TABLE OF CONTENTS       Page     ARTICLE I DEFINITIONS  1 **SECTION1.1.   Definitions**  1 **SECTION 1.2.   Other Definitional Provisions**  28      ARTICLE II THE LOAN  28 **SECTION 2.1.   The Loan; Use of Funds**  28 **SECTION 2.2.   Interest**  29 **SECTION 2.3.   Determination of Applicable Interest Rate**  29 **SECTION 2.4.   Principal Payments**  31 **SECTION 2.5.   Payment; Default Rate; Application of Certain Monies; Priority of Payments; Set-offs**  33 **SECTION 2.6.   Interest Rate Protection Agreement**  34 **SECTION 2.7.   Delay in Disbursement**  36 **SECTION 2.8.   Additional Interest**  37 **SECTION 2.9.   No Withholdings**  37 **SECTION 2.10. Unavailability of LIBOR; Illegality**  38 **SECTION 2.11. Increased Costs and Capital Adequacy**  39 **SECTION 2.12. Usury**  40 **SECTION 2.13. Closing**  40 **SECTION 2.14. Loan Fee Letter**  40 **SECTION 2.15. Cash Sweep Provisions**  41 **SECTION 2.16. FF&E Reserve Account**  42 **SECTION 2.17. Collection and Operating Accounts**  43 **SECTION 2.18. Tenant Security Account**  44 **SECTION 2.19. Accounts**  46      ARTICLE III EARN-OUT DISBURSEMENTS  47 **SECTION 3.1.   Requests for Earn-Out Disbursements**  47 **SECTION 3.2.   Earn-Out Disbursement Conditions**  48 **SECTION 3.3.   Defaults**  50      ARTICLE IV CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS LOAN AGREEMENT  50 **SECTION 4.1.   Representations and Warranties**  50 **SECTION 4.2.   Representations and Warranties**  50 **SECTION 4.3.   Payment of Fees and Expenses**  52 **SECTION 4.4.   No Default or Event of Default**  52 **SECTION 4.5.   No Casualty or Taking**  52 **SECTION 4.6.   Adverse Conditions; Internal Approval**  52      ARTICLE V REPRESENTATIONS AND WARRANTIES  53 **SECTION 5.1.   Due Organization**  53 **SECTION 5.2.   Due Execution**  53 
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       Page **SECTION 5.3.   Enforceability**  53 **SECTION 5.4.   No Violation**  53 **SECTION 5.5.   No Litigation**  54 **SECTION 5.6.   No Default or Event of Default**  54 **SECTION5.7.   Offsets, Defenses, Etc.**  54 **SECTION 5.8.   Consents**  54 **SECTION 5.9.   Financial Statements and Other Information**  54 **SECTION 5.10. Full Disclosure**  55 **SECTION 5.11. Accounts**  55 **SECTION 5.12. Indebtedness**  55 **SECTION 5.13. Insurance Policies**  55 **SECTION 5.14. Availability of Utilities and Access**  55 **SECTION 5.15. No Liens on Ownership Interests**  55 **SECTION 5.16. Compliance with Legal Requirements**  56 **SECTION 5.17. Certain Agreements**  56 **SECTION 5.18. Plans; Construction**  57 **SECTION 5.19. Security Documents**  57 **SECTION 5.20. Casualty and Taking**  57 **SECTION 5.21. Brokerage**  57 **SECTION 5.22. Encroachments**  57 **SECTION 5.23. Foreign Person**  57 **SECTION 5.24. Control Person**  57 **SECTION 5.25. Government Regulation**  58 **SECTION 5.26. ERISA**  58 **SECTION 5.27. Labor Relations**  58 **SECTION 5.28. Name; Principal Place of Business**  58 **SECTION 5.29. Intellectual Property**  59 **SECTION 5.30. Flood Zone**  59 **SECTION 5.31. Condition of Property**  59 **SECTION 5.32. Taxes**  59 **SECTION 5.33. Adverse Contracts**  60 **SECTION 5.34. Adverse Claims**  60 **SECTION 5.35. Creditworthiness**  60 **SECTION 5.36. Patriot Act**  60 **SECTION 5.37. Leases**  60 **SECTION 5.38. Notices to Contractors**  61 **SECTION 5.39. Special Purpose Entity**  61      ARTICLE VI CONSTRUCTION RELATED COVENANTS FOR THE REQUIRED IMPROVEMENTS  61 **SECTION 6.1. Construction of Required Improvements**  61 **SECTION 6.2. Intentionally Omitted**  62 **SECTION 6.3. Revised Construction Budget**  62 **SECTION 6.4. Copies of Changes; Reports**  62 
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       Page     **SECTION 6.5.   Work Changes**  62 **SECTION 6.6.   Correction of Work**  63 **SECTION 6.7.   Required Notices**  63 **SECTION 6.8.   No Encroachments**  63 **SECTION 6.9.   Copies of Documents; Final Survey**  64 **SECTION 6.10. Cost Overruns**  64      ARTICLE VII GENERAL AND OPERATIONAL COVENANTS  64 **SECTION 7.1.   Financial Statements, Reports and Documents**  64 **SECTION 7.2.   Management, Maintenance and Repairs**  70 **SECTION 7.3.   Inspection of Premises and Books and Records**  71 **SECTION 7.4.   Compliance with Legal, Insurance and Contractual Requirements**  73 **SECTION 7.5.   Appraisals**  74 **SECTION 7.6.   Payment of Impositions**  74 **SECTION 7.7.   Liens and Encumbrances; Ownership of Collateral**  74 **SECTION 7.8.   Permitted Contests**  75 **SECTION 7.9.   Alterations**  76 **SECTION 7.10. Leases**  77 **SECTION 7.11. Required Insurance**  78 **SECTION 7.12. Damage or Destruction**  79 **SECTION 7.13. Taking of the Mortgaged Property**  83 **SECTION 7.14. Application of Proceeds of Casualty or Taking to Loan; Loan Repayment**  85 **SECTION 7.15. Costs and Expenses**  85 **SECTION 7.16. Transfers**  86 **SECTION 7.17. Defense of Title**  91 **SECTION 7.18. Recordation and Certain Taxes**  91 **SECTION 7.19. Name, Fiscal Year and Accounting Method**  91 **SECTION 7.20. Consolidation, Merger, Conveyance, Transfer or Lease**  91 **SECTION 7.21. Organization Restrictions**  91 **SECTION 7.22. Changes in Zoning**  92 **SECTION 7.23. Limitation on Indebtedness**  92 **SECTION 7.24. Distributions, Dividends and Affiliate Payments**  92 **SECTION 7.25. ERISA**  93 **SECTION 7.26. Maintenance of Existence**  93 **SECTION 7.27. Subsidiaries and Joint Ventures**  93 **SECTION 7.28. Loans to Members, Etc.**  94 **SECTION 7.29. Transactions with Affiliates**  94 **SECTION 7.30. Adverse Contracts**  94 **SECTION 7.31. Utilities**  94 **SECTION 7.32. Margin Stock**  94 
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       Page     **SECTION 7.33. Patriot Act Compliance**  94 **SECTION 7.34. Post-Closing Obligations**  95      ARTICLE VIII EVENTS OF DEFAULT  95 **SECTION 8.1.   Events of Default**  95 **SECTION 8.2.   Acceleration of Loan**  98 **SECTION 8.3.   Right to Stop Disbursing Funds**  98 **SECTION 8.4.   Agent’s Right to Complete; Sums Advanced**  99 **SECTION 8.5.   Assignment of Funds**  100 **SECTION 8.6.   Accounts**  100 **SECTION 8.7.   No Liability of Agent or Lenders**  101 **SECTION 8.8.   Right of Offset**  101 **SECTION 8.9.   Termination of Loan Agreement**  101 **SECTION 8.10. Right to Perform**  102      ARTICLE IX ASSIGNMENTS AND PARTICIPATIONS  102 **SECTION 9.1.   Assignment and Participations**  102 **SECTION 9.2.   Participation**  103 **SECTION 9.3.   Availability of Records**  103 **SECTION 9.4.   Borrower’s Facilitation of Transfer**  103 **SECTION 9.5.   Notice; Registration Requirement**  104 **SECTION 9.6.   Registry**  104 **SECTION 9.7.   Lender Interest Rate Protection Agreements**  105 **SECTION 9.8.   Disclosure by Agent or Lender**  105 **SECTION 9.9.   No Expense to Borrower**  105      ARTICLE X AGENT AND LENDERS  105 **SECTION 10.1.   Scope of Article XIII**  105 **SECTION 10.2.   Agent**  106 **SECTION 10.3.   Distributions**  107 **SECTION 10.4.   Authority, No Reliance; Binding Effect**  107 **SECTION 10.5.   Loan**  108 **SECTION 10.6.   Equitable Adjustments**  109 **SECTION 10.7.   Other Transactions**  109 **SECTION 10.8.   Obligations Absolute**  109 **SECTION 10.9.   Indemnification**  110 **SECTION 10.10. Taxes**  110 **SECTION 10.11. Return of Payments**  111 **SECTION 10.12. No Partnership**  111 **SECTION 10.13. Resignation and Removal of Agent; Successor Agent**  111 **SECTION 10.14. Defaults by any Lender**  112 **SECTION 10.15. Purchase Price; Payment for Defaulting Lender’s Pro Rata Share**  113 **SECTION 10.16. Funding of Earn-Out Disbursements**  113 
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       Page     **SECTION 10.17. Election of Interest Rate; Distribution of Funds to Lenders**  114      ARTICLE XI GENERAL CONDITIONS  115 **SECTION 11.1.   Indemnity**  115 **SECTION11.2.   No Waivers**  117 **SECTION 11.3.   Agent’s Review**  117 **SECTION 11.4.   Intentionally Omitted**  118 **SECTION 11.5.   Agent and Lenders Sole Beneficiaries**  118 **SECTION11.6.   Entire Agreement**  118 **SECTION 11.7.   Assignment**  118 **SECTION 11.8.   Further Assurances; Filing of Financing Statements**  118 **SECTION11.9.   Cumulative Remedies**  119 **SECTION 11.10. Amendments, Consents, Waivers, Approvals, Etc.**  119 **SECTION 11.11. Notices**  119 **SECTION 11.12. Limitation on Liability**  120 **SECTION 11.13. Binding Effect**  121 **SECTION 11.14. Severability of Provisions**  121 **SECTION 11.15. Governing Law and Consent to Jurisdiction**  121 **SECTION 11.16. Waiver of Jury Trial**  122 **SECTION 11.17. No Joint Venture**  122 **SECTION 11.18. Determinations and Consents of Agent**  122 **SECTION 11.19. Reliance by Agent on Action on Behalf of Borrower**  122 **SECTION 11.20. Headings, Etc.**  122 **SECTION 11.21. Incorporation by Reference**  122 **SECTION 11.22. Counterparts**  122 **SECTION 11.23. Attorneys’ Fees**  123 **SECTION 11.24. Employer Identification Number Etc.**  123 
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Exhibits and Schedules   Exhibit A: The LandExhibit B: Form of Account AgreementExhibit C: Form of Contractor Will-Serve AgreementExhibit D: Form of Credit Card Servicer AgreementExhibit E-1: Engineering ReportExhibit E-2: Environmental ReportExhibit F: Form of FF&E Disbursement RequestExhibit G: Description of Required Improvements and Schedule of PlansExhibit H: Definition of Special Purpose Bankruptcy Remote EntityExhibit I: Agent Wiring InstructionsExhibit J: Form of Earn-out Disbursement RequestExhibit L: Applicable Lending Offices   Schedule 2.6(a): Form of Interest Rate Protection Agreement ConsentSchedule 5.5: Schedule of Disclosed LitigationSchedule 5.11: Schedule of AccountsSchedule 7.11: Schedule of Insurance Policies and RequirementsSchedule 9.5: Form of Assignment and Acceptance
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**LOAN AGREEMENT**          This **LOAN AGREEMENT**(this “Loan Agreement”) dated as of May 1, 2008, by and among**INTERSTATE COLUMBIA SPE, LLC,**a Delaware limited liability company, having an office at c/oInterstate Hotels & Resorts, 4501 North Fairfax Drive, Suite 500, Arlington, Virginia 22203(“Borrower”), **THE LENDERS PARTY HERETO FROM TIME TO TIME**(together with their respectivesuccessors and assigns in their capacities as lenders, including any Assignees (as hereinafterdefined) hereunder, each a “Lender” and collectively “Lenders”), and **CALYON NEWYORK BRANCH,**a branch, licensed under the laws of the State of New York, of a banking corporationorganized under the laws of the Republic of France, having an office at The Calyon Building, 1301Avenue of the Americas, New York, New York 10019, in its capacity as agent for Lenders (togetherwith its successors and assigns in such capacity as agent for Lenders, “Agent”).**WITNESSETH:**          **WHEREAS,**Property Owner (as defined in Section 1.1 hereof) is the owner of certainreal property located in Columbia, Maryland, which property is more particularly described inExhibit A attached hereto (the “Land”), together with the improvements now orhereafter located thereon;          **WHEREAS,**Borrower is the sole member of the Property Owner;          **WHEREAS,**Borrower wishes to borrow up to $35,000,000 (the “Loan Amount”) from Lendersin connection with ownership, operation and renovation of the Premises (as defined in Section1.1 hereof) upon the terms and conditions contained herein.          **NOW, THEREFORE,**in consideration of the premises and of the mutual covenants contained hereinand other good and valuable consideration, the receipt of which is hereby acknowledged, the partieshereto hereby agree as follows:**ARTICLE I****DEFINITIONS**          **SECTION 1.1. Definitions.**For purposes of this Loan Agreement, the following termsshall have the respective meanings set forth in this Article I:          “Account Agreement” means an agreement substantially in the form attached hereto asExhibit B, or such other form of agreement similar in substance and acceptable to Agent, tobe executed and delivered by Borrower or Property Owner, as applicable, Agent and the bank at whichthe Account that is the subject of such agreement is held.          “Accounts” means, collectively, all accounts of Borrower and Property Owner and allaccounts of Property Manager held on behalf of or for the benefit of Borrower or Property Owner,including the Operating Account, the FF&E Reserve Account, the Tenant Security Account, the CashSweep Account and the Collection Account.
 

 
          “Applicable Lending Office” shall mean the “Lending Office” of each Lender (or of anAffiliate of each Lender) designated for each Lender as of the Closing Date specified onExhibit K attached hereto or such other office of each Lender (or of an Affiliate of eachLender) as each Lender may from time to time specify to Borrower as the office by which the Loan isto be made and/or maintained by such Lender.          “Appraisal” means a written appraisal report of the Premises as the term “appraisal”is defined in the Code of Professional Ethics of the Appraisal Institute, meeting the requirementsof Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, prepared bya professional appraiser retained by Agent at Borrower’s expense who is a member of the AppraisalInstitute, addressed to Agent and in form, scope and substance satisfactory to Agent, setting forthsuch appraiser’s determination of the Appraised Value. The appraiser shall be reasonably acceptableto Borrower, provided that if Agent orders the Appraisal during the existence of an Event ofDefault, Borrower shall not have a right to approve the appraiser.          “Appraisal Update” means any written supplement or “update” to an Appraisal, preparedby a professional appraiser retained by Agent at Borrower’s expense who is a member of theAppraisal Institute, addressed to Agent and in form, scope and substance satisfactory to Agent,setting forth such appraiser’s determination of the Appraised Value. The appraiser shall bereasonably acceptable to Borrower, provided that if Agent orders the Appraisal during the existenceof an Event of Default, Borrower shall not have a right to approve the appraiser.          “Appraised Value” means the fair market value of the Premises, which would be obtainedin an arm’s length transaction between an informed and willing buyer and an informed and willingseller, under no compulsion, respectively, to buy or sell, on the appraisal date of the Appraisalor Appraisal Update, as applicable. Such value shall be the “as is” and/or the “as completed” valueof the Premises as Agent may require. The “as is” value shall refer to the fair market value of thePremises in their condition as of the date of such Appraisal or Appraisal Update, as applicable.The “as completed” value shall refer to the fair market value of the Premises in their condition asof the date of such Appraisal or Appraisal Update, as applicable, but assuming that the RequiredImprovements were completed.          “Approved Capital Expenditures” means, for any fiscal year of Property Owner, theCapital Expenditures set forth in the Approved FF&E/Capital Budget for such fiscal year that areactually incurred by Property Owner during such fiscal year.          “Approved FF&E/Capital Budget” means, for any fiscal year of Property Owner, theFF&E/Capital Budget for such fiscal year approved by Agent in writing and any PermittedFF&E/Capital Budget Reallocations, Permitted FF&E/Capital Budget Franchisor Items, and otherreallocations thereof and amendments thereto approved by Agent in writing, such approval not to beunreasonably withheld, conditioned or delayed so long as no Event of Default exists.          “Approved FF&E Expenditures” means, for any fiscal year of Property Owner, the FF&EExpenditures set forth in the Approved FF&E/Capital Budget for such fiscal year that are actuallyincurred by Property Owner during such fiscal year.
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          “Assignee” has the meaning set forth in Section 9.1 hereof.          “Assignment and Acceptance” has the meaning set forth in Section 9.5hereof.          “Assignments of Agreements” means, collectively, (i) that certain Assignment ofAgreements dated as of the Closing Date made by Borrower in favor of Agent and Lenders and (ii)that certain Assignment of Agreements dated as of the Closing Date made by Property Owner in favorof Agent and Lenders.          “Assignment of Leases and Rents” means that certain Assignment of Leases and Rentsdated as of the Closing Date made by Property Owner in favor of Agent and Lenders.          “Assumed Interest Rate” means, as of any Testing Determination Date, a per annuminterest rate equal to the greater of (a) the sum of (i) then current weekly average yield onUnited States Treasury Securities adjusted to constant maturities of ten (10) years, as madeavailable by the Federal Reserve Board and published in Federal Reserve Statistical Release H.15(519), or if not so published, determined on the basis of comparable yields published in apublication designated by Agent, as of the last day of any calendar quarter and (ii) two percent(2.0%), and (b) the Applicable Interest Rate in effect on such Testing Determination Date, subjectto the following sentences. For purposes of calculating the rate pursuant to the precedingclause (b) as of any Testing Determination Date, (1) in the event that as of such TestingDetermination Date, there shall be more than one Applicable Interest Rate in effect, such rateshall be determined on a weighted average basis based on the respective principal balances of eachLoan Portion and (2) in the event that an Interest Rate Protection Agreement is in effect for anyLoan Portion, the Applicable Interest Rate for such Loan Portion shall give effect to suchagreement (e.g., if such agreement is an interest rate cap, and the cap is “in the money”, the caprate plus the LIBOR Rate Margin shall be used as the Applicable Interest Rate for such LoanPortion, and if it is not “in the money, the LIBOR Rate shall be used as the Applicable InterestRate for such Loan Portion, except to the extent, in each case, the Base Rate applies hereunder).          “Authorized Agent Representative” means Agent’s Client Banking Servicesdepartment or as otherwise designated as such by Agent from time to time for purposes ofSection 2.3 hereof by delivery of a notice to Borrower.          “Authorized Borrower Representative” means Carrie McIntyre and any other persondesignated as such by Borrower from time to time for purposes of Section 2.3 hereof bydelivery of a notice to Agent.          “Base Management Fee” means the lesser of (a) the aggregate amount of allmanagement fees payable to Property Manager and (b) three percent (3%) of Gross Revenues.          “Base Rate” means, a rate of interest per annum equal to the sum of (a) the greater of(i) the rate per annum established by Agent from time to time as its reference rate (which Borroweracknowledges is not necessarily Agent’s lowest rate) for short-term commercial loans in Dollars toUnited States domestic corporate borrowers, as determined by Agent on a daily basis, such rate tochange as and when such reference rate changes, and (ii) the Federal Funds Rate, plus one percent(1.00%) per annum, and (b) the Base Rate Margin.
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          “Base Rate Margin” means one percent (1%) per annum.          “Borrower” has the meaning set forth in the first paragraph of this LoanAgreement.          “Borrower’s Certificate” means that certain Borrower’s Certificate by Borrower infavor of Agent dated as of the Closing Date.          “Broker” has the meaning set forth in Section 5.21 hereof.          “Business Day” means any day other than a Saturday, Sunday or other day on whichcommercial banks in New York, New York are authorized or required by law, governmental decree orexecutive order to close.          “Calendar Quarter” means each of the periods of January 1 through the immediatelysucceeding March 31, April 1 through the immediately succeeding June 30, July 1 through theimmediately succeeding September 30, and October 1 through the immediately succeeding December 31.          “Capital Expenditures” means expenditures for repairs, replacements or improvements ofor to the Premises the cost of which would be capitalized under GAAP.          “Capital Expenditures” does not include FF&E Expenditures or expenditures on account of the RequiredImprovements.          “CollectionAccount” means that certain account identified in Schedule 5.11 attached hereto as the “Collection Account” and any account(s) in substitution thereofor in addition thereto hereafter established in accordance with this Loan Agreement.          “Cash Sweep Account” has the meaning set forth in Section 2.15(a)hereof.          “Cash Sweep Condition” shall exist          (a) as of any Testing Determination Date if as of such Testing Determination Date, the DebtService Coverage Ratio for the twelve (12) calendar month period ending on such TestingDetermination Date shall be less than (a) 1.20:1.0 for any Testing Determination Date occurring onor after the Closing Date through and including April 30, 2009, (b) 1.25:1.0 for any TestingDetermination Date occurring on or after May 1, 2009 through and including April 30, 2010, (c)1.30:1.0 for any Testing Determination Date occurring on or after May 1, 2010 through and includingApril 30, 2011, and (d) 1.40:1.0 for any Testing Determination Date occurring on or after May 1,2011. If a Cash Sweep Condition is determined to exist with respect to any Testing DeterminationDate pursuant to this clause (a), then such Cash Sweep Condition shall be deemed tocontinue to exist until there have been two (2) consecutive subsequent Testing Determination Dateson which the Debt Service Coverage Ratio for each of the twelve (12) calendar months period endingon such Testing Determination Dates shall be equal to or greater than the applicable foregoingratios for such periods and the financial statements and other documents required to be deliveredto Agent pursuant to Section 7.1(b) and (c) hereof with respect to the Calendar Quartersending on such Testing Determination Dates have been delivered to Agent; and
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          (b) as of any Testing Determination Date if Borrower shall have failed to deliver to Agent thefinancial statements and other documents required to be delivered to Agent pursuant to Section7.1(b) hereof with respect to the Calendar Quarter ending on such Testing Determination Date.If a Cash Sweep Condition is determined to exist with respect to any Testing Determination Datepursuant to this clause (b), then such Cash Sweep Condition shall continue to exist onlyuntil Borrower delivers such financial statements and other documents to Agent (and a Cash SweepCondition does not otherwise exist pursuant to the other terms of this definition).          “Casualty” means damage or destruction to all or any part of the MortgagedProperty.          “Casualty Proceeds Disbursement Threshold” has the meaning set forth inSection 7.12(a) hereof.          “Central Bank Pledge” has the meaning set forth in Section 9.1hereof.          “Closing” means the execution and delivery of this Loan Agreement by Borrower, Agentand Lenders.          “Closing Date” means the date upon which the Closing occurs.          “Collateral” means the Mortgaged Property and all other property, real or personal,tangible or intangible, and all rights thereto, now or hereafter pledged, mortgaged, assigned ordelivered pursuant or with respect to the Loan Documents or otherwise by Borrower, Property Owneror any other Person to Agent and/or Lenders as security for the Obligations.          “Commitment” means, (a) as to any Lender, the commitment of such Lender to make itsPro Rata Share of the Loan, including all Earn-Out Disbursements with respect thereto, in an amountas of the Closing Date with respect to Calyon New York Branch, in its capacity as the sole Lenderas of the Closing Date, equal to the Loan Amount, and hereafter, as such commitment shall be setforth in any Assignment and Acceptance by which such Lender becomes a Lender or by which suchLender assigns all or any portion of its rights and/or obligations in and to the Loan and the otherLoan Documents to an Assignee, and (b) as to all Lenders, the aggregate commitment of all Lendersto make the Loan, including all Earn-Out Disbursements with respect thereto, which aggregatecommitment shall be the Loan Amount on the Closing Date, as the amounts set forth in the foregoingclauses (a) and (b) may be adjusted in accordance with this Loan Agreement.          “Comparable Standards” means the standards of operation, use and maintenance of hotelslocated in the suburban Washington, D.C-Baltimore metropolitan area that are comparable to thePremises in location, price, size, facilities, amenities, quality and nature and typical of anationally-branded, full service hotel.          “Completion Guaranty” means that certain Guaranty of Completion dated as of theClosing Date made by Guarantor for the benefit of Agent.
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          “Condemnation Proceeds Disbursement Threshold” has the meaning set forth inSection 7.13(a) hereof.          “Construction Budget” means the budget (or budgets if separate budgets are done foreach phase of the Required Improvements) with respect to the costs of the Required Improvements andthe construction, installation and furnishing thereof approved by Agent in writing, and anyPermitted Construction Budget Reallocations, Permitted Construction Budget Franchisor Items andother reallocations thereof and amendments thereto approved by Agent in writing, such approval notto be unreasonably withheld, conditioned or delayed so long as no Event of Default then exists.          “Construction Contracts” means all agreements entered into by Borrower or PropertyOwner pertaining to the provision of oversight, labor, materials, equipment or services inconnection with the construction or installation of the Required Improvements and/or the testing,design, architectural, landscaping or other planning and/or engineering and other professionalservices in connection with the Required Improvements, including any general contractor, architector design engineer.          “Construction Consultant” means such Person as may be designated and engaged by Agentto consult with, provide advice to and to render reports to Agent concerning the RequiredImprovements and the construction, installation and furnishing thereof.          “Construction Consultant Report” means a report by the Construction Consultantacceptable to Agent, based on the Construction Consultant’s review and observation of the Premisesand the work related to the Required Improvements and related documentation, which addresses suchmatters pertaining to the completion, quality, scope, cost and value of the Required Improvementsand such other matters pertaining to the Required Improvements as Agent may require.          “Construction Documents” means, collectively, the Construction Contracts, all WorkChanges and all other agreements to which Borrower or Property Owner is a party or is abeneficiary, in each case pertaining to the Required Improvements and the construction,installation and furnishing thereof.          “Construction Permits” means, collectively, all authorizations, consents and approvalsgiven by and licenses and permits issued by Governmental Authorities that are required for theconstruction or installation of the Required Improvements in accordance with this Loan Agreement.          “Contractor” means any construction manager, contractor, supplier, engineer or otherdesign professional, as the case may be, under a Construction Contract.          “ContractorWill-Serve Agreement” means an agreement in the form of Exhibit C hereto (or in another form acceptable to Agent) by a Contractor under a Major ConstructionContract in favor of Agent.          “Cost Overrun” has the meaning set forth in Section 6.10 hereof.
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          “Credit Card Servicer Agreement” means an agreement in the form attached hereto asExhibit D (or in another form customarily used by the applicable credit card company,service or agent and reasonably acceptable to Agent) among Property Owner and/or Property Manager,as applicable, Agent and each credit card company, servicer or agency used by Property Owner and/orProperty Manager in connection with the Premises, which agreement shall require the deposit offunds into the Collection Account, among other things.          “Debt Service” means, as to any period with respect to which Debt Service is beingdetermined, the amount of Interest due for any such period, giving effect to any Interest RateProtection Agreement then in effect, principal payments due hereunder for such period, and allother amounts due under the Loan Documents for such period.          “Debt Service Coverage Ratio” means as of any Testing Determination Date, the ratio of(a) Net Operating Income for the twelve (12) calendar month period ending on such TestingDetermination Date, to (b) Total Debt Service as of such Testing Determination Date. With respectto any twelve (12) calendar month period that includes any period prior to the Closing Date, NetOperating Income shall be calculated on a pro forma basis reasonably acceptable to Agent.          “Debt Service Coverage Ratio Event of Default” shall exist as of any TestingDetermination Date if as of such Testing Determination Date, the Debt Service Coverage Ratio forthe twelve (12) calendar month period ending on such Testing Determination Date shall be less than(a) 1.10:1.0 for any Testing Determination Date occurring on or after the Closing Date through andincluding April 30, 2009, (b) 1.15:1.0 for any Testing Determination Date occurring on or after May1, 2009 through and including April 30, 2010 and (c) 1.20:1.0 for any Testing Determination Dateoccurring on or after May 1, 2010.          “Default” means any event which, with the giving of notice or the passage oftime, or both, would constitute an Event of Default.          “Default Rate” means, as to any date, the lesser of (i) the maximum rate permitted byapplicable law or (ii) the actual Applicable Interest Rate for that date (determined on a weightedaverage basis to the extent more than one Applicable Interest Rate is then in effect), plus fivepercent (5%) per annum.          “Defaulting Lender” has the meaning set forth in Section 10.14(a)hereof.          “Documentation” has the meaning set forth in Section 11.24 hereof.          “Dollars” or the sign “$” means dollars in the lawful currency of the United States ofAmerica.          “Earn-out Disbursement Request” has the meaning set forth in Section 3.2 hereof.          “Earn-out Disbursements” has the meaning set forth in Section 3.1hereof.          “Earn-out Maximum Amount” has the meaning set forth in Section 3.1hereof.
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          “Engineering Report” means, collectively, those certain reports and assessments setforth on Exhibit E-l attached hereto.          “Environmental Indemnity” means that certain Environmental Indemnity dated as of theClosing Date made by Borrower, Property Owner and Guarantor in favor of Agent and Lenders.          “Environmental Report” means, collectively, those certain reports andassessments set forth on Exhibit E-2 attached hereto.          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and therules and regulations promulgated thereunder by any Governmental Authority, as from time to time ineffect.          “ERISA Affiliate” means any organization, trade or business, or other arrangement(whether or not incorporated) which is treated as a single employer with Borrower or Property Ownerwithin the meaning of IRC Section 414(b), (c), (m) or (o) or Section 4001 of ERISA.          “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA orthe regulations issued thereunder with respect to a Pension Plan (other than an event for which the30-day notice period is waived); (b) the withdrawal of Borrower, Property Owner or any ERISAAffiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was asubstantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or partialwithdrawal of Borrower, Property Owner or any ERISA Affiliate from any Multiemployer Plan, (d)notice of reorganization or insolvency of a Multiemployer Plan, (e) the filing of a notice ofintent to terminate a Pension Plan or the treatment of a plan amendment as a termination underSection 4041 of ERISA, (f) the institution, or threat of institution, of proceedings to terminateor appoint a trustee to administer a Pension Plan or Multiemployer Plan by the PBGC, (g) thefailure to make any required contribution to a Pension Plan or Multiemployer Plan, (h) theimposition of a lien under IRC Section 412 or Section 302 of ERISA on Borrower or any ERISAAffiliate, (i) the existence with respect to any Pension Plan of an “accumulated fundingdeficiency” (as defined in IRC Section 412 or Section 302 of ERISA), whether or not waived, or (j)any event or condition that might reasonably be expected to constitute grounds under Section 4042of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan orMultiemployer Plan or the imposition of any liability under Title IV of ERISA, other than for PBGCpremiums due but not delinquent under Section 4007 of ERISA.          “Event of Default” has the meaning set forth in Section 11.1 hereof.          “Excess Cash Flow” means, with respect to any period, the excess of (a) NetOperating Income for such period over (b) the amount of Debt Service for such period.          “Excluded Taxes” means, with respect to any Lender, (a) income, franchise or similartaxes imposed on (or measured by) its net income by the United States of America, or by thejurisdiction under the laws of which such Lender is organized or in which its principal office islocated or in which its Applicable Lending Office is located, and (b) any branch profits taxes
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imposed by the United States of America or any similar law imposed by any other jurisdiction inwhich such Lender is organized or in which its principal office is located or in which itsApplicable Lending Office is located.          “Expenses” means, for any period, operating costs and expenses which are accrued (inaccordance with Applicable Accounting Standards, consistently applied) by, or by Property Manageron behalf of, Borrower or Property Owner (without duplication) during such period in connectionwith Property Owner’s ownership and operation of the Premises (without duplication of any costs andexpenses prepaid during a prior period or otherwise paid prior to being incurred or accrued),including (i) the FF&E Reserve Amount during such period, (ii) the Base Management Fee, (iii) realestate taxes and personal property taxes and any taxes in lieu of or in the nature of theforegoing, (iv) sales, payroll, use and occupancy taxes and (v) insurance premiums, butexcluding (s) nonrecurring and other extraordinary items not expected to be incurred on anannual basis, (t) FF&E Expenditures and Capital Expenditures to the extent in excess of the FF&EReserve Amount during such period, (u) amounts funded from Loan, insurance or condemnationproceeds, (v) all management and incentive fees in the aggregate in excess of the Base ManagementFee, (w) amounts paid from any reserve (including, amounts paid from the FF&E Reserve Account)maintained by Borrower, Property Owner or any other Person, including Property Manager and Agent,on behalf of or for the benefit of Borrower or Property Owner to the extent payment to such reservepreviously constituted an expense, (x) Debt Service, (y) federal and state income taxes (or anyother taxes based on income), franchise taxes, other taxes based on income or gross receipts dueand owing from Borrower, Property or any direct or indirect owner of Borrower and any taxes in lieuof or in the nature of the foregoing, and (z) depreciation, amortization and any other non-cashitems. Notwithstanding that “Expenses” are to be determined on an accrual basis asaforesaid, real estate taxes, personal property taxes and any taxes in lieu of or in the nature ofthe foregoing and insurance premiums shall be annualized and insurance premiums payable underblanket policies including the Premises shall be allocated among the properties under such blanketpolicies in each case in a manner reasonably acceptable to Agent. For purposes of determining“Excess Cash Flow”, the amounts described in the foregoing clause (s) that are incurred inaccordance with this Loan Agreement and are accrued in any period shall not be excluded from thedetermination of “Expenses”. For purposes of determining “Net Operating Income”, the BaseManagement Fee shall be assumed to be equal to three percent (3%) of Gross Revenues.          “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum(based on a 360-day year) equal, for each day of such period, to the rate of interest quoted at11:00 a.m. New York time charged on overnight federal funds transactions with member banks of theFederal Reserve System.          “FF&E” has the meaning set forth in the Mortgage.          “FF&E/Capital Budget” means an annual budget for FF&E Expenditures and CapitalExpenditures as described in Section 7.1(e) of this Loan Agreement.          “FF&E Disbursement Request” means a written request for disbursement from the FF&EReserve Account pursuant to Section 2.16 hereof in the form attached hereto as ExhibitF.
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          “FF&E Expenditures” means expenditures for the repair, replacement or acquisition (asappropriate) of furniture, fixtures and equipment for the Premises, so long as such repairs,replacements or acquisitions would be capitalized as an asset for accounting purposes under GAAP.“FF&E Expenditures” do not include expenditures on account of the Required Improvements.          “FF&E Reserve Account” has the meaning set forth in Section 2.16(a)hereof.          “FF&E Reserve Amount” means, for any calendar month, an amount equal to fourpercent (4%) of Gross Revenues for such calendar month.          “First Tier Default” means a Default arising from the existence of any facts orconditions described in Section 8.1(a)(ii), (b),(k) or (m), hereof (forclarification purposes, without giving effect to any notice or grace period).          “Franchise Agreement” means that certain Sheraton Hotel Change of Ownership LicenseAgreement dated as of November 29, 2007 between Property Owner and Franchisor, as same may beamended to by the form of amendment attached to the Borrower’s Certificate, together with suchother modifications or replacements thereof as shall be consented to by Agent in accordance withthis Loan Agreement.          “Franchisor” means The Sheraton LLC and any replacement franchisor approved by Agentin writing.          “Franchisor Comfort Letter Agreement” means that certain letter agreement dated as ofthe Closing Date among Borrower, Franchisor and Agent.          “Full Recourse Event” means any of those events or circumstances described inclause (h) of the definition of “Recourse Liability Events” in this Section 1.1.          “Funding Direction Letter” means that certain letter dated as of the Closing Date byBorrower to Agent pertaining to the disbursement of Loan proceeds to be made on the Closing Date.          “GAAP” means those generally accepted accounting principles and practices which arerecognized as such by the American Institute of Certified Public Accountants or by the FinancialAccounting Standards Board or through appropriate boards or committees of that Board from and afterthe Closing Date, as amended or changed from time to time by the American Institute of CertifiedPublic Accountants or the Financial Accounting Standards Board (or other appropriate board orcommittee of that Board), and which are consistently applied for all periods, so as to properlyreflect the financial position of a Person. Borrower shall promptly notify Agent of all suchamendments and other changes in such principles and/or practices that are material. If any suchmaterial amendment or change is made such that, if such amendment or change is incorporated intoBorrower’s reporting, it would have the effect of permitting Borrower’s compliance with anyfinancial covenants or performance tests contained in this Loan Agreement when without suchamendment or other change, Borrower would not so comply, such amendment or change shall not begiven effect for purposes of such financial covenants or performance tests unless Agent otherwiseconsents. Borrower may adopt such amendment or
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other change for purposes of its financial statements and other reports required to be delivered toAgent by Borrower hereunder, but Borrower shall deliver to Agent together with any statement orreport first giving effect to such change, the same such statement or report but without givingeffect to such change. If Agent consents to such amendment or change, such amendment or changeshall be effective thereafter for purposes of such financial covenants and performance tests.          “Government Lists” means (A) the OFAC SDN List, (B) any other list of terrorists,terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules andRegulations of OFAC that Agent notified Borrower in writing is now included in “Government Lists”or (C) any similar lists maintained by the United States Department of State, the United StatesDepartment of Commerce or any other government authority or pursuant to any Executive Order of thePresident of the United States of America that Agent notified Borrower in writing is now includedin “Government Lists.”          “Governmental Authority” means any federal, state, county, municipal, parish,provincial or other government, or any department, commission, board, court, agency, committee, orquasi-governmental unit of the United States of America, or any instrumentality of any of them, orany other political subdivision thereof.          “Gross Revenues” means, for any period, collectively but without duplication, allOperating Revenues for such period but excluding proceeds of the Loan, any loan, equityinvestment or capital contribution made by a Member or any other Person to Borrower or PropertyOwner, Security Deposits until they are forfeited by the depositor, interest income, net paymentsto Borrower resulting from any Interest Rate Protection Agreement, casualty and condemnationproceeds and awards and any other income of an extraordinary or non-recurring nature. “GrossRevenues” shall be determined in accordance with the accrual basis of accounting.          “Guarantor” means Intestate Operating Company, LP, a Delaware limitedpartnership.          “Hard Costs” means the costs of FF&E and other materials for the Required Improvementsand other costs, if any, designated on or described in the Construction Budget as “Hard Costs”.          “IHR” has the meaning set forth in Section 7.16(e) hereof.          “Impositions” means and includes all taxes, assessments for public improvements orbenefits and any payments in lieu thereof, whether or not commenced or completed prior to the datehereof or while any of the Obligations are outstanding, water rates and sewer rents, charges,license fees, permit fees, inspection fees and other governmental levies or payments, of every kindand nature whatsoever, general and special, foreseen or unforeseen, ordinary and extraordinary,which now or at any time hereafter may be assessed, levied, confirmed, imposed or which may becomea lien upon the Mortgaged Property, or any portion thereof, or which are payable with respectthereto, or upon the rents, issues, revenue, income, proceeds or profits thereof, or on theoccupancy, operation, use, possession or activities thereof, whether any or all
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of the same be levied directly or indirectly or as excise or income or franchise taxes in lieu oftaxes which are otherwise imposed upon property of the same type as the Mortgaged Property,together with any penalties or other charges with respect to the late payment or non-paymentthereof.          “Improvements” has the meaning set forth in the Mortgage.          “Indebtedness” means:     (a) all indebtedness for borrowed money or for the deferred purchase price ofproperty or services (including all obligations, contingent or otherwise inconnection with letter of credit facilities, acceptance facilities or other similarfacilities);     (b) all obligations evidenced by bonds, notes, debentures or other similarinstruments;     (c) all indebtedness created or arising under any conditional sale or othertitle retention agreement with respect to property acquired by such Person (eventhough the rights and remedies of the seller or lender under such agreement in theevent of default are limited to repossession or sale of such property);     (d) all capital lease obligations;     (e) all obligations, contingent or otherwise, in connection with indemnities,hold harmless agreements and similar arrangements and in connection with interestrate exchange agreements and similar instruments; and     (f) all indebtedness of the nature referred to in clauses (a) through(e) above of another Person guaranteed directly or indirectly or secured by (or forwhich the holder of such Indebtedness has an existing right, contingent orotherwise, to be secured by) any lien, security interest or other charge orencumbrance upon or in property (including accounts and contract rights) owned bythe Person with respect to whom Indebtedness is being determined, even though suchPerson has not assumed or become liable for the payment of such Indebtedness.          “Indemnified Party” has the meaning set forth in Section 11.1hereof.          “Initial Disbursement” means the disbursement of Loan proceeds in the amount of$25,000,000 on the Closing Date.          “Insurance Policies” means the insurance policies described on ExhibitE hereto.          “Insurance Requirements” means and includes all provisions of any Insurance Policy,all requirements of the issuer of any such Insurance Policy, and all orders, rules, regulations andother requirements of the National Board of Fire Underwriters (or any other body exercising similarfunctions) applicable to or affecting the Premises.
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          “Interest” means interest payable on the Loan at the Applicable Interest Rate or theDefault Rate, as applicable.          “Interest Period” means the period commencing on each Payment Date and endingon the day immediately preceding the next succeeding Payment Date, with the first InterestPeriod commencing on the Closing Date.          “Interest Rate Protection Agreement” means an agreement with respect to an interestrate cap, swap, collar or other derivative arrangement acceptable to Agent, in each case, whichconforms to the requirements set forth in Section 2.6 hereof, and the effect of which is toprotect Borrower from an increase in the rate of interest payable by Borrower on the Loan at theApplicable Interest Rate (exclusive of the LIBOR Rate Margin) and shall include any Lender InterestRate Protection Agreement.          “Interest Rate Protection Agreement Consent” has the meaning setforth in Section 2.6(a) hereof.          “IRC” means the Internal Revenue Code of 1986, as amended.