PERMANENT LOAN CROSS INDEMNITY


 


THIS PERMANENT LOAN
CROSS INDEMNITY (this "Agreement"), made effective as of the 1st day of April, 2014, by TCA BLOCK 7,
INC., a Virginia corporation ("TCAB7"), ARMADA/HOFFLER PROPERTIES II, L.L.C., a Virginia limited liability company
("AHPII"), DANIEL A. HOFFLER ("Hoffler"), LOUIS S. HADDAD ("Haddad"), CHRI VIRGINIA
BEACH HOTEL (A/H) MINORITY HOLDING, LLC, a Delaware limited liability company ("CVBH"), AMERICAN REALTY CAPITAL
HOSPITALITY TRUST, INC., a Maryland corporation ("ARC REIT"), HAMPTON W COMPANY, LLC, a Virginia limited liability
company ("HWC"), HAMPTON UNIVERSITY, a private non-stock foundation ("HU"), LEGACY HOSPITALITY, LLC,
a Maryland limited liability company ("Legacy"), and VB CITY HOTELS LLC, a Virginia limited liability company
("VBCH").


 


WITNESSETH:


 


WHEREAS, the parties
hereto and/or their affiliates are members in TCA Block 7 Hotel, L.L.C., a Virginia limited liability company (the "Borrower");


 


WHEREAS, the Borrower
obtained a loan (the "Loan") from German American Capital Corporation, a Maryland corporation (the "Lender")
in the original principal amount of $20,700,000.00 for permanent financing for a hotel and various other improvements (collectively,
the "Hotel") on a parcel of land located in the City of Virginia Beach, Virginia, which Loan and some of the documents
(the "Loan Documents") evidencing such Loan are more particularly described on Exhibit A attached hereto;


 


WHEREAS, in connection
with the Loan, Hoffler, Haddad and ARC REIT (the "Guarantors") executed a Guaranty of Recourse Obligations (the "Guaranty")
providing for "non-recourse carve-out" indemnification to the Lender;


 


WHEREAS, the Lender
would not have made the Loan but for the agreement of the Guarantors to execute and deliver the Guaranty;


 


WHEREAS, TCAB7, AHPII,
Hoffler, Haddad, CVBH, ARC REIT, HWC, HU, VBCH and Legacy each directly or indirectly have an ownership interest in the Borrower
and will benefit directly by the Borrower obtaining the Loan and Guarantors providing the Guaranty to Lender and, as an inducement
to Guarantors to execute and deliver the Guaranty to Lender, have agreed to execute this Agreement.


 


NOW, THEREFORE, THIS PERMANENT LOAN CROSS
INDEMNITY WITNESSETH:


 


That for and in consideration
of the mutual undertakings set forth herein and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:


 




    	1



    	 



    

 


1.Definitions.
Unless otherwise defined herein, the following shall have the meanings and definitions provided below:


 


"Affiliate"
means any Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. For
the purposes of this definition, "control" means the ability, directly or indirectly, to direct the management and policies
of the respective Person whether through the ownership of voting interests, through a contract that provides for the delegation
of that Person's managerial rights and duties, or otherwise. The parties agree that ARC REIT is controlled by its Board of Directors
and not by its investors, nor its external advisors, and as such, none of such investors or advisors qualify as "Affiliates"
of ARC REIT. AHCC is an Affiliate of the AH Parties.


 


"AH Parties" means TCAB7, AHPII,
Hoffler and Haddad. "ARC REIT Parties" means CVBH and ARC REIT.


 


"Franchise
Agreement" means that certain New Build License Agreement, with an effective date of December 28, 2004, between the Borrower
and Westin Hotel Management, L.P., as assigned by an Assignment and Assumption Agreement, dated July 20, 2005 (the "Assignment"),
as amended by a First Amendment, dated July 21, 2005, as amended by that Second Amendment, dated May 26, 2006, and as amended by
a Third Amendment, dated January 28, 2008, and as amended by a Fourth Amendment, dated March 21, 2014, together with that certain
Reservations and Technology Systems Agreement, with an effective date of December 28, 2004, between the Borrower and Westin Hotel
Management, L.P.


 


"Franchise
Guaranty" means that certain guarantee of Franchise Agreement obligations by Armada Hoffler Construction Co. ("AHCC"),
pursuant to a Guarantee, dated July 20, 2005, pursuant to the Assignment, which Guarantee replaced a Guarantee, dated December
28, 2004, executed by Armada Hoffler Development Company, Inc.


 


"Guarantors" means ARC REIT, Hoffler
and Haddad.


 


"Guaranty"
means collectively the Franchise Guaranty and the Loan Guaranty (hereinafter defined).


 


"HU Parties" means HWC and HU.


 


"Loan
Guaranty" means the Guaranty of Recourse Obligations, dated April , 2014, executed by the Guarantors in favor of Lender.


 


"Losses"
means any and all loss, liability, damage, cost, judgment, charge and expense, of every kind and nature, including, but not
limited to, reasonable attorney's fees, which Guarantors, or any of them, may suffer or incur arising out of the Guaranty.


 


"Ownership
Interest" means the percentage interest of a Party as set forth on Exhibit B attached hereto. For purposes
of this Agreement TCAB7, AHPII, Hoffler and Haddad


 




    	2



    	 



    

 


shall be treated as one entity/group and
are listed as AH Parties on Exhibit B, HWC and HU shall be treated as one entity/group and are listed as HU Parties
on Exhibit B. and CVBH and ARC REIT, as an Affiliate of CVBH, shall be treated as having the Ownership Interest of
CVBH as set forth on Exhibit B.


 


"Party"
means each of, and "Parties" mean more than one or all of, as the context may require, TCAB7, AHPII, Hoffler,
Haddad, HWC, HU, CVBH, ARC REIT, VBCH and Legacy.


 


"Person"
means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization, or government or any agency or political subdivision thereof.


 


"Pro Rata
Share" means an allocation based upon Ownership Interests of the Parties responsible, i.e. each Party who is responsible
for Losses will be liable in an amount equal to such Losses multiplied by a fraction whose numerator is the Ownership Interest
percentage of such Party and whose denominator is the sum of the Ownership Interest percentages of all of Parties responsible for
such Losses. (For example, applying the Parties' current ownership percentages, the parties' Pro Rata Shares of a Loss that is
not covered by Section 3 of this Agreement would be as follows: AH Parties: 22.8137% (20.5323%/90%); HU Parties: 22.6164% (20.3548%/90%);
CVBH: 33.9248% (30.5323%/90%); and Legacy: 20.6451% (18.5806%/90%).


 


2.Each of AH Parties,
ARC REIT Parties, HU Parties and Legacy agrees to be responsible for its Pro Rata Share of Losses and each agrees to indemnify
and hold harmless each other Party and/or any of its Affiliates which have executed the Guaranty to the extent of such Pro Rata
Share of such Losses. Each of the AH Parties shall be jointly and severally liable for the Pro Rata Share of Losses for which the
AH Parties are responsible pursuant to the terms hereof Each of the ARC REIT Parties shall be jointly and severally liable for
the Pro Rata Share of Losses for which the ARC REIT Parties are responsible pursuant to the terms hereof. Each of the HU Parties
shall be jointly and severally liable for the Pro Rata Share of Losses for which the HU Parties are responsible pursuant to the
terms hereof.


 


3.Notwithstanding
anything contained herein to the contrary, each Party and its Affiliates shall be solely responsible for any Losses to the extent
such Losses arise as a result of its, or any of its Affiliates', acts, negligence, recklessness, bad faith or willful misconduct.
Each Party and its Affiliates shall indemnify, defend and hold harmless the other Parties and their Affiliates (including, without
limitation, any Guarantor) from any liabilities arising (a) under the Loan Guaranty, the Franchise Guaranty, or (b) as a result
of a default under the Loan Documents, in each event to the extent arising as a result of such Party's, or its Affiliates', acts,
negligence, recklessness, bad faith or willful misconduct. For the purposes of this Agreement, Crestline Hotel & Resorts, LLC
("CHRLLC"), while acting in its capacity as manager of the Hotel, will not be considered to be an Affiliate of ARC REIT
and the liability of CHRLLC, if any, will be governed by the terms of that certain management agreement in connection with the
management of the Hotel by and between Borrower and CHRLLC ("Management Agreement"). However, CHRLLC shall be considered
to be an Affiliate of ARC REIT with respect to actions


 




    	3



    	 



    

 


by CHRLLC taken outside of its capacity
as manager of the Hotel pursuant to the Management Agreement.


 


4.The liabilities
and obligations of each Party under this Agreement are direct and primary and arise upon the occurrence of the matters which are
the subject of this Agreement. The liability of each Party hereunder is not conditioned or contingent upon the occurrence of any
other events or the pursuit by a Party of any other remedies except demand for performance upon a Party.


 


5.Each Party consents
to the exercise of personal jurisdiction over such Party by any state court in the City of Virginia Beach, Virginia and in the
United States District Court for the Eastern District of Virginia (Norfolk Division) and consents to the laying of venue in such
courts. Service shall be effected by any means permitted by the court in which any action is filed, or by mailing process, postage
prepaid, by certified or registered mail, return receipt requested, to the other party at the address provided for herein. Service
shall be deemed effective upon receipt.


 


6.If any clause
or provision contained herein operates or would prospectively operate to invalidate this Agreement in whole or in part, then such
clause or provision shall be held naught as though not contained herein, and the remainder of this Agreement shall remain operative
and in full force and effect.


 


7.All notices,
requests, demands or other communications provided for herein shall be in writing and shall be deemed duly given upon actual receipt,
and shall be delivered (i) in person, (ii) by registered or certified mail, postage prepaid, return receipt requested, (iii) by
nationally recognized overnight courier, or (iv) by facsimile or other generally accepted means of electronic transmission including
email (provided that a copy of any notice delivered pursuant to this clause (iv) shall also be sent pursuant to clause (ii) or
(iii), addressed as follows (or to such other addresses as may be specified by like notice to the other Party):


 


	To TCAB7, AHPII,	 
	Hoffler and Haddad:	 
	 	Armada Hoffler Properties II, L.L.C. 

222 Central Park Avenue, Suite 2100 

Virginia Beach, Virginia 23462

 Facsimile No. (757) 424-2513
	 	Email: mohara@armadahoffler.com 

Attn: Michael P. O'Hara
	 	 
	and a copy to:	Faggert & Frieden, P.C.
	 	222 Central Park Avenue, Suite 1300
	 	Virginia Beach, Virginia 23462 

Facsimile No. (757) 424-0102

 Email: dfaggert@fflaw.com 

Attn: David Y. Faggert, Esq.
	 	 
	To CDBH and 	 
	ARC REIT: 	American Realty Capital Hospitality Trust, Inc.




    	4



    	 



    

 


	 	405 Park Avenue, 15th Floor Drive, Suite 500
	 	New York, New York 10022
	 	Attn: Jon Mehlman
	 	Facsimile No. (646) 381-0539
	 	Email: JMehlman@arlcap.com
	 	 
	To HWC and HU:	Hampton University
	 	Hampton W Company, LLC
	 	100 East Queen Street
	 	Hampton, Virginia 23668
	 	Facsimile No. (757) 727-5746
	 	Email:
	 	Attn: Dr. W. R. Harvey, President
	 	 
	and a copy to:	Hampton University
	 	Hampton W Company, LLC
	 	100 East Queen Street
	 	Hampton, Virginia 23668
	 	Facsimile No. (757) 727-5746
	 	Email: faye.lucas@hamptonu.edu
	 	Attn: Faye Hardy-Lucas, Esq., Vice President and
	 	General Counsel
	 	 
	To Legacy:	Legacy Hospitality, LLC
	 	1390 Piccard Drive
	 	Suite 120
	 	Rockville, Maryland 20850
	 	Facsimile No. (301) 795-1401
	 	Email: tfauquier@vanguardrealty.com
	 	Attn: Thomas D. W. Fauquier, Manager
	 	 
	and a copy to:	Bregman, Berbert, Schwartz & Gilday, LLC
	 	7315 Wisconsin Avenue
	 	Suite 800 West
	 	Bethesda, Maryland 20814
	 	Facsimile No. (301) 961-8625
	 	Email: tschwartz@bergmanlaw.com
	 	Attn: Timothy P. Schwartz
	 	 
	If to VBCH:	VB City Hotels LLC
	 	One Columbus Center
	 	Suite 700
	 	Virginia Beach, Virginia 23462 
	 	Attn: Gerald S. Divaris 
	 	Facsimile: (757) 497-1338 
	 	Email: gdivaris@divaris.com 


 




    	5



    	 



    

 


 


	With a copy to:	Wilcox & Savage, P.C.
	 	222 Central Park Avenue, Suite 1500 
	 	Virginia Beach, Virginia 23462 
	 	Attn: Mark E. Slaughter
	 	Facsimile: (757) 628-5659 
	 	Email: mslaughter@wilsay.com


 


8.This Agreement
shall be construed, performed and enforced in accordance with the laws of the Commonwealth of Virginia without regard to the principles
of conflicts of law. Each Party had an opportunity to seek legal counsel prior to executing this Agreement and each Party participated
in the negotiation of its terms; therefore, this Agreement shall not be construed more favorably toward or against any Party.


 


9.This Agreement
shall be binding upon each Party and its successors, heirs, personal representatives and assigns, and shall inure to the benefit
of each Party and its successors and assigns.


 


10.In any suit,
cause of action, arbitration or other proceeding brought by one Party against another Party or Parties to enforce this Agreement,
the Party which substantially prevails in such enforcement action, as determined by the trier-of-fact, shall be entitled to recover
from the Party or Parties which do not substantially prevail in such enforcement action its reasonable out-of-pocket costs and
expenses, including attorney's fees, as determined by the trier-of-fact.


 


TCAB7, AHPII, CHRI,
HWC, CVBH, and Legacy are each members in the Borrower and are parties to a Second Amended and Restated Operating Agreement of
TCA Block 7 Hotel, L.L.C., dated as of January 1, 2008, as amended by a First Amendment to Second Amended and Restated Operating
Agreement of TCA Block 7 Hotel, L.L.C., dated as of January 1, 2012, and a Second Amendment to Second Amended and Restated Operating
Agreement of TCA Block 7 Hotel, L.L.C., dated as of even date herewith (collectively, the "Operating Agreement"). Should
any Party be in default of its obligations under this Agreement, such Party and/or the group of parties to which it belongs shall
also be in default under the Operating Agreement (for example, if Haddad is in default of this Agreement, then the All Parties
shall also be in default hereunder and the AH Party which is a member of the Borrower shall be in default under the Operating Agreement
(such Party(ies), the "Defaulting Parties"). In such event, to the extent that the Party(ies) that have not received
amounts due to them under this Agreement (the "Unpaid Parties") have not been able to collect the amounts due, and the
majority in interest of the Unpaid Parties elect to pursue the following remedy, then the Defaulting Party and/or the group of
parties to which it belongs hereunder shall each be treated as a Non-Contributing Member under the Operating Agreement and the
Default Amount under the Operating Agreement shall be the amount that such Party has failed to pay under this Agreement (including
any amounts calculated in accordance with the first sentence of this Section 10) and the Ownership Interest of such Party and/or
the group of parties to which it belongs in the Borrower shall be subject to forfeiture and/or reduction in accordance with Sections
6.E, I and J of the Operating Agreement; provided, however, that in the application of such Sections for the purposes of this Agreement,
Additional Capital Contribution(s) shall mean the Losses under this Agreement that a Party has paid or not paid, as the case may
be, and in Section E the numerator


 




    	6



    	 



    

 


of the fraction shall be two times the
Default Amount instead of the amount of Additional Capital Contribution which the Non-Contributing Member fails to contribute and
the denominator shall be the Losses. Following the application of this provision, the Default Amount will be deemed to have been
extinguished. Notwithstanding the foregoing, to the extent that two times the Default Amount is more than the amount of the Losses
(meaning that the Non-Contributing Member's full Ownership Interest shall have been extinguished without fully exhausting the Default
Amount, then only so much of the Default Amount as is necessary (after multiplying by two) to equal the amount of the Losses shall
be deemed to have been extinguished, and the remaining Default Amount shall continue to be due and owing to the Unpaid Parties,
who may thereafter pursue recovery of such remaining amount by any legal means. For the purposes of this Agreement, the Ownership
Interest of VBCH shall be subject to the provisions of the above-referenced Sections of the Operating Agreement.


 


To the extent any
Default Amount is unpaid (either because the majority in interest of the Unpaid Parties elects not to pursue the foregoing remedy,
or because a portion of the Default Amount continues to be due following the application of the foregoing remedy), then, as liquidated
damages and not a penalty (the Parties acknowledging that the additional harm to a Party associated with the necessity of pursuing
legal redress is difficult to estimate), the Unpaid Parties shall be entitled to recover from the Non-Contributing Members, in
addition to the unpaid Default Amount ultimately determined by the trier-of-fact to have been due from the Non-Contributing Members,
an amount equal to twenty percent (20%) of such Default Amount.


 


11.No amendment,
modification or supplement of this Agreement shall be binding on any of the Parties hereto unless it is in writing and signed by
the Parties in interest at the time of any such amendment, modification or supplement. No provision hereof may be waived except
in writing signed by the Party against whom any such waiver is sought. The waiver by any Party of a breach of any provision of
this Agreement shall not operate as or be construed as a waiver of any subsequent breach.


 


12.This Agreement
is solely for the benefit of the Parties to this Agreement and should not be deemed to confer upon third-parties any remedy, claim,
liability, reimbursement, claims or actions or other right in excess of those existing without reference to this Agreement.


 


13.This Agreement
may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective
when signed by each of the parties hereto and delivered by each of the parties hereto, in person or by facsimile or other electronic
transmission, to the other parties hereto.


 


[The next page is page 8, the first page
of the signature pages.]


 




    	7



    	 



    

 


WITNESS the following signatures and seals
as of the date first above written.


 


 


	 	/s/ Daniel A. Hoffler
	 	Daniel A. Hoffler
	 	 
	 	/s/ Louis S. Haddad
	 	Louis S. Haddad
	 	 
	 	TCA Block 7, Inc., a Virginia corporation
	 	 
	 	By: 	/s/ Louis S. Haddad	 (SEAL)
	 	 	Louis S. Haddad, President
	 	 	 	 
	 	ARMADA HOFFLER PROPERTIES II, 
	 	L.L.C., a Virginia limited liability company
	 	 	 	 
	 	By: 	/s/ Louis S. Haddad	 (SEAL)
	 	 	Louis S. Haddad, Manager
	 	 	 	 
	 	CHRI VIRGINIA BEACH HOTEL (A/H) 
	 	MINORITY HOLDINGS, L.L.C., a Delaware limited liability company
	 	 	 
	 	By: 	ARC Hospitality TRS Holdings, LLC, 
	 	 	its sole member
	 	 	 	 
	 	 	By:	American Realty Capital Hospital 
	 	 	 	Operating Partnership, L.P., its sole member
	 	 	 	 	 
	 	 	 	By:	/s/ William M. Kahane
	 	 	 	 	Name: William Kahane
	 	 	 	 	Title: Chief Executive Officer
	 	 	 	 	 	 


 




    	8



    	 



    

 


WITNESS the following signatures and seals
as of the date first above written.


 


 


	 	AMERICAN REALTY CAPITAL HOPSPITALITY TRUST, INC., a Maryland corporation
	 	 	 
	 	By: 	/s/ Jesse C. Galloway
	 	Name: 	 Jesse C. Galloway
	 	Title: 	Authorized Signatory 
	 	 	 
	 	HAMPTON W COMPANY, LLC
	 	a Virginia limited liability company
	 	 	 
	 	By: 	Hampton management Company, LLC
	 	 	a Virginia limited liability company
	 	 	 
	 	 	By: Hampton University, Manager
	 	 	 	 	 
	 	 	 	By: 	/s/ Doretha J. Spells
	 	 	 	 	Doretha J. Spells, Vice President for Business Affairs
	 	 	 	 	 
	 	HAMPTON UNIVERSITY
	 	 	 
	 	By: 	/s/ Doretha J. Spells
	 	 	Doretha J. Spells, Vice President for Business Affairs
	 	 	 
	 	LEGACY HOSPITALITY, LLC, a Maryland limited liability company
	 	 	 
	 	By: 	/s/ Thomas D. W. Fauquier
	 	 	Thomas D.W. Fauquier
	 	 	Manager
	 	 	 
	 	VB CITY HOTELS, LLC,
	 	a Virginia limited liability company
	 	 	 	 
	 	By:	/s/ Gerald S. Divaris	 (SEAL)
	 	 	Gerald S. Divaris, Manager
	 	 	 	 
	 	By: 	                                               	 (SEAL)
	 	 	Michael B. Divaris, Manager
	 	 	 	 
	 	By:	/s/ Sanford M. Cohen	 (SEAL)
	 	 	Sanford M. Cohen, Manager
	 	 	 	 	 	 


 


 


 




    	9



    	 



    

 


EXHIBIT A


TO PERMANENT LOAN CROSS INDEMNITY


 


LOAN DOCUMENTS


 


		1.	Promissory Note in the amount of $20,700,000 made by Borrower payable to the order of Lender.



		2.	Loan Agreement between Borrower and Lender.



		3.	Deed of Trust, Assignment of Leases and Rents, and Security Agreement made by Borrower to Equity Title Company, LLC for the
benefit of Lender.



		4.	Assignment of Leases and Rents from Borrower to Lender.



		5.	Guaranty of Recourse Obligations.



		6.	Deposit Account Control Agreement



		7.	Environmental Indemnity Agreement.



		8.	Assignment of Management Agreement and Subordination of Management Fees.



		9.	Assignment of Agreements, Licenses, Permits and Contracts





    	10



    	 



    

 


EXHIBIT B

TO


PERMANENT LOAN CROSS INDEMNITY


 


OWNERSHIP PERCENTAGES


 


	
        TCA Block 7, Inc.

        Armada/Hoffler Properties II, L.L.C.
	 
	 	 
	Daniel A. Hoffler and Louis S. Haddad, collectively AH Parties	20.5323%
	 	 
	Hampton W Company LLC and Hampton University, collectively HU Parties	20.3548%
	 	 
	CHRI Virginia Beach Hotel (A/H) Minority Holding, LLC	30.5323%
	 	 
	Legacy Hospitality, LLC	18.5806%
	 	 
	VB City Hotels LLC	10.0000%
	 	 
	 	Total	100.0000%


 


 








    	11