cash management
procedures set forth in the Management Agreement or the Loan Documents
(Mortgage) or Loan Documents (Senior Mezzanine), decrease the cash flow of the
Property, adversely affect the marketability of the Property or the Collateral,
change the definitions of "default" or "event of default," change the
definitions of "operating expense" or words of similar meaning to add additional
items to such definitions, change any definitions or provisions so as to reduce
the payments due the Mortgage Borrower thereunder, change the timing of
remittances to the Mortgage Borrower thereunder, increase or decrease reserve
requirements, change the term of the Management Agreement or increase any
Management Fees payable under the Management Agreement; provided, however, the
Group Services Fee may include amounts in addition to the existing Sales and
Marketing Group Services Expense if and to the extent such amounts are
attributable to services that would otherwise constitute an Operating Expense or
fee and such services qualify under the provisions of the Management
Agreement;

 

(b)  Mezzanine
Borrower may permit Mortgage Borrower to enter into a new Management Agreement
with an Acceptable Manager upon receipt of a Rating Agency Confirmation (or, if
such manager is a Pre-approved Manager, upon receipt of Mezzanine Lender's prior
written consent) with respect to the Property Management Agreement and delivery
of an acceptable Non-Consolidation Opinion covering such replacement Manager if
such Person (i) is not covered by the Non-Consolidation Opinion or an Additional
Non-Consolidation Opinion, and (ii) is an Affiliate of Mortgage Borrower;

 








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(c)  Mezzanine
Borrower hereby agrees that, subject to the provisions of the Assignment of
Management Agreement (Senior Mezzanine), Mezzanine Lender shall have the right
to terminate the Manager subsequent to (i) an Event of Default under this
Agreement and (ii) an acceleration of the Loan.

 

5.2.15  Franchise
Fee and Management Fee. Mezzanine Borrower may not, without the
prior written consent of Mezzanine Lender (which may be withheld in its sole and
absolute discretion) take or permit Mortgage Borrower to take any action that
would increase the percentage amount of the Management Fee, or add a new type of
fee (other than a "Group Services Expense" as permitted by Section 5.2.14
above) payable to Manager relating to the Property, including, without
limitation, the Franchise Fee and Management Fee;

 

5.2.16  Reserved.

 

5.2.17  REAs.
Without the prior consent of Mezzanine Lender, which shall not be unreasonably
withheld, delayed or conditioned, Mezzanine Borrower shall not permit Mortgage
Borrower to execute modifications to the REAs;

 

5.2.18  Modify
Account Agreement (Senior Mezzanine). Without the prior consent of
Mezzanine Lender, which shall not be unreasonably withheld, delayed or
conditioned, Mezzanine Borrower shall not execute any modification to the
Account Agreement (Senior Mezzanine);

 

5.2.19  Zoning
Reclassification. Except as contemplated by Section 2.3.4 of
the Loan Agreement (Mortgage), without the prior written consent of Mezzanine
Lender, which consent shall not be unreasonably withheld, permit Mortgage
Borrower to (a) initiate or consent to any zoning reclassification of any
portion of the Property, (b) seek any variance under any existing zoning
ordinance that could result in the use of the Property becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, or (c) allow any portion of the Property to be used in any manner
that could result in the use of the Property becoming a non-conforming use under
any zoning ordinance or any other applicable land use law, rule or
regulation;

 

5.2.20  Change
of Principal Place of Business. Change its principal place of
business and chief executive office set forth on the first page of this
Agreement without first giving Mezzanine Lender thirty (30) days' prior written
notice (but in any event, within the period required pursuant to the UCC) and
there shall have been taken such action, reasonably satisfactory to Mezzanine
Lender, as may be necessary to maintain fully the effect, perfection and
priority of the security interest of Mezzanine Lender hereunder in the Account
Collateral (Senior Mezzanine) and the Rate Cap Collateral (Senior Mezzanine) at
all times;

 

5.2.21  Reserved.

 








59
















 

5.2.22  Debt
Cancellation. Cancel or otherwise forgive or release any material
claim or debt owed to it by any Person, except for adequate consideration or in
the ordinary course of its business;

 

5.2.23  Misapplication
of Funds. Distribute any revenue from the Property or any Proceeds
in violation of the provisions of this Agreement, fail to remit amounts to the
Senior Mezzanine Account, as required by Section 3.1, or the Pledge,
misappropriate any security deposit or portion thereof or apply the proceeds of
the Loan in violation of Section 2.1.4; or

 

5.2.24  Single-Purpose
Entity. Fail to be a Single-Purpose Entity or take or suffer any
action or inaction the result of which would be to cause it or any SPE Entity to
cease to be a Single-Purpose Entity.

 


	VI.  	
      INSURANCE; CASUALTY;





 

CONDEMNATION; RESTORATION

 

Section
6.1  Insurance Coverage
Requirements

 

(a)  Mezzanine
Borrower will cause Mortgage Borrower, at its expense, to procure and maintain
the insurance policies required by the Loan Documents (Mortgage). Each
commercial general liability or umbrella liability policy with respect to the
Property shall name Mezzanine Lender as an additional insured and shall contain
a cross liability/severability endorsement in form and substance acceptable to
Mezzanine Lender. 

 

(b)  In
the event of any loss or damage to the Property, Mezzanine Borrower shall give
prompt written notice to the insurance carrier and Mezzanine Lender. Mezzanine
Lender acknowledges that Mortgage Borrower’s rights to any insurance proceeds
are subject to the terms of the Loan Agreement (Mortgage). Mezzanine Borrower
may not and shall not permit Mortgage Borrower to settle, adjust or compromise
any claim under such insurance policies without the prior written consent of
Mezzanine Lender which shall not be unreasonably withheld, delayed or denied;
provided, further, that Mortgage Borrower may make proof of loss and adjust and
compromise any claim under casualty insurance policies which is of an amount
less than $500,000 so long as no Event of Default has occurred. Any proceeds of
such claim which are not used to reconstruct or repair the Property, or applied
to the balance of the loan evidenced by the Loan Documents (Mortgage), shall be
deposited into the accounts established pursuant to the Loan Agreement
(Mortgage) to the extent required thereby, or if such deposit is not required
thereunder, then such proceeds shall be paid to Mezzanine Lender and applied to
the payment of the Obligations (Senior Mezzanine) whether or not then due.

 

(c)  In
the event that Mortgage Borrower is permitted pursuant to the terms of the Loan
Agreement (Mortgage) to reconstruct, restore or repair the Property following a
casualty to any portion of the Property, Mezzanine Borrower shall cause 

 








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Mortgage Borrower to promptly and diligently repair and restore the
Property in the manner and within the time periods required by the Loan
Agreement (Mortgage), the Leases and any other agreements affecting the
Property. In the event that Mortgage Borrower is permitted pursuant to terms of
the Loan Agreement (Mortgage) to elect to not reconstruct, restore or repair the
Property following a casualty to any portion of the Property, Mezzanine Borrower
shall not permit Mortgage Borrower to elect not to reconstruct, restore or
repair the Property without the prior written consent of Mezzanine Lender.

 

(d)  Mezzanine
Borrower shall comply with all Insurance Requirements and shall not bring or
keep or permit to be brought or kept any article upon any of the Property or
cause or permit any condition to exist thereon which would be prohibited by any
Insurance Requirement, or would invalidate insurance coverage required to be
maintained by Mortgage Borrower on or with respect to any part of the Property
pursuant to Section 6.1 of the Loan Agreement (Mortgage).  

 

Section
6.2  Condemnation and Insurance
Proceeds

 

In the event that all or any portion of the Property shall be damaged
or taken through condemnation (which term shall include any damage or taking by
any governmental authority, quasi-governmental authority, any party having the
power of condemnation, or any transfer by private sale in lieu thereof), or any
such condemnation shall be threatened, Mezzanine Borrower shall give prompt
written notice to Mezzanine Lender. Mezzanine Lender acknowledges that Mortgage
Borrower’s rights to any condemnation award is subject to the terms of the Loan
Agreement (Mortgage). Mezzanine Borrower may not and shall not permit Mortgage
Borrower to settle or compromise any claim, action or proceeding relating to
such damage or condemnation without the prior written consent of Mezzanine
Lender, which shall not be unreasonably withheld, delayed or denied; provided,
further, that Mortgage Borrower may settle, adjust and compromise any such
claim, action or proceeding which is of an amount less than $5,000,000 so long
as no Default or Event of Default has occurred. Any Excess Proceeds shall be
paid to Mezzanine Lender and applied to the payment of the Obligations (Senior
Mezzanine) whether or not then due pursuant to Section 2.3.1(b). In the
event that Mortgage Borrower is permitted pursuant to the terms of the Loan
Agreement (Mortgage) to reconstruct, restore or repair the Property following a
condemnation of any portion of the Property, Mezzanine Borrower shall cause
Mortgage Borrower to promptly and diligently repair and restore the Property in
the manner and within the time periods required by the Loan Agreement
(Mortgage), the Leases and any other agreements affecting the Property. In the
event that Mortgage Borrower is permitted pursuant to the terms of the Loan
Agreement (Mortgage) to elect not to reconstruct, restore or repair the Property
following a condemnation of any portion of the Property, Mezzanine Borrower
shall not permit Mortgage Borrower to elect not to reconstruct, restore or
repair the Property without the prior written consent of Mezzanine Lender.

 

Section
6.3  Certificates

 








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Mezzanine Borrower shall deliver (or cause Mortgage Borrower to
deliver) to Mezzanine Lender annually, concurrently with the renewal of the
insurance policies required hereunder, a certificate from Mezzanine Borrower's
and Mortgage Borrower's insurance agent stating that the insurance policies
required to be delivered to Mezzanine Lender pursuant to Section 6.1 and
Section 2.5.2(h) are maintained with insurers who comply with the terms
of Section 6.1.9 of the Loan Agreement (Mortgage), setting forth a schedule
describing all premiums required to be paid by Mezzanine Borrower or Mortgage
Borrower, as applicable, to maintain the policies of insurance required under
Section 6.1 and Section 2.5.2(h), and stating that either
Mezzanine Borrower or Mortgage Borrower, as applicable, has paid such premiums.
Certificates of insurance with respect to all replacement policies shall be
delivered to Mezzanine Lender not less than fifteen (15) Business Days prior to
the expiration date of any of the insurance policies required to be maintained
hereunder which certificates shall bear notations evidencing payment of
applicable premiums. Originals (or certified copies) of such replacement
insurance policies shall be delivered to Mezzanine Lender promptly after
Mezzanine Borrower's receipt thereof but in any case within thirty (30) days
after the effective date thereof (including the insurance certificates delivered
pursuant to Section 2.5.2(h)). If Mezzanine Borrower fails to (i)
maintain or to deliver to Mezzanine Lender the certificates of insurance
required by this Agreement or (ii) maintain and deliver originals (or
certificated copies) of such insurance policies within thirty (30) days after
the effective date thereof, upon five (5) Business Days' prior notice to
Mezzanine Borrower, Mezzanine Lender may procure such insurance, and all costs
thereof (and interest thereon at the Default Rate) shall be added to the
Indebtedness. Mezzanine Lender shall not, by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment or defense of lawsuits, and Mezzanine Borrower
hereby expressly assumes full responsibility therefor and all liability, if any,
with respect thereto. Mezzanine Borrower agrees that any replacement insurance
policy required hereunder shall not include any so called "terrorist exclusion"
or similar exclusion or exception to insurance coverage relating to the acts of
terrorist groups or individuals.

 


	VII.  	
      INTENTIONALLY
OMITTED




 


	VIII.  	
      TRANSFERS, INDEBTEDNESS AND SUBORDINATE
      LIENS




 

Section
8.1  Restrictions on Transfers and
Indebtedness

 

(a)  Unless
such action is a Permitted Mezzanine Transfer, or is otherwise permitted by the
subsequent provisions of this Article VIII, Mezzanine Borrower shall not, and
shall not permit Mortgage Borrower or any other Person to, without Mezzanine
Lender's prior written consent, (a) Transfer legal, Beneficial or direct or
indirect equitable interests in all or any part of the Property, the Mezzanine
Borrower, Mortgage Borrower, Operating Lessee, General Partner, or Mortgage
Borrower General 

 








62













Partner, (B) permit or suffer any owner, directly or indirectly, of a
legal, Beneficial, or equitable interest in the Property, the Mezzanine
Borrower, Mortgage Borrower, Operating Lessee, General Partner, or Mortgage
Borrower General Partner, to Transfer such interest, whether by Transfer of
stock or other legal, Beneficial or equitable interest in any entity or
otherwise, (C) mortgage, hypothecate or otherwise encumber or grant a security
interest in all or any part of the legal, Beneficial or equitable interests in
all or any part of the Collateral, the Property, the Mezzanine Borrower,
Mortgage Borrower, the Operating Lessee, General Partner, or Mortgage Borrower
General Partner, or (D) file a declaration of condominium with respect to the
Property. 

 

Notwithstanding any provision herein to the contrary, nothing
contained herein shall be deemed to restrict or otherwise interfere with the
ability of the holders of direct or indirect legal, Beneficial or equitable
interests in CNL Hospitality Partners, LP and/or KSL DC Operating, LLC to
Transfer such interests, whether in connection with an initial public offering
of shares in CNL Hospitality Partners, LP and/or KSL DC Operating, LLC or
otherwise.

 

(b)  Mezzanine
Borrower shall not incur, create or assume any Debt or incur any liabilities
without the consent of Mezzanine Lender; provided, however, Mezzanine Borrower
may, without the consent of Mezzanine Lender, incur, create or assume Permitted
Debt (Senior Mezzanine).

 

Section
8.2  Sale of Building Equipment and Immaterial
Transfers and Easements by Mortgage Borrower

 

Mezzanine Borrower may permit Mortgage Borrower to effect any
Transfer permitted pursuant to Section 8.2 and 8.3 of the Loan Agreement
(Mortgage) without Mezzanine Lender's prior written consent. 

 

Section
8.3  Intentionally Omitted

 

Section
8.4  Transfers of Interests in Mezzanine
Borrower

 

Each holder of any direct or indirect interest in Mezzanine Borrower
shall have the right to transfer (but not pledge, hypothecate or encumber) its
equity interest in the Mezzanine Borrower to any Person who is not a
Disqualified Transferee without Mezzanine Lender's consent or a Rating Agency
Confirmation if Section 8.6 is complied with and, after giving effect to
such transfer:

 

(a)  Mezzanine
Borrower and the Property will be directly owned by a Single Purpose Entity in
compliance with the representations, warranties and covenants in Section
4.1.20 hereof (as if the Mezzanine Borrower shall have remade all of such
representations, warranties and covenants as of, and after giving effect to, the
transfer), and which shall have executed and delivered to Mezzanine Lender an
assumption agreement in form and substance acceptable to Mezzanine Lender,
evidencing the continuing agreement of the Mezzanine Borrower to abide and be
bound by all the terms, covenants and conditions set forth in this Agreement,
the Mezzanine Note, the Pledge and the other Senior Mezzanine Loan Documents and
all other outstanding obligations 

 








63













under the Loan, together with such legal opinions and title insurance
endorsements as may be reasonably requested by Mortgage Lender and Mezzanine
Lender;

 

(b)  an
Acceptable Manager shall continue to act as Manager for the Property pursuant to
the existing Management Agreement or an Acceptable Management Agreement; 

 

(c)  KSL
DC Operating, LLC, CNL Hospitality Partners, LP or a Close Affiliate of either
such entity owns directly or indirectly at least fifty-one percent (51%) of the
equity interests in the Mezzanine Borrower and Mortgage Borrower and the Person
that is the proposed transferee is not a Disqualified Transferee; provided that,
after giving effect to any such transfer, in no event shall any Person other
than CNL Hospitality Partners, LP, KSL DC Operating, LLC or a Close Affiliate of
CNL Hospitality Partners, LP or KSL DC Operating, LLC exercise Management
Control over the Mezzanine Borrower and/or Mortgage Borrower. In the event that
Management Control shall be exercisable jointly by CNL Hospitality Partners, LP,
KSL DC Operating, LLC or a Close Affiliate of CNL Hospitality Partners, LP or
KSL DC Operating, LLC with any other Person or Persons, then CNL Hospitality
Partners, LP, KSL DC Operating, LLC or such Close Affiliate shall be deemed to
have Management Control only if CNL Hospitality Partners, LP, KSL DC Operating,
LLC or such Close Affiliate retains the ultimate right as between the CNL
Hospitality Partners, LP, KSL DC Operating, LLC or such Close Affiliate and the
transferee to unilaterally make all material decisions with respect to the
operation, management, financing and disposition of the Property; 

 

(d)  if
there has been a Transfer of forty-nine percent (49%) or more of the direct
membership interests, stock or other direct equity ownership interests in
Mezzanine Borrower, Mortgage Borrower, General Partner, Mortgage Borrower
General Partner, Mezzanine Borrower shall have first delivered to Mezzanine
Lender an Officer's Certificate and legal opinion of the types described in
Section 8.6 below; and

 

(e)  Mezzanine
Borrower shall cause the transferee, if Mezzanine Lender so requests and if such
transferee is required to be a Single Purpose Entity pursuant to this Agreement,
to deliver to Mezzanine Lender its organizational documents solely for the
purpose of Mezzanine Lender confirming that such organizational documents comply
with the single purpose bankruptcy remote entity requirements set forth
herein.

 

Section
8.5  Loan Assumption

 

Without limiting the foregoing, Mezzanine Borrower and Operating
Lessee shall have the right to sell, assign, convey or transfer (but not
mortgage, hypothecate or otherwise encumber or grant a security interest in)
legal or equitable title to all (but not less than all) of the Collateral only
if Mortgage Borrower and Operating Lessee simultaneously exercise their right to
transfer the Property pursuant to Section 8.5 of the Loan Agreement (Mortgage)
and:

 

(a)  after
giving effect to the proposed transaction:

 








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(i)  Mezzanine
Borrower will be owned by a Single Purpose Entity wholly owned (directly or
indirectly) by a Permitted Borrower Transferee, Pre-approved Transferee or such
other entity (specifically approved in writing by Mezzanine Lender) which will
be in compliance with the representations, warranties and covenants contained in
Section 4.1.20 hereof (as if such transferee shall have remade all of
such representations, warranties and covenants as of, and after giving effect
to, the proposed transaction), and which shall have executed and delivered to
Mezzanine Lender an assumption agreement and such other agreements as Mezzanine
Lender may reasonably request (collectively, the Assumption
Agreement) in form and substance acceptable to Mezzanine Lender,
evidencing the proposed transferee's agreement to abide and be bound by all the
terms, covenants and conditions set forth in this Agreement, the Mezzanine Note
and the other Loan Documents (Senior Mezzanine) and all other outstanding
obligations under the Loan; the Permitted Borrower Transferee, Pre-Approved
Transferee or such other approved entity shall assume the obligations of
Guarantor under the Loan Documents (Mezzanine) (and such Single Purpose Entity
and the applicable Permitted Borrower Transferee, Pre-approved Transferee or
other approved entity shall thereafter be subject to the provisions of this
Article VIII), and the transferee shall cause to be delivered to Mezzanine
Lender such legal opinions and title insurance endorsements as may be reasonably
requested by Mezzanine Lender;

 

(ii)  an
Acceptable Manager shall continue to act as Manager for the Property pursuant to
the existing Management Agreement or an Acceptable Management Agreement;

 

(iii)  no
Event of Default shall have occurred and be continuing; and

 

(iv)  Mezzanine
Borrower shall have caused (i) the transferee to execute and deliver to
Mezzanine Lender a fully executed counterpart to the Pledge, pledging all of
such transferee's direct equity interests in Mortgage Borrower to Mezzanine
Lender as additional collateral for the Loan and (ii) the ultimate parent(s) of
such transferee to execute and deliver to Mezzanine Lender a fully executed
counterpart to the Recourse Guaranty (Senior Mezzanine) and Environmental
Indemnity (Senior Mezzanine), together with a legal opinion from such
transferee's counsel reasonably satisfactory to Mezzanine Lender with respect to
the due execution, delivery, authority, enforceability and perfection (solely
with respect to the Pledge) of the Pledge, Recourse Guaranty (Senior Mezzanine)
and Environmental Indemnity (Senior Mezzanine).

 

(b)  the
Assumption Agreement shall state the applicable transferee's agreement to abide
by and be bound by the terms in the Mezzanine Note (or such other promissory
notes to be executed by the transferee, such other promissory note or notes to
be on the same terms as the Mezzanine Note), this Agreement (or such other loan
agreement to be executed by such transferee, which shall contain terms
substantially identical to the terms hereof) and such other Loan Documents
(Senior Mezzanine) (or other loan documents to be delivered by such transferee,
which shall contain terms 

 








65













substantially identical to the terms of the applicable Loan Documents
(Senior Mezzanine)) whenever arising, and Mezzanine Borrower, and/or such
transferee shall deliver such legal opinions and title insurance endorsements as
may reasonably be requested by Mezzanine Lender;

 

(c)  following
execution of a contract for the sale of the Property and not less than thirty
(30) days prior to the expected date of such proposed sale, Mezzanine Borrower
shall submit notice of such sale to Mezzanine Lender. Mezzanine Borrower shall
submit to Mezzanine Lender, not less than ten (10) days prior to the expected
date of such sale, the Assumption Agreement for execution by Mezzanine Lender.
Such documents shall be in a form appropriate for the jurisdiction in which the
Collateral is located and shall be reasonably satisfactory to Mezzanine Lender.
In addition, Mezzanine Borrower shall provide all other documentation Mezzanine
Lender reasonably requires to be delivered by Mezzanine Borrower in connection
with such assumption, together with an Officer's Certificate certifying that (i)
the assumption to be effected will be effected in compliance with the terms of
this Agreement and (ii) will not impair or otherwise adversely affect the
validity or priority of the Lien of the Pledge (or replacement pledge
agreements, as applicable);

 

(d)  prior
to any such transaction, the proposed transferee shall deliver to Mezzanine
Lender an Officer's Certificate stating that (x) such transferee is not an
"employee benefit plan" within the meaning of Section 3(3) of ERISA that is
subject Title I of ERISA or any other Similar Law and (y) the underlying assets
of the proposed transferee do not constitute assets of any such employee benefit
plan for purposes of ERISA or any Similar Law;

 

(e)  if
the transfer is to (i) an entity other than a Pre-approved Transferee or a
Permitted Borrower Transferee, such transfer shall be subject to Mezzanine
Lender's consent in its sole discretion, and (ii) a Permitted Borrower
Transferee, such transfer shall be subject to Mezzanine Lender's prior written
consent in its reasonable discretion;

 

(f)  the
terms of Section 8.6 shall be complied with and Mezzanine Borrower shall
cause the transferee to deliver to Mezzanine Lender its organizational documents
solely for the purpose of Mezzanine Lender confirming that such organizational
documents comply with the single purpose bankruptcy remote entity requirements
set forth herein; and

 

(g)  Mezzanine
Lender shall have received the payment of, or reimbursement for, all reasonable
costs and expenses incurred by Mezzanine Lender (and any Servicer) in connection
therewith (including, without limitation, reasonable attorneys' fees and
disbursements).

 

(h)  Each
of the Intermediate Mezzanine Borrower and Junior Mezzanine Borrower shall
simultaneously exercise its right to transfer the "Collateral" (as defined in
the Mezzanine Loan) pursuant to and in accordance with Section 8.5 of
each Mezzanine the Loan Agreement).

 








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Section
8.6  Notice Required; Legal
Opinions

 

Not less than five (5) Business Days prior to the closing of any
transaction permitted under the provisions of Sections 8.2 through
8.5, Mezzanine Borrower shall deliver or cause to be delivered to
Mezzanine Lender (A) an Officer's Certificate describing the proposed
transaction and stating that such transaction is permitted hereunder and under
the other Loan Documents (Senior Mezzanine), together with any documents upon
which such Officer's Certificate is based, and (B) a legal opinion of counsel to
Mezzanine Borrower or the transferee selected by either of them (to the extent
approved by Mezzanine Lender), in form and substance consistent with similar
opinions then being required by the Mezzanine Lender and acceptable to the
Mezzanine Lender, confirming, among other things, that the assets of the
Mezzanine Borrower, and of its managing general partner or managing member, as
applicable, will not be substantively consolidated with the assets of such
owners or Controlling Persons of the Mezzanine Borrower as Mezzanine Lender may
specify, in the event of a bankruptcy or similar proceeding involving such
owners or Controlling Persons.

 

Section
8.7  Leases

 

8.7.1  New
Leases and Lease Modifications. Except as otherwise provided in
this Section 8.7, Mezzanine Borrower shall not permit Operating Lessee to
(x) enter into any Lease on terms other than “market” and rental rates (in
Mezzanine Borrower’s or Operating Lessee's good faith judgment), or enter into
any Material Lease (a New Lease) or (y) consent to the
assignment of any Material Lease (unless required to do so by the terms of such
Material Lease) that releases the original Tenant from its obligations under the
Material Lease, or (z) modify any Material Lease (including, without limitation,
accept a surrender of any portion of the Property subject to a Material Lease
(unless otherwise permitted or required by law), allow a reduction in the term
of any Material Lease or a reduction in the Rent payable under any Material
Lease, change any renewal provisions of any Material Lease, materially increase
the obligations of the landlord or materially decrease the obligations of any
Tenant) or terminate any Material Lease (any such action referred to in clauses
(y) and (z) being referred to herein as a Lease Modification)
without the prior written consent of Mezzanine Lender which consent shall not be
unreasonably withheld or delayed. Any New Lease or Lease Modification that
requires Mezzanine Lender's consent shall be delivered to Mezzanine Lender for
approval not less than ten (10) Business Days prior to the effective date of
such New Lease or Lease Modification. Lender agrees that non material changes to
the Operating Lease (as determined by Mezzanine Lender in its sole but
reasonable discretion) may be permitted without requiring Mezzanine Lender's
consent.

 

8.7.2  Leasing
Conditions. Subject to terms of this Section 8.7, provided
no Event of Default shall have occurred and be continuing, Mortgage Borrower may
enter into a New Lease or Lease Modification, without Mezzanine Lender's prior
written consent, that satisfies each of the following conditions (as evidenced
by an 

 








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Officer's Certificate delivered to Mezzanine Lender prior to Mortgage
Borrower’s entry into such New Lease or Lease Modification):

 

(a)  with
respect to a New Lease or Lease Modification, the premises demised thereunder is
not more than 10,000 net rentable square feet of the Property;

 

(b)  the
term of such New Lease or Lease Modification, as applicable, does not exceed 120
months, plus up to two (2) 60-month option terms (or equivalent combination of
renewals);

 

(c)  the
New Lease or Lease Modification provides for "market" rental rates other terms
and does not contain any terms which would adversely affect Mezzanine Lender's
rights under the Loan Documents (Senior Mezzanine) or that would have a Material
Adverse Effect;

 

(d)  the
New Lease or Lease Modification, as applicable, provides that the premises
demised thereby cannot be used for any of the following uses; any pornographic
or obscene purposes, any commercial sex establishment, any pornographic,
obscene, nude or semi-nude performances, modeling, materials, activities or
sexual conduct or any other use that has or could reasonably be expected to have
a Material Adverse Effect;

 

(e)  the
Tenant under such New Lease or Lease Modification, as applicable, is not an
Affiliate of Mortgage Borrower;

 

(f)  the
New Lease or Lease Modification, as applicable, does not prevent Proceeds from
being held and disbursed by Mezzanine Lender in accordance with the terms of the
Loan Documents (Mortgage) and does not entitle any Tenant to receive and retain
Proceeds except those that may be specifically awarded to it in condemnation
proceedings because of the Condemnation of its trade fixtures and its leasehold
improvements which have not become part of the Property and such business loss
as Tenant may specifically and separately establish; and

 

(g)  the
New Lease or Lease Modification, as applicable satisfies the requirements of
Section 8.7.7 and Section 8.7.8 of the Loan Agreement
(Mortgage).

 

8.7.3  Delivery
of New Lease or Lease Modification. Upon the execution of any New
Lease or Lease Modification, as applicable, Mezzanine Borrower shall cause
Mortgage Borrower to deliver to Mezzanine Lender an executed copy of the
Lease.

 

8.7.4  Lease
Amendments. Mezzanine Borrower shall cause Mortgage Borrower to
agree that it shall not have the right or power, as against Mezzanine Lender
without its consent, to cancel, abridge, amend or otherwise modify any Lease
unless such modification complies with this Section 8.7. 

 

8.7.5  Security
Deposits. All security or other deposits of Tenants of the Property
shall be treated as trust funds and shall, if required by law or the 

 








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applicable Lease, not be commingled with any other funds of Mortgage
Borrower, and such deposits shall be deposited, upon receipt of the same by
Mortgage Borrower in a separate trust account maintained by Mortgage Borrower
expressly for such purpose. Within ten (10) Business Days after written request
by Mezzanine Lender, Mezzanine Borrower shall cause Mortgage Borrower to furnish
to Mezzanine Lender reasonably satisfactory evidence of compliance with this
Section 8.7.5, together with a statement of all lease securities
deposited with Mortgage Borrower by the Tenants and the location and account
number of the account in which such security deposits are held. 

 

8.7.6  No
Default Under Leases. Mezzanine Borrower shall cause Mortgage
Borrower to (i) promptly perform and observe all of the material terms,
covenants and conditions required to be performed and observed by Mortgage
Borrower under the Leases and the REAs, if the failure to perform or observe the
same would have a Material Adverse Effect; (ii) exercise, within ten (10)
Business Days after a written request by Mezzanine Lender, any right to request
from the Tenant under any Lease, or the party to any REAs, a certificate with
respect to the status thereof and (iii) not collect any of the Rents, more than
one (1) month in advance (except that Mortgage Borrower may collect such
security deposits and last month's Rents as are permitted by Legal Requirements
and are commercially reasonable in the prevailing market and collect other
charges in accordance with the terms of each Lease).

 


	IX.  	
      INTEREST RATE CAP
  AGREEMENT




 

Section
9.1  Interest Rate Cap
Agreement

 

Mezzanine Borrower shall maintain the Interest Rate Cap Agreement
with an Acceptable Counterparty in effect and having a term extending through
the last day of the accrual period in which the applicable Maturity Date occurs,
and an initial notional amount equal to the Loan Amount. The Interest Rate Cap
Agreement shall have a strike rate equal to the Maximum Pay Rate. The notional
amount of the Interest Rate Cap Agreement may be reduced from time to time in
amounts equal to any prepayment of the principal of the Loan made in accordance
with the Loan Documents (Senior Mezzanine), provided that the strike rate shall
be equal to the Maximum Pay Rate. 

 

Section
9.2  Pledge and Collateral
Assignment

 

Mezzanine Borrower hereby pledges, assigns, transfers, delivers and
grants a continuing first priority lien to Mezzanine Lender, as security for
payment of all sums due in respect of the Loan and the performance of all other
terms, conditions and covenants of this Agreement and any other Loan Documents
(Senior Mezzanine) on Mezzanine Borrower's part to be paid and performed, in, to
and under all of Mezzanine Borrower's right, title and interest whether now
owned or hereafter acquired and whether now existing or hereafter arising
(collectively, the Rate Cap Collateral (Senior
Mezzanine)): (i) in the Interest Rate Cap Agreement (as soon as such
agreement is effective or when and if any replacement agreement becomes
effective, any Replacement Interest Rate Cap Agreement (Senior Mezzanine) or
Extension Interest Rate Cap Agreement); (ii) to receive any and all payments
under the Interest Rate Cap Agreement 

 








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(or, when and if any such agreement becomes effective, any
Replacement Interest Rate Cap Agreement (Senior Mezzanine) or Extension Interest
Rate Cap Agreement), whether as contractual obligations, damages or otherwise;
and (iii) to all claims, rights, powers, privileges, authority, options,
security interests, liens and remedies, if any, under or arising out of the
Interest Rate Cap Agreement (as soon as such agreement is effective or when and
if any such agreement becomes effective, any Replacement Interest Rate Cap
Agreement (Senior Mezzanine) or Extension Interest Rate Cap Agreement), in each
case including all accessions and additions to, substitutions for and
replacements, products and proceeds of any of the foregoing. Mezzanine Borrower
shall deliver to Mezzanine Lender an executed counterpart of such Interest Rate
Cap Agreement, Replacement Interest Rate Cap Agreement (Senior Mezzanine) or
Extension Interest Rate Cap Agreement (Senior Mezzanine) (which shall, by its
terms, authorize the assignment to Mezzanine Lender and require that payments be
made directly to Mezzanine Lender) and notify the Counterparty of such
assignment (either in such Interest Rate Cap Agreement (Senior Mezzanine),
Replacement Interest Rate Cap Agreement (Senior Mezzanine) or Extension Interest
Rate Cap Agreement or by separate instrument). Mezzanine Borrower shall not,
without obtaining the prior written consent of Mezzanine Lender, further pledge,
transfer, deliver, assign or grant any security interest in the Interest Rate
Cap Agreement (Senior Mezzanine)(or, when and if any such agreement becomes
effective, any Replacement Interest Rate Cap Agreement (Senior Mezzanine) or
Extension Interest Rate Cap Agreement), or permit any Lien or encumbrance to
attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements or any other notice or instrument as may be required under the UCC,
as appropriate, except those naming Mezzanine Lender as the secured party, to be
filed with respect thereto.

 

Section
9.3  Covenants

 

(a)  Mezzanine
Borrower shall comply with all of its obligations under the terms and provisions
of the Interest Rate Cap Agreement (Senior Mezzanine). All amounts paid by the
Counterparty under the Interest Rate Cap Agreement to Mezzanine Borrower or
Mezzanine Lender shall be deposited immediately into the Senior Mezzanine
Account pursuant to Section 3.1. Mezzanine Borrower shall take all
actions reasonably requested by Mezzanine Lender to enforce Mezzanine Borrower's
rights under the Interest Rate Cap Agreement (Senior Mezzanine) in the event of
a default by the Counterparty thereunder and shall not waive, amend or otherwise
modify any of its rights thereunder.

 

(b)  Mezzanine
Borrower shall defend Mezzanine Lender's right, title and interest in and to the
Rate Cap Collateral (Senior Mezzanine) pledged by Mezzanine Borrower pursuant
hereto or in which it has granted a security interest pursuant hereto against
the claims and demands of all other Persons.

 

(c)  In
the event of (x) any downgrade, withdrawal or qualification (each, a
Downgrade) of the rating of the Counterparty such that,
thereafter, the Counterparty shall cease to be an Acceptable Counterparty and
(y) the Counterparty shall fail to comply with the requirements contained in the
Interest Rate Cap Agreement (Senior Mezzanine) which are described in
Exhibit I upon such occurrence, the 

 








70













Mezzanine Borrower shall either (i) obtain Lender's prior written
consent to retain such Counterparty or (ii) replace the Interest Rate Cap
Agreement (Senior Mezzanine) with a Replacement Interest Cap Agreement, (x)
having a term extending through the end of the Interest Period in which the
Maturity Date occurs, (y) in a notional amount at least equal to the Principal
Amount of the Loan then outstanding, and (z) having a strike rate equal to the
Maximum Pay Rate.

 

(d)  In
the event that Mezzanine Borrower fails to purchase and deliver to Mezzanine
Lender the Interest Rate Cap Agreement (Senior Mezzanine) as and when required
hereunder, Mezzanine Lender may purchase the Interest Rate Cap Agreement (Senior
Mezzanine) and the cost incurred by Mezzanine Lender in purchasing the Interest
Rate Cap Agreement (Senior Mezzanine) shall be paid by Mezzanine Borrower to
Mezzanine Lender with interest thereon at the Default Rate from the date such
cost was incurred by Mezzanine Lender until such cost is paid by Mezzanine
Borrower to Mezzanine Lender.

 

(e)  Mezzanine
Borrower shall not (i) without the prior written consent of Mezzanine Lender,
modify, amend or supplement the terms of the Interest Rate Cap Agreement (Senior
Mezzanine), (ii) without the prior written consent of Mezzanine Lender, except
in accordance with the terms of the Interest Rate Cap Agreement (Senior
Mezzanine), cause the termination of the Interest Rate Cap Agreement (Senior
Mezzanine) prior to its stated maturity date, (iii) without the prior written
consent of Mezzanine Lender, except as aforesaid, waive or release any
obligation of the Counterparty (or any successor or substitute party to the
Interest Rate Cap Agreement (Senior Mezzanine)) under the Interest Rate Cap
Agreement (Senior Mezzanine), (iv) without the prior written consent of
Mezzanine Lender, consent or agree to any act or omission to act on the part of
the Counterparty (or any successor or substitute party to the Interest Rate Cap
Agreement (Senior Mezzanine)) which, without such consent or agreement, would
constitute a default under the Interest Rate Cap Agreement (Senior Mezzanine),
(v) fail to exercise promptly and diligently each and every material right which
it may have under the Interest Rate Cap Agreement (Senior Mezzanine), (vi) take
or intentionally omit to take any action or intentionally suffer or permit any
action to be omitted or taken, the taking or omission of which would result in
any right of offset against sums payable under the Interest Rate Cap Agreement
(Senior Mezzanine) or any defense by the Counterparty (or any successor or
substitute party to the Interest Rate Cap Agreement (Senior Mezzanine)) to
payment or (vii) fail to give prompt notice to Mezzanine Lender of any notice of
default given by or to Mezzanine Borrower under or with respect to the Interest
Rate Cap Agreement (Senior Mezzanine), together with a complete copy of such
notice. 

 

(f)  In
connection with an Interest Rate Cap Agreement (Senior Mezzanine), Mezzanine
Borrower shall obtain and deliver to Mezzanine Lender an Opinion of Counsel from
counsel (which counsel may be in-house counsel for the Counterparty) for the
Counterparty upon which Mezzanine Lender and its successors and assigns may rely
(the Counterparty Opinion), under New York law and, if the
Counterparty is a non-U.S. entity, the applicable foreign law, substantially in
compliance 

 








71













with the requirements set forth in Exhibit F
or in such other form approved by the Mezzanine Lender.

 

Section
9.4  Representations and
Warranties

 

Mezzanine Borrower hereby covenants with, and represents and warrants
to, Mezzanine Lender as follows:

 

(a)  The
Interest Rate Cap Agreement (Senior Mezzanine) constitutes the legal, valid and
binding obligation of Mezzanine Borrower, enforceable against Mezzanine Borrower
in accordance with its terms, subject only to applicable bankruptcy, insolvency
and similar laws affecting rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

 

(b)  The
Rate Cap Collateral (Senior Mezzanine) is free and clear of all claims or
security interests of every nature whatsoever, except such as are created
pursuant to this Agreement and the other Loan Documents (Senior Mezzanine), and
Mezzanine Borrower has the right to pledge and grant a security interest in the
same as herein provided without the consent of any other Person other than any
such consent that has been obtained and is in full force and effect.

 

(c)  The
Rate Cap Collateral (Senior Mezzanine) has been duly and validly pledged
hereunder. All consents and approvals required to be obtained by Mezzanine
Borrower for the consummation of the transactions contemplated by this Agreement
have been obtained.

 

(d)  Giving
effect to the aforesaid grant and assignment to Mezzanine Lender, Mezzanine
Lender has, as of the date of this Agreement, and as to Rate Cap Collateral
(Senior Mezzanine) acquired from time to time after such date, shall have, a
valid, and upon proper filing, perfected and continuing first priority lien upon
and security interest in the Rate Cap Collateral (Senior Mezzanine); provided
that no representation or warranty is made with respect to the perfected status
of the security interest of Mezzanine Lender in the proceeds of Rate Cap
Collateral (Senior Mezzanine) consisting of "cash proceeds" or "non-cash
proceeds" as defined in the UCC except if, and to the extent, the provisions of
Section 9-306 of the UCC shall be complied with.

 

(e)  Except
for financing statements filed or to be filed in favor of Mezzanine Lender as
secured party, there are no financing statements under the UCC covering any or
all of the Rate Cap Collateral (Senior Mezzanine) and Mezzanine Borrower shall
not, without the prior written consent of Mezzanine Lender, until payment in
full of all of the Obligations (Senior Mezzanine), execute and file in any
public office, any enforceable financing statement or statements covering any or
all of the Rate Cap Collateral (Senior Mezzanine), except financing statements
filed or to be filed in favor of Mezzanine Lender as secured party.

 

Section
9.5  Payments

 








72













If Mezzanine Borrower at any time shall be entitled to receive any
payments with respect to the Interest Rate Cap Agreement (Senior Mezzanine),
such amounts shall, immediately upon becoming payable to Mezzanine Borrower, be
deposited by Counterparty into the Senior Mezzanine Account.

 

Section
9.6  Remedies

 

. Subject to the provisions of the Interest Rate Cap Agreement
(Senior Mezzanine), if an Event of Default shall occur and then be
continuing:

 

(a)  Mezzanine
Lender, without obligation to resort to any other security, right or remedy
granted under any other agreement or instrument, shall have the right to, in
addition to all rights, powers and remedies of a secured party pursuant to the
UCC, at any time and from time to time, sell, resell, assign and deliver, in its
sole discretion, any or all of the Rate Cap Collateral (Senior Mezzanine) (in
one or more parcels and at the same or different times) and all right, title and
interest, claim and demand therein and right of redemption thereof, at public or
private sale, for cash, upon credit or for future delivery, and in connection
therewith Mezzanine Lender may grant options and may impose reasonable
conditions such as requiring any purchaser to represent that any "securities"
constituting any part of the Rate Cap Collateral (Senior Mezzanine) are being
purchased for investment only, Mezzanine Borrower hereby waiving and releasing
any and all equity or right of redemption to the fullest extent permitted by the
UCC or applicable law. If all or any of the Rate Cap Collateral (Senior
Mezzanine) is sold by Mezzanine Lender upon credit or for future delivery,
Mezzanine Lender shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such failure, Mezzanine
Lender may resell such Rate Cap Collateral (Senior Mezzanine). It is expressly
agreed that Mezzanine Lender may exercise its rights with respect to less than
all of the Rate Cap Collateral (Senior Mezzanine), leaving unexercised its
rights with respect to the remainder of the Rate Cap Collateral (Senior
Mezzanine), provided, however, that such partial exercise shall in no way
restrict or jeopardize Mezzanine Lender's right to exercise its rights with
respect to all or any other portion of the Rate Cap Collateral (Senior
Mezzanine) at a later time or times.

 

(b)  Mezzanine
Lender may exercise, either by itself or by its nominee or designee, in the name
of Mezzanine Borrower, all of Mezzanine Lender's rights, powers and remedies in
respect of the Rate Cap Collateral (Senior Mezzanine), hereunder and under
law.

 

(c)  Mezzanine
Borrower hereby irrevocably, in the name of Mezzanine Borrower or otherwise,
authorizes and empowers Mezzanine Lender and assigns and transfers unto
Mezzanine Lender, and constitutes and appoints Mezzanine Lender its true and
lawful attorney-in-fact, and as its agent, irrevocably, with full power of
substitution for Mezzanine Borrower and in the name of Mezzanine Borrower, upon
the occurrence and during the continuance of an Event of Default, (i) to
exercise and enforce every right, power, remedy, authority, option and privilege
of Mezzanine Borrower under the Interest Rate Cap Agreement (Senior Mezzanine),
including any 

 








73













power to subordinate or modify the Interest Rate Cap Agreement
(Senior Mezzanine) (but not, unless an Event of Default exists and is
continuing, the right to terminate or cancel the Interest Rate Cap Agreement
(Senior Mezzanine)), or to give any notices, or to take any action resulting in
such subordination, termination, cancellation or modification and (ii) in order
to more fully vest in Mezzanine Lender the rights and remedies provided for
herein, to exercise all of the rights, remedies and powers granted to Mezzanine
Lender in this Agreement, and Mezzanine Borrower further authorizes and empowers
Mezzanine Lender, as Mezzanine Borrower's attorney-in-fact, and as its agent,
irrevocably, with full power of substitution for Mezzanine Borrower and in the
name of Mezzanine Borrower, upon the occurrence and during the continuance of an
Event of Default, to give any authorization, to furnish any information, to make
any demands, to execute any instruments and to take any and all other action on
behalf of and in the name of Mezzanine Borrower which in the opinion of
Mezzanine Lender may be necessary or appropriate to be given, furnished, made,
exercised or taken under the Interest Rate Cap Agreement (Senior Mezzanine), in
order to comply therewith, to perform the conditions thereof or to prevent or
remedy any default by Mezzanine Borrower thereunder or to enforce any of the
rights of Mezzanine Borrower thereunder. These powers-of-attorney are
irrevocable and coupled with an interest, and any similar or dissimilar powers
heretofore given by Mezzanine Borrower in respect of the Rate Cap Collateral
(Senior Mezzanine) to any other Person are hereby revoked.

 

(d)  Upon
the occurrence and during the continuance of an Event of Default, Mezzanine
Lender may, without notice to, or assent by, Mezzanine Borrower or any other
Person (to the extent permitted by law), but without affecting any of the
Obligations (Senior Mezzanine), in the name of Mezzanine Borrower or in the name
of Mezzanine Lender, notify the Counterparty, or if applicable, any other
counterparty to the Interest Rate Cap Agreement (Senior Mezzanine), to make
payment and performance directly to Mezzanine Lender; extend the time of payment
and performance of, compromise or settle for cash, credit or otherwise, and upon
any terms and conditions, any obligations owing to Mezzanine Borrower, or claims
of Mezzanine Borrower, under the Interest Rate Cap Agreement (Senior Mezzanine);
file any claims, commence, maintain or discontinue any actions, suits or other
proceedings deemed by Mezzanine Lender necessary or advisable for the purpose of
collecting upon or enforcing the Interest Rate Cap Agreement (Senior Mezzanine);
and execute any instrument and do all other things deemed necessary and proper
by Mezzanine Lender to protect and preserve and realize upon the Rate Cap
Collateral (Senior Mezzanine) and the other rights contemplated hereby. 

 

(e)  Pursuant
to the powers-of-attorney provided for above, Mezzanine Lender may take any
action and exercise and execute any instrument which it may deem necessary or
advisable to accomplish the purposes hereof; provided, however, that Mezzanine
Lender shall not be permitted to take any action pursuant to said
power-of-attorney that would conflict with any limitation on Mezzanine Lender's
rights with respect to the Rate Cap Collateral (Senior Mezzanine). Without
limiting the generality of the foregoing, Mezzanine Lender, after the occurrence
of an Event of Default, shall have the right and power to receive, endorse and
collect all checks and other orders for the payment of money made payable to
Mezzanine Borrower representing: (i) any payment 

 








74













of obligations owed pursuant to the Interest Rate Cap Agreement
(Senior Mezzanine), (ii) interest accruing on any of the Rate Cap Collateral
(Senior Mezzanine) or (iii) any other payment or distribution payable in respect
of the Rate Cap Collateral (Senior Mezzanine) or any part thereof, and for and
in the name, place and stead of Mezzanine Borrower, to execute endorsements,
assignments or other instruments of conveyance or transfer in respect of any
property which is or may become a part of the Rate Cap Collateral (Senior
Mezzanine) hereunder.

 

(f)  Mezzanine
Lender may exercise all of the rights and remedies of a secured party under the
UCC.

 

(g)  Without
limiting any other provision of this Agreement or any of Mezzanine Borrower's
rights hereunder, and without waiving or releasing Mezzanine Borrower from any
obligation or default hereunder, Mezzanine Lender shall have the right, but not
the obligation, to perform any act or take any appropriate action, as it, in its
reasonable judgment, may deem necessary to protect the security of this
Agreement, to cure such Event of Default or to cause any term, covenant,
condition or obligation required under this Agreement or the Interest Rate Cap
Agreement (Senior Mezzanine) to be performed or observed by Mezzanine Borrower
to be promptly performed or observed on behalf of Mezzanine Borrower. All
amounts advanced by, or on behalf of, Mezzanine Lender in exercising its rights
under this Section 9.7(g) (including, but not limited to, reasonable
legal expenses and disbursements incurred in connection therewith), together
with interest thereon at the Default Rate from the date of each such advance,
shall be payable by Mezzanine Borrower to Mezzanine Lender upon demand and shall
be secured by this Agreement.

 

Section
9.7  Sales of Rate Cap Collateral (Senior
Mezzanine)

 

No demand, advertisement or notice, all of which are, to the fullest
extent permitted by law, hereby expressly waived by Mezzanine Borrower, shall be
required in connection with any sale or other disposition of all or any part of
the Rate Cap Collateral (Senior Mezzanine), except that Mezzanine Lender shall
give Mezzanine Borrower at least thirty (30) Business Days' prior written notice
of the time and place of any public sale or of the time when and the place where
any private sale or other disposition is to be made, which notice Mezzanine
Borrower hereby agrees is reasonable, all other demands, advertisements and
notices being hereby waived. To the extent permitted by law, Mezzanine Lender
shall not be obligated to make any sale of the Rate Cap Collateral (Senior
Mezzanine) if it shall determine not to do so, regardless of the fact that
notice of sale may have been given, and Mezzanine Lender may without notice or
publication adjourn any public or private sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. Upon each private sale of the Rate Cap Collateral (Senior Mezzanine)
of a type customarily sold in a recognized market and upon each public sale,
unless prohibited by any applicable statute which cannot be waived, Mezzanine
Lender (or its nominee or designee) may purchase any or all of the Rate Cap
Collateral (Senior Mezzanine) being sold, free and discharged from any trusts,
claims, equity or right of redemption of Mezzanine Borrower, all of which are
hereby waived and released to the extent permitted by law, and may make payment


 








75













therefor by credit against any of the Obligations (Senior Mezzanine)
in lieu of cash or any other obligations. In the case of all sales of the Rate
Cap Collateral (Senior Mezzanine), public or private, Mezzanine Borrower shall
pay all reasonable costs and expenses of every kind for sale or delivery,
including brokers' and attorneys' fees and disbursements and any tax imposed
thereon. However, the proceeds of sale of Rate Cap Collateral (Senior Mezzanine)
shall be available to cover such costs and expenses, and, after deducting such
costs and expenses from the proceeds of sale, Mezzanine Lender shall apply any
residue to the payment of the Obligations (Senior Mezzanine) in the order of
priority as set forth in Section 17.5.

 

Section
9.8  Public Sales Not Possible

 

Mezzanine Borrower acknowledges that the terms of the Interest Rate
Cap Agreement (Senior Mezzanine) may prohibit public sales, that the Rate Cap
Collateral (Senior Mezzanine) may not be of the type appropriately sold at
public sales, and that such sales may be prohibited by law. In light of these
considerations, Mezzanine Borrower agrees that private sales of the Rate Cap
Collateral (Senior Mezzanine) shall not be deemed to have been made in a
commercially unreasonably manner by mere virtue of having been made
privately.

 

Section
9.9  Receipt of Sale Proceeds

 

Upon any sale of the Rate Cap Collateral (Senior Mezzanine) by
Mezzanine Lender hereunder (whether by virtue of the power of sale herein
granted, pursuant to judicial process or otherwise), the receipt by Mezzanine
Lender or the officer making the sale or the proceeds of such sale shall be a
sufficient discharge to the purchaser or purchasers of the Rate Cap Collateral
(Senior Mezzanine) so sold, and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to Mezzanine Lender or such officer or be answerable in any way for the
misapplication or non-application thereof.

 

Section
9.10  Extension Interest Rate Cap Agreement
(Senior Mezzanine)

 

If Mezzanine Borrower exercises any of its options to extend the
Maturity Date pursuant to Section 5 of the Note, then, on or prior to the
Maturity Date being extended, the Mezzanine Borrower shall obtain or have in
place an Extension Interest Rate Cap Agreement (i) having a term through the end
of the Interest Period in which the extended Maturity Date occurs, (ii) in a
notional amount at least equal to the Principal Amount of the Loan as of the
Maturity Date being extended, and (iii) having a strike rate equal to an amount
such that the maximum interest rate paid by the Mezzanine Borrower after giving
effect to payments made under such Extension Interest Rate Cap Agreement shall
equal no more than the Maximum LIBOR Pay Rate. 

 

Section
9.11  Filing of Financing Statements
Authorized

 

Mezzanine Borrower hereby authorizes the filing of a form UCC-1
financing statement naming Mezzanine Borrower as debtor and Mezzanine Lender as
secured party in any 

 

office (including the office of the Secretary of State of the State
of Delaware) covering all property of Mezzanine Borrower (including, but not
limited to, the Account Collateral (Senior Mezzanine) and the Rate Cap
Collateral (Senior Mezzanine), but excluding Net Excess Cash Flow).

 








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	X.  	
      RESERVED




 


	XI.  	
      BOOKS AND RECORDS,
FINANCIAL




 

STATEMENTS, REPORTS AND OTHER INFORMATION

 

Section
11.1  Books and Records

 

Mezzanine Borrower shall cause Mortgage Borrower to keep and maintain
on a fiscal year basis proper books and records separate from any other Person,
in which accurate and complete entries shall be made of all dealings or
transactions of or in relation to the Mortgage Note, the Mezzanine Note, the
Property and the business and affairs of Mortgage Borrower and Mezzanine
Borrower relating to the Property which shall reflect all items of income and
expense in connection with the operation on an individual basis of the Property
and in connection with any services, equipment or furnishings provided in
connection with the operation of the Property, in accordance with GAAP.
Mezzanine Lender and its authorized representatives shall have the right at
reasonable times and upon reasonable notice to examine the books and records of
Mortgage Borrower and Mezzanine Borrower relating to the operation of the
Property and to make such copies or extracts thereof as Mezzanine Lender may
reasonably require. Mezzanine Borrower shall simultaneously furnish (or cause
Mortgage Borrower to furnish) to Mezzanine Lender copies of all financial
statements, reports and information required to be submitted by Mortgage
Borrower to Mortgage Lender pursuant to the Loan Agreement (Mortgage).

 

Section
11.2  Financial Statements

 

11.2.1  Budget.

 

(a)  Not
later than March 1st of each Fiscal Year hereafter, Mezzanine Borrower shall
prepare or cause to be prepared and deliver to Mezzanine Lender, for
informational purposes only, a Budget in respect of the Property for the Fiscal
Year in which such delivery date falls. If Mezzanine Borrower or Mortgage
Borrower subsequently amends the Budget, Mezzanine Borrower shall promptly
deliver the amended Budget to Mezzanine Lender.

 

(b)  Notwithstanding
the foregoing clause, any Budgets submitted during a Low DSCR Period, and in
each case any material amendment therefrom, shall be subject to Mezzanine
Lender's prior written approval, which approval shall not be unreasonably
withheld or delayed.

 

(c)  Within
thirty (30) days after its receipt of notice of the commencement of any Low DSCR
Period, Mezzanine Borrower shall (unless the then current Budget has been
approved in writing by Mezzanine Lender) prepare or cause to 

 








77













be prepared and deliver to Mezzanine Lender for Mezzanine Lender's
approval (which shall not be unreasonably withheld or delayed), a proposed
Budget for the Fiscal Year in which such Low DSCR Period commences. Mezzanine
Borrower shall consult with Mezzanine Lender and shall afford Mezzanine Lender a
reasonable opportunity to meet and confer with Mezzanine Borrower to discuss in
reasonable detail such proposed revised Budget and general hotel operations, and
Borrower (as distinguished from its constituent partners) shall use its best
efforts to obtain Manager's approval of the resulting budget revisions as
requested by Lender in its reasonable discretion.

 

11.2.2  Other
Information. Mezzanine Borrower shall, promptly after written
request by Mezzanine Lender, furnish or cause to be furnished to Mezzanine
Lender, in such manner and in such detail as may be reasonably requested by
Mezzanine Lender, such reasonable additional information as may be reasonably
requested with respect to the Property and/or the Collateral. The information
required to be furnished by Mezzanine Borrower to Mezzanine Lender under this
Section 11.2 shall be provided in both hard copy format and electronic
format; provided that Mezzanine Borrower shall only be required to
provide the information required under this Section 11.2.7 in electronic
format if such information is so available in the ordinary course of the
operations of the Mezzanine Borrower and Manager, and without significant
expense.

 


	XII.  	
      ENVIRONMENTAL
MATTERS




 

Section
12.1  Representations

 

Mezzanine Borrower hereby represents and warrants that except as set
forth in the environmental reports and studies delivered to Mezzanine Lender
(the Environmental Reports), (i) neither Mezzanine Borrower nor
Mortgage Borrower has engaged in or knowingly permitted any operations or
activities upon, or any use or occupancy of the Property, or any portion
thereof, for the purpose of or in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining, dumping or
disposal of any Hazardous Materials on, under, in or about the Property, or
transported any Hazardous Materials to, from or across the Property, except in
all cases in material compliance with Environmental Laws and only in the course
of legitimate business operations at the Property; (ii) to the Best of Mezzanine
Borrower's Knowledge, no tenant, occupant or user of the Property, or any other
Person, has engaged in or permitted any operations or activities upon, or any
use or occupancy of the Property, or any portion thereof, for the purpose of or
in any material way involving the handling, manufacture, treatment, storage,
use, generation, release, discharge, refining, dumping or disposal of any
Hazardous Materials on, in or about the Property, or transported any Hazardous
Materials to, from or across the Property, except in all cases in material
compliance with Environmental Laws and only in the course of legitimate business
operations at the Property; (iii) to the Best of Mezzanine Borrower's Knowledge,
no Hazardous Materials are presently constructed, deposited, stored, or
otherwise located on, under, in or about the Property except in material
compliance with Environmental Laws; (iv) to the Best of Mezzanine Borrower's
Knowledge, no Hazardous Materials have migrated from the Property upon or
beneath other properties which would reasonably be expected to result in
material liability for Mezzanine Borrower or 

 








78













Mortgage Borrower; and (v) to the Best of Mezzanine Borrower's
Knowledge, no Hazardous Materials have migrated or threaten to migrate from
other properties upon, about or beneath the Property which would reasonably be
expected to result in material liability for Mezzanine Borrower or Mortgage
Borrower.

 

Section
12.2  Covenants

 

12.2.1  Compliance
with Environmental Laws. Subject to Mortgage Borrower's right to
contest under Section 7.3 of the Loan Agreement (Mortgage), Mezzanine
Borrower covenants and agrees with Mezzanine Lender that it shall comply and
shall cause Mortgage Borrower to comply in all material respects with all
Environmental Laws. If at any time during the continuance of the Lien of the
Security Instrument and/or Pledge, a Governmental Authority having jurisdiction
over the Property requires remedial action to correct the presence of Hazardous
Materials in, around, or under the Property (an Environmental
Event), Mezzanine Borrower shall deliver prompt notice of the
occurrence of such Environmental Event to Mezzanine Lender. Within thirty (30)
days after Mezzanine Borrower has knowledge of the occurrence of an
Environmental Event, Mezzanine Borrower shall deliver to Mezzanine Lender an
Officer's Certificate (an Environmental Certificate) explaining
the Environmental Event in reasonable detail and setting forth the proposed
remedial action, if any. Mezzanine Borrower shall promptly provide Mezzanine
Lender with copies of all notices which allege or identify any actual or
potential violation or noncompliance received by or prepared by or for Mezzanine
Borrower in connection with any Environmental Law. For purposes of this
paragraph, the term "notice" shall mean any summons, citation, directive, order,
claim, pleading, letter, application, filing, report, findings, declarations or
other materials pertinent to compliance of the Property and Mezzanine Borrower
with such Environmental Laws. 

 

12.2.2  Reserved.

 

Section
12.3  Environmental Reports

 

Upon the occurrence and during the continuance of an Environmental
Event with respect to the Property or an Event of Default, Mezzanine Lender
shall have the right to have its consultants perform a comprehensive
environmental audit of the Property. Such audit shall be conducted by an
environmental consultant chosen by Mezzanine Lender and may include a visual
survey, a record review, an area reconnaissance assessing the presence of
hazardous or toxic waste or substances, PCBs or storage tanks at the Property,
an asbestos survey of the Property, which may include random sampling of the
Improvements and air quality testing, and such further site assessments as
Mezzanine Lender may reasonably require due to the results obtained from the
foregoing. Mezzanine Borrower grants (and shall cause Mortgage Borrower to
grant) to Mezzanine Lender, its agents, consultants and contractors the right to
enter the Property as reasonable or appropriate for the circumstances for the
purposes of performing such studies and the reasonable cost of such studies
shall be due and payable by Mezzanine Borrower to Mezzanine Lender upon demand
and shall be secured by the Lien of this Agreement and the Pledge. Mezzanine
Lender shall not unreasonably 

 








79













interfere with (and shall cause Mortgage Borrower not to unreasonably
interfere with), and Mezzanine Lender shall direct the environmental consultant
to use its commercially reasonable efforts not to hinder, Mortgage Borrower's or
any Tenant's, other occupant's or Manager's operations upon the Property when
conducting such audit, sampling or inspections. By undertaking any of the
measures identified in and pursuant to this Section 12.3, Mezzanine
Lender shall not be deemed to be exercising any control over the operations of
Mezzanine Borrower or Mortgage Borrower or the handling of any environmental
matter or hazardous wastes or substances of Mezzanine Borrower or Mortgage
Borrower for purposes of incurring or being subject to liability therefor.

 

Section
12.4  Environmental
Indemnification

 

Mezzanine Borrower shall protect, indemnify, save, defend, and hold
harmless the Indemnified Parties from and against any and all liability, loss,
damage, actions, causes of action, costs or expenses whatsoever (including
reasonable attorneys' fees and expenses) and any and all claims, suits and
judgments which any Indemnified Party may suffer, as a result of or with respect
to: (a) any Environmental Claim relating to or arising from the Property; (b)
the violation of any Environmental Law in connection with the Property; (c) any
release, spill, or the presence of any Hazardous Materials affecting the
Property; and (d) the presence at, in, on or under, or the release, escape,
seepage, leakage, discharge or migration at or from, the Property of any
Hazardous Materials, whether or not such condition was known or unknown to
Mezzanine Borrower; provided that, in each case, Mezzanine Borrower shall be
relieved of its obligation under this subsection if any of the matters referred
to in clauses (a) through (d) above did not occur (but need not have been
discovered) prior to the foreclosure of the Pledge. If any such action or other
proceeding shall be brought against Mezzanine Lender, upon written notice from
Mezzanine Borrower to Mezzanine Lender (given reasonably promptly following
Mezzanine Lender's notice to Mezzanine Borrower of such action or proceeding),
Mezzanine Borrower shall be entitled to assume the defense thereof, at Mezzanine
Borrower's expense, with counsel reasonably acceptable to Mezzanine Lender;
provided, however, Mezzanine Lender may, at its own expense,
retain separate counsel to participate in such defense, but such participation
shall not be deemed to give Mezzanine Lender a right to control such defense,
which right Mezzanine Borrower expressly retains. Notwithstanding the foregoing,
each Indemnified Party shall have the right to employ separate counsel at
Mezzanine Borrower's expense if, in the reasonable opinion of legal counsel, a
conflict or potential conflict exists between the Indemnified Party and
Mezzanine Borrower that would make such separate representation advisable.
Mezzanine Borrower shall have no obligation to indemnify an Indemnified Party
for damage or loss resulting from such Indemnified Party's gross negligence or
willful misconduct.

 

Section
12.5  Recourse Nature of Certain
Indemnifications

 

Notwithstanding anything to the contrary provided in this Agreement
or in any other Loan Document (Senior Mezzanine), the indemnification provided
in Section 12.4 shall be fully recourse to Mezzanine Borrower and shall
be independent of, and shall survive, the discharge of the Indebtedness, the
release of the Lien created by the Pledge, 

 








80













and/or the conveyance of title to the Collateral to Mezzanine Lender
or any purchaser or designee in connection with a foreclosure of the Pledge or
conveyance in lieu of foreclosure.

 


	XIII.  	
      RESERVED




 


	XIV.  	
      RESERVED




 


	XV.  	
      ASSIGNMENTS AND
PARTICIPATIONS




 

Section
15.1  Assignment and Acceptance

 

At no incremental cost or liability to Mezzanine Borrower, Mezzanine
Lender may assign to one or more Persons all or a portion of its rights and
obligations under this Agreement and the other Loan Documents (Senior Mezzanine)
(including, without limitation, all or a portion of the Mezzanine Note);
provided that the parties to each such assignment shall execute and deliver to
Mezzanine Lender, for its acceptance and recording in the Register (as
hereinafter defined), an Assignment and Acceptance. In addition, at no
incremental cost to Mezzanine Borrower, Mezzanine Lender may participate to one
or more Persons all or any portion of its rights and obligations under this
Agreement and the other Loan Documents (Senior Mezzanine) (including without
limitation, all or a portion of the Mezzanine Note) utilizing such documentation
to evidence such participation and the parties' respective rights thereunder as
Mezzanine Lender, in its sole discretion, shall elect.

 

Section
15.2  Effect of Assignment and
Acceptance

 

Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of Mezzanine Lender, as the case may
be, hereunder and such assignee shall be deemed to have assumed such rights and
obligations, and (ii) Mezzanine Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement and the other Loan Documents (Senior Mezzanine) (and, in the case
of an Assignment and Acceptance covering all or the remaining portion of
Mezzanine Lender's rights and obligations under this Agreement and the other
Loan Documents (Senior Mezzanine), Mezzanine Lender shall cease to be a party
hereto) accruing from and after the effective date of the Assignment and
Acceptance, except with respect to (A) any payments made by Mezzanine Borrower
to Mezzanine Lender pursuant to the terms of the Loan Documents (Senior
Mezzanine) after the effective date of the Assignment and Acceptance and (B) any
letter of credit, cash deposit or other deposits or security (other than the
Liens of this Agreement and the Pledge and the other Loan Documents (Senior
Mezzanine)) delivered to or for the benefit of or deposited with German American
Capital Corporation, as Mezzanine Lender, for which German American Capital
Corporation shall remain responsible for the proper disposition thereof until
such items are delivered to a party who is qualified as an Approved Bank and
agrees to hold the same in accordance with the terms and provisions of the
agreement pursuant to which such items were deposited.

 








81
















 

Section
15.3  Content

 

By executing and delivering an Assignment and Acceptance, Mezzanine
Lender and the assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, Mezzanine Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Documents (Senior
Mezzanine) or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, this
Agreement or any other Loan Documents (Senior Mezzanine) or any other instrument
or document furnished pursuant hereto or thereto; (ii) Mezzanine Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Mezzanine Borrower or the performance or observance by
Mezzanine Borrower of any of its obligations under any Loan Documents (Senior
Mezzanine) or any other instrument or document furnished pursuant thereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon
Mezzanine Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents (Senior
Mezzanine); (v) such assignee appoints and authorizes Mezzanine Lender to take
such action as agent on its behalf and to exercise such powers and discretion
under the Loan Documents (Senior Mezzanine) as are delegated to Mezzanine Lender
by the terms hereof together with such powers and discretion as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform, in
accordance with their terms, all of the obligations which by the terms of this
Agreement and the other Loan Documents (Senior Mezzanine) are required to be
performed by Mezzanine Lender.

 

Section
15.4  Register

 

Mezzanine Lender shall maintain a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of Mezzanine Lender and each assignee pursuant to this
Article XV and the Principal Amount of the Loan owing to each such
assignee from time to time (the Register). The entries in the
Register shall, with respect to such assignees, be conclusive and binding for
all purposes, absent manifest error. The Register shall be available for
inspection by Mezzanine Borrower or any assignee pursuant to this Article
XV at any reasonable time and from time to time upon reasonable prior
written notice.

 

Section
15.5  Substitute Notes

 








82













Upon its receipt of an Assignment and Acceptance executed by an
assignee, together with any Mezzanine Note or Mezzanine Notes subject to such
assignment, Mezzanine Lender shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit J
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, and (iii) give prompt written notice thereof
to Mezzanine Borrower. Within five (5) Business Days after its receipt of such
notice, Mezzanine Borrower, at Mezzanine Lender's own expense, shall execute and
deliver to Mezzanine Lender in exchange and substitution for the surrendered
Mezzanine Note or Mezzanine Notes a new Mezzanine Note to the order of such
assignee in an amount equal to the portion of the Loan assigned to it and a new
Mezzanine Note to the order of Mezzanine Lender in an amount equal to the
portion of the Loan retained by it hereunder. Such new Mezzanine Note or
Mezzanine Notes shall be in an aggregate Principal Amount equal to the aggregate
then outstanding principal amount of such surrendered Mezzanine Note or
Mezzanine Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the Mezzanine
Note (modified, however, to the extent necessary so as not to impose duplicative
or increased obligations on Mezzanine Borrower and to delete obligations
previously satisfied by Mezzanine Borrower). Notwithstanding the provisions of
this Article XV, Mezzanine Borrower shall not be responsible or liable
for any additional taxes, reserves, adjustments or other costs and expenses that
are related to, or arise as a result of, any transfer of the Loan or any
interest or participation therein that arise solely and exclusively from the
transfer of the Loan or any interest or participation therein or from the
execution of the new Mezzanine Note contemplated by this Section 15.5,
including, without limitation, any mortgage tax. Mezzanine Lender and/or the
assignees, as the case may be, shall from time to time designate one agent
through which Mezzanine Borrower shall request all approvals and consents
required or contemplated by this Agreement and on whose statements Mezzanine
Borrower may rely.

 

Section
15.6  Participations

 

Each assignee pursuant to this Article XV may sell
participations to one or more Persons (other than Mezzanine Borrower or any of
its Affiliates) in or to all or a portion of its rights and obligations under
this Agreement and the other Loan Documents (Senior Mezzanine) (including,
without limitation, all or a portion of the Mezzanine Note held by it);
provided, however, that (i) such assignee's obligations under this
Agreement and the other Loan Documents (Senior Mezzanine) shall remain
unchanged, (ii) such assignee shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such assignee
shall remain the holder of any such Mezzanine Note for all purposes of this
Agreement and the other Loan Documents (Senior Mezzanine), and (iv) Mezzanine
Borrower, Mezzanine Lender and the assignees pursuant to this Article XV shall
continue to deal solely and directly with such assignee in connection with such
assignee's rights and obligations under this Agreement and the other Loan
Documents (Senior Mezzanine). In the event that more than one (1) party
comprises Mezzanine Lender, Mezzanine Lender shall designate one party to act on
the behalf of all parties comprising Mezzanine Lender in providing approvals and
all other necessary 

 








83













consents under the Loan Documents (Senior Mezzanine) and on whose
statements Mezzanine Borrower may rely. 

 

Section
15.7  Disclosure of Information

 

Any assignee pursuant to this Article XV may, in connection
with any assignment or participation or proposed assignment or participation
pursuant to this Article XV, disclose to the assignee or participant or
proposed assignee or participant, any information relating to Mezzanine Borrower
furnished to such assignee by or on behalf of Mezzanine Borrower;
provided, however, that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree in
writing for the benefit of Mezzanine Borrower to preserve the confidentiality of
any confidential information received by it.

 

Section
15.8  Security Interest in Favor of Federal
Reserve Bank

 

Notwithstanding any other provision set forth in this Agreement or
any other Loan Document (Senior Mezzanine), any assignee pursuant to this
Article XV may at any time create a security interest in all or any
portion of its rights under this Agreement or the other Loan Documents (Senior
Mezzanine) (including, without limitation, the amounts owing to it and the
Mezzanine Note or Mezzanine Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System. 

 


	XVI.  	
      RESERVED




 


	XVII.  	
      DEFAULTS




 

Section
17.1  Event of Default

 

(a)  Each
of the following events shall constitute an event of default hereunder (an
Event of Default):

 

(i)  if
(A) the Indebtedness is not paid in full on the Maturity Date, (B) any Debt
Service is not paid in full on the applicable Payment Date, (C) any prepayment
of principal due under this Agreement or the Mezzanine Note is not paid when
due, (D) the Prepayment Fee is not paid when due, (E) any deposit to the Senior
Mezzanine Account or any of the other Collateral Accounts is not made on the
required deposit date therefor; or (F) except as to any amount included in (A),
(B), (C), (D), and/or (E) of this clause (i), any other amount payable pursuant
to this Agreement, the Mezzanine Note or any other Loan Document (Senior
Mezzanine) is not paid in full when due and payable in accordance with the
provisions of the applicable Loan Document (Senior Mezzanine), with such failure
as described in subclauses (A), (B), (C), (D), and (E) continuing for ten (10)
Business Days after Mezzanine Lender delivers written notice thereof to
Mezzanine Borrower;

 

(ii)  subject
to Mortgage Borrower's right to contest as set forth in Section 7.3 of
the Loan Agreement (Mortgage), if any of the Impositions or Other 

 








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Charges are not paid prior to the imposition of any interest,
penalty, charge or expense for the non-payment thereof;

 

(iii)  if
the insurance policies required by Section 6.1 are not kept in full force
and effect, or if certificates of any of such insurance policies are not
delivered to Mezzanine Lender within ten (10) Business Days following Mezzanine
Lender's request therefor;

 

(iv)  if,
except as permitted pursuant to Article VIII, (a) any Transfer of any
direct or indirect legal, beneficial or equitable interest in all or any portion
of the Collateral, (b) any Transfer of any direct or indirect interest in
Mortgage Borrower, Mezzanine Borrower, Guarantor, General Partner, or other
Person restricted by the terms of Article VIII, (c) any Lien or encumbrance on
all or any portion of the Collateral, (d) any pledge, hypothecation, creation of
a security interest in or other encumbrance of any direct or indirect interests
in Mezzanine Borrower, Mortgage Borrower, General Partner or other Person
restricted by the terms of Article VIII, or (e) the filing of a declaration of
condominium with respect to the Property;

 

(v)  if
(i) any representation or warranty made by Mezzanine Borrower in Section
4.1.23 shall have been false or misleading in any material respect as of the
date the representation or warranty was made which incorrect, false or
misleading statement is not cured within thirty (30) days after receipt by
Mezzanine Borrower of notice from Mezzanine Lender in writing of such breach or
(ii) if any other representation or warranty made by Mezzanine Borrower herein
by Mezzanine Borrower, Guarantor, General Partner or any Affiliate of Mezzanine
Borrower in any other Loan Document (Senior Mezzanine), or in any report,
certificate (including, but not limited to, any certificate by Mezzanine
Borrower delivered in connection with the issuance of the Non-Consolidation
Opinion), financial statement or other instrument, agreement or document
furnished to Mezzanine Lender shall have been false or misleading in any
material respect as of the date the representation or warranty was made;
provided, however, that if such representation or warranty
which was false or misleading in any material respect is, by its nature, curable
and is not reasonably likely to have a Material Adverse Effect, and such
representation or warranty was not, to the Best of Mezzanine Borrower's
Knowledge, false or misleading in any material respect which made, then same
shall not constitute an Event of Default unless Mezzanine Borrower has not cured
same within five (5) Business Days after receipt by Mezzanine Borrower of notice
from Mezzanine Lender in writing of such breach;

 

(vi)  if
Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE Entity, or any
Guarantor shall make an assignment for the benefit of creditors;

 

(vii)  if
a receiver, liquidator or trustee shall be appointed for Mezzanine Borrower,
Mortgage Borrower, General Partner, any SPE Entity, or any Guarantor or if
Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE Entity, or any
Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or
any 

 








85













similar federal or state law, shall be filed by or against, consented
to, or acquiesced in by, Mezzanine Borrower, Mortgage Borrower, General Partner,
any SPE Entity, or any Guarantor, or if any proceeding for the dissolution or
liquidation of Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE
Entity, or any Guarantor shall be instituted; provided, however,
if such appointment, adjudication, petition or proceeding was involuntary and
not consented to by Mezzanine Borrower, Mortgage Borrower, General Partner, any
SPE Entity, or any Guarantor upon the same not being discharged, stayed or
dismissed within ninety (90) days;

 

(viii)  if
Mezzanine Borrower, General Partner, any SPE Entity, or any Guarantor, as
applicable, Transfers its rights under this Agreement or any of the other Loan
Documents (Senior Mezzanine) or any interest herein or therein in contravention
of the Loan Documents (Senior Mezzanine);

 

(ix)  the
occurrence of a Mortgage Default or Mortgage Event of Default;

 

(x)  with
respect to any term, covenant or provision set forth herein (other than the
other subsections of this Section 17.l) which specifically contains a
notice requirement or grace period, if Mezzanine Borrower, General Partner, any
SPE Entity, or any Guarantor shall be in default under such term, covenant or
condition after the giving of such notice or the expiration of such grace
period;

 

(xi)  if
Mezzanine Borrower, having notified Mezzanine Lender of its election to extend
the Maturity Date as set forth in Section 5 of the Mezzanine Note, fails
to deliver the Replacement Interest Rate Cap Agreement (Senior Mezzanine) to
Mezzanine Lender prior to the first day of the extended term of the Loan and
Mezzanine Borrower has not prepaid the Loan pursuant to the terms of the
Mezzanine Note prior to such first day of the extended term;

 

(xii)  if
Mezzanine Borrower shall fail to comply with any covenants set forth in
Article V or Section XI with such failure continuing for ten (10)
Business Days after Mezzanine Lender delivers written notice thereof to
Mezzanine Borrower; 

 

(xiii)  if
Mortgage Borrower shall fail to comply with any covenants set forth in
Section 4 or Section 3(d) or Section 8 of the Security
Instrument (Mortgage) with such failure continuing for ten (10) Business Days
after Mortgage Lender delivers written notice thereof to Mortgage Borrower;


 

(xiv)  Mezzanine
Borrower shall fail to deposit any sums required to be deposited in the Senior
Mezzanine Account or any Sub-Account thereof pursuant to Article III when
due;

 

(xv)  if
this Agreement or any other Loan Document (Senior Mezzanine) or any Lien granted
hereunder or thereunder, in whole or in part, shall terminate or shall cease to
be effective or shall cease to be a legally valid, binding and enforceable
obligation of Mezzanine Borrower or any Guarantor, or any Lien securing the
Indebtedness shall, in whole or in part, cease to be a perfected first priority
Lien, subject to the Permitted Encumbrances (except in any of the foregoing
cases in accordance with the terms hereof or under any other Loan Document
(Senior Mezzanine) or by reason of any affirmative act of Mezzanine
Lender);

 

(xvi)  Intentionally
Omitted;

 

(xvii)  Intentionally
Omitted;

 

(xviii)  Intentionally
Omitted;

 

(xix)  if
Mezzanine Borrower, General Partner, any SPE Entity or Guarantor shall continue
to be in Default under any of the other terms, covenants or conditions of this
Agreement or of any Loan Document (Senior Mezzanine) not specified in
subsections (i) to (xvii) above, for thirty (30) days after notice from
Mezzanine Lender; provided, however, that if such Default is
susceptible of cure but cannot reasonably be cured within such thirty (30) day
period and provided further that Mezzanine Borrower, General Partner, any SPE
Entity or Guarantor shall have commenced to cure such Default within such thirty
(30) day period and thereafter diligently proceeds to cure the same, such thirty
(30) day period shall be extended for such time as is reasonably necessary for
Mezzanine Borrower in the exercise of due diligence to cure such Default, such
additional period not to exceed ninety (90) days.

 

(b)  Unless
waived in writing by Mezzanine Lender, upon the occurrence and during the
continuance of an Event of Default (other than an Event of Default described in
clauses (a)(vi), (vii) or (viii) above) Mezzanine Lender may, without notice or
demand, in addition to any other rights or remedies available to it pursuant to
this Agreement and the other Loan Documents (Senior Mezzanine) or at law or in
equity, take such action that Mezzanine Lender deems advisable to protect and
enforce its rights against Mezzanine Borrower and in the Collateral, including,
without limitation, (i) declaring immediately due and payable the entire
Principal Amount together with interest thereon and all other sums due by
Mezzanine Borrower under the Loan Documents (Senior Mezzanine), (ii) collecting
interest on the Principal Amount at the Default Rate whether or not Mezzanine
Lender elects to accelerate the Mezzanine Note and (iii) enforcing or availing
itself of any or all rights or remedies set forth in the Loan Documents (Senior
Mezzanine) against Mezzanine Borrower and the Collateral, including, without
limitation, all rights or remedies available at law or in equity; and upon any
Event of Default described in subsections (a)(vi) or (a)(vii) above, the
Indebtedness and all other obligations of Mezzanine Borrower hereunder and under
the other Loan Documents (Senior Mezzanine) shall immediately and automatically
become due and payable, without notice or demand, and Mezzanine Borrower hereby
expressly waives any such notice or demand, anything contained herein or in any
other Loan Document (Senior Mezzanine) to the contrary notwithstanding. The
foregoing provisions shall not be construed as a waiver by Mezzanine Lender of
its right to pursue any other remedies available to it under this Agreement, the
Pledge or any other Loan Document (Senior Mezzanine). Any payment hereunder may
be enforced and recovered in whole or in part at such time by one or more of the
remedies provided to Mezzanine Lender in the Loan Documents (Senior Mezzanine).


 

(c)  Upon
the occurrence of an Event of Default pursuant to Section 17.1(a)(ix),
Mezzanine Borrower shall cause Mortgage Borrower to deliver to Mezzanine Lender
within five (5) Business Days after the first to occur of (a) receipt by
Mortgage Borrower of notice of such Mortgage Default or Mortgage Event of
Default from Mortgage Lender or (b) the date Mortgage Borrower obtains actual
knowledge of the occurrence of such Mortgage Default or Mortgage Event of
Default, a detailed description of the actions to be taken by Mortgage Borrower
to cure such Mortgage Default or Mortgage Event of Default and the dates by
which each such action shall occur. Such schedule shall be subject to the
approval of Mezzanine Lender. Mezzanine Borrower shall cause Mortgage Borrower
to take all such actions as are necessary to cure such Mortgage Default or
Mortgage Event of Default by the date approved by Mezzanine Lender and shall
deliver to Mezzanine Lender not less frequently than weekly thereafter written
updates concerning the status of Mortgage Borrower's efforts to cure such
Mortgage Default or Mortgage Event of Default. Mezzanine Lender shall have the
right, but not the obligation, to pay any sums or to take any action which
Mezzanine Lender deems necessary or advisable to cure any default or alleged
default under the Loan Documents (Mortgage) (whether or not Mortgage Borrower is
undertaking efforts to cure such default), and such payment or such action is
hereby authorized by Mezzanine Borrower, and any sum so paid and any expense
incurred by Mezzanine Lender in taking any such action shall be evidenced by
this Agreement and secured by this Agreement and the Pledge and shall be
immediately due and payable by Mezzanine Borrower to Mezzanine Lender with
interest at the Default Rate until paid. Mezzanine Borrower shall cause Mortgage
Borrower to permit Mezzanine Lender to enter upon the Collateral for the purpose
of curing any default or alleged default under the Loan Documents (Mortgage) or
hereunder. Mezzanine Borrower hereby transfers and assigns any excess proceeds
arising from any foreclosure or sale under power pursuant to the Loan Documents
(Mortgage) or any instrument evidencing the indebtedness secured thereby, and
Mezzanine Borrower hereby authorizes and directs the holder or holders of the
Loan Documents (Mortgage) to pay such excess proceeds directly to Mezzanine
Lender up to the amount of the Obligations (Senior Mezzanine).

 

Section
17.2  Remedies

 

(a)  Unless
waived in writing by Mezzanine Lender, upon the occurrence and during the
continuance of an Event of Default, all or any one or more of the rights,
powers, privileges and other remedies available to Mezzanine Lender against
Mezzanine Borrower and Guarantor under this Agreement or any of the other Loan
Documents (Senior Mezzanine) executed and delivered by, or applicable to,
Mezzanine Borrower or at law or in equity may be exercised by Mezzanine Lender
at any time and from time to time, whether or not all or any of the Indebtedness
shall be declared due and payable, and whether or not Mezzanine Lender shall
have commenced any foreclosure proceeding or other action for the enforcement of
its rights and remedies under any of the Loan Documents (Senior Mezzanine) with
respect to the Collateral. Any such actions taken by Mezzanine Lender shall be
cumulative and concurrent and may be pursued 

 








86













independently, singly, successively, together or otherwise, at such
time and in such order as Mezzanine Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Mezzanine Lender permitted by law, equity or
contract or as set forth herein or in the other Loan Documents (Senior
Mezzanine). Without limiting the generality of the foregoing, Mezzanine Borrower
agrees that if an Event of Default is continuing (i) Mezzanine Lender shall not
be subject to any one action or election of remedies law or rule and (ii) all
liens and other rights, remedies or privileges provided to Mezzanine Lender
shall remain in full force and effect until Mezzanine Lender has exhausted all
of its remedies against the Collateral and this Agreement and the Pledge have
been foreclosed, sold and/or otherwise realized upon in satisfaction of the
Indebtedness or the Indebtedness has been paid in full.

 

(b)  Upon
the occurrence of any Event of Default, Mezzanine Lender may, but without any
obligation to do so and without notice to or demand on Mezzanine Borrower and
without releasing Mezzanine Borrower from any obligation hereunder, take any
action to cure such Event of Default. Mezzanine Lender may appear in, defend, or
bring any action or proceeding to protect its interests in the Collateral or to
foreclose its security interest under this Agreement and the Pledge or under any
of the other Loan Documents (Senior Mezzanine) or collect the
Indebtedness.

 

(c)  Upon
the occurrence and during the continuance of an Event of Default, with respect
to the Account Collateral (Senior Mezzanine), the Mezzanine Lender may:

 

(i)  without
notice to Mezzanine Borrower, except as required by law, and at any time or from
time to time, charge, set-off and otherwise apply all or any part of the Account
Collateral (Senior Mezzanine) against the Obligations (Senior Mezzanine) or any
part thereof;

 

(ii)  in
Mezzanine Lender's sole discretion, at any time and from time to time, exercise
any and all rights and remedies available to it under this Agreement, and/or as
a secured party under the UCC;

 

(iii)  demand,
collect, take possession of or receipt for, settle, compromise, adjust, sue for,
foreclose or realize upon the Account Collateral (Senior Mezzanine) (or any
portion thereof) as Mezzanine Lender may determine in its sole discretion;
and

 

(iv)  take
all other actions provided in, or contemplated by, this Agreement.

 

(d)  With
respect to Mezzanine Borrower, the Account Collateral (Senior Mezzanine), the
Rate Cap Collateral (Senior Mezzanine) and the Collateral, nothing contained
herein or in any other Loan Document (Senior Mezzanine) shall be construed as
requiring Mezzanine Lender to resort to the Collateral for the satisfaction of
any of the Indebtedness, and Mezzanine Lender may seek satisfaction out of the


 








87













Collateral or any part thereof, in its absolute discretion in respect
of the Indebtedness. In addition, Mezzanine Lender shall have the right from
time to time to partially foreclose this Agreement and the Pledge in any manner
and for any amounts secured by this Agreement or the Pledge then due and payable
as determined by Mezzanine Lender in its sole discretion including, without
limitation, the following circumstances: (i) in the event Mezzanine Borrower
defaults beyond any applicable grace period in the payment of one or more
scheduled payments of principal or interest, Mezzanine Lender may foreclose this
Agreement and the Pledge to recover such delinquent payments, or (ii) in the
event Mezzanine Lender elects to accelerate less than the entire outstanding
principal balance of the Loan, Mezzanine Lender may foreclose this Agreement and
the Pledge to recover so much of the principal balance of the Loan as Mezzanine
Lender may accelerate and such other sums secured by this Agreement or the
Pledge as Mezzanine Lender may elect. Notwithstanding one or more partial
foreclosures, the Collateral shall remain subject to this Agreement and the
Pledge to secure payment of sums secured by this Agreement and the Pledge and
not previously recovered.

 

Section
17.3  Remedies Cumulative;
Waivers

 

The rights, powers and remedies of Mezzanine Lender under this
Agreement and the Loan Documents (Senior Mezzanine) shall be cumulative and not
exclusive of any other right, power or remedy which Mezzanine Lender may have
against Mezzanine Borrower pursuant to this Agreement or the other Loan
Documents (Senior Mezzanine), or existing at law or in equity or otherwise.
Mezzanine Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Mezzanine Lender
may determine in Mezzanine Lender's sole discretion. No delay or omission to
exercise any remedy, right or power accruing upon an Event of Default shall
impair any such remedy, right or power or shall be construed as a waiver
thereof, but any such remedy, right or power may be exercised from time to time
and as often as may be deemed expedient. A waiver of one Default or Event of
Default with respect to Mezzanine Borrower or any Guarantor shall not be
construed to be a waiver of any subsequent Default or Event of Default by
Mezzanine Borrower or any Guarantor or to impair any remedy, right or power
consequent thereon.

 

Section
17.4  Costs of Collection

 

In the event that after an Event of Default: (i) the Mezzanine Note
or any of the Loan Documents (Senior Mezzanine) is placed in the hands of an
attorney for collection or enforcement or is collected or enforced through any
legal proceeding; (ii) an attorney is retained to represent Mezzanine Lender in
any bankruptcy, reorganization, receivership, or other proceedings affecting
creditors' rights and involving a claim under this Agreement, the Mezzanine Note
or any of the Loan Documents (Senior Mezzanine); or (iii) an attorney is
retained to protect or enforce the lien or any of the terms of this Agreement,
the Pledge or any of the Loan Documents (Senior Mezzanine); then Mezzanine
Borrower shall pay to Mezzanine Lender all reasonable attorney's fees, costs and
expenses actually incurred in connection therewith, including costs of appeal,
together with interest on any judgment obtained by Mezzanine Lender at the
Default Rate.

 








88
















 

Section
17.5  Distribution of Collateral
Proceeds

 

In the event that, following the occurrence and during the
continuance of any Event of Default, any monies are received in connection with
the enforcement of any of the Loan Documents (Senior Mezzanine), or otherwise
with respect to the realization upon any of the Collateral, such monies shall be
distributed for application as follows:

 

(a)  First,
to the payment of, or (as the case may be) the reimbursement of, Mezzanine
Lender for or in respect of all reasonable costs, expenses, disbursements and
losses which shall have been incurred or sustained by Mezzanine Lender to
protect or preserve the Collateral or in connection with the collection of such
monies by Mezzanine Lender (including without limitation, enforcement costs),
for the exercise, protection or enforcement by Mezzanine Lender of all or any of
the rights, remedies, powers and privileges of Mezzanine Lender under this
Agreement or any of the other Loan Documents (Senior Mezzanine) or in respect of
the Collateral or in support of any provision of adequate indemnity to Mezzanine
Lender against any taxes or liens which by law shall have, or may have, priority
over the rights of Mezzanine Lender to such monies;

 

(b)  Second,
to all other Obligations (Senior Mezzanine) in such order or preference as
Mezzanine Lender shall determine in its sole and absolute discretion;

 

(c)  Third,
the excess, if any, shall be deposited in the Intermediate Mezzanine Account for
application under the Intermediate Mezzanine Loan Documents.

 


	XVIII.  	
      SPECIAL
PROVISIONS




 

Section
18.1  Exculpation

 

18.1.1  Exculpated
Parties. Except as set forth in this Section 18.1, the
Recourse Guaranty and the Environmental Indemnity, no personal liability shall
be asserted, sought or obtained by Mezzanine Lender or enforceable against (i)
Mezzanine Borrower, (ii) any Affiliate of Mezzanine Borrower, (iii) any Person
owning, directly or indirectly, any legal or beneficial interest in Mezzanine
Borrower or any Affiliate of Mezzanine Borrower or (iv) any direct or indirect
partner, member, principal, officer, Controlling Person, beneficiary, trustee,
advisor, shareholder, employee, agent, Affiliate or director of any Persons
described in clauses (i) through (iii) above (collectively, the Exculpated
Parties) and none of the Exculpated Parties shall have any personal liability
(whether by suit, deficiency, judgment or otherwise) in respect of the
Obligations (Senior Mezzanine), this Agreement, the Pledge, the Mezzanine Note,
the Collateral or any other Loan Document (Senior Mezzanine), or the making,
issuance or transfer thereof, all such liability, if any, being expressly waived
by Mezzanine Lender. The foregoing limitation shall not in any way limit or
affect Mezzanine Lender's right to any of the following and Mezzanine Lender
shall not be deemed to have waived any of the following:

 








89
















 

(a)  Foreclosure
of the lien of this Agreement and the Pledge in accordance with the terms and
provisions set forth herein and in the Pledge;

 

(b)  Action
against any other security at any time given to secure the payment of the
Mezzanine Note and the other Obligations (Senior Mezzanine);

 

(c)  Exercise
of any other remedy set forth in this Agreement or in any other Loan Document
(Senior Mezzanine) which is not inconsistent with the terms of this Section
18.1;

 

(d)  Any
right which Mezzanine Lender may have under Sections 506(a), 506(b), 1111(b) or
any other provisions of the Bankruptcy Code to file a claim for the full amount
of the Indebtedness secured by this Agreement and the Pledge or to require that
all collateral shall continue to secure all of the Indebtedness owing to
Mezzanine Lender in accordance with the Loan Documents (Senior Mezzanine);
or

 

(e)  The
liability of any given Exculpated Party with respect to any separate written
guaranty or agreement given by any such Exculpated Party in connection with the
Loan (including, without limitation, the Recourse Guaranty and the Environmental
Indemnity).

 

18.1.2  Carveouts
From Non-Recourse Limitations. Notwithstanding the foregoing or
anything in this Agreement or any of the Loan Documents (Senior Mezzanine) to
the contrary, there shall at no time be any limitation on Mezzanine Borrower's
or any Guarantor's liability (except each Guarantor's liability may be several
in accordance with the terms of the Recourse Guaranty) for the payment, in
accordance with the terms of this Agreement, the Mezzanine Note, the Pledge and
the other Loan Documents (Senior Mezzanine), to Mezzanine Lender of:

 

(a)  any
loss, damage, cost or expense incurred by or on behalf of Mezzanine Lender by
reason of (i) the fraudulent acts of Mezzanine Borrower or intentional
misrepresentations by Mezzanine Borrower or any Affiliate of Mezzanine Borrower
and/or (ii) the failure of Mortgage Borrower and/or Operating Lessee (as
applicable) to have a valid and subsisting certificate of occupancy(s) for all
or any portion of the Property if and to the extent such certificate of
occupancy(s) is required to comply with all Legal Requirements;

 

(b)  Proceeds
which Mortgage Borrower, any Affiliate of Mortgage Borrower, Mezzanine Borrower
or any Affiliate of Mezzanine Borrower has received and to which Mezzanine
Lender is entitled pursuant to the terms of this Agreement or any of the Loan
Documents (Senior Mezzanine) to the extent the same have not been applied toward
payment of the Indebtedness, or used for the repair or replacement of the
Property in accordance with the Loan Agreement (Mortgage);

 

(c)  any
membership deposits and any security deposits and advance deposits which are not
delivered to Mortgage Lender upon a foreclosure of the Property 

 








90













or action in lieu thereof, except to the extent any such deposits
were applied or refunded in accordance with the terms and conditions of any of
the Leases or membership agreement, as applicable, prior to the occurrence of
the Event of Default that gave rise to such foreclosure or action in lieu
thereof;

 

(d)  any
loss, damage, cost or expense incurred by or on behalf of Mezzanine Lender by
reason of all or any part of the Collateral, the Account Collateral (Senior
Mezzanine) or the Rate Cap Collateral (Senior Mezzanine) being encumbered by a
Lien (other than this Agreement and the Pledge) in violation of the Loan
Documents (Senior Mezzanine);

 

(e)  after
the occurrence and during the continuance of an Event of Default, any Rents,
issues, profits and/or income collected by Mortgage Borrower, Operating Lessee,
Mezzanine Borrower or any Affiliate of Mortgage Borrower, Mezzanine Borrower, or
Operating Lessee (other than Rents and credit card receivables sent to the
Collection Account pursuant to the Loan Agreement (Mortgage) or paid directly to
Mortgage Lender pursuant to any notice of direction delivered to tenants of the
Property or credit card companies) and not applied to payment of the Obligations
or used to pay normal and verifiable Operating Expenses of the Property or
otherwise applied in a manner permitted under the Loan Documents (Mortgage) and
Loan Documents (Senior Mezzanine);

 

(f)  any
loss, damage, cost or expense incurred by or on behalf of Mezzanine Lender by
reason of physical damage to the Property from intentional waste committed by
Mortgage Borrower, any Affiliate of Mortgage Borrower, Mezzanine Borrower or any
Affiliate of Mezzanine Borrower;

 

(g)  any
loss, damage, cost or expense incurred by or on behalf of Mezzanine Lender by
reason of the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnity (Senior Mezzanine)
concerning environmental laws, hazardous substances and asbestos and any
indemnification of Mezzanine Lender with respect thereto;

 

(h)  Intentionally
Omitted;

 

(i)  if
Mezzanine Borrower fails to obtain Mezzanine Lender's prior written consent to
any Transfer, as required by this Agreement or the Pledge; 

 

(j)  any
and all liabilities, obligations, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees, causes of action,
suits, claims, demands and adjustments of any nature or description whatsoever)
which may at any time be imposed upon, incurred by or awarded against Mezzanine
Lender, in the event (and arising out of such circumstances) that (x) Mezzanine
Borrower should raise any defense, counterclaim and/or allegation in any
foreclosure action by Mezzanine Lender relative to the Property, the Account
Collateral (Senior Mezzanine) or the Rate Cap Collateral (Senior Mezzanine) or
any part thereof which is found by a court to have been raised by Mezzanine
Borrower in bad faith or to be without basis in fact or law, or (y) an
involuntary case is commenced against Mezzanine Borrower under the Bankruptcy
Code with the collusion of Mezzanine Borrower or any of its Affiliates or (z) an
order for relief is entered with respect to the Mezzanine Borrower under the
Bankruptcy Code through the actions of the Mezzanine Borrower or any of its
Affiliates at a time when the Mezzanine Borrower is able to pay its debts as
they become due unless Mezzanine Borrower and Guarantor shall have received an
opinion of independent counsel that the General Partner of Mezzanine Borrower
has a fiduciary duty to seek such an order for relief;

 

(k)  any
loss, damage, cost, or expense incurred by or on behalf of Lender by reason of
Mezzanine Borrower or General Partner failing to be since the date of its
formation, a Single Purpose Entity; and

 

(l)  reasonable
attorney's fees and expenses incurred by Mezzanine Lender in connection with any
successful suit filed on account of any of the foregoing clauses (a) through
(l).

 


	XIX.  	
      MISCELLANEOUS




 

Section
19.1  Survival

 

This Agreement and all covenants, indemnifications, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Mezzanine Lender of the Loan and the
execution and delivery to Mezzanine Lender of the Mezzanine Note, and shall
continue in full force and effect so long as all or any of the Indebtedness is
outstanding and unpaid unless a longer period is expressly set forth herein or
in the other Loan Documents (Senior Mezzanine). Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. All covenants, promises and agreements
in this Agreement, by or on behalf of Mezzanine Borrower, shall inure to the
benefit of the successors and assigns of Mezzanine Lender. If Mezzanine Borrower
consists of more than one person, the obligations and liabilities of each such
person hereunder and under the other Loan Documents (Senior Mezzanine) shall be
joint and several.

 

Section
19.2  Mezzanine Lender's
Discretion

 

Whenever pursuant to this Agreement, Mezzanine Lender exercises any
right given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Mezzanine Lender, the decision of Mezzanine Lender to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Mezzanine Lender and shall be final and conclusive.

 

Section
19.3  Governing Law

 

(a)  THIS
AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY
MEZZANINE LENDER AND 

 








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ACCEPTED BY MEZZANINE BORROWER IN THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS (SENIOR MEZZANINE)
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST
EXTENT PERMITTED BY LAW, MEZZANINE BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS AGREEMENT AND THE MEZZANINE NOTE AND THE OTHER LOAN DOCUMENTS
(SENIOR MEZZANINE), AND THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)  ANY
LEGAL SUIT, ACTION OR PROCEEDING AGAINST MEZZANINE LENDER OR MEZZANINE BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT MEZZANINE LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND
MEZZANINE BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE
BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND MEZZANINE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MEZZANINE
BORROWER DOES HEREBY DESIGNATE AND APPOINT:

 

CORPORATION SERVICE COMPANY

                80
STATE STREET

                ALBANY,
NEW YORK 12207-2543

 

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS
BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND
AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN
NOTICE OF SAID SERVICE MAILED OR DELIVERED TO MEZZANINE BORROWER IN THE MANNER
PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON MEZZANINE BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF
NEW YORK. MEZZANINE BORROWER (I) SHALL GIVE PROMPT NOTICE TO MEZZANINE LENDER OF
ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND
FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW
YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE
PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE
SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK,
NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

 

Section
19.4  Modification, Waiver in
Writing

 

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

 

Section
19.5  Delay Not a Waiver

 

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

 

Section
19.6  Notices

 

All notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document (Senior Mezzanine) shall be given in
writing and shall be effective for all purposes if hand delivered or sent by (a)
certified or registered United States mail, postage prepaid, return receipt
requested, (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of 

 








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attempted delivery or (c) telecopier (with answer back acknowledged),
addressed as follows (or at such other address and Person as shall be designated
from time to time by any party hereto, as the case may be, in a written notice
to the other parties hereto in the manner provided for in this Section):

 




            If
to Mezzanine Lender:

                            

                            German
American Capital Corporation

                            60
Wall Street, 10th Floor

                            New
York New York 10005

                            Attention:
Todd Sammann and General Counsel

                            Telecopy
No.: (212) 797-4489

                            Confirmation
No.: (212) 250-2748

                            

            With
a copy to: 

 

Midland Loan Services, Inc.

10851 Mastin Suite 700

Overland Park, Kansas 66210

Attention: Jan Sternin

Telecopy No.: (913) 253-9001

Confirmation No.: (913) 253-9216

 

            With
a copy to: 

 

                            Skadden,
Arps, Slate, Meagher & Flom LLP

                            Four
Times Square

                            New
York, New York 10036

                            Attention:
Harvey R. Uris, Esq.

                            Telecopy
No.: (917) 777-2212

                            Confirmation
No.: (212) 735-3000

 

         If to
Mezzanine Borrower: 

 

                            c/o
CNL Hotels Resorts, Inc.

                            Center
at City Commons

                            450
South Orange Avenue

                            Orlando,
Florida 32801

                            Attention
Senior Vice President

                            Telefax
No.: (407) 650-1085

 

             and

 

                            c/o
KSL Resorts

                            50-905
Avenida Bermudas

                            La
Quinta, California 92253

                            Attention:
Mr. Eric Resnick, Chief Financial Officer

                            Telefax
No.: (760) 564-8005

 








93











 

            With
a copy to: 

 

                            Gibson
Dunn & Crutcher LLP


                            333
South Grand Avenue

                            Los
Angeles, CA 90071-3197

                            Attention:
Michael F. Sfregola, Esq.

                            Telefax
No.: (213) 229-6558

 

 

            and

 

                            Lowndes
Drosdick Doster Kantor & Reed, P.A.

                            215
North Eola Avenue

                            Orlando,
Florida 32801

                            Attention:
Richard J. Fildes, Esq.

                            Telefax
No.: (407) 843-4444

 

All notices, elections, requests and demands under this Agreement
shall be effective and deemed received upon the earliest of (i) the actual
receipt of the same by personal delivery or otherwise, (ii) one (1) Business Day
after being deposited with a nationally recognized overnight courier service as
required above, (iii) three (3) Business Days after being deposited in the
United States mail as required above or (iv) on the day sent if sent by
facsimile with confirmation on or before 5:00 p.m. New York time on any Business
Day or on the next Business Day if so delivered after 5:00 p.m. New York time or
on any day other than a Business Day. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, election,
request, or demand sent.

 

Section
19.7  TRIAL BY JURY

 

MEZZANINE BORROWER AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER IT,
HEREBY EXPRESSLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER
THIS AGREEMENT, THE PLEDGE, THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT
(SENIOR MEZZANINE), INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE
MODIFICATION THEREOF OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT, THE PLEDGE, THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT (SENIOR
MEZZANINE) (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 MEZZANINE BORROWER HEREBY AGREES AND CONSENTS
THAT AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION MAY BE FILED WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT HERETO TO THE WAIVER OF ANY RIGHT TO
TRIAL BY JURY. MEZZANINE BORROWER ACKNOWLEDGES THAT IT HAS CONSULTED WITH LEGAL
COUNSEL REGARDING THE MEANING OF THIS WAIVER AND ACKNOWLEDGES THAT THIS WAIVER
IS AN ESSENTIAL INDUCEMENT FOR THE MAKING OF THE LOAN. THIS WAIVER SHALL SURVIVE
THE REPAYMENT OF THE LOAN.

 

Section
19.8  Headings

 

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

 

Section
19.9  Severability

 

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

 

Section
19.10  Preferences

 

To the extent Mezzanine Borrower makes a payment or payments to
Mezzanine Lender, which payment or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the obligations hereunder or part thereof intended
to be satisfied shall be revived and continue in full force and effect, as if
such payment or proceeds had not been received by Mezzanine Lender.

 

Section
19.11  Waiver of Notice

 

Mezzanine Borrower shall not be entitled to any notices of any nature
whatsoever from Mezzanine Lender except with respect to matters for which this
Agreement or the other Loan Documents (Senior Mezzanine) specifically and
expressly provide for the giving of notice by Mezzanine Lender to Mezzanine
Borrower and except with respect to matters for which Mezzanine Borrower is not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Mezzanine Borrower hereby expressly waives the right to receive any
notice from Mezzanine Lender with respect to any matter for which this Agreement
or the other Loan Documents (Senior Mezzanine) do not specifically and expressly
provide for the giving of notice by Mezzanine Lender to Mezzanine
Borrower.

 








94
















 

Section
19.12  Expenses; Indemnity

 

(a)  Except
as may be otherwise expressly set forth in the Loan Documents (Senior
Mezzanine), Mezzanine Borrower covenants and agrees to pay or, if Mezzanine
Borrower fails to pay, to reimburse, Mezzanine Lender upon receipt of written
notice from Mezzanine Lender for all reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by Mezzanine Lender in
connection with (i) the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents (Senior Mezzanine) and the consummation
of the transactions contemplated hereby and thereby and all the costs of
furnishing all opinions by counsel for Mezzanine Borrower (including without
limitation any opinions requested by Mezzanine Lender pursuant to this
Agreement); (ii) Mezzanine Lender's ongoing performance of and compliance with
all agreements and conditions contained in this Agreement and the other Loan
Documents (Senior Mezzanine) on its part to be performed or complied with after
the Closing Date; (iii) the negotiation, preparation, execution, delivery and
administration of any consents, amendments, waivers or other modifications to
this Agreement and the other Loan Documents (Senior Mezzanine) and any other
documents or matters as required herein or under the other Loan Documents
(Senior Mezzanine); (iv) securing Mezzanine Borrower's compliance with any
requests made pursuant to the provisions of this Agreement; (v) the filing and
recording fees and expenses, mortgage recording taxes, title insurance and
reasonable fees and expenses of counsel for providing to Mezzanine Lender all
required legal opinions, and other similar expenses incurred in creating and
perfecting the Lien in favor of Mezzanine Lender pursuant to this Agreement and
the other Loan Documents (Senior Mezzanine); (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or
affecting Mezzanine Borrower, this Agreement, the other Loan Documents (Senior
Mezzanine), the Property, or any other security given for the Loan; (vii)
enforcing any obligations of or collecting any payments due from Mezzanine
Borrower under this Agreement, the other Loan Documents (Senior Mezzanine) or
with respect to the Collateral or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a work-out or of any insolvency or bankruptcy proceedings and (viii)
procuring insurance policies pursuant to Section 6.1.11; provided,
however, that Mezzanine Borrower shall not be liable for the payment of
any such costs and expenses to the extent the same arise (A) by reason of the
gross negligence, illegal acts, fraud or willful misconduct of Mezzanine Lender
or (B) in connection with any action taken under Article IV, other than the
Mezzanine Borrower's internal administrative costs. Any cost and expenses due
and payable to Mezzanine Lender may be paid from any amounts in the Senior
Mezzanine Account if same are not paid by Mezzanine Borrower within ten (10)
Business Days after receipt of written notice from Mezzanine Lender.

 

(b)  Subject
to the non-recourse provisions of Section 18.1, Mezzanine Borrower shall
protect, indemnify and save harmless Mezzanine Lender, and all officers,
directors, stockholders, members, partners, employees, agents, successors and
assigns 

 








95













thereof (collectively, the Indemnified Parties) from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including all reasonable attorneys' fees and
expenses actually incurred) imposed upon or incurred by or asserted against the
Indemnified Parties, the Collateral or the Property or any part of its interest
therein, by reason of the occurrence or existence of any of the following (to
the extent Proceeds payable on account of the following shall be inadequate; it
being understood that in no event will the Indemnified Parties be required to
actually pay or incur any costs or expenses as a condition to the effectiveness
of the foregoing indemnity) prior to (i) the acceptance by Mezzanine Lender or
its designee of a deed-in-lieu of foreclosure with respect to the Collateral, or
(ii) an Indemnified Party or its designee taking possession or control of the
Collateral or (iii) the foreclosure of the Pledge, except to the extent caused
by the willful misconduct or gross negligence of the Indemnified Parties (other
than such willful misconduct or gross negligence imputed to the Indemnified
Parties because of their interest in the Property): (1) ownership of Mezzanine
Borrower's interest in the Property, or any interest therein, or receipt of any
Rents or other sum therefrom, (2) any accident, injury to or death of any
persons or loss of or damage to Property occurring on or about the Property or
any Appurtenances thereto, (3) any design, construction, operation, repair,
maintenance, use, non-use or condition of the Property or Appurtenances thereto,
including claims or penalties arising from violation of any Legal Requirement or
Insurance Requirement, as well as any claim based on any patent or latent
defect, whether or not discoverable by Mezzanine Lender, any claim the insurance
as to which is inadequate, and any Environmental Claim, (4) any Default under
this Agreement or any of the other Loan Documents (Senior Mezzanine) or any
failure on the part of Mezzanine Borrower to perform or comply or to cause
Mortgage Borrower to perform or comply with any of the terms of any Lease within
the applicable notice or grace periods, (5) any performance of any labor or
services or the furnishing of any materials or other Property in respect of the
Property or any part thereof, (6) any negligence or tortious act or omission on
the part of Mezzanine Borrower or any of its agents, contractors, servants,
employees, sublessees, licensees or invitees, (7) any contest referred to in
Section 7.3 of the Loan Agreement (Mortgage), (8) any obligation or
undertaking relating to the performance or discharge of any of the terms,
covenants and conditions of the landlord contained in the Leases, or (9) except
as may be expressly limited herein, the presence at, in or under the Property or
the Improvements of any Hazardous Materials in violation of any Environmental
Law. Any amounts the Indemnified Parties are legally entitled to receive under
this Section which are not paid within fifteen (15) Business Days after
written demand therefor by the Indemnified Parties or Mezzanine Lender, setting
forth in reasonable detail the amount of such demand and the basis therefor,
shall bear interest from the date of demand at the Default Rate, and shall,
together with such interest, be part of the Indebtedness and secured by this
Agreement and the Pledge. In case any action, suit or proceeding is brought
against the Indemnified Parties by reason of any such occurrence, Mezzanine
Borrower shall at Mezzanine Borrower's expense resist and defend such action,
suit or proceeding or will cause the same to be resisted and defended by counsel
at Mezzanine Borrower's reasonable expense for the insurer of the liability or
by counsel designated by Mezzanine Borrower (unless reasonably disapproved by
Mezzanine Lender promptly after Mezzanine Lender has been notified of such
counsel); provided, however, that nothing 

 








96













herein shall compromise the right of Mezzanine Lender (or any
Indemnified Party) to appoint its own counsel at Mezzanine Borrower's expense
for its defense with respect to any action which in its reasonable opinion
presents a conflict or potential conflict between Mezzanine Lender and Mezzanine
Borrower that would make such separate representation advisable; provided
further that if Mezzanine Lender shall have appointed separate counsel pursuant
to the foregoing, Mezzanine Borrower shall not be responsible for the expense of
additional separate counsel of any Indemnified Party unless in the reasonable
opinion of Mezzanine Lender a conflict or potential conflict exists between such
Indemnified Party and Mezzanine Lender. So long as Mezzanine Borrower is
resisting and defending such action, suit or proceeding as provided above in a
prudent and commercially reasonable manner, Mezzanine Lender and the Indemnified
Parties shall not be entitled to settle such action, suit or proceeding without
Mezzanine Borrower's consent which shall not be unreasonably withheld or
delayed, and claim the benefit of this Section with respect to such
action, suit or proceeding and Mezzanine Lender agrees that it will not settle
any such action, suit or proceeding without the consent of Mezzanine Borrower;
provided, however, that if Mezzanine Borrower is not diligently
defending such action, suit or proceeding in a prudent and commercially
reasonable manner as provided above, and Mezzanine Lender has provided Mezzanine
Borrower with thirty (30) days' prior written notice, or shorter period if
mandated by the requirements of applicable law, and opportunity to correct such
determination, Mezzanine Lender may settle such action, suit or proceeding and
claim the benefit of this Section 19.12 with respect to settlement of
such action, suit or proceeding. Any Indemnified Party will give Mezzanine
Borrower prompt notice after such Indemnified Party obtains actual knowledge of
any potential claim by such Indemnified Party for indemnification hereunder. The
Indemnified Parties shall not settle or compromise any action, proceeding or
claim as to which it is indemnified hereunder without notice to Mezzanine
Borrower.

 

Section
19.13  Exhibits and Schedules
Incorporated

 

The Exhibits and Schedules annexed hereto are hereby incorporated
herein as a part of this Agreement with the same effect as if set forth in the
body hereof.

 

Section
19.14  Offsets, Counterclaims and
Defenses

 

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

 

Section
19.15  Liability of Assignees of Mezzanine
Lender

 








97













No assignee of Mezzanine Lender shall have any personal liability,
directly or indirectly, under or in connection with this Agreement or any other
Loan Document (Senior Mezzanine) or any amendment or amendments hereto made at
any time or times, heretofore or hereafter, any different than the liability of
Mezzanine Lender hereunder. In addition, no assignee shall have at any time or
times hereafter any personal liability, directly or indirectly, under or in
connection with or secured by any agreement, lease, instrument, encumbrance,
claim or right affecting or relating to the Property or to which the Property is
now or hereafter subject any different than the liability of Mezzanine Lender
hereunder. The limitation of liability provided in this Section 19.15 is
(i) in addition to, and not in limitation of, any limitation of liability
applicable to the assignee provided by law or by any other contract, agreement
or instrument, and (ii) shall not apply to any assignee's gross negligence or
willful misconduct.

 

Section
19.16  No Joint Venture or Partnership; No Third
Party Beneficiaries

 

(a)  Mezzanine
Borrower and Mezzanine Lender intend that the relationships created hereunder
and under the other Loan Documents (Senior Mezzanine) be solely that of borrower
and lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between Mezzanine
Borrower and Mezzanine Lender nor to grant Mezzanine Lender any interest in the
Collateral other than that of Mezzanine Lender.

 

(b)  This
Agreement and the other Loan Documents (Senior Mezzanine) are solely for the
benefit of Mezzanine Lender and Mezzanine Borrower and nothing contained in this
Agreement or the other Loan Documents (Senior Mezzanine) shall be deemed to
confer upon anyone other than Mezzanine Lender and Mezzanine Borrower any right
to insist upon or to enforce the performance or observance of any of the
obligations contained herein or therein. All conditions to the obligations of
Mezzanine Lender to make the Loan hereunder are imposed solely and exclusively
for the benefit of Mezzanine Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Mezzanine Lender will refuse to make the Loan in the
absence of strict compliance with any or all thereof and no other Person shall
under any circumstances be deemed to be a beneficiary of such conditions, any or
all of which may be freely waived in whole or in part by Mezzanine Lender if, in
Mezzanine Lender's sole discretion, Mezzanine Lender deems it advisable or
desirable to do so.

 

Section
19.17  Publicity

 

All news releases, publicity or advertising by Mezzanine Borrower or
its Affiliates through any media intended to reach the general public which
refers to the Loan Documents (Senior Mezzanine) or the financing evidenced by
the Loan Documents (Senior Mezzanine), to Mezzanine Lender, or any of its
Affiliates shall be subject to the prior written approval of Mezzanine Lender.


 








98
















 

Section
19.18  Waiver of Marshalling of
Assets

 

To the fullest extent permitted by law, Mezzanine Borrower, for
itself and its successors and assigns, waives all rights to a marshalling of the
assets of Mezzanine Borrower, Mezzanine Borrower's shareholders and others with
interests in Mezzanine Borrower and of the Collateral, and agrees not to assert
any right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Mezzanine Lender under the Loan Documents (Senior Mezzanine) to a sale
of the Collateral for the collection of the Indebtedness without any prior or
different resort for collection or of the right of Mezzanine Lender to the
payment of the Indebtedness out of the net proceeds of the Collateral in
preference to every other claimant whatsoever.

 

Section
19.19  Waiver of Counterclaim and other
Actions

 

Mezzanine Borrower hereby expressly and unconditionally waives, in
connection with any suit, action or proceeding brought by Mezzanine Lender on
this Agreement, the Mezzanine Note, the Pledge or any Loan Document (Senior
Mezzanine), any and every right it may have to (i) interpose any counterclaim
therein (other than a counterclaim which can only be asserted in the suit,
action or proceeding brought by Mezzanine Lender on this Agreement, the
Mezzanine Note, the Pledge or any Loan Document (Senior Mezzanine) and cannot be
maintained in a separate action) and (ii) have any such suit, action or
proceeding consolidated with any other or separate suit, action or
proceeding.

 

Section
19.20  Conflict; Construction of Documents;
Reliance

 

In the event of any conflict between the provisions of this Agreement
and any of the other Loan Documents (Senior Mezzanine), the provisions of this
Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting
and execution of the Loan Documents (Senior Mezzanine) and that such Loan
Documents (Senior Mezzanine) shall not be subject to the principle of construing
their meaning against the party which drafted same. Mezzanine Borrower
acknowledges that, with respect to the Loan, Mezzanine Borrower shall rely
solely on its own judgment and advisors in entering into the Loan without
relying in any manner on any statements, representations or recommendations of
Mezzanine Lender or any parent, subsidiary or Affiliate of Mezzanine Lender.
Mezzanine Lender shall not be subject to any limitation whatsoever in the
exercise of any rights or remedies available to it under any of the Loan
Documents (Senior Mezzanine) or any other agreements or instruments which govern
the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate
of Mezzanine Lender of any equity interest any of them may acquire in Mezzanine
Borrower, and Mezzanine Borrower hereby irrevocably waives the right to raise
any defense or take any action on the basis of the foregoing with respect to
Mezzanine Lender's exercise of any such rights or remedies. 

 








99













Mezzanine Borrower acknowledges that Mezzanine Lender engages in the
business of real estate financings and other real estate transactions and
investments which may be viewed as adverse to or competitive with the business
of Mezzanine Borrower or its Affiliates.

 

Section
19.21  Prior Agreements

 

This Agreement and the other Loan Documents (Senior Mezzanine)
contain the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, are superseded by the terms of
this Agreement and the other Loan Documents (Senior Mezzanine) and unless
specifically set forth in a writing contemporaneous herewith the terms,
conditions and provisions of any and all such prior agreements do not survive
execution of this Agreement.

 

Section
19.22  Counterparts

 

This Agreement may be executed in multiple counterparts, each of
which shall constitute an original, but all of which shall constitute one
document.

 

Section
19.23  Disclosure

 

Notwithstanding anything to the contrary contained in Sections 15.1
and 15.6, in connection with the transactions contemplated by such Sections, in
no event shall Mezzanine Lender deliver financial information with respect to
the Collateral, the Property or the Guarantor to the Persons listed in Schedule
III, without first obtaining Mezzanine Borrower's prior written consent;
provided however, Mezzanine Borrower's consent shall not be required with
respect to Morgan Stanley, Lehman Brothers, The Equitable Life Assurance Society
of the United States, Teachers Insurance and Annuity Association and the state
of Ohio Pension Fund if Mezzanine Lender delivers a confidentiality agreement
from any of such Persons reasonably acceptable to Mezzanine Borrower.

 




 










100
















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

 

MEZZANINE BORROWER:

 

CNL HOTEL DEL SENIOR MEZZ PARTNERS, LP, a Delaware limited
partnership

                                By:    CNL
Hotel Del Senior Mezz Partners 

                    GP, LLC, a Delaware
limited liability

                                company, its General
Partner

 




                                By: 
/s/ John X. Brady, Jr.     

                                Name: 
John X. Brady

                                Title:  
Vice President

 




By signing below, General Partner agrees that in consideration of the
substantial benefit that it will receive from Lender making the Loan to
Borrower, General Partner agrees to comply (or permit Mezzanine Borrower to take
such action necessary to comply) with all of the terms, conditions, obligations
and restrictions affecting General Partner set forth herein:

 

GENERAL PARTNER:

 

CNL HOTEL DEL SENIOR MEZZ PARTNERS GP, LLC, a Delaware limited
liability company

 

 

By:  /s/ John X. Brady, Jr.

                                Name: 
John X. Brady, Jr.

                                Title: 
Vice President

 

[Mezzanine Lender's signature appears on following page]

 






















MEZZANINE LENDER:

 

GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation

 

By:  /s/ Todd O.
Sammon      

Name:   Todd O. Sammon

Title:     Vice President







By:  /s/ Eric M. Schwartz    

Name:   Eric M. Schwartz

Title:     Vice President