exv10w1



 







EXHIBIT
10.1



LOAN
AGREEMENT




 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I
	 	LOAN PROVISIONS	 	 	2	 
	Section 1.1.
	 	Loan	 	 	2	 
	Section 1.2.
	 	Term of Loan	 	 	2	 
	Section 1.3.
	 	Interest/Prepayment	 	 	2	 
	Section 1.4.
	 	Loan Fee	 	 	2	 
	Section 1.5.
	 	Unfunded Fee	 	 	2	 
	Section 1.6.
	 	Interest Advance	 	 	2	 
	Section 1.7.
	 	Extension Option	 	 	2	 
	ARTICLE II
	 	LOAN DOCUMENTS; SECURED OBLIGATIONS	 	 	4	 
	Section 2.1.
	 	Loan Documents	 	 	4	 
	Section 2.2.
	 	Obligations	 	 	5	 
	ARTICLE III
	 	REPRESENTATIONS AND WARRANTIES	 	 	5	 
	Section 3.1.
	 	Representations and Warranties	 	 	5	 
	Section 3.2.
	 	Representations and Warranties to be Continuing	 	 	15	 
	Section 3.3.
	 	Acknowledgment of Lender’s Reliance	 	 	15	 
	ARTICLE IV
	 	CONDITIONS PRECEDENT	 	 	15	 
	Section 4.1.
	 	Conditions Precedent	 	 	15	 
	Section 4.2.
	 	Conditions Precedent to the Second Advance	 	 	17	 
	Section 4.3.
	 	Conditions Precedent to the Third Advance	 	 	19	 
	Section 4.4.
	 	Draws Generally: Certain
Restrictions	 	 	20	 
	ARTICLE V
	 	BORROWER’S COVENANTS	 	 	21	 
	Section 5.1.
	 	Obligations	 	 	21	 
	Section 5.2.
	 	Inspection; Access to Books and Records	 	 	21	 
	Section 5.3.
	 	Material Agreements	 	 	21	 
	Section 5.4.
	 	Leases	 	 	22	 
	Section 5.5.
	 	Approved Management Agreement	 	 	23	 
	Section 5.6.
	 	Insurance	 	 	23	 
	Section 5.7.
	 	Casualty; Condemnation and Application of Proceeds	 	 	27	 
	Section 5.8.
	 	Title to Collateral	 	 	29	 
	Section 5.9.
	 	Zoning	 	 	30	 
	Section 5.10.
	 	Recorded Documents	 	 	30	 






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TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 5.11.
	 	Maintenance of Properties	 	 	30	 
	Section 5.12.
	 	Taxes and Liens	 	 	31	 
	Section 5.13.
	 	Waste	 	 	32	 
	Section 5.14.
	 	Misapplication of Funds	 	 	32	 
	Section 5.15.
	 	Compliance With Laws	 	 	33	 
	Section 5.16.
	 	Books and Records	 	 	33	 
	Section 5.17.
	 	Litigation	 	 	35	 
	Section 5.18.
	 	Bankruptcy	 	 	35	 
	Section 5.19.
	 	Distributions	 	 	36	 
	Section 5.20.
	 	Affiliate Agreements	 	 	36	 
	Section 5.21.
	 	Equity Contribution	 	 	38	 
	Section 5.22.
	 	Single Purpose Entity	 	 	38	 
	Section 5.23.
	 	Intentionally Omitted	 	 	38	 
	Section 5.24.
	 	Loan Party Compliance	 	 	38	 
	Section 5.25.
	 	Continued Existence	 	 	38	 
	Section 5.26.
	 	Conduct of Business	 	 	38	 
	Section 5.27.
	 	Additional Ownership Covenants	 	 	39	 
	Section 5.28.
	 	Intentionally Omitted	 	 	39	 
	Section 5.29.
	 	Organizational Documents	 	 	39	 
	Section 5.30.
	 	ERISA	 	 	39	 
	Section 5.31.
	 	Environmental	 	 	40	 
	Section 5.32.
	 	Estoppel Statements	 	 	41	 
	Section 5.33.
	 	Cooperate in Legal Proceedings	 	 	41	 
	Section 5.34.
	 	Further Assurances	 	 	41	 
	Section 5.35.
	 	Contracts	 	 	42	 
	Section 5.36.
	 	Intentionally Omitted	 	 	42	 
	Section 5.37.
	 	Intentionally Omitted	 	 	42	 
	Section 5.38.
	 	Annual Budget	 	 	42	 
	Section 5.39.
	 	Permitted Debt	 	 	42	 
	Section 5.40.
	 	Franchise Agreements	 	 	43	 






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TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 5.41.
	 	Loan to Value Ratio	 	 	43	 
	Section 5.42.
	 	Interest Coverage Ratio	 	 	43	 
	Section 5.43.
	 	Representations	 	 	43	 
	ARTICLE VI
	 	SENIOR LOAN	 	 	43	 
	Section 6.1.
	 	Compliance	 	 	43	 
	Section 6.2.
	 	Lender’s Cure Rights	 	 	44	 
	Section 6.3.
	 	Estoppels	 	 	45	 
	Section 6.4.
	 	No Additional Senior Loan Documents or Amendments	 	 	46	 
	Section 6.5.
	 	Acquisition of the Senior Loan	 	 	46	 
	Section 6.6.
	 	Intentionally Omitted	 	 	47	 
	Section 6.7.
	 	Intentionally Omitted	 	 	47	 
	Section 6.8.
	 	Deed-in-Lieu	 	 	47	 
	Section 6.9.
	 	Refinancing	 	 	47	 
	Section 6.10.
	 	Senior Loan Mechanics	 	 	47	 
	Section 6.11.
	 	Independent Approval Rights	 	 	48	 
	Section 6.12.
	 	Event of Default	 	 	48	 
	ARTICLE VII
	 	TRANSFERS OF INTERESTS	 	 	48	 
	Section 7.1.
	 	Transfer	 	 	48	 
	Section 7.2.
	 	Contracts to Transfer	 	 	48	 
	Section 7.3.
	 	Costs and Expenses, Further Assurances	 	 	49	 
	Section 7.4.
	 	Control	 	 	48	 
	Section 7.5.
	 	Application of Sale Proceeds	 	 	48	 
	Section 7.6.
	 	Transfers of Interests	 	 	49	 
	ARTICLE VIII
	 	INTENTIONALLY OMITTED	 	 	51	 
	ARTICLE IX
	 	DEFAULTS; REMEDIES	 	 	52	 
	Section 9.1.
	 	Events of Default	 	 	52	 
	Section 9.2.
	 	Other Event of Default	 	 	54	 
	Section 9.3.
	 	Remedies	 	 	55	 
	Section 9.4.
	 	Costs of Enforcement	 	 	57	 
	Section 9.5.
	 	Additional Waivers	 	 	58	 
	ARTICLE X
	 	EXCULPATION	 	 	58	 
	Section 10.1.
	 	Exculpation	 	 	58	 






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TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 10.2.
	 	Intentionally Omitted	 	 	59	 
	Section 10.3.
	 	Full Recourse Events	 	 	59	 
	Section 10.4.
	 	No Waiver	 	 	60	 
	ARTICLE XI
	 	MISCELLANEOUS	 	 	60	 
	Section 11.1.
	 	Further Assurances	 	 	60	 
	Section 11.2.
	 	Bankruptcy	 	 	61	 
	Section 11.3.
	 	Lost Documents	 	 	62	 
	Section 11.4.
	 	Principles of Construction	 	 	62	 
	Section 11.5.
	 	Parties Bound, Etc	 	 	63	 
	Section 11.6.
	 	Waivers	 	 	63	 
	Section 11.7.
	 	Severability	 	 	63	 
	Section 11.8.
	 	Release of Collateral	 	 	63	 
	Section 11.9.
	 	Notices	 	 	64	 
	Section 11.10.
	 	Modification	 	 	65	 
	Section 11.11.
	 	Usury Laws	 	 	65	 
	Section 11.12.
	 	Sole Discretion of Lender	 	 	65	 
	Section 11.13.
	 	Absolute and Unconditional Obligation	 	 	66	 
	Section 11.14.
	 	Governing Law and Jurisdiction	 	 	66	 
	Section 11.15.
	 	Waiver of Right to Trial By Jury	 	 	67	 
	Section 11.16.
	 	Waiver of Statutory Rights	 	 	68	 
	Section 11.17.
	 	Relationship	 	 	68	 
	Section 11.18.
	 	Lender Assignment; Securitization	 	 	68	 
	Section 11.19.
	 	Brokers and Financial Advisors	 	 	70	 
	Section 11.20.
	 	Offsets, Counterclaims and Defenses	 	 	70	 
	Section 11.21.
	 	Payment of Expenses; Protective Advances	 	 	70	 
	Section 11.22.
	 	Servicer; Servicer Fees	 	 	71	 
	Section 11.23.
	 	Rescission of Payments	 	 	72	 
	Section 11.24.
	 	No Third Party Beneficiary	 	 	72	 
	Section 11.25.
	 	Attorney-In-Fact	 	 	72	 
	Section 11.26.
	 	Lender Release	 	 	72	 






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TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 11.27.
	 	Counterparts	 	 	72	 
	Section 11.28.
	 	Time	 	 	73	 
	Section 11.29.
	 	Indemnity	 	 	73	 
	Section 11.30.
	 	ERISA Indemnification	 	 	73	 
	Section 11.31.
	 	Publicity	 	 	73	 
	Section 11.32.
	 	Amendments Included	 	 	74	 
	Section 11.33.
	 	Prior Agreements	 	 	74	 
	Section 11.34.
	 	Captions	 	 	74	 
	Section 11.35.
	 	Liability	 	 	74	 
	Section 11.36.
	 	Accounting Matters	 	 	74	 






	 	 	 
	EXHIBITS:
	 	 
	Exhibit A

	 	Definitions
	Exhibit C

	 	Litigation
	Exhibit D

	 	Ownership Chart
	Exhibit E

	 	Required Consents
	Exhibit F

	 	Permitted Exceptions
	Exhibit J

	 	Material Agreements
	Exhibit L

	 	Senior Loan Documents
	Exhibit N

	 	Initial Annual Budget
	Exhibit O

	 	List of Required Items
	Exhibit S

	 	Financing Statements and Filing Offices
	Exhibit U

	 	Tax ID Numbers
	Exhibit V

	 	Properties Sharing a Tax Lot







v









 





LOAN AGREEMENT




          THIS LOAN AGREEMENT (the “Loan Agreement”) is made as of March 5, 2007 between FORTRESS CREDIT
CORP., having an office at 1345 Avenue of the Americas, 46th Floor, New York, New York 10105
(“Lender”) and SUMMIT HOTEL PROPERTIES, LLC, a South Dakota limited liability company, having an
office at c/o The Summit Group, 2701 South Minnesota Avenue, Suite 6, Sioux Falls, South Dakota
57105 (“Borrower”). All terms as used in this Agreement shall, unless otherwise defined in the
main body of this Agreement, have the meanings given to such terms in Exhibit A attached hereto.




RECITALS




          A. Borrower is the owner of a one hundred percent (100%) interest in each of the following
entities: (i) Summit Hospitality I, LLC, a Delaware limited liability company (“SH I”), (ii) Summit
Hospitality II, LLC, a Delaware limited liability company (“SH II”), (iii) Summit Hospitality III,
LLC, a Delaware limited liability company (“SH III”), and (iv) Summit Hospitality IV, LLC, a
Delaware limited liability company (“SH IV”, collectively with SH I, SH II and SH III, together
with SPE Owner as defined hereinafter, the “SHP Subsidiaries” and each individually a “SHP
Subsidiary”), and




          B. Borrower is the fee or leasehold owner of certain hotel properties described on Schedule
A-1 attached hereto (the “Borrower Properties”).




          C. SHP Subsidiaries are the fee owners of additional hotel properties described on Schedule
A-2 attached hereto (together with hotel properties owned from time-to-time by SPE Owner, the “SHP
Subsidiary Properties” which together with the Borrower Properties and the real estate and hotel
properties which will be acquired by Borrower or SPE Owner in the future are hereinafter referred
to as, the “Properties” and each individually, a “Property”).




          D. Subject to the terms and conditions set forth herein, Lender has agreed to loan to Borrower
the sum of up to Ninety-Nine Million Seven Hundred Thousand and No/100 Dollars ($99,700,000.00).




          NOW, THEREFORE, in consideration of the covenants and agreements contained herein and in the
other Loan Documents and other good and valuable consideration, the receipt of which is hereby
acknowledged, Lender and Borrower hereby covenant and agree as follows:












 




ARTICLE I




LOAN PROVISIONS




     Section 1.1. Loan. Subject to the terms and conditions set forth herein, Lender has
agreed to loan to Borrower the amount of up to Ninety-Nine Million Seven Hundred Thousand and
No/100 Dollars ($99,700,000.00) (the “Loan”).



     Section 1.2. Term of Loan. On the Maturity Date (as the same may be accelerated
pursuant to the provisions of the Loan Documents or otherwise), the entire Debt, including all
amounts outstanding under the Note, all accrued interest thereon and all other amounts due and
payable to Lender hereunder and under the other Loan Documents, if not sooner paid or payable
pursuant to the Loan Documents, shall become due and payable in full.



     Section 1.3. Interest/Prepayment. Interest due under the Note shall accrue and become
payable as set forth therein. Voluntary prepayment under the Note may be made only as set forth in
the Note.



     Section 1.4. Loan Fee. On the Closing Date, Borrower shall pay to Lender a loan fee
(“Loan Fee”) equal to $997,000.00. The Loan Fee shall be deemed fully earned on the Closing Date
and shall not be refundable for any reason.



     Section 1.5. Unfunded Fee. (i) Commencing sixty (60) days after the closing date,
Borrower shall pay to Lender on a monthly basis a fee equal to 0.5% per annum of the unfunded
portion of the Initial Advance (the “Unfunded Fee 1”). (ii) Commencing on the sixth (6th) month
anniversary of the Closing Date, Borrower shall pay to Lender on a monthly basis a fee equal to
0.5% per annum of the unfunded portion of the Second Advance (the “Unfunded Fee A”). (ii)
Commencing on the twelfth (12th) month anniversary of the Closing Date, Borrower shall pay to
Lender on a monthly basis a fee equal to 0.5% per annum of the unfunded portion of the Third
Advance (the “Unfunded Fee B”, collectively with Unfunded Fee 1 and Unfunded Fee A, the “Unfunded
Fee”).



     Section 1.6. Interest Advance. On the 1st day of every calendar month (the
“Interest Advance Date”) until the Schedule Maturity Date, Lender shall deposit into the
Interest Reserve Account a portion of the Interest Advance equal to the interest payment due on the
next following Payment Date (the “Interest Advance”), provided that such advances shall not
exceed, in the aggregate, the Additional Amount. In addition, if Borrower shall have been required
to obtain an interest rate protection agreement, Borrower shall have added the Interest Advance to
the amount covered under the interest rate protection agreement.



     Section 1.7. Extension Option.



               (a) Extension Option. Borrower shall have the option to extend (i) the Scheduled
Maturity Date to the Extended Maturity Date (the “First Extension Option”) and (ii) the Extended
Maturity Date to the Second Extended Maturity Date (the “Second
Extension Option”, collectively with the First Extension Option, the “Extension Option”).
Borrower’s right to exercise the Extension Option or Second Extension Option shall be subject to
the satisfaction of each of the following conditions , if (and



2









 







only if) each of the following
conditions (“Extension Conditions”) have been satisfied within the applicable time periods:



               (i) Borrower shall have delivered to Lender written notice (the “Extension Notice”) of
Borrower’s decision to extend the Scheduled Maturity Date or Extended Maturity Date pursuant to
this Section at least sixty (60) days but not more than ninety (90) days prior to the Scheduled
Maturity Date or Extended Maturity Date (as applicable). The Extension Notice, upon its delivery
to Lender, shall be irrevocable;



               (ii) No Event of Default shall have occurred and no Unmatured Default shall have occurred and
be continuing (i) at the time Borrower gives the Extension Notice and (ii) on the Scheduled
Maturity Date or Extended Maturity Date (as applicable), and on the Scheduled Maturity Date or
Extended Maturity Date (as applicable) Borrower shall have delivered to Lender an Officer’s
Certificate to that effect;



               (iii) On or before the Scheduled Maturity Date or Extended Maturity Date (as applicable),
Borrower shall have paid or provided Lender sufficient funds for the payment of all Loan Expenses
incurred by Lender in connection with the Extension Option;



               (iv) Lender shall have advanced to Borrower such portions of the Second Advance and the Third
Advance as were requested by Borrower to be funded;



               (v) Each representation and warranty made in the Loan Documents by a Loan Party shall continue
to be true and correct as if remade on the Scheduled Maturity Date or on the Extended Maturity Date
(as applicable), and on the Scheduled Maturity Date and Extended Maturity Date (as applicable)
Borrower shall have delivered an Officer’s Certificate to that effect;



               (vi) If required by Lender, on or before the Scheduled Maturity Date or Extended Maturity Date
(as applicable), Borrower shall obtain and deliver to Lender an interest rate protection agreement
in a form and from a counterparty acceptable to Lender in its sole discretion and shall be
effective for the period commencing on the day immediately following the Scheduled Maturity Date or
Extended Maturity Date and ending on the Extended Maturity Date or the Second Extended Maturity
Date;



               (vii) If an interest rate protection agreement is required pursuant to clause (v) above,
Borrower shall deliver a counterparty legal opinion in form and substance acceptable to Lender and
from counsel acceptable to Lender with respect to the interest rate protection agreement;



               (viii) On or before the Scheduled Maturity Date or Extended Maturity Date, Borrower shall have
delivered to Lender UCC Searches, with a search date not more than 30 days prior to the Scheduled
Maturity Date or Extended Maturity Date, confirming the filing of the Financing Statements in favor
of Lender, and disclosing no other security interests, liens, encumbrances, judgments, filed
actions or bankruptcy



3









 







filings by or against any of the SHP Subsidiaries, Borrower or Guarantor with
respect to the Collateral other than the Permitted Exceptions;



               (ix) On or before the Scheduled Maturity Date and the Extended Maturity Date, Borrower shall
have delivered to Lender a Borrower Estoppel Certificate in form and substance acceptable to Lender
with an effective date not more than 5 days prior to the Scheduled Maturity Date;



               (x) Intentionally Omitted;



               (xi) On or before the Scheduled Maturity Date, each Loan Party shall have delivered to Lender
its most current certified financial statement showing no Material Adverse Change from those
delivered to Lender prior to the date hereof and a certification from such Loan Party that since
the date of such statement there has been no Material Adverse Change;



               (xii) Intentionally Omitted;



               (xiii) On or before the Scheduled Maturity Date or Extended Maturity Date, the Borrower shall
satisfy the Loan to Value Test.



               (xiv) On or before the Scheduled Maturity Date, Borrower shall have paid to Lender the Loan
Extension Fee in immediately available United States funds.



          In the event that any of the foregoing Extension Conditions is not satisfied strictly in
accordance with the terms hereof or waived by Lender in writing, the Extension Option shall be null
and void, and the Loan shall mature on the Scheduled Maturity Date or Extended Maturity Date (as
applicable). Further, in the event that the foregoing Extension Option is exercised, the
provisions of section 1.6 shall no longer apply and Borrower shall be required to pay in cash to
Lender the monthly interest payment due on each Payment Date together will all other sums due
hereunder.




ARTICLE II




LOAN DOCUMENTS; SECURED OBLIGATIONS




     Section 2.1. Loan Documents. The Obligations shall be evidenced and secured by the
following documents, all dated as of the date hereof (except as otherwise noted below)
(collectively, together with any Amendments thereto, the “Loan Documents”):



          (a) this Agreement and the Joinder hereto;




          (b) that certain Promissory Note dated as of the date hereof in the principal amount of up to
$99,700,000 given by Borrower to Lender and evidencing the Loan (together with any Amendments
thereto, the “Note”);

4









 









          (c) those certain Pledge and Security Agreements given by Borrower to Lender constituting a
perfected pledge and assignment of Borrower’s 49% interest in SHP Subsidiaries; (such agreements
collectively, together with any Amendments thereto, the “Pledge and Security Agreement”;




          (d) the Financing Statements;




          (e) that certain Guaranty of Recourse Obligations from Guarantor in favor of Lender (together
with any Amendments thereto, the “Guaranty of Recourse Obligations”);




          (f) that certain Subordination of Management Agreement executed by Borrower and the Approved
Manager and Lender;




          (g) [Intentionally Omitted];




          (h) that certain Certificate of Ownership Chart executed by Borrower in favor of Lender;




          (i) that certain Environmental Representation, Warranty and Indemnification Agreement from
Borrower and Guarantor in favor of Lender (together with any Amendments thereto, the “Environmental
Indemnity”).




     Section 2.2. Obligations. The grants, assignments, pledges, encumbrances and
transfers made under the Loan Documents are given for the purpose of securing (i) the payment of
the Debt; and (ii) the performance of all other agreements, covenants, conditions and obligations
of the Borrower and the other Loan Parties contained herein or in the other Loan Documents
(collectively, items (i) and (ii) are the “Obligations”).



ARTICLE III




REPRESENTATIONS AND WARRANTIES




     Section 3.1. Representations and Warranties. The Recitals set forth above are made a
part of this Article and constitute representations and warranties of Borrower to Lender. The
Borrower further represents and warrants to Lender as follows:



          (a) Initial Advance Conditions. Borrower has fully satisfied and/or delivered to
Lender as of the Closing Date all items required by Section 4.1.




          (b) Loan Documents. Each of the Loan Documents is in full force and effect.




          (c) No Event of Default. No Event of Default or Unmatured Default has occurred as of
the date hereof.

5









 









          (d) No Set-Off. The Loan Documents and the performance of each Loan Party’s
obligations thereunder, are not subject to any right of rescission, set-off, counterclaim or
defense by any Loan Party, including the defense of usury, nor would the Loan Parties’ respective
obligations therein nor the exercise of any of the terms of the Loan Documents, or the exercise of
any right thereunder, render the Loan Documents or any remedy provided for thereunder
unenforceable, and no Loan Party has asserted any right of rescission, set-off, counterclaim or
defense with respect thereto.




          (e) Lien of Loan Documents. Each of the Loan Documents which purports to grant or
assign to Lender a Lien or security interest in any Collateral creates a valid, enforceable Lien on
the Collateral in favor of Lender, subject only to Permitted Exceptions. Upon the filing of the
Financing Statements in the filing offices set forth in Exhibit S, Lender will have a perfected
security interest in each item of Collateral. Other than the Financing Statements or any Permitted
Exceptions, no Loan Party has executed any UCC financing statements in favor of any other Person
with respect to any of the Collateral. The recordings, filings and actions set forth on Exhibit S
are all the actions necessary in order to establish, protect and perfect the interest of the Lender
in the Collateral. Other than the financing statements in favor of Lender, no Loan Party has
executed any UCC-1 financing statements in favor of any other Person with respect to the
Collateral.




          (f) Organization; Good Standing; Formation and Organization Documents. Each Loan
Party (other than a Loan Party that is a natural person) is duly organized, validly existing and in
good standing and qualified to do business in the jurisdiction of its organization and in each
State where the Properties are located, and each such Loan Party has all requisite organizational
power and authority to execute, deliver and perform its obligations under each Loan Document to
which it is a party. Borrower has delivered to Lender all formation and Organizational Documents
of each Loan Party (other than a Loan Party that is a natural person), and all such formation and
Organizational Documents remain in full force and effect and have not been amended or modified
since they were delivered to Lender.




          (g) Due Authorization; Enforceability. Each Loan Party and its members, managers,
partners, shareholders, officers and/or directors, as applicable, have taken all necessary action
to authorize the execution, delivery and performance of each Loan Document, and no consent,
authorization or approval of any Person is necessary to authorize each Loan Party to execute,
deliver and perform its obligations under each Loan Document to which it is a party except for the
written consent obtained from the
Persons set forth on Exhibit E, which consents remain in full force and effect, with copies
thereof provided to Lender. Each of the Loan Documents has been duly executed and delivered by or
on behalf of each applicable Loan Party that is a party thereto, and constitutes the legal, valid
and binding obligations of each such Loan Party enforceable against each such Loan Party in
accordance with its terms, and as of the Closing Date there are no defenses, including the defense
of usury, to such enforceability.

6









 









          (h) No Conflicts. The execution, delivery and performance of each Loan Document by
each applicable Loan Party does not and will not (i) conflict with or result in or cause any
violation under any Applicable Law, (ii) conflict with or result or cause a breach of any of the
terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, partnership agreement, operating agreement or other agreement or instrument to which
such Loan Party is party or by which such Loan Party’s property or assets are subject, (iii) result
in the creation or imposition of any Lien, charge or encumbrance (other than pursuant to the Loan
Documents) upon any of the property or assets of any Loan Party, or (iv) result in any violation of
the provisions of any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over such Loan Party or any of its properties or assets. No Loan Party
is a party or subject to (i) any restriction in its Organizational Documents that materially
affects its business or the use or ownership of any of its properties or operation of its business
as presently used, owned, operated or contemplated or (ii) any contract, agreement or restriction
that materially and adversely affects its business or the use or ownership of any of its properties
or operation of its business as presently contemplated. No Loan Party is a party or subject to any
contract or agreement which restricts its right or ability to incur the Debt, and no Loan Party is
a party or subject to any contract or agreement which restricts its right or ability to enter into
the Loan Documents to which it is a party or which prohibits any Loan Party’s execution or
performance of its obligations under this Agreement or any of the other Loan Documents, the
Borrower’s obtaining the Loan, the Guarantor’s guaranty of the Obligations and the Loan Parties’
providing security for the Obligations as provided herein. No Loan Party has agreed or consented
to cause or permit in the future (upon the happening of a contingency or otherwise) any of the
Collateral, whether now owned or hereafter acquired, to be subject to a Lien that is not a
Permitted Lien. As of the date hereof, each Loan Party has provided, to the Lender, accurate and
complete copies of all of the following agreements or documents to which such Loan Party is
subject: (a) all Leases with respect to the Properties; (b) all Hotel Management Agreements with
respect to the Properties; (c) all Senior Loan Agreements; (d) all instruments and agreements
evidencing the issuance of any equity securities, warrants, rights or options to purchase equity
securities of any Loan Party or any Subsidiary of any Loan Party; and (e) all Organizational
Documents of any Loan Party. All such agreements are in full force and effect and are not
presently subject to termination because of an existing default by a Loan Party or, to the best
knowledge of each Loan Party, otherwise. Except to the extent obtained and delivered to Lender in
writing prior to the Closing Date, no registration, qualification, designation, declaration or
filing with, any Person or any Governmental
Authority (other than the filing of financing statements and continuation statements) is or
will be necessary in connection with the execution and delivery of this Agreement or any other Loan
Documents by each Loan Party a party thereto, consummation by each Loan Party a party thereto of
the transactions herein or therein contemplated, including the Borrower’s obtaining the Loan, the
Guarantors’ guaranty of the Obligations and the Loan Parties’ granting security for the
Obligations, performance of or compliance by each Loan Party a party thereto with the terms and
conditions hereof or thereof or the legality, validity and enforceability hereof or thereof.


7









 









          (i) Governmental Consents. Other than the permits and licenses referred to in Section
3.1(bb), no other consent, approval, authorization or order of, or qualification with, any court or
Governmental Authority or any Person is required in connection with the execution, delivery or
performance by any Loan Party of the Loan Documents.




          (j) No Litigation. There are no actions, suits or proceedings at law or in equity by
or before any Governmental Authority or Person now pending against or affecting the Properties, the
Collateral or any Loan Party other than such actions, suits or proceedings (A) described in Exhibit
C or (B) which has a maximum potential liability less than of $50,000.00.




          (k) No Restriction. No Loan Party is in default (after any applicable notice and
grace period) 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 which could have a
Material Adverse Effect.




          (l) Ownership Interests. The Ownership Chart attached hereto as Exhibit D (the
“Ownership Chart”) is true, correct and complete as of the Closing Date. Except as set forth on
Exhibit D, no other Person has any direct or indirect ownership interest in the Properties, SHP
Subsidiaries or Borrower.




          (m) Chief Executive Office. Borrower’s principal place of business and chief
executive office is 2701 South Minnesota Avenue, Suite 6, Sioux Falls, South Dakota 57105.




          (n) Financial Condition. Each financial statement concerning each Loan Party and the
Properties provided to Lender in connection with the Loan, and hereafter from time to time, fairly
and accurately presents, in accordance with [Agreed Accounting Principles] consistently applied, in
all material respects the financial position of each such Loan Party and the Properties, as the
case may be, as of the date of such financial statement. Each such financial statement has been
prepared in accordance with the requirements of Section 5.16(c). There have occurred no changes or
circumstances to such financial data or the financial condition of the Properties, the Borrower or
any Loan
Party which individually or in the aggregate have had or may result in a Material Adverse
Change.




          (o) Fraudulent Transfer; Solvency. None of the Loan Parties have entered into the
Loan Documents with the actual intent to hinder, delay, or defraud any creditor or any other
Person, and each Loan Party has received reasonably equivalent value in exchange for its
obligations under the Loan Documents. As of the Closing Date, after giving effect to the
transactions contemplated by the Loan Documents, the Borrower and SHP Subsidiaries are solvent and
the fair saleable value of each Loan

8









 








Party’s assets exceeds and will, immediately following the
execution and delivery of the Loan Documents, exceed such Loan Party’s total liabilities, including
subordinated, unliquidated, disputed or contingent liabilities. The fair saleable value of each
Loan Party’s assets will, immediately following the execution and delivery of the Loan Documents,
be greater than such Loan Party’s probable liabilities, including the maximum amount of its
contingent liabilities or its debts as such debts become absolute and matured. Each Loan Party’s
assets, immediately following the execution and delivery of the Loan Documents, will not constitute
unreasonably small capital to carry out its business as conducted or as proposed to be conducted.
As of the Closing Date, no Loan Party intends or believes that it will, incur debts and liabilities
(including contingent liabilities and other commitments) beyond its ability to pay such debts as
they mature (taking into account the timing and amounts to be payable on or in respect of its
obligations). No Loan Party has any knowledge of any tenant presently contemplating the filing of
a petition by it under any Bankruptcy Law or the liquidation of all or a major portion of its
assets or property.




          (p) No Bankruptcy Filing. No Loan Party is a debtor in any outstanding action or
proceeding pursuant to any Bankruptcy Law and no Loan Party is (i) contemplating either the filing
of a petition by it under any Bankruptcy Law or the liquidation of all or any portion of its assets
or property, and (ii) no Loan Party is aware that any other Person is contemplating the filing
against any Loan Party of a petition under any Bankruptcy Law.




          (q) Single Purpose. Each of the SHP Subsidiaries was formed solely for the purpose of
acquiring its direct or indirect interest in its respective SHP Subsidiary Properties. Since the
formation of each of the SHP Subsidiaries:




               (i) Neither Borrower nor any SHP Subsidiary has incurred any Indebtedness, other than
Permitted Debt;



               (ii) SHP Subsidiaries have never owned, and do not now own, nor will the SHP Subsidiaries ever
own any asset or property other than (A) the respective SHP Subsidiaries’ Properties, and (B) other
assets incidental to its ownership or operation of such Properties; and



               (iii) Each Loan Party has at all times complied with and will continue to comply with the
provisions of its respective Organizational Documents and the laws of the State in which such Loan
Party was formed and or any other state where laws governing the activities of such Loan Party.



          (r) Control. Except for the powers granted to the Independent Members in the SHP
Subsidiaries, Borrower has the power and authority and the requisite Ownership Interests to control
the actions of the SHP Subsidiaries. Without limiting the foregoing and except for the powers
granted to the Independent Members in the SHP Subsidiaries, Borrower has sufficient control over
SHP Subsidiaries to cause SHP Subsidiaries to (i) take any action on SHP Subsidiaries’ part
required by the Loan Documents and (ii) refrain from taking any action prohibited by the Loan
Documents.




          (s) Intentionally Omitted.




9









 








          (t) Employees. No Loan Party (other than Borrower and Guarantor) has any employees.




          (u) Title. Borrower has good and marketable fee simple or leasehold, as applicable,
title to the Borrower Properties free and clear of all liens, encumbrances and charges whatsoever
other than Permitted Exceptions. SHP Subsidiaries have good and marketable fee simple title to the
SHP Subsidiary Properties free and clear of all liens, encumbrances and charges whatsoever other
than Permitted Exceptions. None of the Permitted Exceptions has a Material Adverse Effect or
otherwise materially interferes with the Intended Use of the Properties, with the value of the
Properties, or with the ability of any Loan Party to perform its obligations under the Loan
Documents. Any Loan Party purporting to grant to Lender a Lien on any other Collateral has good
and marketable title in and to such Collateral free and clear of all liens, encumbrances and
charges whatsoever other than the Lien created by the Loan Documents in favor of Lender and the
Permitted Exceptions.




          (v) Flood Zone. Except for those Properties for which Borrower has delivered to
Lender reasonably acceptable proof of appropriate flood insurance, no portion of the Properties is
located in an area as identified by the Federal Emergency Management Agency or the Federal
Insurance Administration as an area having special flood hazards (Zone A or Zone V).




          (w) Parking. The Properties and the Improvements have and will at all times have, or
have easement rights to, a sufficient number of parking spaces to comply with Applicable Law and
with all obligations under the Material Agreements and Senior Loan Documents.




          (x) Access. Each of the Properties have adequate rights of access to dedicated public
ways either abutting the Properties or through Easement Areas (and
makes no use of any means of access, ingress or egress that is not pursuant to such dedicated
public ways or Easement Areas). All roads necessary for the full utilization of each of the
Properties for all current and Intended Uses have been completed and paid for and are either part
of the Properties (by way of deed, easement or ground lease) or dedicated to public use and
accepted by all Governmental Authorities.




          (y) Utilities. Each of the Properties is served by water, electric, sewer, sanitary
sewer and storm drain facilities and all other utilities necessary and sufficient for all current
and Intended Uses, and such utilities enter each of the Properties directly from a public
right-of-way abutting the Properties or through Easement Areas, and all such utilities are
connected so as to serve the Properties without passing over other property other than Easement
Areas.




          (z) No Encroachments. Except for immaterial encroachments of certain Improvements
across boundaries and building restriction lines of the Properties and immaterial encroachments of
improvements on adjoining properties onto certain of the Properties, the Improvements lie wholly
within the boundaries and building

10









 








restriction lines of the Properties and do not encroach upon
easements or other encumbrances upon the Properties,
including any required set-back, and no
improvements on adjoining properties encroach upon the Properties.




          (aa) Compliance with Applicable Law; Zoning. Each of the Properties (including the
Intended Use) is in compliance with Applicable Law, including the ADA. Each of the Properties
currently comply with all zoning requirements and do not rely on any pre-existing use or rights.




          (bb) Permits and Licenses. All licenses and permits required, including all liquor
licenses, based on Applicable Law in effect on the Closing Date, to own, operate, manage or
maintain the Properties for all current or Intended Uses have been obtained, paid for and are in
full force and effect as of the date hereof.




          (cc) Forfeiture. There has not been committed by any Loan Party any act or omission
affording any Governmental Authority the right of forfeiture as against (i) any of the Properties,
or (ii) any part thereof or direct or indirect Ownership Interest therein or any amounts paid in
performance of the Obligations or (iii) any license or permit. No Loan Party has purchased any of
the Properties or any portion thereof or direct or indirect Ownership Interest therein with the
proceeds of any illegal activity.




          (dd) Casualty. The Properties have not been damaged or injured as a result of any
fire, explosion, accident, flood or other casualty, which damage or injury has not been fully
repaired and the respective Properties restored.




          (ee) No Condemnation. No condemnation or eminent domain proceeding has been
commenced, or, to the Borrower’s Knowledge, is pending or
threatened against any of the Properties or any roadways or Easement Areas providing access to
any of the Properties.




          (ff) No Violations. No Loan Party has received any notice of violations of any
Applicable Law in respect to any of the Properties.




          (gg) Insurance. Borrower and SHP Subsidiaries have obtained Policies satisfying the
insurance coverages, amounts and other requirements set forth in this Agreement (or, if applicable
in the Senior Loan Documents) and, to Borrower’s Knowledge, no Person, has done, by act or omission
anything which would impair the coverage of any such Policy.




          (hh) Management Agreement. Borrower has delivered or has caused to be delivered to
Lender a true, complete and correct copy of each of the Management Agreements as of the date
hereof, which are in full force and effect and free from default by any Loan Party or, to
Borrower’s Knowledge, the manager thereunder as of the date hereof. Other than the Management
Agreements, agreements for the rental of guestrooms and Leases, there are no other agreements in
existence relating to the management or leasing of the Properties.




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          (ii) Leases.




               (i) Borrower has delivered or has caused to be delivered to Lender true, correct and complete
copies of all executed Leases on or before the Closing Date. No tenant or other Person has any
option, right of first refusal or similar preferential right to purchase all or any portion of the
Properties. Except as disclosed to Lender in writing, as of the date hereof, the Leases are in
full force and effect and there are no defaults thereunder by any Loan Party or, to Borrower’s
Knowledge with respect to any Leases, the tenant thereunder, which have a Material Adverse Effect.
All Leases have been entered into in the name of Borrower or a SHP Subsidiary or have been duly
assigned to Borrower or a SHP Subsidiary, and Borrower or a SHP Subsidiary is the landlord under
all Leases. No Person has any possessory interest in any of the Properties or right to occupy the
same except under and pursuant to the provisions of the Leases and the Permitted Exceptions, and
hotel guests.



          (jj) Material Agreements. Exhibit J attached hereto sets forth a list of all Material
Agreements entered into by any Loan Party on or before the Closing Date, and all Material
Agreements entered into after the Closing Date will comply with the Loan Documents and the Senior
Loan Documents in all material respects. All Material Agreements have been or will be entered into
in the name of the Borrower, Guarantor or a SHP Subsidiary or have been duly assigned to and
assumed by Borrower, Guarantor or a SHP Subsidiary. The Material Agreements are in full force and
effect and there are no defaults thereunder by any Loan Party or, to Borrower’s Knowledge, any
other party thereto as of the date hereof which have a Material Adverse Effect.




          (kk) Intentionally Omitted.




          (ll) Taxes and Assessments. Each Loan Party’s federal tax identification number is
set forth on Exhibit U. All taxes and governmental assessments relating to the Properties are
current and are not delinquent. Each Loan Party has filed, or caused to be filed, all tax returns
(federal, state, local and foreign) required to be filed and paid all amounts of taxes shown
thereon to be due (including interest and penalties) and has paid all other taxes, fees,
assessments and other governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangible taxes) owing (or necessary to preserve any liens in favor of Lender) by it,
except for taxes which are not yet due and payable. There are no existing, pending or, to
Borrower’s Knowledge, proposed, special or other assessments for public improvements or otherwise
affecting the Properties other than as reflected on Exhibit M attached hereto.




          (mm) Separate Tax Lot. Except as set forth on Exhibit V, each of the Properties
consist of a separate tax lot or lots and said lot or lots do not include any property not included
within the Properties.




          (nn) ERISA. No Loan Party or any ERISA Affiliate of a Loan Party is an “employee
benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the
assets any Loan Party constitutes or will constitute “plan assets”

12









 








of one or more such plans within
the meaning of 29 C.F.R. Section 2510.3 101. The consummation of the transaction contemplated
hereby will not constitute or result in any transaction prohibited by Section 406 of ERISA or
Section 4975 of the Code.




          (oo) Margin Stock. No Loan Party is engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock, and no proceeds of the Loan will be used for a
purpose which violates, or would be inconsistent with Federal Reserve System Board of Governors’
Board Regulation U or X (as such terms are used in Federal Reserve System Board of Governors’ Board
Regulation U or X or any regulations substituted therefor, as from time to time in effect), or for
any purposes prohibited by Applicable Law or by the terms and conditions of the Loan Documents or
Senior Loan Documents.




          (pp) Foreign Person. No Loan Party is a “foreign person” within the meaning of §
1445(f)(3) of the Internal Revenue Code.




          (qq) Investment Company; Public Utility Holding Company. No Loan Party is an
“investment company” or a “company controlled by an investment company” or an “affiliated person”
or “promoter” or “principal underwriter” for, an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended, or a “holding company,” or a “subsidiary company” of a
“holding company,” or an “affiliate” of a “holding company” or of a “subsidiary company” of a
“holding company,” within the meaning of the Public Utility Holding Company Act of 1935, as
amended.




          (rr) Full and Accurate Disclosure. No statement of fact made by or on behalf of any
Loan Party by any Person in any Loan Document or in any financial statement, certificate, report,
exhibit or document furnished by such Loan Party to the Lender pursuant to or in connection with
this Agreement 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 known to
any Loan Party which has not been disclosed in writing to Lender which has resulted in or may
result in a Material Adverse Change. All reports, documents, instruments, information and forms of
evidence delivered to Lender concerning the Loan or security for the Loan or required by the Loan
Documents are accurate and correct in all material respects and sufficiently complete to give
Lender true and accurate knowledge of their subject matter, and do not contain any
misrepresentation or omission. There are no facts known (or which should upon the exercise of
reasonable diligence be known) to any Loan Party that, individually or in the aggregate, would have
any reasonable likelihood of resulting in or causing a Material Adverse Change which have not been
set forth in the financial statements delivered to Lender or otherwise disclosed in writing to the
Lender prior to the date hereof.




          (ss) Use of Loan Proceeds. Borrower has and shall use proceeds of the Loan solely for
purposes set forth in the signed settlement statement approved by Lender and the Annual Budget.

13









 









          (tt) Senior Loan.




               (i) There is no default or event of default under any of the Senior Loan Documents and no
event or circumstance has occurred which with the giving of notice or the passage of time, or both,
would constitute a default or event of default under the Senior Loan Documents.



               (ii) All of the representations and warranties of any Loan Party under the Senior Loan
Documents are true, complete and correct.



               (iii) There are no Senior Loan Agreements other than those set forth on Exhibit L attached
hereto. Borrower has delivered to Lender or has agreed to deliver to Lender true, complete and
correct copies of all Senior Loan Agreements, and none of the Senior Loan Agreements has been
amended or modified as of the date thereof. The summaries of the Senior Loan Agreements provided by
Hagen, Wilka & Archer, P.C. to Lender are complete and accurate and, other than as noted in the
summaries, no other document or agreement alters in any material respect any of the material terms
of the Senior Loan Agreements.



          (uu) Environmental. Except as set forth in the Environmental Reports, (A) the
Properties and each portion thereof is in full compliance with all applicable Environmental Laws,
(B) there have been no past and there are no pending or threatened
claims, complaints, notices or requests for information known to or received by any Loan Party
with respect to any violation or alleged violation of, or any liability or alleged liability under,
any Environmental Law in connection with or relating to the Properties or any portion thereof, (C)
there have been no releases of Hazardous Materials at, on or under any of the Properties or any
portion thereof; (D) there are no underground storage tanks, active or abandoned, owned or leased,
at any of the Properties; (E) there are no polychlorinated biphenyls or friable asbestos present at
any of the Properties and (F) no condition exists at, on or under any of the Properties or any
portion thereof, which with the passage of time or the giving of notice or both would give rise to
liability under any Environmental Law.




          (vv) Filing and Recording Taxes. All transfer taxes, recording taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes or recording taxes, charges or
fees or similar charges required to be paid by any Person under Applicable Law in connection with
the Loan have been paid. All mortgage, mortgage recording, stamp, intangible or other similar
taxes required to be paid by any Person under Applicable Law in connection with the execution,
delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents
have been paid.




          (ww) No Brokerage Fees. No Loan Party has agreed to pay any brokerage or other fee,
commission or compensation to any Person in connection with the Loan to be made hereunder except as
follows: Borrower is responsible to pay the brokerage fee to Riverside Management Group.

14









 









          (xx) Personal Holding Company. No Loan Party is a “personal holding company” as
defined in Section 542 of the Code.




          (yy) Franchise Agreement. Borrower has delivered to Lender true, correct, accurate
and complete copies of representative Franchise Agreements with respect to the Properties and no
verbal or written agreements exist which terminate, modify or supplement the Franchise Agreements.
The Franchise Agreements are in full force and effect and there is no default thereunder by any
party thereto and no Unmatured Default has occurred thereunder. Lender acknowledges that from time
to time, a franchisor will send a notice of default to a Loan Part based upon a condition of a
Property, but simultaneously grants an extended cure period to such Loan Party. Such types of
default notices shall not be considered a breach hereunder, provided, (i) such default is cured
within such extended cure period, and (ii) the Loan Party sends a copy of such notice to Lender on
the date that is one half of the number of days of such extended cure period after receipt of such
notice if the default has not been cured before such date.




     Section 3.2. Representations and Warranties to be Continuing. Borrower hereby
represents and warrants that, except as otherwise provided in this Section 3.2, all of the
representations and warranties in Section 3.1 are true and correct as of the Closing Date and will
continue to be true throughout the term of the Loan as if remade at all times
afterwards. All representations and warranties made in this Agreement or in any other
document delivered to Lender by or on behalf of any Loan Party shall survive the making of the Loan
and shall continue in full force and effect until the Obligations are fully satisfied. Borrower
shall inform Lender in writing within five (5) Business Days upon discovering any breach of such
representations or warranties, it being understood and acknowledged that any such discovery by any
Loan Party or any other Person having an Ownership Interest shall be deemed to be the discovery by
Borrower. Notwithstanding the foregoing, the representations and warranties in paragraphs (h),
(j), (l) and (ee) in Section 3.1 above shall be true as of the date of each Advance under the Loan
Agreement and shall be a condition precedent to each such Advance.



     Section 3.3. Acknowledgment of Lender’s Reliance. The Borrower acknowledges that
Lender will make the Loan in reliance upon the representations and warranties contained in the Loan
Documents or any certificate delivered to Lender pursuant to the Loan Documents. The Lender shall
be entitled to such reliance notwithstanding any investigation which has been or will be conducted
by Lender or on its behalf.



ARTICLE IV




CONDITIONS PRECEDENT




          Section 4.1. Conditions Precedent. The obligation of Lender to make the Initial
Advance is subject to the fulfillment by Borrower of the following conditions precedent (“Initial
Advance Conditions”) no later than sixty (60) days after the date of execution of this Agreement
(the “Initial Funding Date”), each in form and substance satisfactory

15









 








to Lender and Borrower
represents and warrants to Lender that Borrower has satisfied (except to the extent specifically
waived in writing by Lender) all of the following conditions precedent:




          (a) Senior Loan.




               (i) The Loan Parties shall not be in default with respect to any of the Senior Loans.



               (ii) The form and substance of the Senior Loan Agreements shall be satisfactory to Lender, and
Borrower shall have delivered to Lender true, complete, correct and fully executed copies of all
Senior Loan Agreements.



          (b) Loan Documents. Lender shall have received the Loan Documents, in each case, duly
executed, delivered and, where appropriate, acknowledged by the Persons (other than Lender) party
thereto.




          (c) Representations and Warranties. The representations and warranties of all of the
Loan Parties contained in the Loan Documents shall be true and correct in all material respects on
and as of the Initial Funding Date.




          (d) No Event of Default. No Event of Default shall have occurred and no Unmatured
Default shall have occurred and shall be continuing; and each Loan Party shall be in compliance in
all material respects with all terms and conditions set forth in each Loan Document on its part to
be observed or performed.




          (e) Equity Contribution. Lender shall have received an Officer’s Certificate and
other reasonably satisfactory evidence (including Borrower’s financial statements) that Borrower
has, and shall have at all times that any of the Obligations are outstanding, aggregate member’s
equity of not less than $100,000,000 in the SHP Subsidiaries and the Borrower Properties (the
“Member’s Equity”). No funds loaned to or borrowed by any Loan Party shall count towards the
Equity Contribution.




          (f) Material Adverse Effect. No event or series of events shall have occurred which
has had or is reasonably likely to have a Material Adverse Effect.




          (g) Litigation. No law or regulation shall have been adopted, no order, judgment or
decree of any Governmental Authority shall have been issued and no litigation shall be pending or
threatened in writing, which in Lender’s reasonable judgment could have a Material Adverse Effect.




          (h) Casualty. No Casualty has occurred or Condemnation proceeding has been initiated,
which in Lender’s sole and absolute discretion, could have a Material Adverse Effect.




          (i) Closing Expenses. Lender shall have received reimbursement for all of Lender’s
Closing Expenses (including Professional Fees).




16









 








          (j) Intentionally Omitted.




          (k) Required Deliveries. Lender shall have received, reviewed and approved each of
the items set forth on Exhibit O attached hereto, each of which shall be in form and content
acceptable to Lender.




          (l) Underwriting Assumptions. Lender shall be satisfied that all underwriting
assumptions upon which Lender based its approval of the Loan (the “Underwriting Assumptions”) are
satisfied.




          (m) Details, Proceedings and Documents. All legal details and proceedings in
connection with the transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory to the Lender and the Lender shall have received all such counterpart originals or
certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance satisfactory to the
Lender, as the Lender may from time to time request.




          (n) Additional Collateral. Any real property purchased using the Initial Advance
shall be purchased by SPE Owner. Notwithstanding the foregoing, the properties described on
Schedule 4 attached hereto may be purchased directly by Borrower provided that each such property
is transferred to an SPE Owner within 30 days of the date hereof. Borrower shall pledge its 49%
membership interest in SPE Owner to Lender as additional collateral for the Loan.




     Section 4.2. Conditions Precedent to the Second Advance.



     The obligation of Lender to make each advance under the Second Advance hereunder is subject to
the fulfillment by, or on behalf of, Borrower or waiver by Lender of the following conditions
precedent each time an advance under the Second Advance is requested by Borrower:



          (a) Notice to Lender. At any time, but no more often than monthly, Borrower may
notify Lender, in the form attached hereto on Exhibit Q, of its request for advances in an amount
no less than $5,000,000 (except for the final Second Advance draw which shall be equal to the
remaining undrawn amount if such is less than $5,000,000) under the Second Advance (each, a “Second
Advance Notice”), which Second Advance Notice must be received by Lender at least three Business
Days prior to the requested funding date.




          (b) Project Budget. Borrower shall provide to Lender a project budget which shows, in
reasonable detail, each line item of anticipated acquisition costs and development costs (the
“Project Budget”) for the acquired or constructed properties. Lender’s approval of the Project
Budget shall be in its reasonable discretion.

17









 









          (c) Prior Conditions Satisfied. All conditions precedent described in Section 4.1
above, to the Loan have been, and, shall continue to be satisfied as of the date of the Second
Advance Notice.




          (d) Representations and Warranties; Compliance with Conditions. The representations
and warranties of Borrower and the Loan Parties contained in this Agreement and the other Loan
Documents shall remain true and correct in all material respects on and as of the date of Second
Advance Notice with the same effect as if made on and as of such date, and no Event of Default or
Unmatured Default shall have occurred and be continuing; and Borrower, the SHP Subsidiaries and
Guarantor, respectively, shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on its part to be observed
or performed.




          (e) Loan Documents. The Loan Documents shall be in full force and effect. The
Security Instrument and Pledge Agreement shall constitute a valid Lien on the Collateral, free and
clear of all Liens except Permitted Exceptions.




          (f) Interest Coverage Ratio. The Properties shall have an Interest Coverage Ratio
that satisfies Section 5.42 hereof as of the date of the Second Advance Notice.




          (g) Loan to Value Test. The Properties shall satisfy the Loan to Value Test as of the
date of the Second Advance Notice. For purposes of this subparagraph, the Loan to Value Test shall
include any property to be purchased using the Second Advance and any senior debt to be placed on
such property.




          (h) Intentionally Omitted.




          (i) Intentionally Omitted.




          (j) Payments. All costs and expenses incurred by Lender in connection with the Second
Advance shall be borne by Borrower, including, without limitation, reasonable attorney’s fees.




          (k) Additional Collateral. Any real property purchased using the Second Advance shall
be purchased by SPE Owner. Notwithstanding the foregoing, the properties described on Schedule 4
attached hereto may be purchased directly by Borrower provided that each such property is
transferred to an SPE Owner within 30 days of the date hereof. Borrower shall pledge its 49%
membership interest in SPE Owner to Lender as additional collateral for the Loan.




          (l) Other Documents. Borrower shall have delivered to Lender all items set forth on
Exhibit P and such other documents, opinions and certificates as Lender or its counsel may
reasonably request.

18









 









     Section 4.3. Conditions Precedent to the Third Advance.



     The obligation of Lender to make each advance under the Third Advance hereunder is subject to
the fulfillment by, or on behalf of, Borrower or waiver by Lender of the following conditions
precedent each time an advance under the Third Advance is requested by Borrower:



          (a) Notice to Lender. At any time following the full advancement of the Second
Advance to Borrower, but no more often than monthly, Borrower may notify Lender, in the form
attached hereto on Exhibit Q, of its request for advances in an amount no less than $5,000,000
(except for the final Third Advance draw which shall be equal to the remaining undrawn amount if
such is less than $5,000,000) under the Third Advance (the “Third Advance Notice”), which Third Advance Notice must be received by Lender at least
three Business Days prior to the requested funding date.




          (b) Project Budget. Borrower shall provide to Lender the Project Budget. Lender’s
approval of the Project Budget shall be in its reasonable discretion.




          (c) Prior Conditions Satisfied. All conditions precedent to the Loan described in
Section 4.1 above have been, and, shall continue to be satisfied as of the date of the Third
Advance Notice.




          (d) Representations and Warranties; Compliance with Conditions. The representations
and warranties of Borrower and the Loan Parties contained in this Agreement and the other Loan
Documents shall remain true and correct in all material respects on and as of the date of Third
Advance Notice with the same effect as if made on and as of such date, and no Event of Default or
Unmatured Default shall have occurred and be continuing; and Borrower, the SHP Subsidiaries and
Guarantor, respectively, shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on its part to be observed
or performed.




          (e) Loan Documents. The Loan Documents shall be in full force and effect. The
Security Instrument and Pledge Agreement shall constitute a valid Lien on the Collateral, free and
clear of all Liens except Permitted Exceptions.




          (f) Interest Coverage Ratio. The Properties shall have an Interest Coverage Ratio
that satisfies Section 5.42 hereof as of the date of the Third Advance Notice.




          (g) Loan to Value Test. The Properties shall satisfy the Loan to Value Test as of the
date of the Third Advance Notice. For purposes of this subparagraph, the Loan to Value Test shall
include any property to be purchased using the Third Advance and any senior debt to be placed on
such property.




          (h) Intentionally Omitted




19






 





          (i) Intentionally Omitted.




          (j) Payments. All costs and expenses incurred by Lender in connection with the Third
Advance shall be borne by Borrower, including, without limitation, reasonable attorney’s fees.




          (k) Additional Collateral. Any real property purchased using the Third Advance shall
be purchased by SPE Owner. Notwithstanding the foregoing, the properties described on Schedule 4
attached hereto may be purchased directly by Borrower provided that each such property is
transferred to an SPE Owner within 30 days
of the date hereof. Borrower shall pledge its 49% membership interest in SPE Owner to Lender
as additional collateral for the Loan.




          (l) Other Documents. Borrower shall have delivered to Lender all items set forth on
Exhibit P and such other documents, opinions and certificates as Lender or its counsel may
reasonably request.




     Section 4.4. Draws Generally; Certain Restrictions.



          (a) Notwithstanding the foregoing in this Article IV, Borrower may request funds to be drawn
from the Initial Advance, the Second Advance or the Third Advance, and Lender, subject to all other
conditions and restrictions provided herein, agrees to advance, up to $10,000,000 in the aggregate
for the acquisition of individual Properties reasonably assumed to be valued under $3,000,000 per
individual hotel development parcel, prior to Lender’s receipt of an Appraisal (or if approved by
Lender in its reasonable discretion, a feasibility study or broker’s opinion) for such Properties.
At no time shall an aggregate amount greater than $10,000,000 relating to Properties without
Appraisals (or if approved by Lender in its reasonable discretion, a feasibility study or broker’s
opinion) be outstanding. Upon receipt of an Appraisal, feasibility study or broker’s opinion of
value, in any case acceptable to Lender and otherwise in accordance with this Agreement, for each
such Property, such unappraised outstanding amount shall be reduced by the draw amount relating to
such Property.




          (b) Subject to satisfaction of all Conditions Precedent described in this Article IV, Borrower
may request that Lender fund draws 24 hours prior to the expected closing of any given Property
acquisition transaction. Interest shall begin to accrue on such amounts when so drawn in
accordance this Agreement and the Note. In the event that the subject transaction is not
consummated, Borrower may return the funds to Lender no later than 5 business days after such draw,
together with a fee equal to 2% of such returned amount. Such returned amounts, if timely received
by Lender together with the above described fee, will not be subject to the Minimum Interest Amount
under the Note.





20









 




ARTICLE V




BORROWER’S COVENANTS





     Section 5.1. Obligations. Borrower shall (i) pay and perform the Obligations, and any
and all other obligations, at the time and in the manner provided in this Agreement, the other Loan
Documents and the Senior Loan Documents and (ii) cause the SHP Subsidiaries or other applicable
Person to pay and perform all obligations under this Agreement, the other Loan Documents, and the
Senior Loan Documents.



     Section 5.2. Inspection; Access to Books and Records. Borrower will, and will cause
the SHP Subsidiaries to, at all reasonable times upon prior notice permit Lender
and Lender’s consultants and agents, including the Servicer, to inspect the Properties and all
matters relating to the development, construction and operation of the Properties during normal
business hours. Borrower will, and will cause the SHP Subsidiaries and each of their respective
agents and contractors to, cooperate to give Lender and its consultants and agents full access to
the Properties at all times. Lender will endeavor to minimize interference by its consultants with
the activities of such Loan Party or contractors at the Properties in connection with any such
inspection. All inspections by Lender and its consultants shall be for the sole benefit of Lender
for its loan administration purposes only. Neither Lender nor any of its consultants assumes or
shall have any responsibility, obligation or liability to any Loan Party or any other Person by
reason of Lender’s or its consultant’s inspections except to the extent of Lender’s gross
negligence, recklessness or willful misconduct. Neither any Loan Party nor any other Person may
rely on Lender’s inspections for any purpose (including stage of completion, adequacy or
workmanship, compliance with Applicable Law, or other matters related to design, construction and
operation). Lender’s inspection of an item shall not result in any waiver of Lender’s rights in
the event such item does not conform with this Agreement. Notwithstanding anything herein to the
contrary, Borrower shall only be responsible for payment for one inspection per Property per year
unless an Event of Default has occurred and is continuing.



     Section 5.3. Material Agreements.



          (a) Except as permitted under the Senior Loan Documents, Borrower shall not, and shall not
permit the SHP Subsidiaries to, enter into any Material Agreement without the consent of Lender not
to be unreasonably withheld or delayed. Lender may condition its consent upon Borrower or the SHP
Subsidiaries also obtaining the consent of the Senior Lender.




          (b) Except as specifically set forth herein, Borrower will not, and will not permit or cause
the SHP Subsidiaries to, amend, modify, supplement, rescind or terminate any Material Agreement,
without Lender’s approval, including the identity of the party to perform services under such
agreement. Subject to the rights of Senior Lender, if a material or service provider under a
Material Agreement is in default in its obligations thereunder to the extent entitling Borrower or
any of the SHP Subsidiaries to rescind or terminate that agreement, then if Lender so requires (but
not otherwise), Borrower will, or will cause the SHP Subsidiary to, promptly use all reasonable
efforts to terminate that agreement and appoint a new party in its place, with such identity and
terms of appointment approved by Lender.


21









 








          (c) Borrower shall and shall cause each Loan Party, as applicable, to observe and perform each
and every term to be observed or performed by such Loan Party under the Material Agreements the
non-performance of which would cause a Material Adverse Effect.




     Section 5.4. Leases.



          (a) Consent. Except as specifically permitted by the Senior Loan Documents, Borrower
shall not, and shall not permit any SHP Subsidiary, to enter into any Lease of any of the
Properties or any portion thereof without Lender’s prior written consent. Except as specifically
permitted by the Senior Loan Documents, Borrower shall not, and shall not permit any SHP Subsidiary
to modify or amend in any material respect any Lease, including any Lease Guaranty, without the
consent of Lender. Without Lender’s prior written consent, Borrower shall not, and shall not
permit any SHP Subsidiary to, cancel, terminate or accept the surrender of any Lease, except as
permitted by the Senior Loan Documents.




          (b) Performance. Borrower shall or shall cause the SHP Subsidiaries to (i) observe
and perform all the obligations imposed upon the lessor under the Leases; (ii) promptly send copies
to Lender of all notices of default which Borrower or the SHP Subsidiaries or their respective
agents or representatives shall send or receive under any Lease; (iii) enforce all of the terms,
covenants and conditions contained in the Leases upon the part of the lessee thereunder to be
observed or performed; provided, however, Borrower shall not, and shall not permit the SHP
Subsidiaries to, terminate any Lease without the prior written consent of Lender, except as
permitted by the Senior Loan Documents; and (iv) not execute any other assignment of the lessor’s
interest in any of the Leases or the rents, except under the Senior Loan Documents. Subject to
Senior Lender’s rights, Lender shall have the right, at the Borrower’s expense, but shall not be
obligated, to cure any default by the Borrower or the SHP Subsidiaries under any of the Leases
which would entitle the Tenant thereunder to terminate its Lease or offset rent and which the
Borrower or the SHP Subsidiaries are not proceeding diligently to cure, and this provision shall be
deemed to be a written authorization and each tenant shall be entitled to rely thereon. Such
curing by Lender of a default by the Borrower and the SHP Subsidiaries under any of the leases
shall not release the applicable Loan Party in any way from liability to Lender for the failure to
discharge the duty to so cure that default. Any and all sums expended by Lender with respect to
any such cure, together with interest thereon at the Default Rate from the date paid by Lender
until repaid by Borrower, shall immediately be due and payable to Lender by Borrower on demand and
shall be secured by the Loan Documents. Lender, Servicer and any Person designated by Lender or
Servicer are hereby authorized by Borrower to directly communicate with the Approved Manager at any
time and from time to time regarding such matters as Lender deems appropriate, and Borrower on
behalf of SHP hereby acknowledges and agrees that each Loan Party shall have no claim or cause of
action against Lender arising out of such communications.




22









 




     Section 5.5. Approved Management Agreement.




          (a) Management Agreements. Unless otherwise consented to by Lender, all of the
Properties shall at all times during the term of the Loan be managed and
operated by Approved Manager(s) pursuant to management agreements (“Management Agreements”) in
form and content reasonably acceptable to Lender. Borrower shall not, and shall not cause or
permit the SHP Subsidiaries to, enter into any other Management Agreement or terminate or replace
an Approved Manager or amend or modify the existing Management Agreement, without Lender’s prior
written consent.




          (b) Intentionally Omitted.




          (c) Lender Termination Request. Subject to the rights of the Senior Lender and
provided the following does not create an event of default under the Senior Loan Agreements, upon
the occurrence and during the continuance of an Event of Default, if requested by Lender in writing
(a “Lender Termination Request”), Borrower shall, or shall cause the SHP Subsidiaries to, issue
within five (5) Business Days after delivery of the Lender Termination Request, a notice of
termination to terminate any Management Agreement (a “Manager Termination Notice”).
Notwithstanding the foregoing, if an Approved Manager is an Affiliate of any Loan Party, Lender’s
delivery to Borrower of a Lender Termination Request shall automatically terminate the Management
Agreement with any such Affiliate effective as of the date specified in the Lender Termination
Request. If Borrower fails to issue or cause the SHP Subsidiary to issue the Manager Termination
Notice within said five (5) Business Day period, the same shall constitute an Event of Default, and
Lender shall have the right, and Borrower and the SHP Subsidiary hereby irrevocably authorizes
Lender and irrevocably appoints Lender as Borrower’s and the SHP Subsidiary’s attorney-in-fact
coupled with an interest, at Lender’s sole option, to issue a Manager Termination Notice on behalf
of and in the name of Borrower or the SHP Subsidiary, and each Loan Party hereby releases and
waives any claims against Lender arising out of Lender’s exercise of such authority.




          (d) Replacement Approved Manager. Subject to the rights of the Senior Lender and
provided the following does not create an event of default under the Senior Loan Agreements, if
Lender delivers the Lender Termination Request, upon Lender’s further request, Borrower shall, or
shall cause the SHP Subsidiary to appoint a replacement Approved Manager pursuant to a new
Management Agreement as soon as practicable, but in no event, more than forty-five (45) days after
delivery of such Lender Termination Request, and shall cause such replacement Approved Manager to
execute and deliver to Lender a subordination of management agreement substantially similar to the
Manager’s Subordination and otherwise reasonably satisfactory to Lender.




     Section 5.6. Insurance.



          (a) Policies. Borrower, at its sole cost and expense, shall insure and keep insured,
and shall cause the SHP Subsidiaries, at their sole cost and expense to insure and keep insured the
Properties against such perils and hazards, and in such amounts and with such limits, and pursuant
to such Policies issued by such insurers, as


23









 








Lender may from time to time require (collectively, “Policies”), and, in any event, including:




               (i) All Risk. Insurance against loss to the Properties which shall be on an “All
Risk” Policy form, in each case covering insurance risks no less broad than those covered under a
Standard Multi Peril (SMP) Policy form, which contains a Commercial ISO “Causes of Loss – Special
Form”, including theft, and insurance against such other risks as Lender may reasonably require,
including, but not limited to, insurance covering the cost of demolition of undamaged portions of
any portion of the Properties when required by code or ordinance, the increased cost of
reconstruction to conform with current code or ordinance requirements and the cost of debris
removal. In addition, during any period of construction with respect to the Properties such
Policies shall cover the following: real estate property taxes; architect, engineering, and
consulting fees; legal and accounting fees (including the cost of in-house attorneys and
paralegals); advertising and promotion expenses; interest on money borrowed; additional commissions
incurred upon renegotiating leases and any and all other expenses which may be incurred as a result
of any property loss or destruction by an insured. Such Policies shall be in amounts equal to the
full replacement cost of the Properties, including all fixtures, equipment, construction materials
and personal property on and off-site. Such Policies shall also contain a 100% co-insurance clause
with an agreed amount endorsement (with such amount to include the replacement cost of the
foundation and any underground pipes), a permission to occupy endorsement and deductibles which are
in amounts acceptable to Lender.



               (ii) Intentionally Omitted.



               (iii) Business Interruption. Business interruption insurance insuring against loss
arising out of the perils insured against in the policy or policies referred to in clause (i)
above, in an amount equal to not less than gross revenue from the affected Property(ies) for twelve
(12) months from the operation and rental of all hotels now or hereafter forming part of the
Property(ies), based upon one hundred percent (100%) of the occupancy determined from historical
operating performance of such hotels, less any allocable charges and expenses which do not continue
during the period of restoration.



               (iv) Boiler and Machinery. Broad form boiler and machinery insurance including
business interruption/extra expense and rent and rental value insurance, on all equipment and
objects customarily covered by such insurance and/or involved in the heating, cooling, electrical
and mechanical systems of the Properties (if any are located at the Properties), providing for full
repair and replacement cost coverage, and other insurance of the types and in amounts as Lender may
require, but in no event less than that customarily carried by Persons owning or operating like
properties.



               (v) Workers’ Compensation. During any construction to (or making of any alterations
or improvements to) the Properties (i) insurance covering claims based on the owner’s or employer’s
contingent liability not covered by the



24









 




insurance provided in subsection (ix) below and (ii)
workers’ compensation insurance covering all Persons engaged in such alterations or improvements.




               (vi) Flood. Insurance against loss or damage by flood or mud slide in compliance with
the Flood Disaster Protection Act of 1973, as amended from time to time, if any of the Properties
is now, or at any time while the Loan remains outstanding shall be, situated in any area which an
appropriate governmental authority designates as a special flood hazard area, Zone A or Zone V, in
amounts equal to the full replacement value of all above grade structures on the Properties.



               (vii) Earthquake. Insurance against loss or damage by earthquake, if any of the
Properties is now, or at any time while the Loan remains outstanding shall be, situated in any area
which is classified as a Major Damage Zone, Zones 3 and 4, by the International Conference of
Building Officials in an amount equal to the probable maximum loss for such Properties, fixtures
and equipment, plus the cost of debris removal.



               (viii) Public Liability. Comprehensive liability insurance against death, bodily
injury and property damage arising in connection with the Properties. Such Policy shall be written
on a Standard ISO occurrence basis form or equivalent form, shall list Borrower or the SHP
Subsidiary as the named insured, shall designate thereon the location of the Properties and have
such limits as Lender may reasonably require, but in no event less than $1,000,000 per occurrence.
Borrower shall also obtain, and shall cause the SHP Subsidiaries to obtain, excess umbrella
liability insurance with a minimum of a $50,000,000 limit.



               (ix) Other Insurance. Such other insurance and in such amounts as Lender from time to
time may reasonably request against such other insurable hazards which at the time are commonly
insured against for property similar to the Properties located in or around the region in which the
Properties are located.



          (b) Policy Requirements.




               (i) All insurance shall: (i) be carried with companies with a Best’s rating of A/X or better,
or otherwise acceptable to Lender; (ii) be in form and content acceptable to Lender; (iii) provide
for thirty (30) days’ advance written notice to Lender before any cancellation, adverse material
modification or notice of non-renewal; and (iv) to the extent not otherwise specified herein,
contain deductibles and limits which are in amounts acceptable to Lender.



               (ii) All physical damage Policies and renewals (including those required to be maintained
under the Leases and subcontracts for the benefit of Borrower and the SHP Subsidiaries) shall
contain (i) a standard mortgage clause naming Senior Lender, as mortgagee, which clause shall
expressly state that any breach of any condition or warranty by any Loan Party or any other party
shall not prejudice the rights of Senior Lender under such insurance and shall further waive any
rights of subrogation against



25









 




Senior Lender, and (ii) a loss payable clause in favor of Senior
Lender for personal property, contents, inventory, equipment, loss of rents and business
interruption. All Policies and renewals (including those required to be maintained under the
Leases and subcontracts for the benefit of Borrower and the SHP Subsidiaries) shall name Lender as
an additional insured. All Policies shall have “pollution exclusions” deleted by endorsement. No
additional parties (other than Senior Lender) shall appear in the mortgagee or loss payable clause
without Lender’s prior written consent.




          (c) Delivery of Policies. Any notice pertaining to insurance and required pursuant to
this Section 5.6 shall be given in the manner provided in Section 11.9. The insurance shall be
evidenced by a true and certified copy of the original Policy; provided; however, that Borrower may
provide original certificates of insurance on the Closing Date so long as the original Policies are
provided within thirty (30) days thereafter. Borrower shall, and shall cause the SHP Subsidiaries
to, use its best efforts to deliver originals or certified copies of all Policies and renewals
marked “paid”, (or evidence satisfactory to Lender of the continuing coverage) to Lender at least
fifteen (15) days before the expiration of existing Policies and, in any event, Borrower shall, or
shall cause the SHP Subsidiaries to, deliver originals or certified copies of such Policies to
Lender at least five (5) days before the expiration of existing Policies. If Lender has not
received satisfactory evidence of such renewal or substitute insurance (i.e., certified copies of
the Policies marked “premium paid” or accompanied by evidence satisfactory to Lender of payment of
the premiums due thereunder) in the time frame herein specified (regardless of whether not Borrower
or the SHP Subsidiaries have informed Lender verbally or in writing that such renewal or substitute
insurance has been obtained), upon written notice to Borrower or the SHP Subsidiaries, Lender shall
have the right, but not the obligation, to purchase such insurance required under this Agreement.
Any amounts so disbursed by Lender pursuant to this Section shall be deemed Protective Advances.
Nothing contained in this Section shall require Lender to incur any expense or take any action
hereunder, and inaction by Lender shall never be considered a waiver of any right accruing to
Lender on account of this Section.




          (d) Separate Insurance. Borrower shall not carry (and shall not allow any other Loan
Party to carry) any separate insurance on the Properties concurrent in kind or form with any
insurance required hereunder or contributing in the event of loss without Lender’s prior written
consent, and any such Policy shall have attached standard non-contributing mortgagee clause, with
loss payable to Lender (subject to rights of Senior Lender), and shall otherwise meet all other
requirements set forth herein.




          (e) Insurance Review. At Lender’s option, Lender may (i) require Borrower to certify
to Lender on a quarterly basis that insurance required by this Section 5.6 is in place and (ii) not
more often than annually, Lender may obtain, at Borrower’s expense, a report from Lender’s
Insurance Consultant, certifying that insurance required by this Section 5.6 is in place.




          (f) Senior Loan. Notwithstanding anything set forth to the contrary in this Section
5.6, Borrower shall, and shall cause the SHP Subsidiaries to, maintain the

26









 








insurance required by the Senior Loan Documents. Nothing herein shall require insurance with higher limits, with lower
deductibles, with additional riders, or with more stringent terms and conditions that are required
by the most stringent of the Senior Loan Documents.




     Section 5.7. Casualty; Condemnation and Application of Proceeds.



          (a) Casualty.




               (i) If the Properties shall be damaged or destroyed, in whole or in part, with the cost of
repairing or restoring the damage to any effected Properties estimated to be $100,000 in the
aggregate or more (but such $100,000 limit shall apply on a per-Property basis), by fire or other
casualty (a “Casualty”), Borrower shall give prompt written notice of such damage to Lender. If
required by the Senior Loan Documents or if there is no Senior Loan on the applicable Property,
Borrower shall promptly commence and diligently prosecute, or shall cause the SHP Subsidiaries to
promptly commence and diligently prosecute, the completion of the repair, replacement, rebuilding
and restoration of the Property as nearly as possible to the condition the Property was in
immediately prior to such fire or other casualty (the “Restoration”) if such Restoration is
reasonable practicable, and otherwise in accordance with the Senior Loan Documents. Borrower shall
pay or shall cause the SHP Subsidiaries to pay all costs of such Restoration whether or not such
costs are covered by insurance or whether Borrower or the SHP Subsidiaries are entitled to use the
proceeds of such insurance for the Restoration pursuant to the Loan Documents or the Senior Loan
Documents.



               (ii) Intentionally Omitted.



               (iii) Upon the occurrence of a Casualty causing damage greater than $100,000, if the Senior
Lender does not have the right to participate in the settlement, adjustment or compromise any claim
under any Policy of insurance, or in the event the Senior Lender has such right but shall waive or
otherwise fail to exercise such right, then it shall be an Event of Default hereunder if any such
claim is settled or compromised on terms that are not approved by Lender in writing such approval
not to be unreasonably withheld or delayed.



               (iv) Intentionally Omitted.



               (v) The reasonable expenses incurred by Lender in the adjustment and collection of insurance
proceeds shall be deemed Loan Expenses.



          (b) Condemnation.




               (i) Borrower shall promptly give Lender written notice of the actual or threatened
commencement of any condemnation or eminent domain proceeding with respect to any of the Properties
and shall deliver to Lender copies of any and all papers served or received by any Loan Party in
connection with such actual or threatened proceedings. Unless prohibited by the Senior Loan
Documents, Lender may participate (as determined by Lender) in any such actual or threatened



27









 







proceedings at Borrower’s sole cost and expense, and Borrower shall from time to time deliver to
Lender, or cause the SHP Subsidiary to deliver to Lender, all instruments requested by it to permit
such participation. Borrower shall, or shall cause the SHP Subsidiary to, at Borrower’s or SHP’
Subsidiary’s expense, diligently prosecute any such proceedings, and shall consult with Lender, its
attorneys and experts, and cooperate with them in the carrying on or defense of any such
proceedings.



               (ii) Notwithstanding any taking by any public or quasi-public authority through eminent domain
or otherwise (including any transfer made in lieu of or in anticipation of the exercise of such
taking, a “Condemnation”), Borrower shall continue to pay the Debt at the time and in the manner
provided for its payment under the Loan Documents and the Debt shall not be reduced unless and
until any award or payment therefore shall have been actually received and applied by Lender, after
the deduction of reasonable expenses of collection, to the Debt.



               (iii) If substantially all of any of the Properties or any portion thereof are taken by a
condemning authority, and if required or permitted by the Senior Lender, Borrower shall, and shall
cause the SHP Subsidiaries to, promptly commence and diligently prosecute the Restoration of the
Property, to the extent reasonably practical, and otherwise comply with the provisions of this
Section 5.7.



               (iv) The reasonable expenses incurred by Lender in the negotiation, prosecution, evaluation
and settlement (including Professional Fees) of any condemnation award shall be deemed Loan
Expenses, shall be secured by the Loan Documents and shall be due and payable by Borrower to Lender
on demand.



          (c) Application.




               (i) Notwithstanding anything to the contrary herein, upon the occurrence of a Casualty or
Condemnation, if Senior Lender elects to apply insurance proceeds or condemnation award (in either
case, the “Loss Proceeds”) to the Senior Loan, then the balance of any Loss Proceeds not so applied
to the Senior Loan shall be applied to the Loan. In the event Senior Lender makes, or is otherwise
required to make,
the Loss Proceeds available to Borrower or to a SHP Subsidiary for Restoration, then the Loss
Proceeds shall be so applied as provided in the Senior Loan Documents and any excess Loss Proceeds
remaining after completion of Restoration and released to Borrower or a SHP Subsidiary shall be
paid to Senior Lender, or if not paid to Senior Lender, then to Lender to be applied to the Debt or
for such other purposes approved by Lender and Borrower.



               (ii) If at any time a Casualty in excess of $100,000.00 or a Condemnation occurs after the
Senior Loan has been paid in full, the Loss Proceeds shall, at the option of Lender, subject to the
following sentence, be applied to the payment of the Debt or applied to reimburse Borrower or the
SHP Subsidiary, as the case may be, for



28









 







the cost of Restoration in the manner set forth below. In
the event of a Casualty in the amount of $100,000.00 or less after the Senior Loan has been paid in
full, the Loss Proceeds shall be applied by Borrower to the Restoration of the Property. In no
case shall any such application reduce or postpone any payments otherwise required under the Loan
Documents. Only if the Senior Loan is paid in full and an Event of Default has occurred and is
continuing, Lender shall make such Loss Proceeds available to the Borrower or the SHP Subsidiary
for Restoration provided that each of the following conditions (“Restoration Conditions”) is
satisfied or waived in writing: (A) no Event of Default has occurred and is continuing, (B) (x)
Lender is satisfied that such repair or restoration can be completed not less than 90 days prior to
the Scheduled Maturity Date, or if the Loan has been extended, 90 days prior to the Extended
Maturity Date or Second Extended Maturity Date, as applicable and (y) Guarantor provides Lender
with a completion guaranty covering such repair or restoration on terms and conditions acceptable
to Lender and (C) Borrower complies with all of the other conditions to disbursement of such Loss
Proceeds set forth in Section 5.7(c)(iii) below. If such Casualty or Condemnation occurs while
Senior Loan is outstanding, then the Senior Lender shall control the application of proceeds and
determinations of whether to commence restoration, to the extent permitted by the Senior Loan
Documents.



               (iii) In the event that Lender, as set forth above, elects to make the Loss Proceeds available
to Borrower or a SHP Subsidiary for Restoration, Lender may set reasonable conditions for making
said funds available to Borrower and the SHP Subsidiary, including requiring that if the Loss
Proceeds are not sufficient, in Lender’s sole judgment to complete such Restoration and pay for
additional property carry costs, that Borrower or the SHP Subsidiary shall deposit an amount equal
to such shortfall with Lender and that such amounts be expended on Restoration prior to Borrower or
the SHP Subsidiary being permitted to use such Loss Proceeds.



               (iv) If the Loss Proceeds are to be disbursed by Senior Lender for Restoration, Borrower and
the SHP Subsidiary shall deliver to Lender copies of all written correspondence delivered to and
received from Senior Lender that relates to the Restoration and release of the Loss Proceeds.



          (d) Intentionally Omitted




     Section 5.8. Title to Collateral. Subject to the Permitted Exceptions, Borrower shall
(i) warrant and defend (A) the title to the Collateral and every part thereof, and (B) the validity
and priority of the Liens and security interests created by the Loan Documents against the claims
of all Persons whatsoever and (ii) warrant and defend, and cause the SHP Subsidiaries to warrant
and defend, the title of the SHP Subsidiaries to the SHP Subsidiary Properties and every part
thereof. Borrower shall reimburse Lender for any Losses (including Professional Fees) incurred by
Lender if an interest in the Properties or the Collateral is claimed by another Person (other than
for Permitted Exceptions), and such Losses and any other amounts expended by Lender with respect to
such Losses shall be deemed Protective Advances. All proceeds payable under the Owner’s Title
Insurance Policy for the SHP Subsidiary Properties, subject to the rights of



29









 







Senior Lender, if any,
under its mortgage title insurance Policy, shall be deemed to constitute a distribution from the
SHP Subsidiaries to Borrower and subject to the provisions of the Pledge Agreements.



     Section 5.9. Zoning. Borrower shall not, nor shall it permit the SHP Subsidiaries to,
initiate, join in, acquiesce in, or consent to any change in any public or private restrictive
covenant, easement, zoning law or any other public or private restriction, limiting, conditioning,
changing, qualifying or defining the uses which may be made of any of the Properties or any part
thereof without the prior written consent of Lender. If under applicable zoning provisions the use
of all or any portion of any of the Properties is or shall become a nonconforming use, Borrower
will not cause or permit and shall cause the SHP Subsidiaries to not cause or permit the
nonconforming use to be discontinued or abandoned without the express written consent of Lender.
Without limiting the generality of the foregoing, Borrower covenants that it will cause each of the
Properties to be completed, maintained and operated in compliance in all material respects with all
requirements of the Zoning Ordinance and Applicable Law, including: setback, building height, FAR
and other bulk requirements; unit mix and marketing requirements with respect thereto, if
applicable; and parking and loading dock requirements, if applicable.



     Section 5.10. Recorded Documents. If such change shall cause a Material Adverse
Effect, without the prior written consent of the Lender, which consent shall not be unreasonably
withheld or denied, Borrower shall not, and shall not permit or cause the SHP Subsidiaries or any
other Person to, record any map, plat, parcel map, lot line adjustment or other subdivision map,
easement, reciprocal easement agreement, declaration or any other recorded document of any kind
covering any portion of the Properties, or any amendment to any of the foregoing (collectively,
“Subdivision Map”), Borrower shall, or shall cause the SHP Subsidiaries to, submit such Subdivision
Map and any and all amendments thereto to Lender for Lender’s review and approval. Any default,
breach or violation of this Section 5.10 shall be an automatic Event of Default (without any
notice, grace or cure period.). As a condition precedent to approval by
Lender, if required by Lender, (i) Borrower shall execute, acknowledge and deliver to Lender
such amendments to the Loan Documents as Lender may reasonably require to reflect the change in the
legal description of any of the Properties resulting from the recordation of any Subdivision Map,
and (ii) Borrower shall deliver to Lender, at Borrower’s sole expense, a title endorsement to the
Owner’s Title Insurance Policy in form and substance satisfactory to Lender. Subject to the
execution and delivery by Borrower of any documents required under this Section 5.10, Lender shall,
if required by applicable law, sign any Subdivision Map approved by Lender pursuant to this Section
5.10, within a reasonable period after written request by Borrower.



     Section 5.11. Maintenance of Properties. Borrower shall, or shall cause the SHP
Subsidiaries to, maintain the Properties in a good and safe condition and repair. The
Improvements, materials, equipment, furniture, fixtures and other articles of personal property
located therein and thereon not owned by lessees under Leases (the “Personal Property”) shall not
be removed, demolished or materially altered (except for normal



30









 







replacement of the Personal
Property and compliance with franchise requirements or as otherwise permitted herein) without the
prior written consent of Lender, which shall not be unreasonably withheld or delayed. Borrower
shall not, nor shall it permit the SHP Subsidiaries to, initiate, join in, acquiesce in, or consent
to any change in any private restrictive covenant, zoning law or other public or private
restriction, limiting or defining the uses which may be made of the Properties or any part thereof
without the prior written consent of Lender, which shall not be unreasonably withheld or delayed.



     Notwithstanding the above, Borrower or SHP Subsidiaries shall be entitled to repair and
remodel any Property if: (a) such repairs or remodeling do not involve structural repairs or
changes as to the Improvements; and (b) if such repairs or remodeling do not exceed Two Hundred
Fifty Thousand and No/100 Dollars ($250,000.00) in any given year or Five Hundred Thousand and
No/100 Dollars ($500,000.00) over the term of the Note; and (c) such repair or remodeling shall not
reduce the number of hotel guest rooms at the respective Property. In all events, if the
remodeling or repairs may be reasonably determined to materially decrease the revenues or
profitability of Borrower or SHP Subsidiary as respects the operations at the respective Property,
prior written consent of the Lender must be obtained.



          Section 5.12. Taxes and Liens.




               (a) Taxes and Other Charges. Borrower shall promptly pay or cause the SHP
Subsidiaries to pay all taxes, assessments, governmental licenses and impositions, and other
similar charges (the “Taxes”), all ground rents, maintenance charges, charges for utility services
and similar charges (the “Other Charges”), in each case now or hereafter levied or assessed or
imposed against any of the Properties or any part thereof as same become due and payable. Borrower
will, or will cause the SHP Subsidiaries to, deliver to Lender, promptly upon Lender’s request,
evidence satisfactory to Lender that the Taxes and Other Charges have been so paid or are not then
delinquent.
At Lender’s request, Borrower shall, or shall cause the SHP Subsidiaries to, furnish to Lender
paid receipts for the payment of the Taxes and Other Charges prior to the date the same shall
become delinquent. Subject to the Senior Loan, Borrower or the SHP Subsidiaries, at their own
expense, may contest by appropriate legal proceedings, promptly initiated and conducted in good
faith and with due diligence, the amount or validity or application in whole or in part of any of
the Taxes, Other Charges or any Lien (other than the Lien of the Loan Documents or Senior Loan
Documents) provided that, and only for so long as (1) no Event of Default has occurred and is
continuing; (2) neither any of the Properties nor any part thereof or interest therein will in the
opinion of Lender be in danger of being sold, forfeited, terminated, cancelled or lost; (3) in the
case of Taxes, Borrower or the SHP Subsidiaries have paid the same before such amounts become
delinquent even though Borrower is contesting the same; (4) such contest shall be permitted under
and be conducted in accordance with Applicable Law and in accordance with the provisions of any
other instrument or agreement affecting any of the Properties to which Borrower or the SHP
Subsidiaries is subject (including the Senior Loan Documents) and shall not constitute a default
thereunder; (5) Borrower or the SHP Subsidiaries promptly pays any contested amount if and to the
extent the outcome of such



31









 







contest requires the payment of the same; (6) unless Borrower or the SHP
Subsidiaries shall have paid the same under protest or Senior Lender shall have undertaken any of
the following if permitted by the Senior Loan Documents; at Lender’s option Borrower or the SHP
Subsidiaries shall have either (i) deposited with Lender adequate cash reserves for the payment
thereof, together with all interest and penalties which may accrue thereon, or (ii) furnished to
Lender such other security Lender may deem adequate to insure the payment of such contested amounts
together with all interest and penalties which may accrue thereon; provided, however, Lender agrees
that Borrower or the SHP Subsidiaries may satisfy the requirements of this clause (6) by obtaining
in favor of Lender an indemnity (in form and content reasonably acceptable to Lender) from a title
insurance company or other surety acceptable to Lender in respect of any Lien being contested by
the Borrower so long as at no time shall the aggregate amount of all then outstanding Liens for
which an indemnity has been obtained exceed the sum of $50,000. In addition, if the contested
Taxes or Other Charges are not paid in full when such Loan Party commences such contest, then such
proceeding must suspend the collection of Taxes and Other Charges. In addition, Borrower shall pay
to Lender upon demand, any reasonable costs incurred by Lender in ensuring compliance by such Loan
Party with this Section 5.12 including reasonable attorney’s fees, monitoring and evaluating
expenses and any tax service fees.



          (b) Liens. Borrower shall not allow nor permit the SHP Subsidiaries to allow and
shall promptly cause to be paid and discharged any Lien or charge whatsoever other than the Senior
Loan and Permitted Liens which may be or become a Lien other than the Senior Loan. Borrower shall
not allow the Properties to at any time be encumbered by any Lien which is not a Permitted Lien or
the Senior Loan.




          (c) Tax and Insurance Escrow. If at any time any Senior Lender ceases maintaining a
tax escrow or a capital improvement reserve in accordance with the Senior Loan Documents as in
effect on the date hereof, then Lender shall have the right to require Borrower to establish any
such reserve with Lender in such amounts as would have been required in accordance with the Senior
Loan Documents in effect on the date hereof and pursuant to such procedures as reasonably
determined by Lender.




     Section 5.13. Waste. Borrower shall not, and shall cause the SHP Subsidiaries to not,
(a) commit or cause any waste of any of the Properties, (b) make or permit to be made any change in
the use of the Properties which will in any way materially increase the risk of fire or other
hazard arising out of the use or operation of the Properties, (c) take or cause to be taken any
action that might invalidate or give cause for cancellation of any Policy, or (d) do or permit to
be done thereon anything that could in any way materially impair the value of any of the Properties
or Lender’s rights under the Loan Documents.



     Section 5.14. Misapplication of Funds. Borrower shall not, and shall cause each other
Loan Party not to, distribute any Property revenues or Loss Proceeds in violation of the provisions
of the Loan Documents, misappropriate or apply any Security Deposit or



32









 







portion thereof, or make any
Distributions in violation of the provisions of the Loan Documents.



     Section 5.15. Compliance With Laws. Borrower shall, and shall cause the SHP
Subsidiaries to promptly comply with all Applicable Law relating to the design, construction,
completion, ownership, operation and maintenance of the Properties applicable to the ownership, use
and operation of the Properties. Borrower shall from time to time, upon Lender’s request, provide
Lender with evidence reasonably satisfactory to Lender that the Properties comply in all material
respects with all Applicable Law. Borrower shall not alter and shall not permit the SHP
Subsidiaries to alter the Properties in any manner which would materially increase Borrower’s or
SHP’ Subsidiaries’ responsibilities or obligations for compliance with Applicable Law without the
prior written approval of Lender, which shall not be unreasonably withheld or delayed. Lender’s
approval of the plans, specifications, or working drawings for alterations of any of the Properties
shall create no responsibility or liability on behalf of Lender for their completeness, design,
sufficiency or their compliance with Applicable Law, and such approval shall not be relied on by
any Person. Lender may condition any such approval upon receipt of a certificate of compliance in
all material respects with Applicable Law from an independent architect, engineer, or other Person
reasonably acceptable to Lender. Borrower shall give prompt notice to Lender of the receipt by
Borrower or SHP Subsidiaries of any notice related to a material violation of any Applicable Law
and of the commencement of any proceedings or investigations which relate to compliance with
Applicable Law.



     Section 5.16. Books and Records.



          (a) Maintain. Borrower will keep and maintain, and will cause the SHP Subsidiaries to
keep and maintain, on a Fiscal Year basis, in accordance with Agreed Accounting Principles in
writing and consistently applied, proper and accurate books, records and accounts reflecting all of
the financial affairs of Borrower, SHP Subsidiaries and each Loan Party and all items of income and
expense in connection with the operation of the Properties. Lender shall have the right from time
to time at all times with prior notice during normal business hours to examine such books, records
and accounts at the office of Borrower or other Person maintaining such books, records and accounts
and to make copies or extracts thereof as Lender shall desire, at Lender’s sole expense unless an
Event of Default has occurred and is continuing. After the occurrence of an Event of Default, the
Borrower shall pay any reasonable costs and expenses incurred by Lender to examine such accounting
records as Lender shall determine to be necessary or appropriate in the protection of Lender’s
interest. The Borrower shall, and cause the SHP Subsidiaries to, furnish or make available to
Lender and its agents convenient facilities for the examination and audit of any of the applicable
books and records.




          (b) Senior Loan. Borrower shall, and shall cause the SHP Subsidiaries to,
concurrently furnish to Lender all financial statements, operating statements, balance sheets,
budgets, rent rolls, notices, consents, requests, reports, and all other financial or

33









 








written
communications related to the Properties delivered to the Senior Lender and/or received by Borrower
or SHP Subsidiaries from or on behalf of Senior Lender.




          (c) Financial and Other Reports. Borrower shall deliver, and cause the SHP
Subsidiaries to deliver to Lender each of the following:




               (i) annually, within one hundred twenty (120) days after the end of each Fiscal Year, complete
executed copies of the audited financial statements of Borrower and Guarantor, including a
statement of operations (profit and loss), a statement of cash flows, a calculation of net
operating income, a balance sheet for such Fiscal Year (A) prepared by an Approved Accounting Firm,
and (B) certified to by a duly authorized representative of such applicable party and such Approved
Accounting Firm as being true, complete and accurate; and such other information as reasonably
requested by Lender, covering, in a separate report which shall not be audited and shall be
internally-prepared, the Properties, the SHP Subsidiaries, Borrower and each Loan Party;



               (ii) annually, within ninety (90) days after the end of each Fiscal Year, complete copies of
the internally-prepared statements of operations for the Properties;



               (iii) within forty-five (45) days after the end of each calendar quarter, complete copies of
unaudited financial statements for the Properties and for the SHP Subsidiaries, Borrower and each
Loan Party for such quarter and the year to date
prepared and certified to by a duly authorized representative of such applicable party as
being true, complete and accurate;



               (iv) annually, within one hundred twenty (120) days after the end of each Fiscal Year, and
within forty-five (45) days after the end of each calendar quarter if requested by Lender, complete
executed copies of unaudited financial statements for each Guarantor prepared and certified to by
such Guarantor as being true, complete and accurate;



               (v) within twenty-five (25) days after the end of each month, complete executed copies of
internally-prepared financial statements for the Properties for such month on a monthly and year to
date basis and a certified status report concerning the operating performance of the Properties, in
form and substance reasonably satisfactory to Lender, which report shall provide a comparison of
operating performance to the Annual Budget, as applicable;



               (vi) intentionally omitted;



               (vii) intentionally omitted;



               (viii) concurrently with filing, copies of all federal income tax returns filed with respect
to Borrower and the SHP Subsidiaries, if any;




34









 





               (ix) within five (5) days after request, such further detailed information covering the
operation of the Properties and the financial affairs of any Loan Party, as may be reasonably
requested by Lender; and



               (x) concurrently with delivery to Senior Lender, to the extent not otherwise provided pursuant
to the above provisions of this Section 5.16, copies of all financial information required to be
delivered to the Senior Lender pursuant to the Senior Loan Documents.


Each required annual and quarterly financial statement shall be accompanied by an Officer’s
Certificate certifying on the date thereof either (i) that, to such officer’s knowledge, there has
not occurred any Event of Default and there does not exist an Unmatured Default, and (ii) that if
an Event of Default shall have occurred or if an Unmatured Default exists, the nature thereof and
the date of occurrence or the period of time it has existed. If Borrower fails to deliver, or
fails to cause SHP Subsidiaries to deliver, any such report to Lender, and Borrower fails to cure
the same within ten (10) days after receiving notice from Lender, the same shall constitute an
Event of Default.




          (d) Title Reports. Upon request by Lender, Borrower shall provide Lender with current
UCC Searches or updates to UCC Searches previously delivered to Lender. If Borrower fails to
provide such reports to Lender within thirty (30) days of Lender’s request therefore, such failure
shall constitute an Event of Default, and Lender
shall have the right to obtain copies of such reports or updates at Borrower’s sole cost and
expense.




          (e) Officer’s Certificates. At the time of the delivery of the financial statements
provided for in Section 5.16, Borrower shall also deliver an Officer’s Certificate of Borrower,
that to such officer’s knowledge after due inquiry, no Unmatured Default or Event of Default has
occurred and is continuing or, if any Unmatured Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, and setting forth in reasonable detail the
calculations required to establish whether the Loan Parties were in compliance with the Loan
Documents, at the end of such fiscal month.




     Section 5.17. Litigation. Borrower shall give prompt written notice to Lender of any
litigation or governmental proceedings pending against the Properties, the SHP Subsidiaries or any
Loan Party in which the maximum amount of potential liability exceeds $50,000.00.



     Section 5.18. Bankruptcy. Borrower shall give prompt written notice to Lender of any
voluntary or involuntary bankruptcy, reorganization, insolvency or similar proceeding under any
Bankruptcy Law against any Loan Party or any tenant under any Lease.




35









 




     Section 5.19. Distributions.




          (a) Intentionally Omitted.




          (b) Lender’s Collateral. Subject to the Senior Loan, any and all dividends, including
capital dividends, stock or liquidating dividends, and distributions of money or property,
redemptions or any other distributions of any kind or character made by any of SHP Subsidiaries or
Borrower on or in respect of the Ownership Interests in any of the SHP Subsidiaries or Borrower and
any and all cash and other property received in payment of the principal of or in redemption of or
in exchange for any Ownership Interests in any of SHP Subsidiaries or Borrower any other owner of
interests in any of the SHP Subsidiaries or Borrower (collectively, the “Distributions”), shall be
and become Collateral as security for the Obligations. Notwithstanding the foregoing, provided
that there is no continuing Event of Default, the proceeds of Distributions, after passing through
the Lockbox Account may be used by Borrower in the ordinary course of its business or as otherwise
provided herein.




          (c) Prohibition. At no time that any portion of the Debt remains outstanding shall
Borrower permit the purchase or redemption of any direct or indirect interests in any of SHP
Subsidiaries or Borrower in violation of Article VII, or, except as expressly permitted in this
Section and as permitted under Borrower’s Operating Agreement with respect to Classes A, A-1 and B,
the declaration or payment of any
Distributions or the setting aside of any funds for any such purposes. If any Distributions
shall be received by any Loan Party or any other Person prior to passing through the Lockbox
Account (other than Lender or Senior Lender), such Loan Party or other Person shall hold the same
in trust for the benefit of Lender and immediately deliver the same for deposit into the Lockbox
Account.




          (d) Delivery to Lender. Subject to Section 5.19(c) and subject to the Senior Loan,
Borrower expressly agrees that the SHP Subsidiaries shall be permitted to make Distributions to
Borrower only upon the express condition that Borrower shall cause the SHP Subsidiaries to deliver
such Distributions directly to Lender (and to no other Person without the prior express written
consent of Lender) by wire transfer (pursuant to wiring instructions to be furnished by Lender) for
deposit in the Lockbox Account. Unless a Sweep Event has occurred and is continuing, Lender shall
not exercise its rights to control the Lockbox Account and all funds deposited in the Lockbox
Account shall be available for use by Borrower in the ordinary course of its business. In the
event a Sweep Event is continuing, Lender shall be permitted to apply all amounts in the Lockbox
Account toward the balance of the outstanding principal amount of the Loan or any interest and fees
due under the Loan. Notwithstanding the foregoing, in the event a Sweep Event is continuing,
Lender shall permit Borrower to make payments from the Lockbox Account for the purpose of funding
Property operating expenses (other than payments to Affiliates) and Senior Loan debt service
payments, prior to Lender’s application of amounts in the Lockbox Account to the Loan.




     Section 5.20. Affiliate Agreements. Any Loan Party may contract, verbally or in
writing, with any other Loan Party or any direct or indirect partner, member, shareholder or
Affiliate thereof, for services to be provided to such Loan Party related to the



36









 




Properties
(collectively, the “Affiliate Agreements”). Fees, payments, compensation and reimbursements
related to such contracts must be normal and customary for the service provided, and as if the
service were provided by a third party. Payment by a Loan Party to any other Loan Party or any
direct or indirect partner, member, shareholder or Affiliate thereof of any fees, payments,
compensation or reimbursements which are not normal and customary must be consented to in advance
by the Lender. Notwithstanding the above, the following fees, payments, compensation and
reimbursements are specifically approved by Lender: (i) any distribution, disbursement, payment,
fee, return or reimbursement set forth in the Organizational Documents of any Loan Party, but
subject to Section 5.19; (ii) any fee, payment, compensation or reimbursement set forth in the
Management Agreement; (iii) payments of commissions and fees to Summit Real Estate Investments, LLC
for broker-dealer services provided, not to exceed 8% of securities sold plus expense
reimbursement; (iv) payment of salaries, bonuses, benefits or other compensation to employees of
any Loan Party; (v) payment of principal and interest for funds borrowed by a Loan Party; or (vi)
reimbursements of expenses paid on behalf of a Loan Party. The payment of any fees, commissions or
other compensation which are not normal and customary without the prior written consent of Lender,
if required, shall constitute an automatic Event of Default (with no notice, cure or grace
period). The parties to each Affiliate Agreement shall acknowledge and agree that such
agreement is terminable by SHP Subsidiaries or Lender upon notice, without penalty, premium or
liability for future or accrued liabilities or obligations, if an Event of Default shall have
occurred and is continuing under the Loan Documents. Any Management Agreement shall either (i)
provide that such Management Agreement may be terminated on no more than 30 days prior notice, with
or without cause, and without penalty, or (ii) be subject to a manager’s subordination agreement in
substantially the same form and substance as the Subordination Agreement of Approved Manager
delivered on the Closing Date and providing that if Lender acquires an ownership interest in
Borrower, directly or indirectly, then the Manager agrees that Lender (or such purchaser at
foreclosure) may terminate the Management Agreement at any time upon thirty (30) days notice to the
Manager with or without cause or premium. Subject to the Senior Loan, following an Event of
Default under the Loan Documents, i) no Loan Party shall enter into any new Affiliate Agreements
without the prior written consent of Lender in each case, and (ii) if requested by Lender in
writing, Borrower shall, or shall cause the SHP Subsidiaries or the applicable Loan Party to,
terminate the Management Agreement and any other Affiliate Agreement specified by Lender within
five (5) days after delivery of Lender’s request without payment of any penalty, premium or
termination fee. If such Affiliate Agreement is not terminated in accordance with the immediately
preceding sentence, Lender shall have the right, and Borrower hereby irrevocably authorizes Lender
and irrevocably appoints Lender as Borrower’s attorney-in-fact coupled with an interest, at
Lender’s sole option, to terminate the Management Agreement and such Affiliate Agreement on behalf
of and in the name of Borrower or the applicable Loan Party, and Borrower hereby releases and
waives any claims against Lender arising out of Lender’s exercise of such authority. Any default,
breach or violation of this Section 5.20 shall be an automatic Event of Default (without any
notice, grace or cure period.). [Notwithstanding the foregoing, all funds used to pay any and all
sums due under the




37









 




Affiliate Agreements and the Management Agreement shall, so long as this Loan is
outstanding and at all times hereunder be paid from sums in the Lockbox Account. It is expressly
understood that all revenues and cash flows of, and all distributions paid to, Borrower (after the
payment of debt service for the Senior Debt and the payment of operating expenses of the Properties
other than with respect to the Affiliate Agreements), shall be deposited in, and as permitted
hereunder, disbursed from, the Lockbox Account.




     Section 5.21. Equity Contribution. Unless otherwise approved by Lender in writing,
until such time as the Loan has been indefeasibly paid in full (together with all interest thereon
and other sums payable with respect thereto), Borrower shall cause the SHP Subsidiaries at all
times to keep the Equity Contribution invested in the Properties as equity and shall not permit any
return of the Equity Contribution.



     Section 5.22. Single Purpose Entity. The SHP Subsidiaries shall at times be a Single
Purpose Entity, and Borrower shall not, and shall not permit any of the SHP Subsidiaries to take
any action inconsistent with the provisions which embody the
requirements for a Single Purpose Entity or as otherwise set forth in the respective SHP
Subsidiaries’ Organizational Documents.



     Section 5.23. Intentionally Omitted.



     Section 5.24. Loan Party Compliance. Borrower shall take all steps necessary to cause
each Loan Party to comply with the terms and provisions of the Loan Documents and the Senior Loan
Documents.



     Section 5.25. Continued Existence. Borrower shall, and shall cause each Loan Party
to, do or cause to be done all things necessary to preserve, renew and keep in full force and
effect its existence, and material rights, licenses, permits and franchises in compliance with
Applicable Law. Borrower shall not, and shall not allow, cause or permit the SHP Subsidiaries to
dissolve, terminate, liquidate, merge with, consolidate into or acquire another Person. Borrower
shall, and shall take all steps necessary to cause each Loan Party, to at all times maintain,
preserve and protect all franchises and trade names and preserve all of such party’s property used
or useful in the conduct of their business and shall keep the Properties 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. Borrower will not, and will not
allow, cause or permit the SHP Subsidiaries to change its name, identity (including its trade name
or names) or ownership structure without Lender’s prior written consent. Borrower shall not allow
or permit any change in the use of the Properties without Lender’s prior written consent. Borrower
will, and will cause the SHP Subsidiaries to qualify to do business and will remain in good
standing under the laws of the states in which the Properties are located and in each jurisdiction
as and to the extent the same is required for the ownership, maintenance, management and operation
of the Properties.



     Section 5.26. Conduct of Business. Borrower shall not make, and shall cause the SHP
Subsidiaries not to make, any material change in the scope or nature of its business



38









 




objectives,
purposes or operations, or undertake or participate in activities other than the continuance of its
present business without Lender’s prior written consent not to be withheld or delayed Borrower
shall not, and shall not allow any Loan Party to make any change in the location of its “place of
business” or “chief executive office” (as such terms are used in Section 9-307 of the Uniform
Commercial Code) without the prior written consent of Lender which shall not be unreasonably
withheld or delayed so long as Lender’s security interest in the Collateral remains a fully
perfected first priority security interest in the Collateral and provided Borrower executes and
delivers to Lender or causes to be executed and delivered to Lender such UCC financing statements
as Lender may reasonably require.




     Section 5.27. Additional Ownership Covenants. Until the Debt and the Obligations have
been fully paid and performed (a) the Borrower shall be the sole and exclusive member of each of
the SHP Subsidiaries, (b) Guarantor shall be the sole and
exclusive Company Manager of Borrower, in accordance with Borrower’s Organizational Documents
and (c) Guarantor shall have the requisite power and authority to direct the management and affairs
of Borrower, Borrower shall have the requisite power and authority to solely control and direct the
management and affairs of each of the SHP Subsidiaries, except as otherwise set forth in the SHP
Subsidiaries’ Organizational Documents.



     Section 5.28. Intentionally Omitted.



     Section 5.29. Organizational Documents. Unless otherwise consented to in writing by
Lender, Borrower shall not amend, modify or terminate, and shall not cause, permit or cause the SHP
Subsidiaries or any other Loan Party, to amend, modify or terminate, its formation and
Organizational Documents without Lender’s prior written consent.



     Section 5.30. ERISA.



          (a) Borrower covenants and agrees that it shall not engage in any transaction, nor will it
permit or cause any Loan Party to engage in any transaction, which would cause any obligation or
action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the
Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited
transaction under ERISA.




          (b) Borrower further covenants and agrees to deliver to Lender such certifications or other
evidence from time to time throughout the term of the Loan, as required by Lender, that: (i) no
Loan Party is an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to
Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (ii) no
Loan Party is subject to state statutes regulating investments and fiduciary obligations with
respect to governmental plans; and (iii) one or more of the following circumstances is true with
respect to each Loan Party: (A) equity interests in such Loan Party are publicly offered
securities, within




39









 







the meaning of 29 C.F.R. § 2510.3-101(b)(2); (B) less than 25 percent of each
outstanding class of equity interests in such Loan Party are held by “benefit plan investors”
within the meaning of 29 C.F.R. § 2510.3-101(f)(2); and (C) each Loan Party qualifies as an
“operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §
2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940.




     Section 5.31. Environmental.



          (a) Compliance with Environmental Laws. Borrower will cause, and will cause the SHP
Subsidiaries to cause, the use of the Properties to be in full compliance at all times with all
Environmental Laws.




          (b) Environmental Permits. Borrower shall, and shall cause the SHP Subsidiaries to,
obtain and maintain all required permits, approvals, certificates, licenses and other
authorizations relating to any Permitted Environmental Use.




          (c) Notification. Borrower shall, and shall cause the SHP Subsidiaries to,
immediately notify Lender (with copies where applicable) of any claims, complaints, notices,
inquiries or other information which any Loan Party has or may receive or obtain relating to any
Environmental Condition of the Properties or any surrounding areas.




          (d) Inspection and Reports. At the request of Lender at any time and from time to
time, Borrower shall, and shall cause the SHP Subsidiaries to, permit Lender and its consultants
and agents to perform an environmental assessment of the Properties or any portion thereof,
including the preparation of any new or updated Environmental Report. In connection therewith,
Lender and its consultant and agents may enter upon and inspect any of the Properties or any
portion thereof and perform tests of the air, soil, ground water and building materials; and
Borrower will, and will cause the SHP Subsidiaries to, cooperate and use best efforts to cause
tenants and other occupants of the Properties to cooperate with Lender and its consultants and
agents The cost of any such assessment and any report based thereon will be deemed Loan Expenses
(i) if the assessment or report discloses any Environmental Condition which is not a Permitted
Environmental Use or (ii) if such assessment was initiated at a time when Lender has reasonable
cause to believe that an Environmental Condition exists at any of the Properties which is not a
Permitted Environmental Use or (iii) any time after the occurrence of an Event of Default.
Borrower and the Guarantor hereby acknowledge and agree that in no event will Lender, its
consultants or agents have any liability to Borrower or any other Loan Party with respect to the
results of any such assessment or report.




          (e) Remedies. In the event of any Environmental Condition affecting any of the
Properties which is not Permitted Environmental Use, whether or not any action to correct or
ameliorate such Environmental Condition has been ordered by any Governmental Authority or other
Person, Lender may (but shall have no obligation), in Lender’s sole discretion:




40









 








               (i) by notice to Borrower, obligate Borrower to take, or cause the SHP Subsidiaries to take,
appropriate action to correct or ameliorate such Environmental Condition, in which event Borrower
or the SHP Subsidiaries (as the case may be) shall take such action at Borrower’s or SHP
Subsidiaries’ sole expense;



               (ii) enter or cause its agents or consultants to enter upon the Property and take appropriate
action to correct or ameliorate the Environmental Condition, in which case Borrower will, and will
cause SHP Subsidiaries to, cooperate and use best efforts to cause tenants and other occupants of
the Properties to cooperate with Lender and its consultants and agents; and/or



               (iii) exercise any other rights or remedies that Lender may have.


Any expenditures made by Lender in exercising its rights in connection with the foregoing shall be
deemed Protective Advances. Notwithstanding the above, any action or requirement of a Senior
Lender regarding such Environmental Condition shall supersede the ability of Lender to take an
action or requirement as set forth hereunder.




     Section 5.32. Estoppel Statements. Within ten (10) days after request by Lender to
Borrower, but not more frequently than reasonably necessary, Borrower shall furnish to Lender a
statement, duly acknowledged and certified and setting forth (A) the original principal amount of
the Note, (B) the unpaid principal amount of the Note, (C) the applicable interest rate of the
Note, (D) the date on installments of interest and principal were last paid, (E) the terms of
payment, (F) any offsets or defenses to the payment of the Loan, if any, (G) that the Note, this
Agreement and the other Loan Documents are valid, legal and binding obligations of the Loan
Parties, and have not been Amended or, if Amended, giving particulars of such Amendment (H) that,
except as provided in such statement, there are no defaults or events which with the passage of
time or the giving of notice or both, would constitute an Event of Default under the Loan
Documents, (I) whether or not, to the best knowledge of the Loan Parties, any of the tenants under
the Leases are in default under the Leases, and, if any of the tenants are in default, setting
forth the specific nature of all such defaults, and (J) as to any other matters reasonably
requested by Lender, including with respect to the Senior Loan (“Borrower Estoppel Certificate”).



     Section 5.33. Cooperate in Legal Proceedings. Borrower shall, and shall cause the SHP
Subsidiaries to cooperate fully with Lender with respect to any proceedings before any court, board
or other Governmental Authority, which may in any way affect the rights of Lender hereunder, or any
rights obtained by Lender under any of the other Loan Documents and, in connection therewith,
permit Lender, at its election, to participate in any such proceedings.



     Section 5.34. Further Assurances. Borrower shall and shall cause each of the Loan
Parties to, do and execute all and such further lawful and reasonable acts, conveyances and
assurances as are reasonably required, as reasonably determined by Lender, to carry out the intents
and purposes of this Agreement and the other Loan



41









 




Documents. At Lender’s request, Borrower shall
cause each of the Loan Parties to execute and deliver on demand one or more financing statements or
other instruments, to evidence or perfect more effectively the security interest of Lender in the
Collateral, and if any of the Loan Parties fails to execute and deliver any of the foregoing within
ten (10) Business Days after such request by Lender, Borrower on its own behalf and on behalf of
each Loan Party hereby grants to Lender an irrevocable power of attorney coupled with an interest
for the purpose of exercising and perfecting any and all rights and remedies available to Lender
pursuant to this Section 5.34, and hereby authorizes Lender to
execute in the name of such Loan Party or without the signature of such Loan Party to the
extent Lender may lawfully do so, any such financing statements or other instruments.




     Section 5.35. Contracts. Borrower shall and shall cause the SHP Subsidiaries to,
deliver or cause to be delivered to Lender at least once a year copies of all new, material
contracts or other agreements (and all amendments, modifications or supplements thereto) affecting
any Loan Party or the use, maintenance, management or operation of any of the Properties. All
service, maintenance or other contracts affecting the Properties shall be arms-length transactions
with Persons who are not Affiliates of any Loan Party, or are otherwise in the ordinary course of
the applicable Loan Party’s business and on terms and conditions not less favorable than could be
obtained from a third party and shall provide for the payment of fees in amounts and upon terms not
in excess of existing market rates, unless otherwise approved by Lender.



     Section 5.36. Intentionally Omitted.

Section 5.37. Intentionally Omitted.



     Section 5.38. Annual Budget. Borrower shall prepare and deliver to Lender, within
forty-five (45) days prior to the beginning of each calendar year, an annual expenditure budget for
the Properties showing, on a month-by-month basis, in reasonable detail (i) each line item of
anticipated income and operating expenses, and (ii) each line item of anticipated Capital
Expenditures (“Annual Budget”). The Annual Budget shall set forth in reasonable detail budgeted
capital, operating and other expenses, including without limitation the salaries and potential
bonuses and other compensation of directors, officers and employees of Borrower and the SHP
Subsidiaries. The Annual Budget through December 31, 2006 is attached hereto as Exhibit N.



     Section 5.39. Permitted Debt.



          (a) Neither Borrower nor any of SHP Subsidiaries shall incur any Indebtedness other than
Permitted Debt and other than new construction financing for newly acquired development properties.




          (b) No individual draw under the Omaha Unsecured Debt shall remain outstanding or unsecured,
(i) except as provided in subparagraphs (ii) and (iii) hereof below, for more than 90 days, (ii) at
such time as the Initial Advance, the Second Advance and the Third Advance shall have been fully
drawn, for more than 180 days or




42









 




(iii) with respect to funds identified by Borrower to be used for
working capital, not to exceed $2,000,000 in the aggregate, for more than 360 days.
Notwithstanding anything to the contrary contained in the Omaha Loan Agreement, Borrower may not,
at any time convert secured debt to unsecured debt thereunder.




     Section 5.40. Franchise Agreements. Without the prior written consent of Lender,
which consent shall not be unreasonably withheld, conditioned or delayed, Borrower shall not, and
shall cause SHP Subsidiaries to not (i) surrender, terminate the Franchise Agreements, (ii) reduce
or consent to the reduction of the term of the Franchise Agreements, (iii) increase or consent to
the increase of the amount of any charges under the Franchise Agreements or (iv) otherwise modify,
change, supplement, restate, alter or amend, or waive or release any of its rights and remedies
under the Franchise Agreements in any material respect. In the event that any Franchise Agreement
expires or is terminated (without limiting any obligation of Borrower to obtain Lender’s consent to
any termination or modification of the Franchise Agreements in accordance with the terms and
provisions of this Agreement) Borrower shall promptly enter into a replacement Franchise Agreement.



     Section 5.41. Loan to Value Ratio. So long as the Loan is outstanding, Borrower shall
not exceed the Loan to Value Ratio at any time.



     Section 5.42. Interest Coverage Ratio. The Properties shall have an Interest Coverage
Ratio of 1.40 until December 31, 2007, 1.45 from January 1, 2008 until December 31, 2008 and 1.50
at all times thereafter.



     Section 5.43. Representations. Borrower shall cause all representations and
warranties set forth in Article III to be true and correct in all material respects at all times
until the Loan is irrevocably repaid in full, as fully as if each such representation and warranty
were remade as of each such date.



ARTICLE VI




SENIOR LOAN




     Section 6.1. Compliance. Borrower shall, and shall cause the SHP Subsidiaries to (a)
pay all principal, interest and other amounts required to be paid under and pursuant to the
provisions of the Senior Loan Documents; (b) diligently perform and observe all of the material
terms, covenants and conditions of the Senior Loan Documents (provided, however, that any term,
covenant or condition, the non-performance of which would trigger a default or event of default
under the Senior Loan Documents shall be deemed “material”); (c) notify Lender in writing upon
receipt by Borrower or any SHP Subsidiary of any notice by the Senior Lender of any default
(whether or not subject to cure) by any Person in the performance or observance of any of the
terms, covenants or conditions of the Senior Loan Documents; and (d) deliver to Lender a true copy
of each such other notice regarding a consent or request for consent, or other material
correspondence to or from Senior Lender in connection with or relating to the Senior Loan.



43









 





     Section 6.2. Lender’s Cure Rights.



          (a) Cure Rights. Without limiting the generality of the other provisions of this
Agreement, and without waiving or releasing any Loan Party from any of their Obligations under the
Loan Documents, if there shall occur any default under the Senior Loan Documents or if Senior
Lender asserts that Borrower, any SHP Subsidiary or any other Person has defaulted in the
performance or observance of any term, covenant or condition of the Senior Loan Documents (whether
or not the same shall have continued beyond any applicable notice or grace periods, whether or not
Senior Lender shall have accelerated the Senior Loan or delivered proper notice to Borrower, SHP
Subsidiaries or any other Person, and without regard to any other defenses or offset rights
Borrower, the SHP Subsidiaries or any other Person may have against Senior Lender), Borrower and
the SHP Subsidiaries hereby expressly agree that Lender shall have the right (but not the
obligation), beginning on the date that is one half the number of days of the applicable cure
period from the date on which such cure period begins to run, without notice to or demand on
Borrower or the SHP Subsidiaries or any other Person, (A) to pay all or any part of the Senior Loan
that is then due and payable and any other sums and to perform any act or take any action, on
behalf of Borrower, the SHP Subsidiaries or such other Person, as may be appropriate to cause all
of the terms, covenants and conditions of the Senior Loan Documents to be promptly performed or
observed, (B) to pay any other amounts and take any other action as Lender shall deem reasonably
necessary to protect or preserve the rights and interests of Lender in the Loan and/or the
Collateral, and (C) Lender may take any such action deemed necessary by Lender to cure or attempt
to cure any default under the Senior Loan Documents. Borrower hereby expressly acknowledges and
agrees that Lender shall have no obligation to Senior Lender, Borrower, SHP Subsidiaries or any
other Person to make any such payment or performance or to complete any cure or attempted cure
undertaken or commenced by Lender.




          (b) Reliance. If the Senior Lender or its agents or representatives shall deliver to
Lender a copy of any written statement, demand or notice of default or breach under the Senior Loan
Documents, such statement, demand or notice shall constitute full protection to Lender for any
action taken or omitted to be taken by Lender, in good faith, in reliance thereon, regardless of
any protest or objection thereto that any Loan Party may have or may wish to assert. As a material
inducement to Lender’s making the Loan, Borrower and each other Loan Party hereby absolutely and
unconditionally releases and waives all claims, offsets, defenses or counterclaims against Lender
arising out of Lender’s exercise of its rights and remedies provided in this Article VI.




          (c) Amounts Secured; Indemnification. All amounts paid (including any and all amounts
paid under or on, or on account of, the Senior Loan) and all costs and expenses incurred by Lender
in exercising its rights under this Article VI (including Professional Fees), shall be Protective
Advances, shall constitute a portion of the Debt, shall be secured by the Loan Documents and shall
be due and payable to Lender within
five (5) Business Days after demand therefore by Lender. In furtherance thereof and in
addition thereto, Borrower hereby agrees to indemnify, defend and hold Lender harmless




44









 




from and
against all liabilities, obligations, losses, damages, penalties, assessments, actions, or causes
of action, judgments, suits, claims, demands, costs, expenses (including Professional Fees whether
or not suit is brought and settlement costs) and disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against Lender as a result of Lender taking any
action which Lender is permitted to take under this Article VI, and any amounts so paid by Lender
shall be deemed Protective Advances.




          (d) Access and Authority. Borrower, on behalf of itself and the SHP Subsidiaries,
hereby grants Lender and any Person designated by Lender the right to enter upon any of the
Properties at any time for the purpose of carrying out the rights granted to Lender under this
Article VI. Borrower shall not, and shall not cause, permit or cause SHP or any other Loan Party
to impede, interfere with, hinder or delay, any effort or action on the part of Lender to cure any
default or asserted default under the Senior Loan, or to otherwise protect or preserve Lender’s
interests in the Loan and the Collateral, including the Properties in accordance with the
provisions of this Agreement and the other Loan Documents. Further, in connection with the
exercise of its rights in this Article VI, Lender shall have the right at any time to discuss the
Properties, the Senior Loan, the Loan or any other matter directly with Senior Lender or Senior
Lender’s consultants, agents or representatives without notice to or permission from Borrower or
any other Loan Party, nor shall Lender have any obligation to disclose such discussions or the
contents thereof with the Borrower or any other Loan Party.




          (e) No Waiver. Any default or breach under the Senior Loan Documents which is cured
by Lender, whether or not such cure is prior to the expiration of any applicable grace, notice or
cure period under the Senior Loan Documents, shall constitute an immediate Event of Default under
this Agreement without any notice, grace or cure period otherwise applicable under this Agreement.




          (f) Subrogation. In the event that Lender makes any payment in respect of a Senior
Loan, Lender shall be subrogated to all of the rights of the respective Senior Lender under the
Senior Loan Documents against the respective Property(ies), the SHP Subsidiaries and each other
obligor thereunder in addition to all other rights Lender may have under the Loan Documents or
Applicable Law.




          (g) Reinstatement. In the event the Lender is required to pay over any payment or
distribution of assets, whether in cash, property or securities which is applied to the Debt,
including, without limitation, any proceeds of the Properties previously received by Lender on
account of the Loan to the Senior Lender, then Borrower agrees to indemnify Lender for any amounts
so paid, and any amount so paid shall continue to be owing pursuant to the Loan Documents as part
of the Debt notwithstanding the prior receipt of such payment by Lender.




     Section 6.3. Estoppels. If permitted by the Senior Loan Documents, Borrower shall,
and shall cause the SHP Subsidiaries to, on an annual basis, obtain from Senior Lender such
certificates of estoppel with respect to compliance by Borrower and the SHP



45









 




Subsidiaries with the
terms of its Senior Loan Documents as may be requested by Lender and required to be given by Senior
Lender pursuant to the Senior Loan Documents. Borrower hereby indemnifies Lender from and against
all liabilities, obligations, losses, damages, penalties, assessments, actions, or causes of
action, judgments, suits, claims, demands, costs, expenses (including Professional Fees whether or
not suit is brought and settlement costs) and disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against Lender based in whole or in part upon any fact,
event, condition, or circumstances related to the Senior Loan which was misrepresented in, or which
warrants disclosure and was omitted from such estoppel.




     Section 6.4. No Additional Senior Loan Documents or Amendments. Without the prior
written consent of Lender, Borrower shall not, and shall cause the SHP Subsidiaries and all other
Loan Parties and any other Persons to not, enter into or become bound by any agreements (or
amendments, modifications or waivers of or under agreements) with Senior Lender (written or
otherwise) or any other lender that are not set forth on Exhibit L with respect to the Senior Loan.
Without obtaining the prior written consent of Lender, Borrower shall not, and shall cause the SHP
Subsidiaries and all other Persons executing the Senior Loan Documents not to amend, modify,
cancel, terminate, supplement or waive any rights or benefits of Borrower or the SHP Subsidiaries
or any other Loan Party under, any of the Senior Loan Documents. Borrower shall promptly provide
Lender with a copy of any agreement entered into with the Senior Lender. Notwithstanding the
foregoing, Borrower (1) may encumber Properties owned by SPE Owner with construction or mortgage
financing without the prior written consent of Lender provided such financing does not result in a
violation of the Loan to Value Ratio test, and (2) shall be entitled to modify and/or amend the
individual Senior Loans listed on Schedule 6.4 attached hereto in the manner described on
Schedule 6.4 without the prior written consent of Lender on terms that are ordinary and
customary for the Borrower for each particular type of transaction.



     Section 6.5. Acquisition of the Senior Loan.



          (a) Prohibition. No Loan Party and no Affiliate thereof or any other Person acting
upon their direction or request shall acquire or agree to acquire, obtain, purchase or control the
Senior Loan, or any portion thereof or any interest therein, or any direct or indirect Ownership
Interest in the holder of, or participant in, the Senior Loan in any manner whatsoever (except for
holdings of stock that is publicly traded on a nationally-recognized exchange), and any breach or
attempted breach of this provision shall constitute an immediate Event of Default hereunder without
any notice, grace or cure period otherwise applicable under this Agreement. If, solely by
operation of applicable subrogation law, any Loan Party or Affiliate thereof shall be in breach of
or fail to comply with the foregoing, then Borrower (i) shall immediately notify Lender of
such failure or breach, and (ii) shall cause any and all Loan Parties and Affiliates thereof
acquiring any interest in the Senior Loan Documents (A) not to enforce the Senior Loan Documents,
and (B) upon the request of Lender, to the extent any such Loan Party or Affiliate has the power or
authority to do so, to promptly (1) cancel, reconvey and release its interest in the Senior Loan
Documents, (2) discontinue and terminate any




46









 




enforcement proceeding(s) under the Senior Loan
Documents and (3) assign and transfer its interest in the Senior Loan Documents to Lender.




          (b) By Lender. Lender shall have the right during the continuance of an Event of
Default or during an event of default under the Senior Loan to acquire all or any portion of the
Senior Loan or any interest in any holder of, or participant in, the Senior Loan without notice or
consent of Borrower or any other Loan Party, in which event Lender shall have and may exercise all
rights of the Senior Lender thereunder (to the extent of its interest), including the right (i) to
declare that the Senior Loan is in default and (ii) to accelerate the Senior Loan indebtedness, in
accordance with the terms thereof and (iii) to pursue all remedies against any obligor under the
Senior Loan Documents. In addition, Borrower and each other Loan Party hereby expressly agree that
any claims, counterclaims, defenses, offsets, deductions or reductions of any kind which Borrower
or any other Person may have against Senior Lender relating to or arising out of the Senior Loan
shall be the personal obligation of Senior Lender, and in no event shall the SHP Subsidiaries,
Borrower or any other Loan Party be entitled to bring, pursue or raise any such claims,
counterclaims, defenses, offsets, deductions or reductions against Lender or any Affiliate of
Lender or any other Person as the successor holder of the Senior Loan or any interest therein.




     Section 6.6. Intentionally Omitted.



     Section 6.7. Intentionally Omitted.



     Section 6.8. Deed-in-Lieu. Without the prior written consent of Lender, Borrower
shall not, and shall not cause, cause or permit the SHP Subsidiaries to, enter into any
deed-in-lieu or consensual foreclosure with or for the benefit of Senior Lender or any of Senior
Lender’s Affiliates. Without the express prior written consent of Lender, Borrower shall not, and
shall not cause, cause or permit the SHP Subsidiaries to, enter into any consensual sale or other
transaction in connection with the Senior Loan which could diminish, modify, terminate, impair or
otherwise adversely affect the interests of Lender in the Collateral or any portion thereof or any
interest therein.



     Section 6.9. Refinancing. Without the prior written consent of Lender, which consent
shall not be unreasonably withheld, conditioned or delayed, Borrower shall not refinance, or cause
the SHP Subsidiaries to Refinance, the Senior Loan, except as permitted by Section 6.4 above.



     Section 6.10. Senior Loan Mechanics. Lender agrees to execute and deliver such
further documents, consistent with the terms hereof, as any Senior Lender may reasonably request
regarding such Senior Lenders rights to specific collateral. Further, Lender agrees to enter into
intercreditor agreements as reasonably requested by Senior Lender and agrees to allow Senior Lender
to direct cash flows from a Property or entity into such Senior Lender’s lockbox account, provided
such lockbox account provides for the automatic release of funds contained therein, after the
payment of debt service and customary reserves or expenses on Senior Loan, to Lender’s Lockbox
Account.



47









 





     Section 6.11. Independent Approval Rights. Except as otherwise set forth herein, if
any action, proposed action or other decision is consented to or approved by Senior Lender, such
consent or approval shall not be binding or controlling on Lender. Borrower hereby acknowledges
and agrees that (i) the risks of Senior Lender in making the Senior Loan are different from the
risks of Lender in making the Loan, (ii) in determining whether to grant, deny, withhold or
condition any requested consent or approval Senior Lender and Lender may reasonably reach different
conclusions, and (iii) Lender has an absolute independent right to grant, deny, withhold or
condition any requested consent or approval based on its own point of view. Further, the denial by
Lender of a requested consent or approval shall not create any liability or other obligation of
Lender if the denial of such consent or approval results directly or indirectly in a default under
the Senior Loan, and Borrower, the SHP Subsidiaries and the Guarantor hereby waive any claim of
liability against Lender arising from any such denial.



     Section 6.12. Event of Default. Any breach, violation or default under this Article
VI be an automatic Event of Default (without any notice, grace or cure period).



ARTICLE VII




TRANSFERS OF INTERESTS




     Section 7.1. Transfer. Without the prior written consent of Lender, which shall not
be unreasonably withheld, conditioned or delayed, except as specifically permitted by this
Agreement, Borrower shall not, and shall not allow, permit or cause to occur any Transfer of any of
the Properties or any portion thereof or any Ownership Interest therein. Any Transfer of any of
the Properties or any portion thereof or interest therein, including any direct or indirect
Transfer of any interests in any Loan Party, directly or indirectly and no matter how remote
(including preferred equity or securities convertible into preferred or common equity), whether or
not intentional or unintentional, whether or not within the control of Borrower or any other Loan
Party, whether by operation of law or otherwise, or the Transfer of a controlling interest in any
Person having a direct or indirect (and no matter how remote) legal or beneficial Ownership
Interest in any Loan Party, except as specifically permitted by this Agreement, including any legal
or beneficial interest in any constituent member, partner or owner of such Persons, or the change,
removal, resignation or addition of a partner, joint venturer or
member in any Loan Party, in each case, without the prior written consent of Lender, which
consent in any and all circumstances may be conditioned or denied for any reason or no reason,
shall be an immediate Event of Default without any notice, grace or cure period. The provisions of
the foregoing two sentences of this Section 7.1 shall apply to each and every such further
Transfer, regardless of whether or not Lender has consented to, or waived its rights hereunder with
respect to, any such previous Transfer, and irrespective of whether such further Transfer is
voluntary, by reason of operation of law or is otherwise made.



     Section 7.2. Contracts to Transfer. Without the prior written consent of Lender or
except as otherwise permitted herein, Borrower shall not enter into, and shall not



48









 




allow, permit or
cause any other Person to enter into, any contract, option, right of first offer, right of first
refusal or other agreement to Transfer any of the Properties or any Ownership Interest or other
interest, direct or indirect and no matter how remote that is prohibited by Section 7.1. Any
default, breach or violation of this Section 7.2 shall be an automatic Event of Default (without
any notice, grace or cure period).




     Section 7.3. Costs and Expenses, Further Assurances. Except as otherwise provided
herein, in the case of any proposed Transfer, Borrower shall give Lender at least thirty (30) days
prior written notice of such proposed Transfer. In the case of a Transfer which Lender (in its
sole and absolute discretion) may approve, as a condition to such Transfer, Borrower shall cause to
be delivered to Lender such pledge and security agreements, financing statements and other
instruments, to evidence Lender’s continuing security interest in the Collateral as Lender may
require, and deliver such further assurances as Lender may require, including the following in form
and substance satisfactory to Lender: opinions of counsel, non-consolidation opinion, a newly
certified Ownership Chart, evidence that the Transfer is permitted under the Senior Loan, the
reaffirmation of the Guarantors and payment of any applicable transfer taxes. Borrower shall pay
or cause to be paid Lender’s and Servicer’s out of pocket costs and expenses relating to any Lender
approved Transfer, or any proposed Transfer which Lender does not approve (including Professional
Fees and the Servicer’s fees, costs and expenses).



     Section 7.4. Control. Borrower shall at all times maintain a 100% ownership interest
in SHP Subsidiaries.



     Section 7.5. Application of Sale Proceeds. In the event that (i) Borrower, with
Lender’s consent, Transfers a Borrower Property (ii) a SHP Subsidiary, with Lender’s consent,
Transfers a SHP Subsidiary Property or (iii) Borrower Transfers any owned real property that is not
Collateral for this Loan with the exception of the Properties set forth on Schedule 7.5, then any
residual value from such Transfer, following the payoff of the Senior Loan applicable to such
transferred property and all reasonable, third party costs of such sale or transfer, shall be paid
to Lender to be applied to the Indebtedness as set forth in the Note. Notwithstanding the
foregoing, the Properties set forth on Schedule
7.5(a) shall not be subject to payment of the Minimum Interest Amount as defined in the Note.



      Section 7.6. Transfers of Interests




          (a) If, without Lender’s prior written consent, (i) any interest in a Loan Party is sold or
conveyed; (ii) any ownership interest in a Loan Party is further encumbered or pledged; or, (iii)
without limiting the generality of clause (i) above, the ownership of shares of a Loan Party, if a
corporation, or of any corporate general partner of a Loan Party, if a partnership, or the general
partnership interests in any partnership which is a general partner of a Loan Party, or any
membership interest in a Loan Party which is a limited liability company, or any beneficial
interest in any a Loan Party which is a trust or trustee, is sold or conveyed, Lender shall at its
sole discretion be entitled to accelerate the Loan and declare the then unpaid principal balance
and all accrued interest




49









 




and other sums due and payable under the Note due and payable and exercise
all remedies available to Lender under the Loan Documents. Beneficial ownership of Borrower is
comprised of membership interests falling into four classes of interests: Class A Members, Class
A-1 Members, Class B Members and Class C Members (all as defined or provided for in Borrower’s
Third Amended and Restated Operating Agreement (“Operating Agreement”)). The entire Class C
Membership Interest is owned directly by The Summit Group, Inc., a South Dakota corporation, which
is the Company Manager (as defined in the Operating Agreement) and Guarantor.




          (b) Notwithstanding the restrictions of paragraph (a) above, no (a) transfer, sale or
assignment or (b) creation, of any Class A Membership Interest, Class A-1 Membership Interest or
Class B Membership Interest in Borrower shall require Lender’s notification or consent, allow
Lender to enforce the remedies set forth in this paragraph (a) above, so long as such transfer,
sale, assignment or creation of such interest(s) does not result in a Change of Control. For
purposes hereof, a “Change of Control” occurs when, in connection with a transaction or related
series of transactions, (i) The Summit Group, Inc. no longer retains Class C Membership Interests
in Borrower equivalent to at least [40%] of the Sharing Ratios (as defined in the Operating
Agreement) of Borrower; or (ii) The Summit Group, Inc. is no longer the Company Manager of
Borrower.




          (c) Furthermore, Lender will permit a one time transfer, sale, assignment or creation of
membership interests resulting in a Change in Control; provided, (i)(a) the transferee has a
financial and credit standing and management expertise acceptable to Lender as equal or greater
than that of Borrower on the date hereof, and (b) the Class C Member and the Company Manager has
management expertise acceptable to Lender; (ii) assumption documents in form and substance
satisfactory to Lender are executed by the transferee; (iii) Lender is paid a transfer fee equal to
one percent (1%) of the then outstanding indebtedness; (iv) Borrower reimburses Lender at closing
all fees and expenses associated with the transfer including legal fees;
(v) Lender receives an endorsement to Lender’s mortgagee’s title insurance policy, if any, in
form and substance acceptable to Lender; (vi) at Lender’s option, Lender receives opinions of
counsel and Borrower and transferee authorization documents in form and substance acceptable to
Lender; and (vii) no Event of Default shall have occurred and be continuing hereunder or under any
of the other Loan Documents. Further, Lender, in its sole judgment and discretion, may require
individuals specifically named by Lender to deliver to Lender an Environmental Indemnification
Agreement on Lender’s standard form. The rights granted to Borrower in this paragraph (c) are
personal to Borrower, shall be extinguished after the exercise thereof, and shall not inure to the
benefit of any subsequent transferee. Such transfer and assumption will not, however, release
Borrower or any guarantors, from any liability to the Lender without the prior written consent of
Lender, which consent may be given or withheld in Lender’s sole discretion, but if given, may be
conditioned upon, without limitation, the execution of new guaranties from principals of the
transferee as Lender deems necessary, execution by the principals of the




50









 




transferee of Lender’s
standard Environmental Indemnification Agreement and such other requirements as Lender may deem
appropriate in its discretion.




          (d) Notwithstanding the restrictions of Section 7.6 Lender will permit the following transfers
of ownership interests within The Summit Group, Inc. without the 1% fee or any change in the Loan
terms provided that: (i) no Event of Default shall have occurred and be continuing hereunder or
under the Loan Documents or any separate documents guaranteeing Borrower’s payment and performance
of the Loan; (ii) Lender is promptly notified of such proposed transfer and provided with such
documentation evidencing the transfer and identity of the transferee as reasonably requested by
Lender; (iii) assumption documents, if deemed necessary by the Lender, in a form that is acceptable
to Lender are executed by the transferee; and (iv) Borrower reimburses Lender for all fees and
expenses including reasonable attorney’s fees associated with Lender’s review and documentation of
the transfer:





     (i) Any ownership interest in The Summit Group, Inc. may be transferred upon
the death of the holder of said interest but only by will or intestacy.




     (ii) Any ownership interest in The Summit Group, Inc. may be voluntarily sold,
transferred, conveyed or assigned to immediate family members or to a family trust
for estate planning purposes, provided that at all times there exists a minimum of
51% voting control of The Summit Group, Inc. and the Borrower by the party or
parties owning interests as of the date hereof. “Immediate family members” shall
mean the spouse, children, grandchildren, siblings, and the siblings’ children, of
each holder of an ownership interest in The Summit Group, Inc., as of the date
hereof, or a trust for the benefit of one or more of any such persons.




     (iii) Any ownership interest in The Summit Group, Inc. may be voluntarily
sold, transferred or conveyed or assigned to another person owning an ownership
interest in The Summit Group, Inc. as of the date hereof.




     (iv) Any non-voting ownership interest in The Summit Group, Inc. may be
voluntarily sold, transferred or conveyed or assigned to an employee, officer, or
director of Borrower or Guarantor.



ARTICLE VIII




INTENTIONALLY OMITTED




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ARTICLE IX




DEFAULTS; REMEDIES




     Section 9.1. Events of Default. The term “Event of Default” as used in this Agreement
shall mean the occurrence of (i) any one or more of the following events set forth in this Section
9.1 or (ii) any other Event of Default set forth in Section 9.2;



          (a) If Borrower shall fail to make any principal or interest payment to Lender or Servicer
under the Loan Documents when due and payable, and Borrower’s failure to make such payment shall
continue for ten (10) days (inclusive of the first day such payment was due), except that no grace
or cure period shall apply to payment of any amounts due on the Maturity Date, or Borrower shall
fail to pay the Debt or any portion thereof on the Maturity Date;




          (b) If any representation or warranty of any Loan Party in any Loan Document or in any
certificate, report, financial statement or other instrument or document furnished to Lender by or
on behalf of any Loan Party shall have been false or misleading in any material respect when made
or deemed remade in accordance with Section 3.2; provided, however, if such false or misleading
representation or warranty is susceptible of being cured within thirty (30) days, the same shall be
an Event of Default hereunder only if the same is not cured within a reasonable time not to exceed
thirty (30) days after notice from Lender;




          (c) Any violation, breach or default continuing beyond, 15 days after written notice from
Lender on non-monetary defaults, or otherwise applicable grace periods, under Section 5.4, Section
5.5, Section 5.6, Section 5.9, Section 5.14, Section 5.19, Section 5.20, Section 5.21, Section
5.22, Section 5.23, Section 5.25, Section 5.26,
Section 5.27, Section 5.28, Section 5.29, Section 5.30, Section 5.41, Section 5.42, Article
VI, Article VII or Article VIII;




          (d) If any Loan Party executes any chattel mortgage or other security agreement with respect
to any materials, equipment, furniture, fixtures or any Personal Property used in the use of the
Properties, except for Permitted Liens or as otherwise permitted herein, or if Borrower does not,
or does not cause the SHP Subsidiaries to, furnish to Lender on reasonable request the contracts,
bills of sale, statements, receipted vouchers or other agreements, under which Borrower or the SHP
Subsidiaries claim title to such Personal Property;




          (e) Any sequestration or attachment of, or any levy or execution upon the Properties or any
portion of the Collateral, which sequestration, attachment, levy or execution is not released,
expunged or dismissed within sixty (60) days, or if earlier, the date that is ten (10) days prior
to the public or private sale thereof;




          (f) Borrower, the SHP Subsidiaries or any Loan Party shall commence any case, proceeding or
other action (i) under any Bankruptcy Law seeking to have an




52









 




order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or
its debts, or (ii) seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for any substantial portion of its assets, or Borrower, the SHP
Subsidiaries or any Loan Party shall make a general assignment for the benefit of its creditors;




          (g) There shall be commenced by any Person against Borrower, the SHP Subsidiaries or any Loan
Party any case, proceeding or other action of a nature referred to in subsection (g) above which
(i) results in the entry of an order for relief or any such adjudication or appointment, or (ii)
remains undismissed, undischarged or unbonded for a period of sixty (60) days; or Borrower, the SHP
Subsidiaries or any Loan Party shall take any action seeking to convert any case filed against it
under Chapter 7 of the Federal Bankruptcy Law to a Chapter 11 case under Federal Bankruptcy Law, or
vice versa;




          (h) Borrower, the SHP Subsidiaries or any Loan Party shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Section
9.1(f) or (g) above;




          (i) The SHP Subsidiaries, Borrower or any Loan Party shall not, or shall be unable to, or
shall admit in writing its inability to, pay its debts generally as they become due;




          (j) If one or more final judgments or decrees in excess of $100,000 shall be entered against
the SHP Subsidiaries, Borrower or any Loan Party which is not fully paid within 30 days from the
entry thereof;




          (k) If any amounts disbursed under the Loan are applied or used for purposes other than those
approved by Lender in writing or permitted under the Loan Documents;




          (l) If the SHP Subsidiaries or Borrower shall incur any Indebtedness other than Permitted
Debt;




          (m) If there shall occur any breach or default under the Senior Loan Documents, and any grace,
notice or cure period has expired;




          (n) If any Loan Party intentionally misapplies or converts (i) any Loss Proceeds (ii) any
revenues of the Properties, or (iii) any deposits, sale proceeds or other funds or income arising
with respect to the Properties or any part thereof;




          (o) If any Loan Party or Affiliate of any Loan Party shall interfere with any right to cure
granted to Lender in any of the Loan Documents (including the rights granted to Lender in Article
VI of this Agreement);




53









 





          (p) intentionally omitted;




          (q) If any Loan Party is deemed to hold “plan assets” within the meaning of ERISA or
any regulations promulgated thereunder of an employee benefit plan (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the
Code);




          (r) If any Recourse Event occurs;




          (s) If the Pledge Agreements shall cease for any reason to be enforceable and in full force
and effect and of the priority purported to be created thereby or if the Pledge Agreements cease to
create a first priority, fully perfected security interest in the Collateral;




          (t) Intentionally Omitted; or




          (u) If an event occurs which, under the terms of this Agreement or any other Loan Document,
which by such terms is deemed to constitute “Event of Default” under such Loan Document.




     Section 9.2. Other Event of Default. If any event or circumstance exists or has
occurred (other than the event or circumstances described in Section 9.1) which is a violation,
default or breach of any of the terms, provisions or conditions of this
Agreement or any of the Loan Documents, and such violation, default or breach is not fully
cured by Borrower or other Loan Party: (i) within the specified notice or cure period, if any,
provided for in this Agreement or such Loan Document or (ii) if this Agreement or such Loan
Document does not provide for a grace, notice or cure period, within twenty (20) days after written
notice from Lender in the case of any violation, default or breach which can be cured by the
payment of a sum of money, or (iii) within thirty (30) days after written notice from Lender in the
case of any other violation, default or breach, then the same shall be an Event of Default
hereunder; provided, however, in the case of a violation, default or breach referred to in clause
(iii) which is capable of cure but cannot reasonably be cured within such thirty (30) day period,
and provided Borrower or other Loan Party shall have commenced to cure such violation, default or
breach within such thirty (30) day period and thereafter diligently and expeditiously proceeds to
cure the same, such thirty (30) day period shall be extended for so long as it shall require
Borrower or such other Loan Party in the exercise of due diligence to cure such violation, default
or breach, but in no event shall such cure period extend beyond ninety (90) days following notice
from Lender of such violation, default or breach. Notwithstanding anything to the contrary Section
9.1 or the preceding provisions of this Section 9.2, if any event or circumstance would result in a
default or event of default under the Senior Loan Documents and the Senior Loan Documents provide a
shorter grace, notice or opportunity to cure, if any, than Section 9.1 or the preceding provisions
of this Section 9.2, then the grace, notice or cure period set forth in the Senior Loan Documents
shall be substituted for the grace, notice or cure period set forth in Section 9.1 or the preceding
provisions of this Section 9.2.



54









 





     Section 9.3. Remedies.



          (a) Upon the occurrence of any Event of Default and expiration of any applicable grace or cure
period, Borrower agrees that Lender may (but without any obligation to do so) take such action,
without notice or demand, as Lender deems advisable to protect and enforce its rights against
Borrower or any Loan Party and in and to the Collateral, including the following actions, each of
which may be pursued concurrently, separately or otherwise, at such time and in such order as
Lender may determine, in its sole and absolute discretion, without impairing or otherwise affecting
the other rights and remedies of Lender (and any and all costs and expenses, including Professional
Fees, paid or incurred by Lender in connection with the following shall constitute a Protective
Advance) and shall be payable on demand:




               (i) declare the entire unpaid Debt to be immediately due and payable; provided, however, if
any Event of Default as described in Section 9.1(f), (g) or (h) above shall occur, the entire
unpaid Debt shall be automatically due and payable, without any further notice, demand or other
action by Lender;



               (ii) institute proceedings, judicial or otherwise, or take any other action, for the
enforcement of Lender’s rights under the Loan Documents or at law
or in equity, including the foreclosure, auction or sale (public or private) of the Collateral
or any portion thereof;



               (iii) terminate, in whole or in part, any obligation Lender may have to make any advance
hereunder;



               (iv) institute an action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained in the Loan Documents;



               (v) recover judgment on the Note either before, during or after any proceedings for the
enforcement of the Loan Documents;



               (vi) exercise any and all rights and remedies granted to a secured party upon default under
any applicable Uniform Commercial Code;



               (vii) exercise all or any one or more of the rights, powers and other remedies available to
Lender against any of the Loan Parties under the Loan Documents, at law or in equity, at any time
and from time to time, whether or not all or any portion of the Debt shall be declared due and
payable, and whether or not Lender shall have commenced any foreclosure proceedings or other action
for the enforcement of its rights and remedies under any of the Loan Documents with respect to the
Collateral, including exercising all or any one or more of the rights, powers and remedies
available to Lender under the Guaranty;



55









 





               (viii) apply any sums then deposited in the Lockbox Account and any other sums held in escrow
or otherwise by Lender in accordance with the terms the Loan Documents to the payment of the Debt
in such order of payment as Lender shall elect;



               (ix) pay, perform, or cause the performance of (provided Lender shall have no obligation to do
so) such covenant or obligation; and



               (x) pursue such other remedies and rights as Lender may have under any Applicable Law or at
equity.



          (b) Default Rate. Upon the occurrence and during the continuance of an Event of
Default, 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 notice, 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 Debt (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 Debt, shall itself accrue interest at the same rate as the Loan and shall be
secured by the Collateral. This
paragraph shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of
the occurrence of any Event of Default; the acceptance of any payment of by Lender shall not be
deemed to cure or constitute a waiver of any Event of Default; and Lender retains its rights under
this Agreement and the other Loan Documents to accelerate and to continue to demand payment of the
Debt upon the happening of any Event of Default, despite any payments made to Lender after the
occurrence of such Event of Default.




          (c) Proceeds. The proceeds of any disposition of the Collateral, or any part thereof,
or any other sums collected by Lender pursuant to the Loan Documents, may be applied by Lender to
the payment of the Debt in such priority and proportions as Lender in its discretion shall deem
proper.




          (d) Lender Action. Upon the occurrence of any Event of Default, Lender may, but
without any obligation to do so and without notice to or demand on any Loan Party and without
releasing Borrower or any Loan Party from any Obligation, take any action in such manner and to
such extent as Lender may deem necessary to protect the Collateral and/or take any action to cure
any Event of Default, including any default under the Senior Loan, provided however, that cures of
defaults under the Senior Loan shall be after the expiration of 1/2 of any applicable cure period
granted by the Senior Loan Documents. Borrower, for itself and on behalf of each of the Loan
Parties, agrees that Lender is authorized to enter upon any of the Properties for such purposes, or
appear in, defend, or bring an action or proceeding to protect its interest in the Properties or to
collect the Debt, and the cost and expense thereof (including Professional Fees), shall constitute
a Protective Advance and shall be payable on demand.




56









 





          (e) No Cure. Lender’s or Senior Lender’s exercise of any right or remedy which has
the effect of remedying an Event of Default under the Loan Documents or any default under the
Senior Loan Documents shall not constitute a cure or waiver of such Event of Default.




          (f) Senior Loan. Lender’s remedies under this subsection shall be in addition to
Lender’s rights relating to the Senior Loan Documents set forth in Article VI of this Agreement.




          (g) No Waiver. The failure of Lender to insist upon strict performance of any term,
covenant or condition contained in the Loan Documents shall not be deemed to be a waiver,
modification, amendment or estoppel with respect to the enforcement of such term, covenant or
condition. No Loan Party shall be relieved or released from their respective Obligations by reason
of (i) the failure of Lender to comply with any request of any Loan Party to take any action to
enforce any of the provisions of the Loan Documents, (ii) the release, regardless of consideration,
of the whole or any part of the Collateral, or of any Person liable for the Debt or any portion
thereof, or (iii) any
agreement or stipulation by Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Loan Documents. Lender may resort for the payment of the Debt to
any Collateral held by Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of Lender thereafter to recover against the Collateral under
the Loan Documents. The rights of Lender under each of the Loan Documents shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the others. No act of
Lender shall be construed as an election to proceed under any one provision of any Loan Document to
the exclusion of any other provision. Lender shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at
law or in equity.




     Section 9.4. Costs of Enforcement. In the event of the (i) exercise of any remedy by
Lender under this Agreement or the other Loan Documents or following the occurrence of an Event of
Default, (ii) foreclosure of the Security Instruments or Pledge Agreements, (iii) bankruptcy,
insolvency, reorganization, rehabilitation, liquidation or other similar proceeding in respect of
any Loan Party or an assignment by any Loan Party for the benefit of its creditors, (iv)
enforcement of any obligations of or collection of any payments due from any Loan Party under this
Agreement, the other Loan Documents or with respect to the Collateral, or (v) incurring of any
costs or expenses by Lender in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a “work-out”, then Borrower, its
successors or assigns, shall pay to Lender on demand any and all expenses, including Professional
Fees, incurred or paid by Lender in connection therewith or in protecting Lender’s interest in the
Collateral or in collecting any amount payable hereunder or in enforcing Lender’s rights hereunder
with respect to the Collateral, whether or not any legal proceeding is commenced hereunder or
thereunder and whether or not any Unmatured Default or Event of Default shall have occurred and is
continuing, together with interest



57









 




thereon at the Default Rate from the date paid or incurred by
Lender until such expenses are paid by Borrower.




     Section 9.5. Additional Waivers. Borrower agrees that if an Event of Default is
continuing (i) to the maximum extent allowed by law, Lender is not subject to any “one action” or
“election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges
provided to Lender shall remain in full force and effect until Lender has exhausted all of Lender’s
remedies against the Collateral, the Security Instruments and the Pledge Agreements has been
foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been
paid in full.



ARTICLE X




EXCULPATION




     Section 10.1. Exculpation.



          (a) Lender may not enforce the liability and obligation of Borrower or any other Loan Party by
any action or proceeding against the Borrower wherein a money judgment shall be sought personally
against the Borrower, except pursuant to the provisions of Sections 10.3 and 10.4.
Notwithstanding the immediately preceding sentence or any other provision of this Agreement or any
other Loan Document, (A) Lender shall be entitled to exercise Lender’s rights and remedies under
any Guaranty against any Guarantor to the full extent provided therein without in any way being
restricted, limited or impaired by any provision or term contained in this Article X; and (B)
Lender may bring any foreclosure action, action for specific performance, UCC auction or sale
(public or private) or any other action or proceeding against Borrower or any other Loan Party
(“Remedial Action”) to enable Lender to enforce and realize upon Lender’s security interest and
Lien in and on the Collateral given to Lender pursuant to the Loan Documents; provided,
however, that, in the case of any Remedial Action referred to in this clause (B), subject to
the qualifications in clause (A), the qualifications below and the provisions of Sections 10.2,
10.3 and 10.4, any judgment in any such Remedial Action shall be enforceable against Borrower
and/or SHP Subsidiaries only to the extent of Borrower’s and/or SHP Subsidiaries’ interest in the
Collateral or other security given to Lender under the Loan Documents.




          (b) The provisions of this Article X shall not, however, (i) constitute a waiver, release or
impairment of any Obligation; (ii) impair the right of Lender to name any other Loan Party or any
other Person as a party defendant in any Remedial Action; (iii) affect the validity or
enforceability of any Guaranty or any of the rights and remedies of Lender against each Guarantor;
(iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement
of any Loan Document in respect of the Collateral described therein; (vi) prevent Lender from
seeking and obtaining a deficiency judgment against Borrower or any other Loan Party (except as
restricted by this Article X) or taking any other action or seeking and obtaining any other
judgment or remedy against Borrower or any Loan Party in order to (A) fully realize on the
Collateral




58









 







granted by the Loan Documents or (B) recover the full amounts guaranteed under each and
every Guaranty or (C) preserve Lender’s claims or causes of action or right to proceed under each
and every Guaranty or realize upon any Collateral securing the Obligations; (vii) prohibit Lender
from taking any action to perfect the Liens and security interests granted or created under or
pursuant to the Loan Documents in the Collateral; or (viii) prohibit Lender from taking any action
(including seeking a money judgment) to enforce the personal liability of the Borrower or any other
Loan Party to the extent set forth in Section 10.3 and 10.4 hereof.




     Section 10.2. Intentionally Omitted.



     Section 10.3. Full Recourse Events. Notwithstanding anything in this Agreement to the
contrary, including Section 10.1(a), the Debt shall be fully recourse to
Borrower and the provisions of Section 10.1(a) shall be wholly inapplicable ab initio,
and Borrower shall be fully personally liable for the payment and performance of the Obligations,
upon the occurrence of any one or more of the following events (collectively, the “Recourse
Events”, and individually, a “Recourse Event”): (i) the gross negligence or willful misconduct of
the SHP Subsidiaries, Guarantor or Borrower or any of their respective agents, managers, officers
or employees; (ii) the physical waste or willful destruction of the Properties or any material
portion thereof by any Loan Party, or any of their respective agents, managers, officers, employees
or Affiliates; (iii) any fraud by any Loan Party in connection with the Loan whether made prior to
or after the Closing Date; (iv) the removal or disposal of any portion of the Properties by any
Loan Party, or any of their agents, managers, officers or employees except as expressly permitted
by the Loan Documents; (v) any breach or violation or the occurrence of any prohibited actions with
respect to any of the events described in Sections 9.1(f), (g) or (h); (vi) any financial
information (including any financial information required by Section 5.16 of this Agreement)
concerning the Properties, SHP or any other Loan Party, whether provided to the Lender before or
after the Closing Date, is fraudulent in any material respect or any violation, breach or failure
to comply with Section 5.16 shall occur and Borrower shall fail to cure the same within fifteen
(15) days after notice thereof from Lender; (vii) any Loan Party or any other Person at the
direction of any Loan Party, in any judicial or quasi-judicial case, action or proceeding, directly
or indirectly contests the validity or enforceability of the Loan Documents or directly or
indirectly contests or intentionally hinders, delays or obstructs the pursuit of any Remedial
Action under the Loan Documents or pursuant to Applicable Law; (viii) Intentionally omitted;
(viii) any violation, breach or failure to comply with Section 7.1, Section 7.2, Section 7.3 or
Section 7.4; (ix) any breach of Section 5.29 or 5.31; (x) failure to maintain the insurance
coverages required by Section 5.6 or any failure of Borrower or any other Loan Party to pay any
deductible under any Policy after a loss covered by such Policy; (xi) the theft, misappropriation,
misapplication or conversion (whether intentional or unintentional) by any Loan Party of any
revenues of the Properties, Loss Proceeds, Distributions, Security Deposits or proceeds of the
Loan; (xii) any failure of Borrower to pay Lender’s or Servicer’s costs and expenses in accordance
with Section 11.22; (xiv) if any Loan Party takes any action or causes any




59










 




action to be taken by any Person without obtaining Lender’s consent if such action requires
Lender’s prior consent pursuant to the terms of this Agreement or any other Loan Document; (xiii)
any Loan Party incurs Indebtedness other than Permitted Debt or as otherwise permitted herein or
approved by Lender; or (xiv) any violation, breach or failure to comply with Section 5.26 or any
Loan Party takes any action which directly or indirectly interferes with the filing of any of the
Financing Statements by Lender or takes any action which directly or indirectly interferes with
Lender’s perfected first lien security interest in the Collateral or causes such security interest
(or any portion thereof) to be unperfected. The rights of the Lender under this Section 10.3 shall
be in addition to, and not in limitation of, the rights of Lender under Section 10.4.




     Section 10.4. No Waiver. Notwithstanding anything to the contrary in this Agreement
or any of the other Loan Documents (including the provisions of this Article X) Lender shall not be
deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any
other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt or to
require that all Collateral shall continue to secure all of the Debt owing to Lender in accordance
with the Loan Documents.



ARTICLE XI




MISCELLANEOUS




     Section 11.1. Further Assurances.



          (a) Borrower shall, and shall cause each Loan Party, to forthwith upon the execution and
delivery of this Agreement and thereafter, from time to time, at Lender’s reasonable request, cause
any of the Loan Documents (including any additional financing statements or continuation
statements) to be filed, registered or recorded in such manner and in such places as may be
required by any Applicable Law in order to publish notice of and fully to protect, perfect or
continue the perfection of any Lien or security interest in favor of Lender, and the interest of
Lender in, the Collateral. Borrower will pay or will cause the SHP Subsidiaries to pay, all taxes,
filing, registration or recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Loan Documents, any note or other agreements supplemental
thereto, any security instrument with respect to the Collateral and any instrument of further
assurance, and any Amendment of the foregoing documents, and all federal, state, county and
municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the
execution and delivery of the Loan Documents with respect to the Collateral or any instrument of
further assurance, and any Amendment of the foregoing documents, except where prohibited by law so
to do.




          (b) Borrower will, at the sole cost and expense of Borrower, and without expense to Lender,
(i) do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances, assignments, Financing Statements, continuation
statements, notices of assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the




60









 




better assuring, carrying out, conveying, assigning, transferring, pledging, hypothecating,
perfecting, preserving and confirming unto Lender the security interests, liens, property and
rights granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred
or intended now or hereafter so to be under the Loan Documents, or which Borrower may be or may
hereafter become bound to convey, assign, transfer, pledge, or hypothecate to Lender, or for
carrying out the intention or facilitating the performance of the terms of the Loan Documents and
(ii) furnish or cause to be furnished to Lender all instruments, documents, certificates, insurance
reports and agreements, and each and every other document, certificate, agreement and instrument
required to be furnished by Borrower or any other Loan Party pursuant to the terms of the Loan
Documents or reasonably requested by Lender in connection therewith. Borrower and each other Loan
Party, on demand, will execute and deliver and hereby authorizes Lender to execute in the name of
Borrower or such Loan Party or without the signature of Borrower or such other Loan Party to the
extent Lender may lawfully do so, one or more financing statements, or other instruments, to
evidence more effectively the security interest of Lender in the Collateral. Borrower and each
other Loan Party grants to Lender an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies available to Lender at law and
in equity or under the Loan Documents.




          (c) If any law is enacted or adopted or amended after the date of this Agreement which deducts
the Debt from the value of the Collateral for the purpose of taxation or which imposes a tax,
either directly or indirectly, on the Debt or Lender’s interest in the Collateral (other than
income, franchise and similar taxes), Borrower will pay the tax, with interest and penalties
thereon, if any. If at any time the United States of America, any State thereof or any subdivision
of any such State shall require revenue or other stamps to be affixed to the Note or any other of
the Loan Documents or impose any other tax or charge on the same, except for any tax or imposition
imposed on the income of Lender, Borrower will pay for the same, with interest and penalties
thereon, if any. If Borrower fails to pay such tax, with interest and penalties thereon within
twenty (20) Business Days after demand therefore is made by Lender, then Lender shall have the
option, by written notice of not less than ninety (90) days, to declare the Debt immediately due
and payable.




     Section 11.2. Bankruptcy. Borrower, Lender and each other Loan Party hereby
acknowledge and agree that upon the filing of a bankruptcy petition by or against any Loan Party
under any Bankruptcy Law, any amounts held in the Lockbox Account shall be deemed not to be
property of the bankrupt Loan Party’s bankruptcy estate within the meaning of Section 541 of the
Bankruptcy Code. In the event, however, that a court of competent jurisdiction determines that,
notwithstanding the foregoing characterization of the funds in the Lockbox Account, that the funds
in the Lockbox Account do constitute property of such Loan Party’s bankruptcy estate, then
Borrower, Lender and each other Loan Party hereby further acknowledge and agree that all such funds
in the Lockbox Account, whether due and payable before or after the filing of the petition, are and
shall be cash collateral of Lender. Borrower acknowledges that Lender does not consent to



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Borrower’s or any other Person’s use of such cash collateral and that, in the event Lender
elects (in its sole discretion) to give such consent, such consent shall only be effective if given
in writing signed by Lender. Except as provided in the immediately preceding sentence, Borrower
shall not have the right to use or apply or require the use or application of such cash collateral
unless (i) Borrower shall have received a court order authorizing the use of the same, and (ii)
Borrower shall have provided such adequate protection to Lender as shall be required by the
bankruptcy court in accordance with the Bankruptcy Code.



     Section 11.3. Lost Documents. Upon receipt of a “loss of document affidavit” executed
by Lender and Lender’s indemnity of Borrower (or, as applicable, another Loan Party), which shall
be in form and substance reasonably satisfactory to Borrower or otherwise customary in the
industry, with respect to all claims and losses arising from the loss, theft, destruction or
mutilation of any of the Loan Documents which are not of public record, and, in the case of any
such mutilation, upon surrender and cancellation of such mutilated Loan Document, Borrower will
issue, or cause to be issued (in the case of documents issued by other Loan Parties), in lieu
thereof, a replacement Loan Document, dated the date of such lost, stolen, destroyed or mutilated
Loan Document in the same principal amount thereof and otherwise of like tenor. Each party shall
be liable for its own costs and expenses in preparing and reviewing any replacement documents and
otherwise performing its agreements under this Section 11.3.



     Section 11.4. Principles of Construction. The following principles of construction
shall apply to this Agreement:



               (i) The titles and headings of the Articles, Sections and subsections of this Agreement have
been inserted for convenience of reference only and are not intended to summarize or otherwise
describe the subject matter of such Articles, Sections and subsections and shall not be given any
consideration in the construction of this Agreement.



               (ii) All references to Sections and Exhibits are to Sections and Exhibits in or to this
Agreement unless otherwise specified. Any reference to “this Section” in this Agreement shall mean
the Section in which such reference appears, and shall also be deemed refer to the subsections
contained in such Section.



               (iii) 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.



               (iv) The words “includes”, “including” and similar terms shall be construed
as if followed by
the words “without limitation.”



               (v) 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.



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               (vi) To the extent that any provision in this Agreement requires, expressly or implicitly,
performance, observance or compliance by any Person other than Borrower (but only including those
Persons who are affiliates, agents, managers or employees of Borrower or SHP Subsidiaries), such
provision shall be construed as Borrower’s obligation to cause such other Person to perform,
observe or comply with such provision, and, accordingly, the failure by such Person to perform,
observe or comply with such provision shall be considered a breach by Borrower of its obligations
under this Agreement. Further, whenever any provision of this Agreement prohibits any Person from
doing, or requires any Person to abstain from doing, any at or thing, such provision shall be
deemed to have been breached if such act or thing is done by any other Person acting by or on
behalf of such Person.



               (vii) Definitions contained in this Agreement or any other Loan Document which identify
documents, including this Agreement or any other Loan Document, shall be deemed to include all
Amendments thereto.



               (viii) Any reference in the Loan Documents to the successors or assigns of any Loan Party
shall not be construed to imply any consent or approval by Lender of any such succession or
assignment.



               (ix) Each Loan Party acknowledges and agrees that this Agreement and the other Loan Documents
shall not be construed more strictly against the Lender because the Lender or its legal counsel was
the primary draftsperson of this Agreement or such other Loan Document, as the case may be.



     Section 11.5. Parties Bound, Etc. The provisions of this Agreement shall be binding
upon and inure to the benefit of Borrower and Lender and their respective permitted successors and
assigns, provided nothing in this Section shall be deemed to give Borrower or any other Loan Party
the right to Transfer any interest in the Properties or Transfer any Ownership Interest except as
expressly permitted by Article VII.



     Section 11.6. Waivers. Lender may at any time and from time to time waive any one or
more of the conditions, requirements or obligations contained herein, but any such waiver shall be
deemed to be made in pursuance hereof and not in modification thereof, and any such waiver in any
instance or under any particular circumstance shall not be effective unless in writing and shall
not be considered a waiver of such condition in any other instance or any other circumstance.



     Section 11.7. Severability. If any term, covenant or provision of this Agreement or
any other Loan Document shall be held to be invalid, illegal or unenforceable in any respect, this
remainder of this Agreement or such other Loan Document shall remain in full force and effect and
shall be construed without such term, covenant or provision.



     Section 11.8. Release of Collateral. Lender may release, regardless of consideration,
any part of the Collateral without in any way impairing or affecting the validity, priority or
perfection of its Lien on or in the remaining Collateral.



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     Section 11.9. Notices. Any notice, request, demand, statement, authorization,
approval, consent or acceptance made hereunder shall be in writing and shall be (a) hand delivered
or (b) sent by overnight delivery via United Parcel Service or other reputable overnight courier
service, or (c) sent by registered or certified mail, postage prepaid with return receipt
requested, (d) sent by facsimile (with a confirmatory duplicate copy sent by first class United
States mail) and shall be deemed given (i) upon delivery, if delivered in person, (ii) one (1)
Business Day after being deposited with United Parcel Service or any other reputable overnight
courier service for overnight delivery, or (iii) three (3) Business Days after being postmarked and
addressed as follows if sent by registered or certified mail, return receipt requested or (iv) upon
receipt if sent by facsimile, in each case, addressed as follows:



If to Lender:


Fortress Credit Corp.

1345 Avenue of the Americas, 46th Floor

New York, New York 10105

Attention:      Dean Dakolias

Telephone:     212-798-6050

Facsimile:       212-202-3685

With a copy to:




Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: J. Philip Rosen, Esq.

Telephone: (212) 310-8604

Facsimile: (212) 310-8007




If to Borrower:

Summit Hotel Properties

2701 South Minnesota Avenue, Suite 6

Sioux Falls, South Dakota 57105

Attn: Hulyn Farr

Facsimile No: 605-3629388

Telephone No. 605-3619566




With a copy to:




Hagen, Wilka & Archer, P.C.

600 South Main Avenue, Suite 102

Sioux Falls, SD 57104

Attention: Jennifer L. Larsen, Esq.

Telephone: (605) 334-0005

Facsimile: (605) 334-4814




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Each party may designate a change of address or facsimile number by notice to the other party sent
pursuant to this Section, given at least fifteen (15) days before such change of address is to
become effective.




     Section 11.10. Modification. This Agreement may not be modified, amended or
terminated, except by an agreement in writing executed by Lender and Borrower. Borrower
acknowledges that the Loan Documents set forth the entire agreement and understanding of Lender and
the Loan Parties with respect to the Loan and that no oral or other agreements, understandings,
representations or warranties exist with respect to the Loan other than those expressly set forth
in the Loan Documents.



     Section 11.11. Usury Laws. This Agreement and the other Loan Documents are subject to
the express condition that at no time shall Borrower or any other Loan Party be obligated or
required to pay interest on the Debt at a rate which could subject the Lender or any holder of the
Loan Documents to either civil or criminal liability as a result of being in excess of the maximum
interest rate which Borrower or any other Loan Party is permitted by law to contract or agree to
pay. If by the terms of this Agreement or any other Loan Document, Borrower or any other Loan
Party is at any time required or obligated to pay interest on the principal balance of the Debt at
a rate in excess of such maximum rate, the rate of interest applicable to the Debt shall be deemed
to be immediately reduced to such maximum rate and the interest payable shall be computed at such
maximum rate and all prior interest payments in excess of such maximum rate shall be applied and
shall be deemed to have been payments in reduction of the principal balance of the Debt. In
determining whether or not the interest paid or payable, under any specific contingency, exceeds
the maximum nonusurious rate under applicable law, if any, the Borrower and Lender shall, to the
maximum extent permitted under applicable law, (a) characterize any nonprincipal amount as an
expense or fee rather than as interest, (b) exclude voluntary prepayments and the effects thereof,
or (c) ”spread” the total amount of interest throughout the entire term of the Debt and the
Obligations so that the interest rate is uniform throughout the entire term of the Debt and the
Obligations; provided, however, that if the Debt and Obligations are paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the maximum nonusurious rate, if any, Lender shall refund to
Borrower the amount of such excess.



     Section 11.12. Sole Discretion of Lender. Whenever pursuant to this Agreement or any
Loan Documents, Lender may approve or disapprove any act (or any action) or any document, delivery
or other item, or where Lender’s consent or approval is required in any respect or where any
document or other item must be satisfactory to Lender, except in those specific instances where
Lender has specifically agreed not to unreasonably withhold Lender’s consent pursuant to the terms
of this Agreement or any of the Loan Documents, Lender’s approval, disapproval or consent must be
in writing, and the decision of Lender to approve or disapprove or to decide whether arrangements
or terms are satisfactory or not satisfactory or to grant or withhold consent shall be in the sole,
absolute and unfettered discretion of Lender, without any express or implied obligation of
reasonableness whatsoever and shall be final and conclusive. Borrower



65









 







acknowledges and agrees that in no circumstance shall Borrower have any claim or cause of
action, in contract or in tort, against Lender as a result of the granting or withholding of any
such consent or approval. The inclusion of references to Lender’s sole or absolute discretion in
any particular provisions of this Agreement or any of the Loan Documents shall not limit or affect
the applicability of this Section to all provisions of this Agreement or any of the Loan Documents,
including those provisions wherein a specific reference to Lender’s sole and absolute discretion is
not made. Without limiting the preceding provisions of this Section, in the event that a claim or
adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed
acting in any case where, by Applicable Law or under this Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower
agrees that neither Lender, Servicer nor their agents or employees shall be liable for any special,
consequential or punitive damages whatsoever, whether in contract, tort (including negligence and
strict liability) or any other legal or equitable principles, under any circumstances whatsoever,
and Borrower’s sole remedy shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. Additionally, Borrower agrees that unless Lender acted with gross
negligence, recklessness, in bad faith or engaged in willful misconduct, neither Lender, Servicer
nor their agents or employees shall be liable for any monetary damages of any kind whether in
contract, tort (including negligence and strict liability) or any other legal or equitable
principles, and Borrower’s sole remedy shall be limited to commencing an action seeking injunctive
relief or declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably or in good faith shall be determined by an action
seeking declaratory judgment.



     Section 11.13. Absolute and Unconditional Obligation. Borrower and each other Loan
Party acknowledges that the payment and performance of the Obligations in accordance with the
provisions this Agreement and the other Loan Documents is and shall at all times continue to be
absolute and unconditional in all respects, and shall at all times be valid and enforceable
irrespective of any other agreements or circumstances of any nature whatsoever which might
otherwise constitute a defense to this Agreement or any other Loan Document or the Obligations or
otherwise with respect to the Loan.



     Section 11.14. Governing Law and Jurisdiction.



          (a) Governing Law. This Agreement was negotiated in part in the State of New York,
and the Loan was made by Lender in the State of New York, and the proceeds of the Loan delivered
pursuant hereto were disbursed from the State of New York, which state the Lender and each Loan
Party agrees has a substantial relationship to the Lender and each Loan Party and to the underlying
transaction embodied hereby, and in all respects, including matters of construction, validity and
performance, this Agreement 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 (excluding application
of any principle of conflict of laws which would direct the application of the law of any other
jurisdiction) and any Applicable Law of the United States of America. To the fullest extent
permitted by law, Borrower hereby unconditionally and irrevocably




66









 




waives any claim to assert that the law of any other jurisdiction governs this Agreement, and
this Agreement shall be governed by and construed in accordance with the laws of the state of New
York pursuant to §5-1401 of the New York General Obligations Law.




          (b) SUIT BY LOAN PARTIES. EACH LOAN PARTY HEREBY AGREES THAT ANY LEGAL SUIT, ACTION
OR PROCEEDING BROUGHT BY SUCH LOAN PARTY AGAINST LENDER ARISING OUT OF OR RELATING TO THE LOAN,
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS SHALL ONLY BE INSTITUTED IN COURTS OF THE STATE
OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK, NEW YORK OR THE UNITED STATES DISTRICT
COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK, NEW YORK. EACH LOAN PARTY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO BRING ANY LEGAL
SUIT, ACTION OR PROCEEDING AGAINST LENDER ARISING OUT OF OR RELATING TO THE LOAN, THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS IN ANY OTHER COURT OTHER THAN COURTS OF THE STATE OF NEW YORK
LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK, NEW YORK OR THE UNITED STATES DISTRICT COURT
LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK, NEW YORK.




          (c) SUIT BY LENDER. WITH RESPECT TO ANY CLAIM OR ACTION ARISING HEREUNDER OR UNDER
THE OTHER LOAN DOCUMENTS, BORROWER (i) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK, NEW YORK, (ii) AGREES THAT ALL SUCH CLAIMS OR ACTIONS MAY BE HEARD AND
DETERMINED IN SUCH COURTS OF THE STATE OF NEW YORK OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT AND (iii) IRREVOCABLY WAIVES ANY (A) OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
BROUGHT IN ANY SUCH COURT AND (B) ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM; PROVIDED, HOWEVER, EACH LOAN PARTY HEREBY
ACKNOWLEDGES AND AGREES THAT LENDER MAY COMMENCE ANY ACTION HEREUNDER OR UNDER THE LOAN DOCUMENTS
IN ANY JURISDICTION PERMITTED BY APPLICABLE LAW.




          (d) SERVICE OF PROCESS. PROCESS MAY BE SERVED BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS REFERRED TO IN SECTION 10.9 OF THIS AGREEMENT.




     Section 11.15. Waiver of Right to Trial By Jury. BORROWER, LENDER AND EACH OTHER LOAN
PARTY HEREBY EXPRESSLY WAIVE ANY



67









 







RIGHT TO TRIAL BY JURY FOR ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE
LOAN DOCUMENTS OR (b) IN ANY WAY RELATING TO THE LOAN DOCUMENTS OR THE SENIOR LOAN DOCUMENTS OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH,
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 BORROWER, LENDER AND EACH OTHER LOAN PARTY HEREBY AGREES AND CONSENTS THAT ANY OF
THEM MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL
BY JURY.



     Section 11.16. Waiver of Statutory Rights. Neither Borrower nor any other Loan Party
shall apply for or avail itself of any appraisement, valuation, stay, extension or exemption laws,
or any similar laws now existing or hereafter enacted, in order to prevent or hinder the
enforcement of the Loan Documents, but hereby waives the benefit of such laws to the full extent
that it may do so under Applicable Law. Borrower and each other Loan Party for itself and all who
may claim through or under it waives any and all right to have the property and estates comprising
the Collateral marshaled and agrees that any court having jurisdiction over any exercise of
Lender’s remedies may order the Collateral sold as an entirety or in separate parts. Borrower and
each other Loan Party hereby waives for itself and all who may claim through or under it, and to
the full extent it may do so under Applicable Law, any and all rights of redemption from sale under
any order or decree of foreclosure granted under any statute now existing or hereafter enacted.



     Section 11.17. Relationship. The relationship of Lender, and the one hand, and
Borrower and each other Loan Party, on the other hand, is strictly and solely that of lender and
borrower and nothing contained in the Loan Documents or any other document or instrument now or
hereafter executed and delivered in connection therewith or otherwise in connection with the Loan
is intended to create, or shall in any event or under any circumstance be construed as creating, a
partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature
whatsoever between Lender, on the one hand, and all or any of Borrower or any Loan Party, on the
other hand, other than as lender and borrower. Lender neither undertakes nor assumes any
responsibility or duty to Borrower or any other Loan Party, except as expressly provided in the
Loan Documents, or to any other Person.



     Section 11.18. Lender Assignment; Securitization.



          (a) Assignment. Borrower and each other Loan Party hereby acknowledges and agrees
that Lender currently has, and shall continue to have in the




68









 




future, the absolute and unconditional right at any time after the date hereof and at any time
during the term of the Loan, at Lender’s sole cost and expense, without giving any notice to or
requiring any consent or approval from Borrower, any Loan Party or any other Person to sell,
assign, pledge, hypothecate or otherwise transfer Lender’s interest in the Loan in whole or in
part, or to place one or more participation interests therein in one or more separate transactions,
or to effect a syndication or securitization of the Loan in one or more transactions, in each case
to or with such Persons, parties, entities or investors (including domestic or foreign banks,
insurance companies, pension funds, trusts, other institutional lenders or investors, natural
persons, grantor trusts, owner trusts, special purpose corporations, REMICs, FASITs, real estate
investment trusts or other similar or comparable investment vehicles) and on such terms and
conditions as Lender shall deem to be appropriate (in each case, a “Lender Transfer”).




          (b) Disclosure. In connection with any Lender Transfer, Lender shall have the
absolute and unconditional right without giving any notice to or obtaining the prior consent or
approval of any Loan Party or any other Person to disclose, deliver and to share with any
prospective purchaser or assignee of the Loan or of any securities or of any participation or other
interest therein (including any such interest to be acquired in connection with a syndication or
securitization of the Loan), or with any prospective rating agency, or their respective counsel or
representatives, such information (financial or otherwise), documents and instruments pertaining to
the Loan or any other Person, party or entity associated or connected with the Loan or the
Collateral or the Properties (collectively, the “Disclosure Material and Information”) as Lender
shall deem to be appropriate.




          (c) Cooperation. Borrower shall cooperate, and shall cause each other Loan Party and
each other Person (to the extent possible), associated or connected with the Loan or the Collateral
to cooperate, in all reasonable respects with Lender in connection with any Lender Transfer. At
Lender’s sole cost and expense, Borrower shall execute and deliver, and shall cause each Loan Party
and each other Person (to the extent possible) associated or connected with the Loan or the
Collateral or the Properties to execute and deliver, such documents and instruments as may be
reasonably necessary to (a) split the Loan into two or more loans evidenced by and pursuant to
separate sets of Note and other related loan documents, or (b) to modify the terms and provisions
of the Loan Documents, in each case to the full extent required by Lender to facilitate any Lender
Transfer, provided that (i) any such splitting or modification of the Loan will not adversely
affect or diminish the rights of any Loan Party as presently set forth in the Loan Documents and
will not increase the monetary obligations and liabilities or materially increase the non-monetary
obligations of any Loan Party under the Loan Documents, and (ii) if the Loan is split, the retained
interest of Lender, if any, in the Loan shall be allocated to or among one or more of such separate
loans in a manner specified by Lender.




          (d) Notice. Lender shall endeavor to provide notice to Borrower of a Lender Transfer
in a reasonably timely manner, but any failure by Lender to provide notice to Borrower shall not
give rise to any claim or defense on the part of any of the




69









 




Loan Parties, or limit the rights of Lender under this Section 11.18 or the Loan Documents.
Until otherwise directed in writing by Lender following a Lender Transfer, Borrower shall continue
to make all payments and deposits as required prior to such occurrence.




     Section 11.19. Brokers and Financial Advisors.



          (a) Borrower hereby represents to Lender that no Loan Party has dealt with financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with the transactions
contemplated by this Agreement, (except for Riverside Management Group, who shall be paid by
Borrower). Borrower agrees to indemnify and hold the Lender harmless from and against any and all
claims, liabilities, costs and expenses of any kind (including Professional Fees) in any way
relating to or arising from a claim by any Person that such Person acted on behalf of any Loan
Party in connection with the transactions contemplated herein. The provisions of this Section
shall survive the expiration and termination of this Agreement and the repayment of the Debt.




          (b) Lender hereby represents to Borrower that Lender has not dealt with financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Lender agrees to indemnify and hold the Borrower harmless from and
against any and all claims, liabilities, costs and expenses of any kind (including Professional
Fees) in any way relating to or arising from a claim by any Person that such Person acted
exclusively on behalf of Lender in connection with the transactions contemplated herein. The
provisions of this Section shall survive the expiration and termination of this Agreement and the
repayment of the Debt.




     Section 11.20. Offsets, Counterclaims and Defenses. Borrower and each Loan Party
hereby waives the right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way
connected with the Loan, the Loan Documents or the Obligations. Without limiting in any manner the
rights of any assignee of Lender’s interest at law or in equity, any assignee of Lender’s interest
in the Loan shall take the same free and clear of all offsets, counterclaims or defenses.



     Section 11.21. Payment of Expenses; Protective Advances.



          (a) Loan Expenses. Borrower covenants and agrees to pay Lender and/or Servicer all
reasonable out-of-pocket costs and expenses (“Loan Expenses”) including Professional Fees, incurred
by Lender or Servicer in connection with: (i) the Loan Parties’ ongoing performance of and
compliance with their respective agreements and covenants contained in the Loan Documents on their
part to be performed or complied with after the Closing Date, including confirming compliance with
environmental and insurance requirements; (ii) the negotiation, preparation, execution, delivery
and administration of any consents, amendments, waivers, extensions or other modifications to the
Loan Documents and any other documents or matters requested by




70









 




any Loan Party or by Lender; (iii) filing and recording fees and expenses, Lender’s UCC
Insurance Policies and reasonable fees and disbursements of counsel for providing to Lender all
required legal opinions, and other similar expenses incurred in creating and perfecting the Liens
in favor of Lender pursuant to the Loan Documents; and/or (iv) enforcing or preserving any rights,
in response to third party claims or the prosecuting or defending of any action or prosecution or
other litigation against the Collateral or any Loan Party. All Loan Expenses shall be due and
payable within fifteen (15) days of demand.




          (b) Protective Advances. Borrower covenants and agrees to pay Lender and/or Servicer
within twenty (20) days after demand all reasonable costs and expenses including Professional Fees,
paid by Lender in connection with or as a consequence of any Unmatured Default or Event of Default
under the Loan Documents or any default under the Senior Loan, any utility costs, ground lease
payments or any other costs which Lender determines in the exercise of its sole and absolute
discretion are necessary for the operation of the Properties or for the protection of the value
thereof (“Protective Advances”). Each Loan Party hereby acknowledges and agrees that all
Protective Advances shall be secured by the Loan Documents and be part of the Debt. The foregoing
shall be payable by Borrower to Lender or Servicer, as the case may be, with or without the filing
of any legal action or proceeding, and shall include any reasonable fees and expenses (including
Professional Fees) incurred in (i) any bankruptcy proceeding of any Loan Party; (ii) the collection
of the Debt, (iii) the enforcement of Lender’s rights and remedies under the Loan Documents, or
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
the Properties, any Loan Party, the Loan Documents or any other security given for the Loan or the
Properties; (iv) the payment of any transfer taxes in connection with the exercise of Lender of its
right under any or all of the Security Instruments or Pledge Agreements; (v) curing any defaults
under the Loan Documents; and (vi) any other payment which is permitted or designated as a
Protective Advance by any other provision of the Loan Documents. All Protective Advances made by
Lender under the Loan Documents shall be evidenced by, and be deemed to be advanced as principal
under, the Note, regardless of whether any such Protective Advance causes the principal balance of
the Note to exceed the face amount thereof, and shall be due and payable on demand. The making of
any Protective Advance by Lender shall constitute an Event of Default hereunder.




     Section 11.22. Servicer; Servicer Fees. Borrower acknowledges and agrees that at the
option of Lender, the Loan may be serviced by a servicer/trustee (the “Servicer”) selected by
Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and
the other Loan Documents to the Servicer pursuant to a servicing agreement between Lender and
Servicer; provided, however, such delegation will not release Lender from any of its obligations
under the Loan Documents. Borrower shall also be responsible for the payment of all out-of-pocket
costs and expenses incurred by Servicer in connection with the Loan, including for review and
approval of or consent to Leases, Property inspections, the participation in any Condemnation
proceedings, the



71









 







approval of any Casualty settlement or the enforcement of the Loan Documents. Any action or
inaction taken by the Servicer pursuant to this Agreement and the Loan Documents shall be binding
to the same extent as if taken by Lender, and Borrower shall be entitled to rely on all actions and
directions given by Servicer with respect to all matters concerning the Loan and Loan Documents
unless and until Borrower receives contrary written instructions from the Lender.



     Section 11.23. Rescission of Payments. If at any time all or any part of any payment
made by Borrower or any other Loan Party in connection with this Agreement or any other Loan
Document is rescinded or returned for any reason whatsoever (including the insolvency, bankruptcy
or reorganization of Borrower or any other Loan Party), then the Obligations of Borrower or such
Loan Party shall, to the extent of the payment rescinded or returned, be deemed to have continued
in existence notwithstanding such previous payment, and the Obligations of Borrower or such Loan
Party under the Loan Documents shall continue to be effective or be reinstated, as the case may be,
as to such payment, all as though such previous payment had never been made.



     Section 11.24. No Third Party Beneficiary. No Person other than Lender and Borrower,
Guarantor and any Loan Party and their permitted successors and assigns or any Indemnified Lender
Party shall have any rights under this Agreement.



     Section 11.25. Attorney-In-Fact. Borrower and each Loan Party hereby irrevocably
appoints and authorizes Lender, as its attorney-in-fact, which agency is coupled with an interest,
to execute and/or record in Lender’s or Borrower’s or such Loan Party’s name any notices,
instruments or documents that Lender deems appropriate to protect Lender’s interest under any of
the Loan Documents if Borrower fails to execute and deliver, or cause same to be executed and
delivered, within five (5) Business Days after written request by Lender, provided that Borrower is
required to execute and deliver same pursuant to this Agreement or the Loan Documents.



     Section 11.26. Lender Release. Lender may release, regardless of consideration, any
part of the Collateral without in any way impairing or affecting the validity, priority or
perfection of Lender’s Lien on and security interest in the remaining Collateral.



     Section 11.27. Counterparts. To facilitate execution, this Agreement may be executed
in as many counterparts as may be convenient or required. It shall not be necessary that the
signature of, or on behalf of, each party, or that the signature of all Persons required to bind
any party, appear on each counterpart. All counterparts shall collectively constitute a single
document. It shall not be necessary in making proof of this Agreement to produce or account for
more than a single counterpart containing the respective signatures of, or on behalf of, each of
the parties hereto. Any signature page to any counterpart may be detached from such counterpart
without impairing the legal effect of the signatures thereon and thereafter attached to another
counterpart identical thereto except having attached to it additional signature pages. For
purposes hereof, facsimile signatures shall be binding on the parties to this Agreement.



72









 





     Section 11.28. Time. Time is of the essence of each and every term of this Agreement
and the other Loan Documents, except and only to the extent specifically waived by Lender in
writing.



     Section 11.29. Indemnity. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD
HARMLESS LENDER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS (EACH AN
“INDEMNIFIED LENDER PARTY”) FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS,
ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING PROFESSIONAL FEES) WHICH
SUCH INDEMNIFIED LENDER PARTY MAY INCUR (OTHER THAN BY REASON OF SUCH INDEMNIFIED PARTY’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OR THE WILLFUL AND INTENTIONAL BREACH OF LENDER’S OBLIGATIONS
HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS AS A DIRECT OR INDIRECT CONSEQUENCE OF: (i) THE
GRANTING OF PLEDGE, THE LIEN ON THE COLLATERAL OR ANY INTEREST THEREIN OR LENDER’S ENFORCING
LENDER’S RIGHTS, AND REMEDIES UNDER THE PLEDGE AGREEMENT, SECURITY INSTRUMENTS OR THE OTHER LOAN
DOCUMENTS; (ii) THE COMPLIANCE OF THE PROPERTIES AND EACH PORTION THEREOF WITH APPLICABLE LAW;
(iii) THE PURPOSE TO WHICH BORROWER APPLIES THE LOAN PROCEEDS; (iv) THE FAILURE OF BORROWER TO
PERFORM, OR TO CAUSE ANY OTHER LOAN PARTY TO PERFORM, ANY OBLIGATIONS AS AND WHEN REQUIRED BY ANY
OF THE LOAN DOCUMENTS; (v) ANY FAILURE AT ANY TIME OF ANY OF BORROWER’S REPRESENTATIONS OR
WARRANTIES TO BE TRUE AND CORRECT; OR ANY ACT OR OMISSION BY ANY LOAN PARTY OR OTHER PERSON OR
ENTITY (OTHER THAN LENDER) WITH RESPECT TO THE PROPERTIES OR ANY PORTION THEREOF. BORROWER SHALL
IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS INDEMNITY, WITHIN THIRTY (30)
DAYS OF SUCH INDEMNIFIED LENDER PARTY’S DEMAND THEREFOR. BORROWER’S DUTY AND OBLIGATION TO DEFEND,
INDEMNIFY AND HOLD HARMLESS EACH LENDER INDEMNIFIED PARTY SHALL SURVIVE CANCELLATION OF THE NOTE
AND THE RELEASE, OR REASSIGNMENT OF ANY COLLATERAL.



     Section 11.30. ERISA Indemnification. Borrower shall, at Borrower’s sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and
against any and all Losses (including attorneys’ fees and costs incurred in the investigation,
defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale
of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA
that may be required, in Lender’s sole discretion) that Lender may incur, directly or indirectly,
as a result of a default under Sections 3.1(nn) or 5.30.



     Section 11.31. Publicity. All news releases, publicity or advertising by the Loan
Parties or their Affiliates through any media intended to reach the general public which



73









 







refers to the Loan Documents or the financing evidenced by the Loan Documents or to Lender, or
any of their Affiliates shall be subject to the prior written approval of Lender.



     Section 11.32. Amendments Included. Definitions contained in this Agreement or any
other Loan Documents which identify documents, including this Agreement or any other Loan
Documents, shall be deemed to include all amendments, modifications, supplements, novations,
restatements, renewals, and replacements to such documents, and assignments of such documents,
which may be entered into from time to time with Lender’s consent and in compliance with the
requirements of this Agreement.



     Section 11.33. Prior Agreements. This Agreement and the other Loan Documents 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, including any term sheets, discussion outlines or commitment letters (as same may be
amended) between any of the Loan Parties and Lender are superseded by the terms of this Agreement
and the other Loan Documents.



     Section 11.34. Captions. Captions and headings used in this Agreement and the other
Loan Documents are for convenience of reference only, and shall not affect the construction or
interpretation of this Agreement or the other Loan Documents.



     Section 11.35. Liability. If Borrower consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and several. This
Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns forever.



     Section 11.36. Accounting Matters. Except as otherwise provided in this Agreement,
all computations and determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with
Agreed Accounting Principles. If at any time a Loan Party has any Subsidiaries, all accounting and
financial terms herein shall be deemed to include references to consolidation and consolidating
principles, and covenants, representations and agreements with respect to a Loan Party and its
properties and activities shall be deemed to refer to such Loan Party and its consolidated
Subsidiaries collectively. Notwithstanding the above Lender acknowledges and agrees that annual
financial statements of the Guarantor shall be prepared in accordance with the income tax method of
accounting; and the quarterly or other interim financial statements for any person shall be
prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) to the extent
reasonably possible.



[SIGNATURES BEGIN ON NEXT PAGE]




74









 





          IN WITNESS WHEREOF, Lender and Borrower have duly executed this Agreement the day and year
first above written.




	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	SUMMIT HOTEL PROPERTIES, LLC,	 	 
	 	 	a South Dakota limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kerry W. Boekelheide	 	 
	 

	 	 	 	 

	 	 
	 	 	Name: Kerry W. Boekelheide,	 	 
	 	 	Title: Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	FORTRESS CREDIT CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Constantine Dakolias	 	 
	 

	 	 	 	 

	 	 
	 	 	Name: Constantine Dakolias	 	 
	 	 	Title: Chief Credit Officer	 	 






 









 





JOINDER AND CONSENT




          The undersigned (the “Joinder Party”) has reviewed the Loan Agreement (“Loan Agreement”) dated
as of March 5, 2007 between Fortress Credit Corp. (“Lender”), and Summit Hotel Properties, LLC, a
South Dakota limited liability company (“Borrower”), to which this Joinder and Consent has been
attached, and hereby covenants, represents, warrants, acknowledges and agrees that:




          (a) Joinder Party has read and reviewed each of the Loan Documents, and is familiar with the
terms and provisions thereof.




          (b) Joinder Party consents to the Borrower’s execution of the Loan Documents without
reservation or qualification.




          (c) Joinder Party covenants and agrees to cooperate with Borrower and each other Loan Party in
the performance and observance of all covenants and agreements contained in the Loan Agreement and
the other Loan Documents on the part of Borrower or any other Loan Party as necessary to comply or
facilitate Borrower’s or such other Loan Party’s compliance therewith.




          (d) Intentionally Omitted;




          (e) WHENEVER ANY PROVISION OF THE LOAN AGREEMENT PROVIDES FOR OR REFERS TO (i) THE
ACKNOWLEDGEMENT OR AGREEMENT OF A JOINDER PARTY, (ii) THE WAIVER OR RELEASE OF RIGHTS BY ANY
JOINDER PARTY, (iii) THE GRANT BY SUCH JOINDER PARTY OF A POWER OF ATTORNEY IN FAVOR OF LENDER OR
(iv) THE APPOINTMENT BY A JOINDER PARTY OF AN AGENT FOR THE SERVICE OF PROCESS, EACH JOINDER PARTY
HEREBY CONSENTS TO AND CONFIRMS SUCH ACKNOWLEDGEMENT, AGREEMENT, WAIVER, GRANT OR APPOINTMENT (AS
THE CASE MAY BE) AS BEING ITS ACKNOWLEDGMENT, AGREEMENT, WAIVER, GRANT AND APPOINTMENT AS FULLY AS
IF SUCH ACKNOWLEDGEMENT, AGREEMENT, WAIVER, GRANT OR APPOINTMENT (AS THE CASE MAY BE) WERE FULLY
SET FORTH HEREIN.




          (f) EACH JOINDER PARTY HEREBY WAIVES ANY AND ALL RIGHTS OR CLAIMS SUCH JOINDER PARTY NOW HAS
OR MAY HEREAFTER HAVE AGAINST BORROWER OR THE SHP SUBSIDIARIES, WHETHER BY WAY OF SUBROGATION,
CONTRIBUTION, REIMBURSEMENT OR OTHERWISE, ARISING BECAUSE OF SUCH JOINDER PARTY’S PAYMENT OR
PERFORMANCE OF ANY OF THE OBLIGATIONS.




          (g) EACH JOINDER PARTY ACKNOWLEDGES AND AGREES THAT IF THE DEBT IS NOT PAID IN FULL ON THE
MATURITY DATE (AS SCHEDULED OR EARLIER UPON ACCELERATION), AUTOMATICALLY AND WITHOUT FURTHER ACTION
OF ANY PERSON, ANY INDEBTEDNESS (AS




 









 




SUCH TERM IS DEFINED IN THE LOAN AGREEMENT) OF SHP SUBSIDIARIES OR BORROWER TO ANY JOINDER
PARTY OR TO ANY AFFILIATE OF ANY JOINDER PARTY, WHETHER EXISTING PRIOR TO, ON OR AFTER SUCH
MATURITY DATE, SHALL BE AND BECOME CANCELLED, VOID AND OF NO FORCE AND EFFECT, AND EACH JOINDER
PARTY, ON BEHALF OF THEMSELVES AND THEIR AFFILIATES) HEREBY IRREVOCABLY WAIVES ANY RIGHT, CLAIM OR
CAUSE OF ACTION TO COLLECT OR OBTAIN ANY REIMBURSEMENT, RETURN OR REPAYMENT OF SUCH INDEBTEDNESS.
THE FOREGOING SENTENCE SHALL BE APPLICABLE WHETHER OR NOT THE INDEBTEDNESS IS PERMITTED DEBT BUT
NOTHING CONTAINED HEREIN IS INTENDED TO PERMIT SHP SUBSIDIARIES OR BORROWER TO INCUR ANY
INDEBTEDNESS WHICH IS NOT PERMITTED DEBT.




          Further, the SHP Subsidiaries, as a Joinder Party, in addition to the agreements set forth
above, also hereby covenants, represents, warrants, acknowledges and agrees:




          (a) The SHP Subsidiaries hereby grants to Lender the right to enter upon the Properties to
conduct reasonable inspections in accordance the Loan Agreement and the other Loan Documents;




          (b) In the event that the SHP Subsidiaries fail to terminate any Affiliate Agreement within
the period required in the Loan Agreement, Lender shall have the right, and SHP hereby irrevocably
authorizes Lender and irrevocably appoints Lender as SHP’s attorney-in-fact coupled with an
interest, at Lender’s sole option, to terminate such Affiliate Agreement on behalf of and in the
name of the SHP Subsidiaries, and the SHP Subsidiaries hereby release and waive any claims against
Lender arising out of Lender’s exercise of such authority;




          (c) As a material inducement to Lender’s making the Loan to Borrower, the SHP Subsidiaries
hereby grants Lender the right to take any action to cure or attempt to cure on its behalf or
otherwise any default or asserted default under the Senior Loan Documents after the expiration of
one-half of the applicable cure period under the Senior Loan Documents (including the right to
enter upon the Properties);




          (d) Joinder Party hereby unconditionally and irrevocably waives the right to a jury trial as
provided in Section 11.15 of this Agreement; and




          (e) Without limiting Lender’s rights under the other Loan Documents, it is hereby expressly
understood and agreed that the execution of this Joinder and Consent by any Joinder Party shall not
make such Joinder Party liable to Lender for the payment of the Debt.




[END OF TEXT. SIGNATURES BEGIN ON NEXT PAGE]




 









 





          IN WITNESS WHEREOF, the undersigned have duly executed this Joinder and Consent the day and
year first above written.




	 	 	 	 	 	 	 
	 	 	SUMMIT HOTEL PROPERTIES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kerry W. Boekelheide	 	 
	 

	 	Name:
	 	 

Kerry W. Boekelheide
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	SUMMIT HOSPITALITY I, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kerry W. Boekelheide	 	 
	 

	 	Name:
	 	 

Kerry W. Boekelheide
	 	 
	 

	 	Title:
	 	Chief Manager	 	 
	 
	 	 	 	 	 	 
	 	 	SUMMIT HOSPITALITY II, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kerry W. Boekelheide	 	 
	 

	 	Name:
	 	 

Kerry W. Boekelheide
	 	 
	 

	 	Title:
	 	Chief Manager	 	 
	 
	 	 	 	 	 	 
	 	 	SUMMIT HOSPITALITY III, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kerry W. Boekelheide	 	 
	 

	 	Name:
	 	 

Kerry W. Boekelheide
	 	 
	 

	 	Title:
	 	Chief Manager	 	 
	 
	 	 	 	 	 	 
	 	 	SUMMIT HOSPITALITY IV, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Kerry W. Boekelheide	 	 
	 

	 	Name:
	 	 

Kerry W. Boekelheide
	 	 
	 

	 	Title:
	 	Chief Manager	 	 






 









 





EXHIBIT A




(Definition of Certain Terms)




          “ADA” means the Americans with Disabilities Act, 42 U.S.C. §§ 12101, et seq., as amended from
time to time, or any successor statute.




          “Additional Amount” shall mean $24,700,000.00.




          “Advance” means any advance of proceeds of the Loan made by Lender for any purpose pursuant to
the Loan Documents or any advance made by the Senior Lender for any purpose pursuant to the Senior
Loan Documents.




          “Affiliate” shall mean as to any specified Person, (i) any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under common control with
such Person, (ii) any Person owning or controlling 10% or more of the outstanding voting securities
of or other Ownership Interests in such Person, (iii) any officer, director, partner, employee or
member (direct or indirect and no matter how remote) of such Person, (iv) if such Person is an
individual, any entity for which such Person directly or indirectly acts as an officer, director,
partner, owner employee or member, (v) any entity in which such Person (together with the members
of his family if the Person in question is an individual) owns, directly or indirectly through one
or more intermediaries an interest in any class of stock (or other beneficial interest in such
entity) of 10% or more, (vi) any family member of such Person, (vii) any Loan Party, or (viii) any
direct or indirect owner of an interest in the Properties. Any reference in this Agreement to a
“Person and an Affiliate” shall be deemed to refer to such Person and an Affiliate of such
Person and any references in this Agreement to a “Person or an Affiliate” shall be deemed
to refer to such Person or an Affiliate of such Person. As used in this Agreement, the term
“control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and Policy and/or Policies of a Person, whether through ownership of
voting securities or other Ownership Interests, by contract or otherwise.




          “Affiliate Agreements” has the meaning set forth in Section 5.20.




          “Agreed Accounting Principles” shall mean GAAP or such other accounting methods or principles
acceptable to Lender in Lender’s sole discretion from time to time.




          “Amendments” means any and all amendments, modifications, extensions, replacements,
terminations, renewals, substitutions, consolidations, restatements, or supplements made from time
to time and expressly approved by Lender.




          “Annual Budget” has the meaning set forth in Section 5.38 of this Agreement.




A-1 









 





          “Applicable Law” means (i) all existing and future governmental statutes, laws, rules, orders,
regulations, ordinances, judgment decrees and injunctions of any Governmental Authorities
(including Environmental Laws and the ADA) affecting either the Lender, any Loan Party, the
Properties, any Collateral, or any part thereof, or the ownership, use alteration or operation of
the Properties, or any part thereof (whether now or hereafter enacted and in force), including
those relating to zoning, occupancy, building codes, health, fire and safety; (ii) all permits,
licenses and authorizations and regulations relating thereto; and (iii) all covenants, conditions
and restrictions contained in any agreements, recorded or unrecorded instruments or other documents
at any time in force (whether or not involving any Governmental Authority) affecting the Properties
or any part thereof which, in the case of this clause (iii), require repairs, modifications or
alterations in or to the Properties or any part thereof, or in any material way limit or restrict
the existing or Intended Use and enjoyment thereof.




          “Appraisal” means a written appraisal of the Properties prepared by an appraiser selected by
Senior Lender and reasonable approved by Lender, unless the Senior Loan is paid in full in which
case an appraiser selected by Lender.




          “Approved Accounting Firm” means an independent certified public accountants of recognized
national standing and constituting one of the largest four auditing firms in the United States or
any other accounting firm selected by the Borrower’s Audit Committee and approved by Lender in its
reasonable discretion.




          “Approved Manager” means either (i) The Summit Group, Inc. or (ii) another reputable and
experienced professional property management or leasing agent, as the case may be, approved by
Senior Lender in writing, provided that if under any circumstances, Senior Lender does not have the
right to approve such manager or agent, such manager or agent shall be approved by Lender.




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




          “Bankruptcy Law” means the Bankruptcy Code and any other existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or similar law, rule or regulation for the relief of debtors.




          “Borrower” has the meaning set forth in the introductory paragraph of this Agreement.




          “Borrower Estoppel Certificate” has the meaning set forth in Section 5.32 of this Agreement.




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




A-2 









 





          “Borrower’s Counsel Opinion”. An opinion of legal counsel in form and content satisfactory to
Lender covering such matters as Lender shall reasonably request, including: (a) organization,
legal existence, good standing and qualification of each Loan Party in each applicable
jurisdiction, (b) organizational power and authority of each Loan Party; (c) the due authorization,
execution and delivery of each of the Loan Documents by each Loan Party which is a party thereto;
(d) absence of litigation; (e) no violation of law; (f) no consents required; (g) the perfection of
security interests under Applicable Law; (h) the interest rate terms of the Loan do not violate any
applicable usury laws; (i) the enforceability of each of the Loan Documents under New York law and
(to the extent applicable) the jurisdiction where each of the Properties are located; (j) absence
of conflicts with Organizational Documents and Applicable Law; and (k) choice of law respected.




          “Borrower’s Knowledge” means the actual knowledge of any Loan Party any Loan Party’s officers
or managers.




          “Business Day” means any day other than (i) a Saturday or a Sunday and (ii) a day on which
federally insured depository institutions in the State of New York are authorized or obligated by
Applicable Law to be closed.




          “Casualty” has the meaning set forth in Section 5.7 of this Agreement.




          “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and any other
amendments thereto now or hereafter enacted.




          “Closing Date” means the date on which this Agreement is executed.




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




          “Collateral” means any and all property, real or personal, tangible or intangible, mortgaged,
assigned, pledged or transferred to Lender pursuant to the Loan Documents by any Loan Party as
security for the Obligations.




          “Condemnation” has the meaning set forth in Section 5.7(b)(ii) of this Agreement.




          “Debt” means, without duplication, (a) all amounts and indebtedness owing under the Loan
Documents, including the whole of the principal sum of the Note and all accrued and unpaid interest
thereon, together with any and all other sums due under the Note, including any Late Fees, Default
Interest, servicing fees, additional fees and costs, all as may be set forth with greater
specificity in the applicable terms and provisions of the Note or the other Loan Documents, (b) all
Protective Advances,




A-3 









 




including all sums advanced by Lender in connection with the Senior Loan or otherwise to
protect and preserve the Properties, the Loan, the Collateral and/or any of Lender’s Borrower’s
and/or Loan Party’s interests therein, (c) all Servicer Fees, (d) all Losses resulting from a
Recourse Event, (e) all Loan Expenses, (f) all other amounts agreed or provided to be paid by any
Loan Party in this Agreement and the other Loan Documents, and (g) all other sums advanced and
costs and expenses (including Professional Fees) incurred by Lender in connection with the
foregoing indebtedness or any part thereof, any renewal, extension, or change of or substitution
for the foregoing indebtedness or any part thereof, or the acquisition or perfection of the
security therefore, or the exercise by Lender of any remedies under the Loan Documents, whether
made or incurred at the request of Borrower or Lender or any other Person in connection with the
Loan.




          “Default Interest” has the meaning set forth in the Note.




          “Default Rate” shall have the meaning provided in the Note.




          “Distributions” shall have the meaning set forth in Section 5.19(b) of this Agreement.




          “Easement Areas” means real property which (a) directly abuts the Properties or (b) abuts a
public right-of-way, which real property is the subject of an irrevocable easement agreement
(whether or not recorded) which benefits the any of the Properties, all of which Easement Areas are
listed in Schedule A of the Owner’s Title Insurance Policy and the Lender’s Title Insurance Policy
so as to be included in the “insured property” description thereof.




          “Environmental Condition” means any of the following: (A) the actual, suspected, threatened
or alleged presence, release, abatement, cleanup, disposal, generation, handling, manufacture,
possession, remediation, removal, storage, transportation, treatment or use of any Hazardous
Material on, in, under or above all or any portion of the Properties or any surrounding areas or
(B) the actual, suspected, threatened or alleged violation of any Environmental Law with respect to
the Properties; or (C) the failure, suspected failure, threatened failure or alleged failure of the
Properties or any portion thereof or any Loan Party to obtain or to abide by the terms or
conditions of any permit or approval required under any Environmental Law with respect to the
Properties. A condition described above shall be deemed to be an Environmental Condition
regardless of whether or not any Governmental Authority has taken any action in connection
therewith.




          “Environmental Indemnity” has the meaning set forth in Section 2.1(m) of this Agreement.




          “Environmental Laws” has the meaning set forth in the Environmental Indemnity.




A-4 









 





          “Environmental Report” means a “Phase I Environmental Site Assessment” as referred to in the
ASTM Standards on Environmental Site Assessment for Commercial Real Estate, E 1527-94 (and, if
recommended in such Phase I environmental report, a “Phase II Environmental Assessment”), prepared
by an environmental auditor reasonably approved by Senior Lender, or Lender if Senior Loan is paid
in full, and delivered to Lender and any amendments or supplements thereto delivered to Lender and
shall also include any other environmental reports delivered to Lender pursuant to this Agreement
and the Environmental Indemnity, in form and substance reasonably acceptable to Lender, permitting
Lender to rely on the report.




          “Equity Contribution” shall have the meaning set forth in Section 4.1(e) of this Agreement.




          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended form time to
time, or any successor statute.




          “ERISA Affiliate” means each Person (as defined in Section 3(9) of ERISA) which together with
Borrower or any Subsidiary (as defined under ERISA) thereof, would be deemed to be a member of the
same “controlled group” within the meaning of Section 414(b), (c), (m) and (o) of the Code.




          “Event of Default” shall have the meaning provided in Section 9.1 of this Agreement.




          “Extended Maturity Date” means March 2, 2011. If such Extended Maturity Date is not a
Business Day, such Extended Maturity Date shall be the next succeeding Business Day.




          “Extension Conditions” has the meaning set forth in Section 1.6 of this Agreement.




          “Extension Notice” has the meaning set forth in Section 1.6 of this Agreement.




          “Extension Option” has the meaning set forth in Section 1.6 of this Agreement.




          “Financing Statements” means the UCC financing statements identified on Exhibit S attached
hereto, and such other UCC financing statements covering any Collateral as Lender may reasonably
require from time to time.




          “First Extension Option” has the meaning set forth in Section 1.6 of this Agreement.




          “Fiscal Year” means the 12-month period ending on December 31 of each year.




A-5 









 





          “Franchise Agreements” shall mean those certain Franchise Agreements effecting the Properties
as more particularly described on Exhibit J hereto.




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




          “Governmental Authority” means the United States of America, any state thereof, any political
subdivision of the United States of America or any state (including any city or county in such
states), and any department, commission, agency, board, bureau, court or administrative,
regulatory, adjudicatory, or arbitrational body or other instrumentality or agency of any kind or
any of them having jurisdiction in any way over the Properties, any Loan Party, or any other Person
referred to in this Agreement.




          “Guarantor” means The Summit Group, Inc., a South Dakota corporation.




          “Guaranty” means, individually and collectively, the Guaranty of Recourse Obligations and the
Environmental Indemnity.




          “Guaranty of Recourse Obligations” has the meaning set forth in Section 2.1 of this Agreement.




          “Hazardous Material” means any substance that is defined or listed as a hazardous, toxic or
dangerous substance under any present or future Environmental Law or that is otherwise regulated or
prohibited or subject to investigation or remediation under any present or future Environmental Law
because of its hazardous, toxic, or dangerous properties, including (i) any substance that is a
“hazardous substance” under CERCLA, and (ii) asbestos, petroleum, petroleum products and
polychrlorinated byphenyls. Notwithstanding anything to the contrary herein, the term “Hazardous
Material” shall not include commercially sold products otherwise within the definition of the term
“Hazardous Material”, but (A) which are used or disposed of by Borrower or used or sold by tenants
of the Properties in the ordinary course of their respective businesses, (B) the presence of which
product is not prohibited by applicable Environmental Law, and (C) the use and disposal of which
are in all respects in accordance with applicable Environmental Law.




          “Improvements” shall mean all related utilities, landscaping, access, appurtenances, site work
and off-site improvements, and all other interior and exterior improvements, tenant improvements,
fixtures, machinery, furnishings, equipment, supplies and other property of any kind owned by
Borrower or the SHP Subsidiaries and installed or located or to be installed or located on, within
or adjacent to the Properties.




          “Indebtedness” means, as applied to any Person, all of the obligations, liabilities and
indebtedness of such Person, contingent or otherwise, including the following: (a) all debt and
similar monetary obligations; (b) all liabilities secured by a




A-6 









 




mortgage, pledge, security interest, lien, charge or other encumbrance existing on property
owned or acquired subject thereto, whether or not any liability secured thereby shall have been
assumed by another Person and regardless of whether any of such liabilities are “recourse” or
“non-recourse” in nature; (c) all obligations arising under capital leases; (d) all guarantees,
endorsements and other contingent obligations for borrowed money, whether direct or indirect, in
respect of Indebtedness of others; (e) any agreement or obligation to reimburse, indemnify, defend
or hold harmless any Person under any circumstance; (f) currency swap or interest swap, cap or
collar arrangements; (g) the acquisition cost of any asset to the extent payable before or after
the time of acquisition or possession by the party liable where the advance or deferred payment is
arranged primarily as a method of raising capital or financing the acquisition of that asset; (h)
all obligations to reimburse any issuer in respect of any letter of credit; (i) all operating
expenses and Trade Payables, and (j) all indemnification obligations.




          “Indemnified Lender Party” shall have the meaning set forth in Section 11.29.




          “Independent Party” means each Person who is the “independent director” or “independent
manager” or “independent member”, as the case may be, of the SHP Subsidiaries and who satisfies at
all times the Independent Party Condition.




          “Independent Party Condition” means An “Independent Manager” (including the
Independent Managers set forth on Schedule C to the SPE Organizational Documents) shall
mean a manager of the Company who is a natural person and who is not at the time of initial
appointment, or at any time while serving as a manager of the Company, and has not been at any time
during the preceding five (5) years: (a) a stockholder, director (with the exception of serving as
an Independent Manager of the Company), officer, employee, partner, member (with the exception of
serving as a Springing Member or Special Member of the Company), attorney or counsel of the Company
or any Affiliate of the Company; (b) a lessee, creditor, customer, supplier or other person who
derives any of its purchases or revenues (other than any fee paid to such manager as compensation
for such manager to serve as an Independent Manager) from its activities with the Company or any
Affiliate of the Company (a “Business Party”); (c) a Person controlling or under common
control with any such stockholder, director, officer, employee, partner, member, attorney, counsel,
lessee, creditor, customer, supplier, or Business Party; or (d) a member of the immediate family of
any such stockholder, director, officer, employee, partner, member, attorney, counsel, lessee,
creditor, customer, supplier or Business Party, provided, that an individual who
otherwise satisfies the foregoing shall not be disqualified from serving as an Independent Manager
of the Company if such individual is at the time of initial appointment, or at any time while
serving as an Independent Manager of the Company, an independent director, member or manager of a
“special purpose entity” affiliated with the Company if such individual is an independent director,
member or manager provided by a nationally-recognized company that provides professional
independent directors, members and managers and other corporate services in the ordinary course of
its business. An individual that otherwise satisfies the foregoing shall not be disqualified from
serving as an Independent Manager




A-7 









 




of the Company if such individual is, at the time of initial appointment or at any time while
serving as an Independent Manager of the Company, an independent director, member or manager of a
“special purpose entity” affiliated with the Company (other than any mezzanine borrower). For
purposes of Section 9.5(a) of the SPE Organizational Documents, a “special purpose entity”
is an entity, whose organizational documents contain restrictions on its activities and impose
requirements intended to preserve the entity’s separateness that are substantially similar to those
of the Company, and that provide, inter alia, that it: (a) is organized for the limited
purpose of owning and operating certain property or, in a securitization context, the limited
purpose of issuing mortgage or asset-backed securities; (b) has restrictions on its ability to
incur indebtedness, dissolve, liquidate, consolidate, merge and/or sell assets; (c) may not file
voluntarily a bankruptcy petition on its own behalf without the consent of two persons who meet the
definition of and serve as “Independent Managers” with respect to the entity in question and (d)
shall conduct itself in accordance with certain “separateness covenants” substantially similar to
those set forth in Section 22 of the SPE Organizational Documents.




          “Initial Advance” shall mean the initial advance of $25,000,000.00.




          “Initial Advance Conditions” has the meaning set forth in Section 4.1 of this Agreement.




          “Intended Use” means the use of the Properties as a hotel, and uses related thereto,
including, but not limited to: meeting room rental; providing food service, food and toiletry
pantries, room service, lounge, bar, receptions and similar services; business centers; valet
services; and laundry and drycleaning.




          “Interest Advance” shall mean the interest advance of $24,700,000.00 in the manner set forth
in Section 1.6.




          “Interest Advance Date” shall have the meaning set forth in Section 1.6.




          “Interest Coverage Ratio” shall mean, on the applicable date of determination, the ratio of
(i) Net Operating Income (calculated as the gross income from operations less actual operating
expenses, adjusted for one-time items as approved by Lender is its sole discretion) for the
previous twelve (12) calendar months at the Properties, including the pro rata portion of real
property owned in part directly or indirectly by Borrower or SPE Owner and twelve (12) months of
actual operations, adjusted for one-time items as approved by Lender is its sole discretion, for
Property acquired by Borrower or SPE Owner within the previous twelve (12) calendar months, to (ii)
projected interest payments that would be due for the twelve (12) calendar month period immediately
following such calculation under the Note and Senior Loan, including the pro rata portion of real
property owned in part directly or indirectly by Borrower or SPE Owner, based on the Applicable
Interest Rate at the time of the test. Notwithstanding the foregoing, Borrower may exclude, at its
option any Property under construction or development/stabilization from the above calculation for
a period not to




A-8 









 




exceed 18 months after the earlier of (1) the purchase of such property or (2) the completion
of construction, in which case, neither the Net Operating Income nor the Senior Loan associated
with such Property shall be included until the expiration of such 18 month period or the sooner
inclusion of such at the Borrower’s option.




          “Interest Reserve Account” shall mean that certain account set up by Lender at LaSalle Bank
National Association which shall remain under Lender’s sole control at all times.




          “Joinder Party” shall have the meaning provided in the Joinder and Consent attached to this
Agreement.




          “Late Fees” has the meaning set forth in the Note.




          “Lease” means any lease, license, letting, concession, occupancy agreement or other agreement
(whether written or oral and whether now or hereafter in effect), existing as of the Closing Date
or hereafter entered into by the SHP Subsidiaries or Borrower or any other Loan Party, pursuant to
which any Person is granted a possessory interest in, or right to use or occupy all or any portion
of any space in the Properties, and every modification, amendment or other agreement relating to
such lease or other agreement entered into in connection with such lease or other agreement and all
agreements related thereto, and every guarantee of the performance and observance of the covenants,
conditions and agreements to be performed and observed by the other party thereto.




          “Lease Guaranty” means any guaranty or surety for the obligations of a tenant under the Lease,
including any letter of credit.




          “Lender” shall have the meaning set forth in the introductory paragraph of this Agreement.




          “Lender Termination Request” has the meaning set forth in Section 5.5(c) of this Agreement.




          “Lender’s Closing Expenses” means all out-of-pocket fees, costs and expenses and disbursements
of Lender and Servicer including all Professional Fees incurred by Lender or Servicer, in
connection with (i) the negotiation, preparation, execution and delivery of the Loan Documents and
the documents and instruments referred to therein, (ii) the creation, perfection or protection of
Lender’s Liens in the Collateral (including fees and expenses for title and lien searches and
filing and recording fees, intangible taxes, personal property taxes, due diligence expenses,
travel expenses, costs of appraisals, environmental reports, surveys and engineering reports), and
(iii) all due diligence expenses incurred in connection with the review and approval of the title,
survey, the Senior Loan Documents, Leases and other documents required to be reviewed by Lender in
connection with the underwriting, approval and closing of the Loan.




A-9 









 





          “Lender’s Insurance Consultant” means the Person or firm employed or engaged by Lender from
time to time to review and approve and make recommendations to Lender with respect to the insurance
required to be maintained pursuant to this Agreement and any existing Policy’s compliance
therewith.




          “Lender Transfer” has the meaning set forth in Section 11.18(a) of this Agreement.




          “Lender’s UCC Insurance Policy’ shall mean the Lender’s Policy of UCC insurance issued to
Lender (for example Eagle 9TM of UCC PlusTM).




          “Lien” means any mortgage, deed of trust, lien (statutory or other), pledge, hypothecation,
assignment, preference, priority, security interest, or any other encumbrance or charge (including
any conditional sale or other title retention agreement, any sale-leaseback, any financing lease
having substantially the same economic effect as any of the foregoing, the filing of any financing
statement or similar instrument under the applicable Uniform Commercial Code or comparable law of
any other jurisdiction, domestic or foreign, and mechanics’, materialmen’s and other similar liens
and encumbrances).




          “Loan” has the meaning provided in Section 1.1 of this Agreement.




          “Loan Expenses” has the meaning set forth in Section 11.21 of this Agreement.




          “Loan Extension Fee” means a fee for extending the Loan pursuant to Section 1.6 of this
Agreement in the amount of one percent (1.00%) of the outstanding amount of the Loan.




          “Loan Documents” means the documents set forth in Section 2.1 of this Agreement and any and
all other documents, instruments and agreements now existing or hereafter entered into, evidencing,
securing or otherwise relating to the Loan, together with any Amendments thereto.




          “Loan Fee” has the meaning set forth in Section 1.4 of this Agreement.




          “Loan Party” means each of the Borrower, SHP Subsidiaries, and the Guarantor.




          “Loan to Value Test” shall mean a test that will be satisfied if the aggregate outstanding
principal amount of the Loan, Senior Loan (and Additional Senior Loans, if applicable, as defined
below), Omaha Unsecured Debt and Equipment Debt is not greater than (a) from the Closing Date until
June 30, 2008, 72.5%, (b) from July 1, 2008 until June 30, 2009, 70%, and (c) from July 1, 2009
through the date on which the Debt is paid in full, 67.5%, of the “Value”. “Additional Senior
Loans” to be defined as all debt encumbering property under construction, any property of which
construction




A-10 









 




was completed within 18 months prior to determination of the Loan to Value Test and any
property which was acquired by Borrower or SPE owner within the 18 months prior to determination of
the Loan to Value Test, which Borrower chooses at Borrowers’ sole discretion to include on a
property-by-property basis in the Additional Senior Loans Value. Provided that the debt associated
with any property under construction or development will be limited to the applicable debt
outstanding, not the debt available for such property. Notwithstanding the foregoing, no property
may be excluded from the Loan to Value Test beyond that date that is the earlier of (i) 18 months
after acquisition of such property or (ii) 18 months after the completion of construction of such
property, and each excluded property shall automatically be included in the determination of the
Loan To Value Test using its Value, and the amount of debt encumbering such Property, at the end of
such 18 month period.




          “Lockbox Account” shall mean that certain account in the name of Borrower at the First
National Bank of Omaha which, pursuant to a deposit account control agreement, shall be subject to
Lender’s sole control upon the occurrence of an Event of Default.




          “Losses” means any and all claims, suits, liabilities (including strict liabilities and
contingent liabilities), actions, proceedings, obligations, debts, damages, losses, costs
(including any and all costs and expenses incurred in the preservation, restoration and protection
of the Collateral and other security for the Loan), expenses, diminution in value of the Collateral
or other security for the Loan, fines, penalties, charges, fees, expenses, judgments, awards,
amounts paid in settlement, consequential or punitive damages, lost profit and damages, costs and
expenses of whatever kind or nature (including Professional Fees and other costs of defense)
arising out of, incurred because of, or related to, any Recourse Event. Without limiting the
foregoing, Losses shall specifically include (i) any amount expended by Lender to cure, rectify or
remedy any Recourse Event or any consequence thereof, (ii) the amount of any Indebtedness of the
SHP Subsidiaries or Borrower paid by Lender which is not Permitted Debt and (iii) any and all costs
and expenses incurred by Lender in the preservation, restoration and protection of the Collateral
and other security for the Loan.




          “Loss Proceeds” has the meaning set forth in Section 5.7(c) of this Agreement.




          “Management Agreements” has the meaning set forth in Section 5.5(a) of this Agreement.




          “Manager Termination Notice.” has the meaning set forth in Section 5.5(c) of this Agreement.




          “Manager’s Subordination” means that certain Subordination of Management Agreement dated as of
even date herewith between the Approved Manager and Lender.




A-11 









 





          “Material Adverse Change” means the occurrence of any event or the failure of any event to
occur which has a material adverse effect upon (i) the business, operations, assets or condition
(financial or otherwise) of any Loan Party, (ii) the ability of any Loan Party to perform, or of
Lender to enforce, any material provision of the Loan Documents, (iii) the value or use of the
Properties or the operation thereof, (iv) the validity, priority or enforceability of any of the
Loan Documents or the ability of the Lender to enforce Lender’s legal remedies under the Loan
Documents, or (v) the Loan.




          “Material Adverse Effect” means a material adverse effect upon (i) the business operations,
assets or condition (financial or otherwise) of any Loan Party, (ii) the ability of any Loan Party
to perform any material provision of the Loan Documents or the ability of Lender to enforce any
material provision of the Loan Documents, or (iii) the value or use of the Properties or the
operation thereof, (iv) the validity, priority or enforceability of any of the Loan Documents or
the ability of the Lender to enforce Lender’s legal remedies under the Loan Documents, or (v) the
Loan.




          “Material Agreement” means all agreements entered into by a Loan Party (i) affecting or
relating to any individual Property requiring the payment of more than $50,000 in payments or
liability in any annual period, (ii) requiring the payment of $3,000,000 or more in the aggregate
in payments or liability, or (iii) which is not cancelable without penalty or premium on no more
than thirty (30) days notice other than the Management Agreements and the Leases. Notwithstanding
the foregoing, the Senior Loan Documents shall not be included in the definition of Material
Agreements.




          “Maturity Date” means the first to occur of (i) the Scheduled Maturity Date, as the same may
be extended in accordance with the provisions of Section 1.6 of this Agreement and (ii) the date on
which the Debt becomes due and payable pursuant to the provisions of the Loan Documents (whether by
acceleration or otherwise).




          “Note” has the meaning set forth in Section 2.1 of this Agreement.




          “Obligations” has the meaning provided in Section 2.2 of this Agreement.




          “Officer’s Certificate” means written certification addressed to Lender with respect to a
particular matter made by an individual authorized to act on behalf of Borrower and, to the extent
applicable, any authorized Person with respect to any Loan Party. Without limiting the foregoing,
if the individual signing the certificate is doing so on behalf of a corporation, then such
individual shall hold the office of President, Executive Vice President, Senior Vice President,
Vice President, Chief Financial Officer or Chief Accounting Officer (or the equivalent) with
respect to such corporation. Any such certificate may be based, insofar as it relates to legal,
accounting, architectural or engineering matters or matters customarily dealt with by experts, upon
the written advice of counsel, an accountant, architect, engineer or such expert, as applicable,
provided the individual signing the certificate believes in good faith that such reliance is
justified.




A-12 









 





          “Omaha Unsecured Debt“ means unsecured sums not to exceed $14,000,000 in the aggregate drawn
from that certain credit line pursuant to that certain [Loan Agreement] by and between the First
National Bank of Omaha and Borrower (“Omaha Loan Agreement”) as further described and limited
pursuant to Section 5.39 hereof.




          “Organizational Documents” shall mean (i) with respect to a corporation, such Person’s
certificate of incorporation and by-laws, and any shareholder agreement, voting trust or similar
arrangement applicable to any of such Person’s authorized shares of capital stock, (ii) with
respect to a partnership, such Person’s certificate of limited partnership, partnership agreement,
voting trusts or similar arrangements applicable to any of its partnership interests, (iii) with
respect to a limited liability company, such Person’s certificate of formation, limited liability
company agreement or other document affecting the rights of holders of limited liability company
interests, and (iv) any and all agreements between any constituent member, partner or shareholder
of the Person in question, including any contribution agreement or indemnification agreements. In
each case, “Organizational Documents” shall include any indemnity, contribution, shareholders or
other agreement among any of the owners of the entity in question.




          “Other Charges” has the meaning set forth in Section 5.12(a) of this Agreement.




          “Ownership Chart” has the meaning set forth in Section 3.1(l) of this Agreement.




          “Ownership Interest” means (i) any ownership interest in the Properties or (ii) any ownership
interest in a Loan Party, direct or indirect, contingent or fixed, at any level or any tier, of any
nature whatsoever, whether in the form of a partnership interest, stock interest, membership
interest, equitable interest, beneficial interests, profit interest, loss interest, voting rights,
control rights, management rights or otherwise.




          “Owner’s Title Insurance Policy” means, with respect to the Properties, each title insurance
policy insuring a Loan Party’s, or its affiliate’s as applicable, fee or leasehold interest in a
given Property.




          “Payment Date” has the meaning set forth in the Note




          “Permitted Debt” means (A) the Senior Loan; (B) Taxes and Other Charges not yet delinquent,
(C) Trade Payables and accrued expenses customarily paid within 30 days of incurrence, which are
incurred in the ordinary course of Borrower or SHP’ Subsidiaries’ ownership and operation of the
Properties, in amounts reasonable and customary for similar properties and otherwise in accordance
with the Annual Budget and at no time in excess of: (i) $15,000,000 in the aggregate for all
outstanding Trade Payables which are in fact no more than 30 days outstanding, (ii) $10,000,000 in
the aggregate for all outstanding Trade Payables which are in fact outstanding for greater




A-13 









 




than 30 days but no more than 45 days, and (iii) $5,000,000 in the aggregate for all
outstanding Trade Payables which are in fact outstanding for more than 45 days but no more than 90
days; provided that all outstanding Trade Payables may not exceed $15,000,000 in the aggregate at
any one time; (D) equipment, machinery, furniture and vehicle leases up to an aggregate amount of
$15,000,000 (collectively, “Equipment Debt”); and (E) such other unsecured indebtedness approved by
Lender in writing in Lender’s sole and absolute discretion (F) notes payable to Guarantor or
Affiliates resulting from advances to Borrower to purchase or construct real estate, fund
construction or remodeling, and finance operations, all in the ordinary course of business (G) sums
advanced under the Omaha Credit Line as permitted herein, and (H) any other debt otherwise
explicitly permitted herein.




          “Permitted Environmental Use” means, so long as no release thereof occurs, the use or
temporary storage of Hazardous Materials at the Properties compliance with all Environmental Laws
in the ordinary course of the use of the Properties and (B) of a type and in such quantities which
would not and could not impair the use of the Properties or any portion thereof or the value of the
Properties or any portion thereof should any release of such Hazardous Materials occur.




          “Permitted Exceptions” means (a) the lien of real property taxes, ground rents, water charges,
sewer rents and assessments, in each case not yet delinquent; (b) the exceptions set forth in
Exhibit F, none of which, individually or in the aggregate, materially interferes with the current
use of the Properties or the validity, enforceability, or perfection of any security intended to be
provided by the Loan Documents or with the Borrower’s ability to pay its obligations when they
become due, or the value of the Properties; (c) the mortgages, security agreements, encumbrances
and liens pursuant to, and such other title encumbrances, easements and covenants of record which
are “permitted exceptions” under, the Senior Loan; (d) Liens permitted pursuant to Section 5.12(a);
and (e) liens incurred pursuant to Permitted Debt, unless otherwise prohibited herein.




          “Permitted Lien” shall mean the Liens created by the Loan Documents and the Senior Loan
Documents and any Lien evidencing a Permitted Exception or Permitted Debt.




          “Person” means any individual, sole proprietorship, corporation, general partnership, limited
partnership, limited liability company or partnership, joint venture, association, joint- stock
company, bank, trust, land trust, estate, association, joint stock company, unincorporated
organization, any federal, state, county or municipal government (or any agency or political
subdivision thereof), endowment fund or any other form of entity.




          “Personal Property” shall have the meaning set forth in Section 5.11 of this Agreement.




A-14 









 





          “Pledge and Security Agreement” has the meaning set forth in Section 2.1 of this Agreement.




          “Policies” has the meaning provided in Section 5.6(a) of this Agreement.




          “Professional Fees” means reasonable all fees, costs and expenses of attorneys (including
reasonable fees billed for law clerks, paralegals and others not admitted to the bar but performing
services under the supervision of an attorney and customarily billed to clients and for witness
fees and court costs), accountants, appraisers, advisors and consultants and, in each case,
including document reproduction expenses, cost of exhibit preparation, courier charges and postal
and communication expenses and their other out-of-pocket expenses. The term includes fees and
expenses incurred after the filing of a voluntary or involuntary petition under any Bankruptcy Law.




          “Project Budget” has the meaning set forth in Section 4.2 of this Agreement.




          “Properties” has the meaning provided in the Recitals to this Agreement.




          “Property” has the meaning provided in the Recitals to this Agreement.




          “Protective Advances” has the meaning set forth in Section 11.21(b) of this Agreement.




          “Recourse Event” shall have the meaning set forth in Section 10.3 of this Agreement.




          “Restoration” shall have the meaning set forth in Section 5.7(a) of this Agreement.




          “Scheduled Maturity Date” means March 5, 2010. If such Scheduled Maturity Date is not a
Business Day, such Scheduled Maturity Date shall be the next succeeding Business Day.




          “Second Advance” shall mean the advances no more than monthly in amounts no less than
$5,000,000, not to exceed $25,000,000.00 in the aggregate, in the manner set forth in Section 4.2




          “Second Advance Notice” has the meaning set forth in Section 4.2 of this Agreement.




          “Second Extended Maturity Date” means March 2, 2012. If such Second Extended Maturity Date is
not a Business Day, such Second Extended Maturity Date shall be the next succeeding Business Day.




          “Second Extension Option” has the meaning set forth in Section 1.6 of this Agreement.




A-15 









 








          “Security Deposits” has the meaning set forth in Section 5.4(e) of this Agreement.




          “Security Instrument” has the meaning set forth in Section 2.1(f) of this Agreement.




          “Senior Lender” shall mean the lenders set forth in the Senior Loan Documents. In addition,
the term “Senior Lender” shall also include any other Person who has or acquires a direct interest
in the Senior Loan; provided that all references to the consent or approval of the Senior Lender
means the requisite Person or Persons having the right to consent or approve the same under the
Senior Loan Documents.




          “Senior Loan” means all loans pursuant to the Senior Loan Agreements set forth on Exhibit L to
this Agreement, together with any amendments, renewals or replacements thereof and all other
mortgage financing on the Properties and other real estate acquired or constructed by Borrower or
SHP Subsidiaries subsequent to the date hereof.




          “Senior Loan Agreements” means the agreements (and in some cases, mortgages or deeds of trust)
set forth on Exhibit L to this Agreement evidencing, securing or relating to the Senior Loan,
together with any Amendments thereto, amendments, renewals or replacements thereof and all other
agreements evidencing the material terms of all mortgage financings on the Properties and other
real estate acquired or constructed by any Loan Party subsequent to the date hereof.




          “Senior Loan Documents” means any and all ancillary documents and related agreements executed
in connection with the Senior Loan Agreements.




          “Servicer Fee” has the meaning set forth in Section 11.22 of this Agreement.




          “SH I” has the meaning provided in the Recitals to this Agreement.




          “SH II” has the meaning provided in the Recitals to this Agreement.




          “SH III” has the meaning provided in the Recitals to this Agreement.




          “SH IV” has the meaning provided in the Recitals to this Agreement.




          “SHP Subsidiaries” has the meaning provided in the Recitals to this Agreement.




          “SHP Subsidiary” has the meaning provided in the Recitals to this Agreement.




          “SHP Subsidiary Properties” has the meaning provided in the Recitals to this Agreement.




A-16 









 





          “Single Purpose Entity” means a limited liability company or limited partnership or a
corporation which (a) is organized solely for the purpose of, has not engaged and will not engage
in any business unrelated to, and has not and will not have any assets other than those related to,
the development, construction, ownership, maintenance and operation of the Properties or the direct
or indirect ownership of equity interests in the SHP Subsidiaries or Borrower (as applicable); );
and (b) such entity shall not:





     (A) engage in any business or activity other than the acquisition, development,
ownership, operation, leasing, managing and maintenance of the Properties, and entering
into the Loan, and activities incidental thereto;




     (B) acquire or own any material assets other than (i) the Properties, and (ii) such
incidental personal property as may be necessary for the operation of the Properties, as
the case may be;




     (C) merge into or consolidate with any person or entity or transfer or otherwise
dispose of all or substantially all of its assets or change its legal structure, or, to the
fullest extent permitted by law, dissolve, terminate or liquidate in whole or in part;




     (D) (i) fail to observe its organizational formalities or preserve its existence as an
entity duly formed, validly existing and in good standing under the laws of the State of
Delaware, and its qualification to do business in the States where the Properties are
located, if applicable, or (ii) without the prior written consent of Lender, amend, modify,
terminate or fail to comply with the provisions of the Certificate of Formation or this
Agreement;




     (E) own any subsidiary or make any investment in, any person without the prior written
consent of the respective Senior Lender;




     (F) commingle its assets with the assets of any of its members, affiliates, principals
or of any other person in a way that would prevent identification and separation of the
such entity’s assets or fail to use its own separate stationery, telephone number, invoices
and checks, provided, however, the day to day operations, management and
administration of the Properties shall be performed by property manager, as agent of such
entity, pursuant to the Management Agreement;




     (G) incur any debt, secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than the respective Senior Loan and those debts permitted by the
respective Senior Loan Documents, except for trade payables in the ordinary course of its
business of owning and operating the Properties, provided that such debt (i) is not
evidenced by a note, (ii) is paid within sixty (60) days of the date incurred, (iii) does
not exceed, in the aggregate, four percent (4%) of the outstanding principal balance of the
indebtedness



A-17 









 







incurred pursuant to the respective Senior Loan, and (iv) is payable to trade
creditors and in amounts as are normal and reasonable under the circumstances;




     (H) become insolvent and fail to pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) from its assets as the same shall
become due;




     (I) (i) fail to maintain its records (including financial statements), books of
account and bank accounts separate and apart from those of the members, principals and
affiliates of such entity and any other person, including the affiliates of a member or
principal of such entity, (ii) permit its assets or liabilities to be listed as assets or
liabilities on the financial statement of any other person, provided,
however, that such entity’s financial position, assets, liabilities, net worth and
operating results may be included in the consolidated financial statements of an affiliate,
provided, further, that such consolidated financial statements contain a
footnote indicating that such entity is a separate legal entity and that it maintains
separate books and records, or (iii) include the assets or liabilities of any other person
on its financial statements;




     (J) enter into any contract or agreement with any member, general partner, principal
or affiliate of such entity, guarantor or any member, general partner, principal or
affiliate thereof (other than a business management services agreement with an affiliate of
such entity, provided that (i) such agreement is acceptable to the respective Senior
Lender, (ii) the manager, or equivalent thereof, under such agreement holds itself out as
an agent of such entity, and (iii) the agreement meets the standards set forth in this
subsection (J) following this parenthetical), except upon terms and conditions that are
commercially reasonable, intrinsically fair and substantially similar to those that would
be available on an arm’s-length basis with third parties other than any member, general
partner, principal or affiliate of such entity, guarantor or any member, general partner,
principal or affiliate thereof;




     (K) to the fullest extent permitted by law, seek the dissolution or winding up in
whole, or in part, of such entity;




     (L) fail to correct any known misunderstandings regarding the separate identity of
such entity, or any member, principal or affiliate thereof or any other person;




     (M) guarantee or become obligated for the debts of any other person or hold itself out
to be responsible for the debts of another person, except as may be set forth under the
Omaha Loan Agreement and documents associated therewith;




     (N) make any loans or advances to any third party, including any member, general
partner, principal or affiliate of such entity, guarantor or any member, general partner,
principal or affiliate thereof, or acquire obligations or



A-18 









 







securities of any member, general partner, principal or affiliate of such entity,
guarantor or any member, general partner, or affiliate thereof;




     (O) fail to file its own tax returns or be included on the tax returns of any other
person except as required by applicable law;




     (P) fail either to hold itself out to the public as a legal entity separate and
distinct from any other person or to conduct its business solely in its own name or a name
franchised or licensed to it by a person other than an affiliate of such entity or
guarantor and not as a division or part of any other person, provided,
however, the day to day operations, management and administration of the Properties
shall be performed by property manager, as agent of such entity, pursuant to that certain
Management Agreement; (i) mislead others as to the identity with which such other party is
transacting business, or (ii) to suggest that such entity is responsible for the debts of
any third party (including any member, general partner, principal or affiliate of such
entity, guarantor or any member, general partner, principal or affiliate thereof);




     (Q) fail to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its contemplated
business operations;




     (R) share any common logo with or hold itself out as or be considered as a department
or division of (i) any principal, member or affiliate of such entity, (ii) any affiliate of
a principal or member, or (iii) any other person, provided, however, the
day to day operations, management and administration of the Properties shall be performed
by property manager, as agent of such entity, pursuant to that certain Management
Agreement;




     (S) fail to allocate fairly and reasonably any overhead expenses that are shared with
an affiliate, including paying for office space and services performed by any employee of
an affiliate;




     (T) pledge its assets for the benefit of any other person other than with respect to
the Loan;




     (U) fail to maintain a sufficient number of employees in light of its contemplated
business operations;




     (V) fail to hold its assets in its own name in a way that would prevent identification
and separation of such entity’s assets;




     (W) have any of its obligations guaranteed by an affiliate except guarantor in
connection with the respective Senior Loan; or




     (X) fail at any time to have at least two (2) independent managers.



A-19 









 





          Notwithstanding the above, to the extent that an SHP Subsidiary in existence on the date
hereof is required to be a “single purpose entity” by a Senior Loan, the restrictions and
requirements upon the respective SHP Subsidiaries as Single Purpose Entities are as set forth in
the Organization Documents of such SHP Subsidiaries.




          “SPE Owner” means, one or more newly formed, Single Purpose Entities formed solely for the
purpose of acquiring and owning Properties, and each subject to the pledge described in Sections
4.2(k) and 4.3(K) hereof. It is expressly agreed and understood that Borrower may form more than
one SPE Owner. Each SPE Owner may own one or more property and Borrower may transfer Properties
among SPE Owners upon notice to Lender. Lender agrees to reasonably cooperate with Borrower to
facilitate such transfers among SPE Owners.




          “Subdivision Map” shall have the meaning provided in Section 5.10 of this Agreement.




          “Survey” means, with respect to the Properties, a current title survey of the Properties,
certified to each Title Company and Lender and their successors and assigns, that (i) is in form
and content satisfactory to Lender; (ii) is prepared by a professional and properly licensed land
surveyor satisfactory to Lender in accordance with the Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys jointly established and adopted by ALTA, NSPS and ACSM in 1999; (iii)
and includes the following additional Table A items: 1, 2, 3, 4, 6, 7, 8, 9, 10 and 11; (iv)
reflects the same legal description contained in the Owner’s Title Insurance Policy; and (v)
contains a certification in form and substance reasonably acceptable to Lender, including a
certification that no portion of the Properties lies within a flood plain.




          “Sweep Event” shall mean the occurrence and continuance of an Event of Default or Unmatured
Default.




          “Taxes” has the meaning set forth in Section 5.12(a) of this Agreement.




          “Third Advance” shall mean the advances no more than monthly in amounts no less than
$5,000,000, not to exceed $25,000,000.00 in the aggregate, in the manner set forth in Section 4.3.




          “Third Advance Notice” has the meaning set forth in Section 4.3 of this Agreement.




          “Title Company” means LandAmerica Commercial Services.




          “Trade Payables” means unsecured amounts payable by or on behalf of SHP Subsidiaries or any
other Loan Party for or in respect of the operation of the Properties in the ordinary course,
including amounts payable to suppliers, vendors, contractors, mechanics, materialmen or other
Persons providing property or services to the Properties, Borrower or the SHP Subsidiaries.




A-20 









 








          “Transfer” means any transaction, transfer, sale, assignment, conveyance, mortgage, pledge,
hypothecation, encumbrance or other disposition, directly or indirectly, but not including such
transactions pursuant to the Permitted Encumbrances, Permitted Debt or Permitted Liens, of (A) the
Properties or any portion thereof or (B) any Ownership Interest of any Loan Party.




          “UCC Searches” means UCC searches of the SHP Subsidiaries, Borrower, and Guarantor in such
jurisdictions as Lender shall specify, covering personal property, fixtures, federal and state tax
liens, pending suits, bankruptcy, judgments, and which shall show that all Financing Statements
have been duly filed.




          “Unfunded Fee” has the meaning set forth in Section 1.5 of this Agreement.




          “Unfunded Fee A” has the meaning set forth in Section 1.5 of this Agreement.




          “Unfunded Fee B” has the meaning set forth in Section 1.5 of this Agreement.




          “Uniform Commercial Code” means the Uniform Commercial Code in effect in any applicable
jurisdiction.




          “Unmatured Default” means an event, condition or circumstance, the occurrence or existence of
which shall, upon the giving of notice or the passage of time, or both, constitute an Event of
Default.




          “Value“ means the value calculated by Borrower, and approved by Lender in its reasonable
discretion, on a quarterly basis with respect to any real property owned by Borrower or SPE Owner
(acquired at least 18 months prior to such determination date) including the pro rata portion of
real property owned in part directly or indirectly by Borrower or SPE Owner and Additional Senior
Loan Value (as described below). Provided that if at any time and with respect to any Property,
Lender disagrees with any such valuation in its reasonable discretion, Lender shall have the right
to require Borrower, at Borrower’s sole cost and expense, to obtain a new appraisal conducted by a
third party appraiser selected by Lender. Notwithstanding Lender’s failure to consent to the
valuation of any one or more Properties, if Lender reasonably consents to Borrower’s aggregate
valuation of all Properties, individual new appraisals will not be required on specific hotels.
“Additional Senior Loans Value” to be defined as Borrower’s valuation of any property under
construction, any property of which construction was completed within 18 months prior to the
determination of Value and any property which was acquired by Borrower or SPE Owner within the 18
months prior to the determination of Value, which Borrower chooses at Borrowers’ sole discretion to
include on a property-by-property basis. Notwithstanding the foregoing, Any property under
construction, if included in Value by Borrower, will be valued at the actual cost expended as of
the date of valuation.





A-21 









 





EXHIBIT C




(Litigation)





	1.	 	Maria Del Carmen Flores, Mirna Vega, Margarita Robles and Leonidio Garcia v. Summit
Hotel Group, Hampton Inns, Inc. and Gabriel Ayub
	 
	2.	 	City of Greenwood Village vs. Summit Hotel Properties, LLC
	 
	3.	 	Herbert Johnson, Denise Johnson, Maya Johnson vs. Steven J. Zeiler and The Summit
Group, Inc.
	 
	4.	 	Deborahlyn Davis-McLeod vs. The Summit Group, Inc., Fibercare, Inc.




C-1









 











EXHIBIT D




(Ownership Chart)




Ownership of Summit Hotel Properties, LLC (Borrower) as of December 31, 2006




	 	 	 	 	 	 	 	 	 
	Class of Ownership/Owners	 	Sharing Ratio
	Class A Members
	 	 	 	 	 	 	 	 
	Over 500 members in aggregate
	 	 	 	 	 	 	45.935	%
	 
	 	 	 	 	 	 	 	 
	Class A-1 Members
	 	 	 	 	 	 	 	 
	Over 125 members in aggregate
	 	 	 	 	 	 	3.106	%
	 
	 	 	 	 	 	 	 	 
	Class B Members
	 	 	 	 	 	 	 	 
	The Summit Group, Inc.
	 	 	4.6706	%	 	 	 	 
	Paul A. Schock
	 	 	0.0251	%	 	 	 	 
	Craig J. Aniszewski
	 	 	0.0858	%	 	 	 	 
	Schock Financial Services, Inc.
	 	 	1.1041	%	 	 	 	 
	Bluestem Capital Company, LLC
	 	 	0.1935	%	 	 	 	 
	Kirby Capital Corp.
	 	 	0.0046	%	 	 	 	 
	Jennifer L. Larsen
	 	 	0.0308	%	 	 	 	 
	Other 14 members in aggregate
	 	 	2.0001	%	 	 	 	 
	Total
	 	 	 	 	 	 	8.1146	%
	 
	 	 	 	 	 	 	 	 
	Class C Members
	 	 	 	 	 	 	 	 
	The Summit Group, Inc.
	 	 	 	 	 	 	42.8444	%
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	100.0000	%
	 
	 	 	 	 	 	 	 	 
	Ownership of Summit Hospitality I, LLC
	 	 	 	 	 	 	 	 
	Sole Member
	 	 	 	 	 	 	 	 
	Summit Hotel Properties, LLC
	 	 	 	 	 	 	100.0000	%
	 
	 	 	 	 	 	 	 	 
	Ownership of Summit Hospitality II, LLC
	 	 	 	 	 	 	 	 
	Sole Member
	 	 	 	 	 	 	 	 
	Summit Hotel Properties, LLC
	 	 	 	 	 	 	100.0000	%
	 
	 	 	 	 	 	 	 	 
	Ownership of Summit Hospitality III, LLC
	 	 	 	 	 	 	 	 
	Sole Member
	 	 	 	 	 	 	 	 
	Summit Hotel Properties, LLC
	 	 	 	 	 	 	100.0000	%
	 
	 	 	 	 	 	 	 	 
	Ownership of Summit Hospitality IV, LLC
	 	 	 	 	 	 	 	 
	Sole Member
	 	 	 	 	 	 	 	 
	Summit Hotel Properties, LLC
	 	 	 	 	 	 	100.0000	%






D-1









 






	 	 	 	 	 	 	 	 	 
	Class of Ownership/Owners	 	Sharing Ratio
	Ownership of Summit Group of Detroit, MI LLC
	 	 	 	 	 	 	 	 
	Sole Member
	 	 	 	 	 	 	 	 
	Summit Hotel Properties, LLC
	 	 	 	 	 	 	100.0000	%
	 
	 	 	 	 	 	 	 	 
	Ownership of Summit Group of Scottsdale, AZ LLC
	 	 	 	 	 	 	 	 
	Summit Hotel Properties, LLC
	 	 	 	 	 	 	49.0000	%
	Summit Hospitality of Scottsdale, AZ LLC
	 	 	 	 	 	 	36.0000	%
	Gary Tharaldson
	 	 	 	 	 	 	15.0000	%





D-2









 





EXHIBIT E




(Required Consents)



1. Borrower Board of Managers

2. The Summit Group, Inc. Board of Directors

3. First National Bank of Omaha

4. Metabank




E-1









 





EXHIBIT F




(Permitted Exceptions)




NONE




F-1









 








EXHIBIT J



(Material Agreements)




Franchise Agreements




	 	 	 	 	 
	Property Location	 	Brand	 	Franchise
	Salina KS

	 	Comfort Inn
	 	Comfort Inn Franchise Agreement (Choice)*
	Twin Falls ID

	 	Comfort Inn
	 	Comfort Inn Franchise Agreement (Choice)*
	Couer d’Alene ID

	 	Fairfield Inn
	 	Fairfield Inn Franchise Agreement (Marriott)*
	Salina KS

	 	Fairfield Inn
	 	Fairfield Inn Franchise Agreement (Marriott)*
	Ft. Smith AR

	 	Comfort Inn
	 	Comfort Inn Franchise Agreement (Choice)*
	Kennewick WA

	 	Comfort Inn
	 	Comfort Inn Franchise Agreement (Choice)*
	Kennewick WA

	 	Fairfield Inn
	 	Fairfield Inn Relicensing Franchise Agreement (Marriott)*
	Emporia KS

	 	Fairfield Inn
	 	Fairfield Inn Franchise Agreement (Marriott)*
	Boise ID

	 	Fairfield Inn
	 	Fairfield Inn Relicensing Franchise Agreement (Marriott)*
	Boise ID

	 	Hampton Inn
	 	Franchise License Agreement (Hilton)*
	Lakewood CO

	 	Fairfield Inn
	 	Fairfield Inn Relicensing Franchise Agreement (Marriott)*
	Lakewood CO

	 	Comfort Suites
	 	Comfort Inn Franchise Agreement (Choice)*
	Spokane WA

	 	Fairfield Inn
	 	Fairfield Inn Relicensing Franchise Agreement (Marriott)*
	Denver CO

	 	Fairfield Inn
	 	Fairfield Inn Relicensing Franchise Agreement (Marriott)*
	Provo UT

	 	Hampton Inn
	 	Franchise License Agreement (Hilton)*
	Overland Park KS

	 	Homewood Suites
	 	Franchise License Agreement (Hilton)*
	Missoula MT

	 	Comfort Inn
	 	Comfort Inn Franchise Agreement (Choice)*
	Lewiston ID

	 	Comfort Inn
	 	Comfort Inn Franchise Agreement (Choice)*
	Ellensburg WA

	 	Comfort Inn
	 	Comfort Inn Franchise Agreement (Choice)*
	Ft. Collins CO

	 	Hampton Inn
	 	Franchise License Agreement (Hilton)*
	Bellevue WA

	 	Fairfield Inn
	 	Fairfield Inn Relicensing Franchise Agreement (Marriott)*
	Lincoln NE

	 	Quality Suites
	 	Choice Hotels International Inc Franchise Agreement (Choice)*
	Sandy UT

	 	Comfort Suites
	 	Choice Hotels International Inc Franchise Agreement (Choice)*
	St. Joseph MO

	 	Comfort Suites
	 	Comfort Suites Franchise Agreement (Choice)*
	Vernon Hills IL

	 	Hawthorn Suites, LTD
	 	Hawthorn Suites Ltd. License Agreement (USFS)*
	Ft. Worth TX

	 	Comfort Suites
	 	Choice Hotels International Inc Franchise Agreement (Choice)*
	Twin Falls ID

	 	Holiday Inn Express & Suites
	 	License Agreement (IHG)*
	Lewisville TX

	 	Fairfield Inn
	 	Fairfield Inn Franchise Agreement (Marriott)*
	Emporia KS

	 	Holiday Inn Express & Suites
	 	License Agreement (IHG)*
	Charleston WV

	 	Country Inn & Suites
	 	License Agreement (Carlson)*
	Charleston WV

	 	Comfort Suites
	 	Choice Hotels International Inc Franchise Agreement (Choice)*
	Medford OR

	 	Hampton Inn
	 	Franchise License Agreement (Hilton)*
	Detroit MI

	 	Holiday Inn Express & Suites
	 	Holiday Inn Express & Suites Hotel Conversion License Agreement (IHG)






J-1









 






EXHIBIT J (continued)




	 	 	 	 	 
	Property Location	 	Brand	 	Franchise
	Denver CO

	 	Hampton Inn
	 	Franchise License Agreement (Hilton) *
	Pueblo CO

	 	Hampton Inn
	 	Franchise License Agreement (Hilton) *
	Baton Rouge LA

	 	Fairfield Inn
	 	Fairfield Inn Franchise Agreement (Marriott)
	Baton Rouge LA

	 	SpringHill Suites
	 	Springhill Suites Franchise Agreement (Marriott)
	Baton Rouge LA

	 	TownePlace Suites
	 	TownePlace Suites by Marriott Franchise Agreement (Marriott)
	Lithia Springs GA

	 	SpringHill Suites
	 	Springhill Suites by Marriott Franchise Agreement (Marriott)
	Little Rock AR

	 	SpringHill Suites
	 	Springhill Suites by Marriott Franchise Agreement (Marriott)
	Nashville TN

	 	SpringHill Suites
	 	Springhill Suites by Marriott Franchise Agreement (Marriott)
	Twin Falls ID

	 	Hampton Inn
	 	Franchise License Agreement (Hilton)
	Fenton MO

	 	Fairfield Inn
	 	Fairfield Inn Relicensing Franchise Agreement (Marriott)
	Germantown TN

	 	Courtyard by Marriott
	 	Courtyard by Marriott Relicensing Franchise Agreement (Marriott)
	Jackson MS

	 	Courtyard by Marriott
	 	Courtyard by Marriott Relicensing Franchise Agreement (Marriott)
	Jackson MS

	 	Hampton Inn & Suites
	 	Franchise License Agreement (Hilton)
	Fenton MO

	 	TownePlace Suites
	 	TownePlace Suites by Marriott Relicensing Franchise Agreement (Marriott)
	Boise ID

	 	Holiday Inn Express
	 	Holiday Inn Express Hotel Change of Ownership License Agreement (IHG)
	Germantown TN

	 	Fairfield Inn
	 	Fairfield Inn by Marriott Relicensing Franchise Agreement (Marriott)
	Germantown TN

	 	Residence Inn
	 	Residence Inn Relicensing Franchise Agreement (Marriott)
	Memphis TN

	 	Courtyard by Marriott
	 	Courtyard by Marriott Relicensing Franchise Agreement (Marriott)
	Missoula MT

	 	Courtyard by Marriott
	 	Courtyard by Marriott Franchise Agreement (Marriott)
	El Paso TX

	 	Hampton Inn & Suites
	 	Franchise License Agreement (Hilton)
	Ft. Smith AR

	 	Hampton Inn
	 	Franchise License Agreement (Hilton)
	Ft. Wayne IN

	 	Hampton Inn
	 	Franchise License Agreement (Hilton)
	Ft. Wayne IN

	 	Residence Inn
	 	Residence Inn by Marriott Relicensing Franchise Agreement (Marriott)
	Atlanta GA

	 	Hyatt
	 	Franchise Agreement (Amerisuites)
	Boise ID

	 	Cambria Suites
	 	Choice Hotels International, Inc. Franchise Agreement
	Jackson MS

	 	Residence Inn
	 	Residence Inn by Marriott Franchise Agreement (Marriott)
	Ft. Worth TX

	 	Hampton Inn & Suites
	 	Franchise License Agreement (Hilton)
	Bloomington MN

	 	Hampton Inn & Suites
	 	Franchise License Agreement (Hilton)
	Bloomington MN

	 	Cambria Suites
	 	Choice Hotels International, Inc. Franchise Agreement
	Ft. Collins CO

	 	Hilton Garden Inn
	 	Franchise License Agreement
	Flagstaff AZ

	 	Courtyard by Marriott
	 	Courtyard by Marriott Franchise Agreement (Marriott)
	Denver CO

	 	SpringHill Suites
	 	Springhill Suites by Marriott Franchise Agreement (Marriott)
	Baton Rouge LA

	 	Cambria Suites
	 	Choice Hotels International, Inc. Franchise Agreement







J-2









 






	 	 	 	 	 
	Property Location	 	Brand	 	Franchise
	San Antonio
	 	 	 	 
	(Broadway) TX

	 	Cambria Suites
	 	Choice Hotels International, Inc. Franchise Agreement
	Jacksonville FL

	 	aloft
	 	aloft Hotels New Build License Agreement
	San Antonio
	 	 	 	 
	(Legacy) TX

	 	aloft
	 	aloft Hotels New Build License Agreement
	San Antonio
	 	 	 	 
	(Legacy) TX

	 	Cambria Suites
	 	Choice Hotels International, Inc. Franchise Agreement
	Grapevine TX

	 	aloft
	 	aloft Hotels New Build License Agreement
	Grapevine TX

	 	element
	 	element Hotels New Build License Agreement








 




			
	*	 	Agreements were assigned to Summit Hotel Properties, LLC via Assignment and
Assumption Agreements executed prior to the Summit Hotel Properties, LLC roll-up
March 1, 2004.





Other Material Agreements




     None




J-3









 





EXHIBIT L




(Senior Loan Agreements)




Lehman Brothers Bank – 27 Hotels — $88,000,000





	 	1.	 	Loan Agreement – Summit Hospitality I, LLC, Borrower
	 
	 	2.	 	Deed of Trust/Mortgage, Security Agreement Financing Statement and Fixture Filing
(eighteen separate documents securing the respective properties financed by the lender)





ING Life Insurance – 6 Hotels — $34,150,000





	 	1.	 	Deed of Trust, Security Agreement Financing Statement and Fixture Filing (six
separate documents securing the respective properties financed by the lender)
	 
	 	2.	 	Construction Loan Agreement
	 
	 	3.	 	Side Letter, dated January 29, 2007





ING Life Insurance — 9 Hotels — $36,600,800





	 	1.	 	Deed of Trust, Security Agreement Financing Statement and Fixture Filing (eight
separate documents securing the respective properties financed by the lender)
	 
	 	2.	 	Loan Agreement
	 
	 	3.	 	Side Letter, dated January 29, 2007





ING Life Insurance — Jackson, MS Residence Inn





	 	1.	 	Mortgage, Security Agreement Financing Statement and Fixture Filing (First Priority)
	 
	 	2.	 	Deed of Trust, Security Agreement Financing Statement and Fixture Filing (five
separate documents securing a Second Priority on the respective properties financed under
the $34,150,000 transaction)
	 
	 	3.	 	Construction Loan Agreement
	 
	 	4.	 	Side Letter, dated January 29, 2007





ING Life Insurance — Fort Collins, CO Hilton Garden Inn & Suites





	 	1.	 	Deed of Trust, Security Agreement Financing Statement and Fixture Filing (First
Priority)
	 
	 	2.	 	Deed of Trust, Security Agreement Financing Statement and Fixture Filing (five
separate documents securing a Second Priority on the respective properties financed under
the $36,600,800 transaction)
	 
	 	3.	 	Construction Loan Agreement
	 
	 	4.	 	Side Letter, dated January 29, 2007





Financial Federal Savings Bank – Germantown, TN Courtyard by Marriott





	 	1.	 	Assumption Modification and Release Agreement – Summit Hospitality II, LLC, Borrower
	 
	 	2.	 	Deed of Trust, Assignment of Rents and Security Agreement





Financial Federal Savings Bank – Jackson, MS Courtyard by Marriott





	 	1.	 	Assumption Modification and Release Agreement – Summit Hospitality III, LLC, Borrower
	 
	 	2.	 	Deed of Trust, Assignment of Rents and Security Agreement






L-1









 




Financial Federal Savings Bank – Jackson, MS Hampton Inn




	 	1.	 	Assumption Modification and Release Agreement – Summit Hospitality IV, LLC, Borrower
	 
	 	2.	 	Deed of Trust, Assignment of Rents and Security Agreement





Chambers Bank – Ft. Smith, AR Aspen Hotel





	 	1.	 	Promissory Note
	 
	 	2.	 	Mortgage





U.S. Bank National Association – Kennewick, WA Fairfield Inn





	 	1.	 	Credit Agreement
	 
	 	2.	 	Amendment No. 1 to Promissory Note and Credit Agreement
	 
	 	3.	 	Loan Modification Agreement
	 
	 	4.	 	Deed of Trust (Security Agreement)





MetaBank, f/k/a First Federal Saving Bank of the Midwest – Kennewick, WA Comfort Inn





	 	1.	 	Commercial Loan Agreement
	 
	 	2.	 	Commercial Debt Modification Agreement
	 
	 	3.	 	Real Estate Deed of Trust





MetaBank – Boise, ID Cambria Suites





	 	1.	 	Commercial Loan Agreement
	 
	 	2.	 	Commercial Debt Modification Agreement (4/27/2006)
	 
	 	3.	 	Commercial Debt Modification Agreement (12/1/2006)
	 
	 	4.	 	Real Estate Deed of Trust
	 
	 	5.	 	Real Estate Deed of Trust – St. Joseph, MO Comfort Suites
	 
	 	6.	 	Construction Loan Disbursement Agreement





Scott Financial Corporation – Ellensburg, WA Comfort Inn





	 	1.	 	Term Loan Agreement
	 
	 	2.	 	Leasehold Deed of Trust and Security Agreement
	 
	 	3.	 	Side Letter, dated November 24, 2003





Scott Financial Corporation – Lewiston, ID Comfort Inn





	 	1.	 	Term Loan Agreement
	 
	 	2.	 	Deed of Trust, Security Agreement, Fixture Financing Statement and Assignment of
Leases and Rents
	 
	 	3.	 	Side Letter, dated November 24, 2003





Scott Financial Corporation – Pueblo, CO Hampton Inn





	 	1.	 	Construction and Term Loan Agreement
	 
	 	2.	 	First Amendment to Construction and Term Loan Agreement
	 
	 	3.	 	Second Amendment to Loan Agreement and Related Documents
	 
	 	4.	 	Deed of Trust, Security Agreement, Fixture Financing Statement and Assignment of
Leases and Rents




L-2









 











Scott Financial Corporation – Detroit, MI Holiday Inn Express





	 	1.	 	Construction Loan Agreement
	 
	 	2.	 	First Amendment to Construction Loan Agreement
	 
	 	3.	 	Combination First Construction Mortgage, Security Agreement, Assignment of Leases and
Rents, and Fixture Financing Statement





M & I Marshall and Illsley Bank – Bloomington, MN Hampton Inn & Suites





	 	1.	 	Loan Agreement
	 
	 	2.	 	Real Estate Mortgage, Security Agreement and Financing Statement and Assignment of
Leases and Rents
	 
	 	3.	 	Disbursing Agreement





M & I Marshall and Illsley Bank – Bloomington, MN Cambria Suites





	 	1.	 	Loan Agreement
	 
	 	2.	 	Real Estate Mortgage, Security Agreement and Financing Statement and Assignment of
Leases and Rents
	 
	 	3.	 	Disbursing Agreement





BNC National Bank – Fort Worth, TX Hampton





	 	1.	 	Construction and Term Loan Agreement
	 
	 	2.	 	Addendum A To Construction And Term Loan Agreement
	 
	 	3.	 	Construction Deed of Trust, Security Agreement, Fixture Financing Statement and
Assignment of Leases and Rents





First National Bank of Omaha – Credit Pool





	 	1.	 	Loan Agreement
	 
	 	2.	 	First Amendment of Loan Agreement
	 
	 	3.	 	Second Amendment to Loan Agreement
	 
	 	4.	 	Third Amendment of Loan Agreement
	 
	 	5.	 	Deed to Secure Debt – Atlanta, GA Amerisuites
	 
	 	6.	 	Deed of Trust – Fenton, MO Fenton Fairfield Inn
	 
	 	7.	 	Deed of Trust – Fenton, MO Fenton TownePlace Suites
	 
	 	8.	 	First Amended and Restated Mortgage – Ft. Wayne, IN Residence Inn





First National Bank of Omaha – Acquisition Line





	 	1.	 	Loan Agreement
	 
	 	2.	 	First Amendment of Loan Agreement
	 
	 	3.	 	Second Amendment of Loan Agreement
	 
	 	4.	 	Third Amendment of Loan Agreement
	 
	 	5.	 	Fourth Amendment of Loan Agreement
	 
	 	6.	 	Fifth Amendment of Loan Agreement
	 
	 	7.	 	Sixth Amendment of Loan Agreement





JPMorgan Chase Bank – Scottsdale, AZ Courtyard by Marriott and Springhill Suites





	 	1.	 	Note and Deed of Trust Assumption Agreement
	 
	 	2.	 	Deed of Trust, Assignment of Leases and Rents and Security Agreement





L-3









 





EXHIBIT M




Special Assessments for Public Improvements




	 	 	 
	Quality Suites, Lincoln, NE

	 	Sewer Assessment ($18,200 original assessment, $10,969.44.00
outstanding. Annual amortization of $914.12)






M-1









 





EXHIBIT N




(Initial Annual Budget)




Summit Hotel Properties, LLC FYE 2007 Budget




	 	 	 	 	 
	ROOM SALES
	 	$	122,265,217	 
	PHONE REVENUE
	 	 	200,883	 
	VENDING AND LOBBY REVENUE
	 	 	96,830	 
	OTHER OPERATING
	 	 	1,305,470	 
	TOTAL OPERATING REVENUE
	 	 	123,868,399	 
	 
	 	 	 	 
	MANAGEMENT/ASS’T/SALES WAGES
	 	 	4,894,097	 
	FRONT DESK WAGES
	 	 	5,731,077	 
	HOUSEKEEPING WAGES
	 	 	8,241,709	 
	OTHER WAGES
	 	 	4,497,885	 
	PAYROLL TAXES AND BENEFITS
	 	 	4,559,666	 
	TOTAL PAYROLL COSTS
	 	 	27,924,434	 
	 
	 	 	 	 
	LINENS
	 	 	468,167	 
	CLEANING AND LAUNDRY SUPPLIES
	 	 	566,983	 
	GUEST ROOM SUPPLIES
	 	 	1,543,039	 
	COMPLIMENTARY FOOD & BEVERAGE
	 	 	3,504,956	 
	OFFICE SUPPLIES AND POSTAGE
	 	 	474,090	 
	UTILITIES
	 	 	5,476,391	 
	PHONE
	 	 	1,230,813	 
	REPAIRS AND MAINTENANCE
	 	 	3,217,916	 
	ADVERTISING
	 	 	747,426	 
	MISC. OPERATING EXPENSE
	 	 	2,621,713	 
	BAD DEBT EXPENSE
	 	 	26,892	 
	CONTROLLABLE EXPENSES
	 	 	19,878,386	 
	TOTAL CONTROLLABLE EXP.
	 	 	47,802,820	 
	 
	 	 	 	 
	CONTRIBUTION TO PROFIT
	 	 	76,065,580	 
	 
	 	 	 	 
	PROPERTY TAXES
	 	 	4,300,732	 
	INSURANCE
	 	 	1,107,649	 
	CABLE AND SATELLITE TV
	 	 	795,780	 
	CREDIT CARD/ AGENT COMMISSIONS
	 	 	4,967,334	 
	MANAGEMENT EXPENSES
	 	 	3,856,973	 
	LEGAL AND ACCOUNTING
	 	 	886,449	 
	ROYALTIES
	 	 	5,423,901	 
	AD FUND FEE/RESERVATION FEE
	 	 	7,062,531	 
	TOTAL FIXED EXPENSES
	 	 	28,401,349	 
	 
	 	 	 	 
	NET OPERATING INCOME (LOSS)
	 	 	47,664,231	 
	 
	 	 	 	 
	INTEREST INCOME
	 	 	562,212	 
	INTEREST EXPENSE
	 	 	(13,399,329	)
	 
	OPERATING LEASE and STATE INCOME TAX
	 	 	(919,022	)
	NET INCOME (LOSS) BEFORE DEPRECIATION
	 	 	33,908,091	 
	DEPRECIATION AND AMORTIZATION
	 	 	(11,336,192	)
	 
	 	 	 	 
	NET INCOME (LOSS)
	 	 	22,571,899	 







N-1









 





EXHIBIT O




(List of Required Items)




          (f) UCC-9 Insurance Policies.




          (g) Intentionally Omitted.




          (h) Intentionally Omitted.




          (i) Intentionally Omitted.




          (j) Intentionally Omitted.




          (k) UCC Searches. UCC Searches dated not later than five (5) Business Days prior to
Closing Date (and updates prior to the Initial Funding Date, as Lender may require in Lender’s
discretion).




          (l) Disbursement Statement. Detailed closing statement prepared by the Title Company
and signed by Borrower.




          (m) Closing Instruction Letter. Disbursement instruction or escrow letter, signed by
the authorized representative of Borrower, Lender and Title Company, irrevocably instructing Lender
to fund the proceeds of the Loan being advanced on the Closing Date in accordance with the closing
statement.




          (n) Leases. Copies of all executed Leases, certified by the Borrower as being true,
correct and complete.




          (o) Intentionally Omitted.




          (p) Approved Management Agreement. A copy of the Management Agreement certified by
Borrower as being true, correct and complete.




          (q) Intentionally Omitted.




          (r) Material Agreements. A Copy of all Material Agreements as may have already been
executed certified by the Borrower as being true, correct and complete.




          (s) Annual Budget. A copy of the initial Annual Budget.




          (t) Permits. Intentionally Omitted.




          (u) Insurance Policies. The Policies or certified copies thereof satisfying the
requirements of Section 5.6 of this Agreement, and evidence that the premiums in respect of such
insurance Policies are fully paid, together with endorsements




O-1









 






thereto showing Lender as an additional insured and loss payee as set forth in Section 5.6.




          (v) Environmental Report. The most recent copy of the Environmental Report in respect
of the Properties.




          (w) Tax Lot. Evidence satisfactory to Lender that each of the Properties constitutes
a separate tax lot or lots for conveyance and real estate tax assessment purposes (except for those
lots that are shared lots and identified herein).




          (x) Appraisal. An appraisal of the Properties in form and content satisfactory to
Lender addressed to Lender.




          (y) Ownership Chart. An ownership chart certified by the Borrower depicting the
ownership structure of the Borrower, Guarantor and SHP Subsidiaries.




          (z) Organizational Documents. (i) for each corporate Loan Party: (A) good standing
certificate from state of incorporation and for Borrower and SHP Subsidiaries each state where each
Property is located (if different); (B) certified copy of articles of incorporation and bylaws; (C)
certified copy of resolutions authorizing the transaction; and (D) certificate of incumbency; and
(ii) for any Loan Party that is a limited liability company or limited partnership: (A) good
standing certificate (or equivalent) from state of formation and for Borrower and SHP Subsidiaries
each state where each Property is located (if different), (B) certified copy of operating agreement
or partnership agreement; (C) articles of organization (or equivalent) certified by the Secretary
of State of the State of formation; and (D) certified copy of resolutions authorizing the
transaction.




          (aa) Opinions. The Borrower’s Counsel Opinions dated as of the Closing Date.




          (bb) Financial Statements. Financial Statements for the Loan Parties.




O-2









 








EXHIBIT P




(List of Required Items for each draw under the Second Advance and Third Advance)



Borrowers shall deliver the following documents and information relating to the Properties to
be the subject of such funding:





	 	(i)	 	copies of Borrowers’ internal investment memo(s) with respect to each
Property;
	 
	 	(ii)	 	financial statements for the Property if an acquisition property or five year
pro forma for development property;
	 
	 	(iii)	 	capital improvement schedule for acquisition properties or construction
budget for development properties;
	 
	 	(iv)	 	a current calculation of the Interest Coverage Ratio, both with and without
proposed funding;
	 
	 	(v)	 	a current calculation of Loan to Value Test; both with and without proposed
funding;
	 
	 	(vi)	 	a current preliminary title report for each subject Property, including
legible and complete copies of all exceptions to title referred to therein;
	 
	 	(vii)	 	an ALTA survey of each subject Property by a surveyor selected by Senior
Lender, and in a form reasonably satisfactory to Lender;
	 
	 	(viii)	 	an appraisal of each subject Property prepared by an appraiser selected by Senior
Lender, and approved by Lender is its sole discretion, (or with Lender’s consent, a
feasibility study or broker’s opinion of value) and otherwise satisfactory to Lender;
	 
	 	(ix)	 	a zoning report for each subject Property,
	 
	 	(x)	 	an environmental report for each subject Property;
	 
	 	(xi)	 	engineering reports for each subject Property,
	 
	 	(xii)	 	sources and uses; and
	 
	 	(xiii)	 	such other documents and information as Lender may reasonably request. Lender shall
advise Borrowers of its preliminary determination of whether the proposed acquisition
is approved for funding within three (3) Business Days after the date that Lender has
received all of the documents and
information listed in clauses above with respect to the Property being acquired.






P-1









 





EXHIBIT Q




Form of [Second/Third] Advance Notice and Compliance Certificate 




                    , 20___




Fortress Credit Corp.

1345 Avenue of the Americas 46th Floor

New York, New York 10105

Attention:





			
	     Re:	 	Loan Agreement, dated as of                     , 2007 among Fortress Credit Corp. as
lender and Summit Hotel Properties, LLC as borrower (the “Loan Agreement”)





Ladies/Gentlemen:




     All capitalized terms used but not otherwise defined herein shall have the meaning given them
in the Loan Agreement.



     In accordance with Section [4.2/4.3](a) of the Loan Agreement, the undersigned Borrower(s)
hereby request that Lender make the following Advances:



     1) Name of Borrower: Summit Hotel Properties, LLC;



     2) Requested Advance Amount: $                                        ;



     3) Requested Funding Date:                     , 20___.



     In addition, pursuant to Article IV of the Loan Agreement the undersigned officer of the
Borrower hereby certifies to the best of his/her knowledge that:




	 	1.	 	The Loan Parties are not in default with respect to any of
the Senior Loans.
	 
	 	2.	 	The representations and warranties of all of the Loan Parties
contained in the Loan Documents shall be true and correct in all material
respects on and as of the date hereof.
	 
	 	3.	 	No Event of Default shall have occurred and no Unmatured
Default shall have occurred and shall be continuing; and each Loan Party shall
be in compliance in all material respects with all terms and conditions set
forth in each Loan Document on its part to be observed or performed.






Q-1









 






	 	4.	 	No event or series of events shall have occurred which has
had or is reasonably likely to have a Material Adverse Effect.
	 
	 	5.	 	No law or regulation shall have been adopted, no order,
judgment or decree of any Governmental Authority shall have been issued and no
litigation shall be pending or threatened in writing, which in Lender’s
reasonable judgment could have a Material Adverse Effect.
	 
	 	6.	 	No Casualty has occurred or Condemnation proceeding has been
initiated, which in Lender’s sole and absolute discretion, could have a
Material Adverse Effect.
	 
	 	7.	 	The financial information of the Borrower and regarding the
Properties furnished pursuant to the Loan Agreement, is true, correct, and
fairly presents in all material respects the financial condition of the
Borrower and the Properties.
	 
	 	8.	 	A review of such financial statements delivered pursuant to
Article V of the Loan Agreement has been made under the undersigned’s
supervision with a view to determining whether the Borrower has fulfilled in
all material respects all of their obligations under the Loan Documents.
	 
	 	9.	 	In case of any conflict and inconsistency between this
Compliance Certificate and the Loan Agreement, the Loan Agreement shall
govern.
	 
	 	10.	 	All items required pursuant to Exhibit P of the Loan
Agreement, which are attached hereto, are true, complete and accurate.






IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this
___day of ___, 200[7].



	 	 	 	 	 	 	 
	 	 	SUMMIT HOTEL PROPERTIES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 






Q-2









 





EXHIBIT S




(Financing Statements and Filing Offices)





S-1









 








EXHIBIT U




(Tax ID Numbers)




	 	 	 	 	 
	Loan Party	 	Tax Identification Number
	Summit Hotel Properties, LLC
	 	 	20-0617340	 
	The Summit Group, Inc
	 	 	46-0417504	 
	Summit Hospitality I, LLC
	 	 	20-1964424	 
	Summit Hospitality II, LLC
	 	 	20-2241062	 
	Summit Hospitality III, LLC
	 	 	20-2241095	 
	Summit Hospitality IV, LLC
	 	 	20-2241140	 
	Summit Group of Detroit, Michigan, LLC
	 	 	81-0563741	 
	Summit Group of Scottsdale, Arizona Limited Partnership
	 	 	83-0356513	 






U-1









 





EXHIBIT V




Properties with same Tax Lot




	 	 	 
	Country Inn & Suites and Comfort Suites

	 	Charleston, WV
	Comfort Inn and Courtyard by Marriott

	 	Missoula, MT
	Comfort Suites and Fairfield Inn

	 	Lakewood, CO






V-1









 





Schedule A-1




Properties Owned by Summit Hotel Properties, LLC




Coeur d’Alene, Id — Fairfield Inn

Fort Smith, AR — Comfort Inn

Kennewick, WA — Comfort Inn

Kennewick, WA – Fairfield Inn

Missoula, MT – Comfort Inn

Lewiston, ID – Comfort Inn

Ellensburg, WA – Comfort Inn

Lincoln, NE – Comfort Suites

Sandy, UT – Comfort Suites

St. Joseph – Comfort Suites

Lewisville, TX – Fairfield Inn

Fort Smith, AR – Aspen Hotel & Suites

Denver, CO – Hampton Inn

Pueblo, CO – Hampton

Fenton, MO – Fairfield Inn

Fenton, MO – TownePlace Suites

Boise, ID – Holiday Inn Express

Germantown, TN – Fairfield Inn

Germantown, TN – Residence Inn

Memphis, TN – Courtyard by Marriott

Missoula, MT – Courtyard by Marriott

El Paso, TX – Hampton Inn & Suites

Fort Smith, AR – Hampton Inn

Fort Wayne, IN – Hampton Inn

Fort Wayne, IN — Residence Inn

Atlanta, GA – AmeriSuites

Detroit, MI – Holiday Inn Express

Vernon Hill, IL – Hawthorne Suites



Construction Projects:




Boise, ID – Cambria Suites

Jackson, MI – Residence Inn

Bloomington, MN – Hampton Inn & Suites

Fort Worth, TX – Hampton Inn & Suites

Fort Collins, CO – Hilton Garden Inn

Bloomington, MN – Cambria Suites

Denver, CO – SpringHill Suites

Flagstaff, AZ – Courtyard by Marriott

Baton Rouge, LA – Cambria Suites

San Antonio, TX (Broadway) – Cambria Suites

San Antonio, TX (Broadway) – element by Westin (TBD)

Jacksonville, FL – aloft by Starwood

Jacksonville, FL – element or Cambria (TBD)

San Antonio, TX (Legacy) – aloft by Starwood

San Antonio, TX (Legacy) – Cambria Suites

Houston, TX – Cambria Suites




 









 





Schedule A-2




Properties Owned by SHP Subsidiaries




Summit Hospitality I, LLC




Salina, KS – Comfort Inn

Twin Falls, ID – Comfort Inn

Salina, KS – Fairfield Inn

Emporia, KS – Fairfield Inn

Boise, ID – Fairfield Inn

Boise, ID – Hampton Inn

Lakewood, CO – Fairfield Inn

Lakewood, CO – Comfort Suites

Spokane, WA – Fairfield Inn

Denver, CO – Fairfield Inn

Provo, UT – Hampton Inn

Overland Park, KS – Homewood Suites

Fort Collins, CO – Hampton Inn

Bellevue, WA – Fairfield Inn

Fort Worth, TX – Comfort Suites

Twin Falls, ID – Holiday Inn Express

Emporia, KS – Holiday Inn Express

Charleston, WV – Country Inn & Suites

Charleston, WV – Comfort Suites

Medford, OR – Hampton Inn

Baton Rouge, LA – Fairfield Inn

Baton Rouge, LA – SpringHill Suites

Baton Rouge, LA – TownePlace Suites

Lithia Springs, GA – SpringHill Suites

Little Rock, AR – SpringHill Suites

Nashville, TN – SpringHill Suites

Twin Falls, ID – Hampton Inn




Summit Hospitality II, LLC




Germantown, TN – Courtyard by Marriott




Summit Hospitality III, LLC




Jackson, MS – Courtyard by Marriott




Summit Hospitality IV, LLC




Jackson, MS – Hampton Inn & Suites




 









 





SCHEDULE 4




Properties to be initially purchase directly by Summit Hotel Properties, LLC




	 	 	 	 	 	 	 	 	 
	Property	 	Location	 	Acreage	 	Future Hotel Project
	Jacksonville, FL

	 	River City North Outlots 1& 1A
	 	 	6.16	 	 	aloft & Cambria (TBD)
	San Antonio, TX

	 	8505 Broadway
	 	 	8.78	 	 	Cambria Suites & element (TBD)
	San Antonio, TX

	 	East Sonterra Blvd.
	 	 	5.99	 	 	Cambria Suites & aloft
	Houston, TX

	 	Rogerdale & Harwin Roads
	 	 	2.8	 	 	Cambria Suites






 









 





Schedule 6.4




(Pre-Approved Refinancings)




-See Attached-




 









 





SCHEDULE 6.4




Permitted Debt Refinances




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Appraised	 	 	 	 	 	Probable	 	Outstanding	 	 	 	 	 	Projected	 	 	 	 	 	 
		 	 	 	Stabilized	 	Maturity	 	Refinance	 	Debt	 	Projected Value	 	Outstanding Debt	 	Projected	 	Projected Take-	 	 
	Property Location	 	Hotel	 	Value	 	Date	 	Date	 	12/31/06	 	at Refinance	 	at Refinance	 	Refinance Debt	 	Out Equity	 	Loan-to-Value
	 
	2007
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Ellensburg, WA
	 	Comfort Inn	 	$	4,900,000	 	 	 	3/1/2014	 	 	 	2/15/2007	 	 	$	1,799,771	 	 	$	4,900,000	 	 	$	1,800,218	 	 	$	3,185,000	 	 	$	1,384,782	 	 	 	65.00	%
	Lewiston, ID
	 	Comfort Inn	 	$	3,000,000	 	 	 	3/1/2014	 	 	 	2/15/2007	 	 	$	1,506,422	 	 	$	3,000,000	 	 	$	1,506,801	 	 	$	1,950,000	 	 	$	443,199	 	 	 	65.00	%
	Atlanta, GA
	 	Amerisuites	 	$	15,900,000	 	 	 	5/26/2007	 	 	 	3/15/2007	 	 	$	9,160,000	 	 	$	20,900,000	 	 	$	9,160,000	 	 	$	13,585,000	 	 	$	4,425,000	 	 	 	65.00	%
	FL Wayne, IN
	 	Residence Inn	 	$	9,500,000	 	 	 	4/26/2007	 	 	 	4/26/2007	 	 	$	5,400,000	 	 	$	11,000,000	 	 	$	5,400,000	 	 	$	7,500,000	 	 	$	2,100,000	 	 	 	68.18	%
	Fenton, MO (1)
	 	TownePlace Suites	 	$	5,500,000	 	 	 	6/27/2007	 	 	 	6/27/2007	 	 	$	3,700,000	 	 	$	5,656,000	 	 	$	3,700,000	 	 	$	3,700,000	 	 	 	—	 	 	 	65.42	%
	2008
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Germantown, TN
	 	Courtyard by Marriott	 	$	7,900,000	 	 	 	7/1/2008	 	 	 	4/1/2008	 	 	$	4,582,352	 	 	$	9,458,000	 	 	$	4,375,000	 	 	$	6,147,700	 	 	$	1,772,700	 	 	 	65.00	%
	Jackson, MS
	 	Courtyard by Marriott	 	$	9,200,000	 	 	 	7/1/2008	 	 	 	4/1/2008	 	 	$	5,812,797	 	 	$	11,134,000	 	 	$	5,550,000	 	 	$	7,237,100	 	 	$	1,687,100	 	 	 	65.00	%
	Jackson, MS
	 	Hampton Inn	 	$	7,200,000	 	 	 	7/1/2008	 	 	 	4/1/2008	 	 	$	5,176,360	 	 	$	8,472,000	 	 	$	4,942,000	 	 	$	5,505,800	 	 	$	564,600	 	 	 	65.00	%
	FL Smith, AR
	 	Aspen Hotel & Suites	 	$	4,900,000	 	 	 	6/24/2008	 	 	 	6/24/2008	 	 	$	1,883,919	 	 	$	4,949,000	 	 	$	1,777,000	 	 	$	3,216,850	 	 	$	1,439,850	 	 	 	65.00	%
	Detroit, MI
	 	Holiday Inn Express	 	$	9,700,000	 	 	 	5/1/2013	 	 	 	5/1/2008	 	 	$	5,770,200	 	 	$	9,700,000	 	 	$	5,482,000	 	 	$	6,305,000	 	 	$	823,000	 	 	 	65.00	%
	Pueblo, CO
	 	Hampton Inn	 	$	4,600,000	 	 	 	6/1/2013	 	 	 	6/1/2008	 	 	$	2,501,423	 	 	$	4,692,000	 	 	$	2,379,000	 	 	$	3,049,800	 	 	$	670,800	 	 	 	65.00	%
	2009
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Kennewick, WA
	 	Fairfield Inn	 	$	3,100,000	 	 	 	10/1/2009	 	 	 	10/1/2009	 	 	$	1,096,995	 	 	$	3,162,000	 	 	$	588,000	 	 	$	2,055,300	 	 	$	1,467,300	 	 	 	65.00	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTALS
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	97,023,000	 	 	$	46,660,019	 	 	$	63,436,550	 	 	$	16,778,531	 	 	 	65.39	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Projected Construction Financing
to be Refinanced with Permanent Debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2008
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Boise, ID
	 	Cambria Suites	 	$	12,000,000	 	 	 	 	 	 	 	3/1/2008	 	 	 	 	 	 	$	12,000,000	 	 	$	9,450,000	 	 	$	7,800,000	 	 	 	 	 	 	 	65.00	%
	Ft. Worth, TX
	 	Hampton Inn & Suites	 	$	9,400,000	 	 	 	 	 	 	 	5/1/2008	 	 	 	 	 	 	$	9,400,000	 	 	$	8,245,000	 	 	$	6,110,000	 	 	 	 	 	 	 	65.00	%
	DIA, CO
	 	SpringHill Suites	 	$	12,500,000	 	 	 	 	 	 	 	9/1/2008	 	 	 	 	 	 	$	12,500,000	 	 	$	8,062,500	 	 	$	8,125,000	 	 	 	 	 	 	 	65.00	%
	Bloomington, MN
	 	Cambria Suites	 	$	13,600,000	 	 	 	 	 	 	 	12/1/2008	 	 	 	 	 	 	$	13,600,000	 	 	$	10,400,000	 	 	$	8,840,000	 	 	 	 	 	 	 	65.00	%
	Bloomington, MN
	 	Hampton Inn & Suites	 	$	18,300,000	 	 	 	 	 	 	 	12/1/2008	 	 	 	 	 	 	$	18,300,000	 	 	$	14,325,000	 	 	$	11,695,000	 	 	 	 	 	 	 	65.00	%
	2009
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Baton Rouge, LA
	 	Cambria Suites	 	$	15,700,000	 	 	 	 	 	 	 	3/1/2009	 	 	 	 	 	 	$	15,700,000	 	 	$	11,750,000	 	 	$	10,205,000	 	 	 	 	 	 	 	65.00	%
	San Antario, TX
	 	Cambria Suites	 	$	16,500,000	 	 	 	 	 	 	 	5/1/2009	 	 	 	 	 	 	$	16,500,000	 	 	$	12,400,000	 	 	$	10,725,000	 	 	 	 	 	 	 	65.00	%
	Flagstaff, AZ
	 	Courtyard by Marriott	 	$	26,000,000	 	 	 	 	 	 	 	5/1/2009	 	 	 	 	 	 	$	26,000,000	 	 	$	20,100,000	 	 	$	16,900,000	 	 	 	 	 	 	 	65.00	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	124,000,000	 	 	$	94,732,500	 	 	$	80,600,000	 	 	 	 	 	 	 	65.00	%








 




			
	(1)	 	Loan scheduled to flow from Credit Pool One to Credit Pool Two






			
	NOTE:	 	Projected value at Refinance equals stabilized value, plus 1% annual asset value growth, plus
renovation budget





Permitted Amendments and Modifications




	 	 	 	 	 
	Bank	 	Facility	 	Amendment
	 
	First National Bank of Omaha

	 	Credit Pool
	 	Annual renewal without modification of terms and conditions
	First National Bank of Omaha

	 	Acquisition Line
	 	Annual renewal without modification of terms and conditions

















 





Schedule 7.5




(Properties permitted to be sold without prepayment of the Loan)




	 	 	 
	Coeur d’Alene, ID

	 	     Fairfield Inn located at 2303 North Fourth
	Boise, ID

	 	Surplus land located adjacent to 2613 S. Vista Ave.
	Boise, ID

	 	Land designated as a restaurant pad adjacent to 2970 Elder St.
	San Antonio, TX

	 	Land designated as Restaurant Pad #1 at 8505 Broadway
	San Antonio, TX

	 	Land designated as Restaurant Pad #2 at 8505 Broadway






 









 





Schedule 7.5(a)




(Properties permitted to be sold without payment of Minimum Interest Amount)




	 	 	 
	Detroit, MI

	 	Holiday Inn Express1020 Washington Blvd.
	Fenton, Mo

	 	TownePlace Suites located at 1662 Fenton Business Park Ct.
	Fenton, MO

	 	Fairfield Inn located at 1680 Fenton Business Park Ct.
	Overland Park, KS

	 	Homewood Suites located at 10556 Marty Ave.