exv10w33w4



 





Exhibit 10.33.4




LOAN AND SECURITY AGREEMENT

(Junior Mezzanine Loan)




     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is made as of the 11th day of
April, 2007, between ASHFORD SAPPHIRE JUNIOR HOLDER I LLC, a Delaware limited liability company,
having an address at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254-4308 and ASHFORD
SAPPHIRE JUNIOR HOLDER II LLC, a Delaware limited liability company, having an address at 14185
Dallas Parkway, Suite 1100, Dallas, Texas 75254-4308 (collectively, “Borrower”) and
WACHOVIA BANK, NATIONAL ASSOCIATION, having an address at Wachovia Bank, National Association,
Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075, Charlotte, North Carolina
28262 (“Lender”).



W
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T
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E 
S
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 H:




     WHEREAS, the Persons identified on Exhibit D as Owner (collectively “Owner”)
are the owners of the fee estates and/or leasehold estates in the premises described in Exhibit
A attached hereto and all buildings, foundations, structures, and improvements of any kind or
nature now or hereafter located thereon (collectively, the “Premises”);



     WHEREAS, pursuant to those certain limited liability company agreements (collectively, the
“Senior Operating Agreement”) of Ashford Sapphire Senior Mezz I LLC, a Delaware limited
liability company and Ashford Sapphire Senior Mezz II LLC, a Delaware limited liability company
(collectively “Senior Mez Borrower”) Intermediate Mez Borrower (as hereinafter defined) is
the present owner and holder of one hundred percent (100%) of the limited liability company
interest in Senior Mez Borrower;



     WHEREAS, Senior Mez Borrower delivered a promissory note (the “Senior Mez Note”) to
Wachovia Bank, National Association (the “Senior Mez Lender”) which evidences a loan (the
“Senior Mez Loan”) in the original principal amount of EIGHTY MILLION ONE HUNDRED
TWENTY-TWO THOUSAND AND NO/100 DOLLARS ($80,122,000.00) which is secured by a pledge of one hundred
percent (100%) of the Senior Mez Borrower’s direct and indirect limited liability company interests
in Owner pursuant to that certain loan and security agreement by and between Senior Mez Borrower
and Senior Mez Lender (the “Senior Mez Loan Agreement”, and, together with the Senior Mez
Note and all other documents executed and delivered in connection with the making of the Senior Mez
Loan and/or evidencing, securing or guaranteeing payment of the obligations evidenced by the Senior
Mez Note, collectively, the “Senior Mez Loan Documents”;



     WHEREAS, pursuant to those certain limited liability company agreements (collectively, the
“Intermediate Operating Agreement” and together with the Senior Operating Agreement, the
“Operating Agreement”) of Ashford Sapphire Junior Mezz I LLC, a Delaware limited liability
company and Ashford Sapphire Junior Mezz II LLC, a Delaware limited liability company
(collectively “Intermediate Mez Borrower”) Borrower is the present owner and holder of one
hundred percent (100%) of the limited liability company interest in Intermediate Mez Borrower;



 









 





     WHEREAS, Intermediate Mez Borrower delivered a promissory note (the “Intermediate Mez
Note”) to Wachovia Bank, National Association (the “Intermediate Mez Lender”) which
evidences a loan (the “Intermediate Mez Loan”) in the original principal amount of EIGHTY
MILLION AND NO/100 DOLLARS ($80,000,000.00) which is secured by a pledge of one hundred percent
(100%) of the Intermediate Mez Borrower’s direct and indirect limited liability company interests
in Senior Mez Borrower pursuant to that certain loan and security agreement by and between
Intermediate Mez Borrower and Intermediate Mez Lender (the “Intermediate Mez Loan
Agreement”, and, together with the Intermediate Mez Note and all other documents executed and
delivered in connection with the making of the Intermediate Mez Loan and/or evidencing, securing or
guaranteeing payment of the obligations evidenced by the Intermediate Mez Note, collectively, the
“Intermediate Mez Loan Documents”;



     WHEREAS, the Persons identified on Exhibit D as Operating Tenant (collectively,
“Operating Tenant”) are the operating tenants in the Premises;



     WHEREAS, Senior Mez Borrower is the present owner and holder directly or indirectly of one
hundred percent (100%) of the equity in Owner;



     WHEREAS, Owner delivered a promissory note (the “Mortgage Note”) to Wachovia Bank,
National Association (“Mortgage Lender”) which evidences a loan (the “Mortgage
Loan”) in the original principal amount of $315,000,000 which is secured by certain mortgages,
deeds of trust and deeds to secure debt (collectively, the “Mortgage” and together with the
Mortgage Note and all other documents now or hereafter executed and delivered in connection with
the making of the Mortgage Loan, collectively, the “Mortgage Loan Documents”) encumbering
the Premises;



     WHEREAS, Lender has agreed to make a loan (the “Loan”) to Borrower, which Loan,
together with interest thereon, shall be evidenced by and payable in accordance with the provisions
of the promissory note issued by Borrower, as maker, to Lender, as holder (the “Note”, and
together with this Agreement and all other documents now or hereafter executed and delivered in
connection with the making of the Loan, collectively, the “Loan Documents”) in the original
principal amount of $80,000,000 (the “Loan Amount” and together with interest and all other
sums which may or shall become due under the Note or this Agreement or the other Loan Documents
being hereinafter collectively referred to as the “Debt”); and



     WHEREAS, Lender is willing to make the Loan to Borrower only if Borrower grants and assigns to
Lender, as security for the payment of the Debt and the observance and performance by Borrower of
all of the terms, covenants and provisions of the Note and the other Loan Documents on the part of
Borrower to be observed and performed, a security interest in the Collateral (hereinafter defined)
in the manner hereinafter set forth;



     NOW, THEREFORE, in consideration of the making of the Loan and other good and valuable
consideration, the receipt of which is hereby acknowledged, Borrower hereby represents and warrants
to and covenants and agrees with Lender as follows:



ARTICLE I. DEFINITIONS




     Section 1.01. Defined Terms. Capitalized terms used herein that are not otherwise



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defined shall have the respective meanings ascribed thereto in the definitions list on
Exhibit C attached hereto and if not defined therein shall have the meaning set forth in
the Mortgage. Any references to defined terms or provisions of the Mortgage incorporated by
reference in the Loan Documents shall survive the repayment of the Mortgage Loan and termination of
the Mortgage unless expressly agreed to the contrary by the parties hereto. All citations to the
Mortgage in this Agreement shall refer to the Mortgage as it exists as of the date of this
Agreement; provided, however, that in the event the cited provision is amended and
such amendment is approved in writing by Lender, then such citation shall be to the amended
provision. All references to sections and schedules are to sections and schedules in or to this
Agreement unless otherwise specified.




ARTICLE II. REPRESENTATIONS, COVENANTS AND

WARRANTIES OF BORROWER




     Section 2.01. Pledge of Collateral. (a) As security for the due and punctual payment
and performance of all of the Debt (whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise, including, without limitation, the payment of
amounts that would become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. §362(a)), whether allowed or allowable as claims, and the observance
and performance by Borrower of all of the terms, covenants and provisions of the Note and the other
Loan Documents on the part of Borrower to be observed or performed, Borrower hereby (i) pledges,
transfers, grants, hypothecates and assigns to Lender all of Borrower’s right, title and interest
in, to and under the Collateral, whether now or hereafter acquired, and (ii) grants to Lender a
continuing first priority lien on and security interest in and to all Collateral in which Borrower
now or hereafter has rights. Following the occurrence of an Event of Default, Lender is hereby
authorized: (i) to transfer to the account of Lender or its designee any Pledged Interests whether
in the possession of, or registered in the name of, The Depository Trust Company (the
“DTC”) or other clearing corporation or held otherwise; (ii) to transfer to the account of
Lender or its designee with any Federal Reserve Bank any Pledged Interests held in book entry form
with any such Federal Reserve Bank; and (iii) to exchange certificates representing or evidencing
the Pledged Interests for certificates of smaller or larger denominations. To the extent that the
Pledged Interests have not already been transferred to Lender or its designee in a manner
sufficient to perfect Lender’s security interest therein, Borrower shall promptly deliver or cause
to be delivered to Lender all certificates or instruments evidencing the Pledged Interests,
together with duly executed transfer powers or other appropriate endorsements. With respect to any
Collateral in the possession of or registered in the name of a custodian bank or nominee therefor,
or any Collateral represented by entries on the books of any financial intermediary, Borrower
agrees to cause such custodian bank or nominee either to enter into an agreement with Lender
satisfactory to Lender in form and content confirming that the Collateral is held for the account
of Lender, or at the discretion of Lender and subject to the written instructions of Lender,
deliver any such Collateral to Lender and/or cause any such Collateral to be put in bearer form,
registered in the name of Lender or its nominee, or transferred to the account of Lender with any
Federal Reserve Bank, DTC, or other clearing corporation. With respect to any Collateral held in
an account maintained by Lender as financial intermediary, Borrower hereby gives notice to Lender
of Lender’s security interest in such Collateral. In addition, Borrower agrees that in the event
that any Collateral is held by Lender in a fiduciary capacity for or on behalf of Borrower as the
beneficial owner thereof, any agreements



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executed by Borrower in connection therewith are hereby amended to authorize and direct the
pledge, hypothecation and/or transfer of such Collateral to Lender, as lender, by Lender, as
fiduciary, in accordance with the terms, covenants and conditions of this Agreement. The rights
granted to Lender pursuant to this Agreement are in addition to the rights granted to Lender
pursuant to any such agreements. In case of conflict between the provisions of this Agreement and
those of any other such agreement, the provisions hereof shall prevail. In the event that Borrower
purchases or otherwise acquires or obtains any additional Equity Interests in any Corporation, LLC
or Partnership, or any rights, or options, subscriptions or warrants to acquire such Equity
Interests, all such Equity Interests, rights, options, subscriptions or warrants shall
automatically be deemed to be a part of the Collateral pledged by Borrower. If any such Equity
Interests are to be evidenced by a certificate, such additional certificates shall be promptly
delivered to Lender, together with Powers related thereto, or other instruments appropriate to a
certificate representing an Equity Interest, duly executed in blank. Borrower shall deliver to
Lender all subscriptions, warrants, options and all such other rights, and upon delivery to Lender,
Lender shall hold such subscriptions, warrants, options and other rights as additional collateral
pledged to secure the Debt; provided, however, that if Lender determines, in its sole discretion,
that the value of any such subscriptions, warrants, options or other rights shall terminate, expire
or be materially reduced in value by holding the same as Collateral, Lender shall have the right
(but not the obligation), in its sole discretion, to sell or exercise the same, and if exercised,
then the monies disbursed by Lender in connection therewith shall become part of the Debt and all
of the stock, securities, evidences of indebtedness and other items so acquired shall be titled in
the name of Borrower and shall become part of the Collateral.



     Section 2.02. Representations of Borrower. Borrower represents and warrants to
Lender:



     (a) Existence. Borrower (i) is a limited liability company, general partnership,
limited partnership or corporation, as the case may be, duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, (ii) has all requisite power and
authority and all necessary licenses and permits to enter into the transactions contemplated by the
Note and this Agreement and to carry on its business as now conducted and as presently proposed to
be conducted and (iii) is duly qualified, authorized to do business and in good standing in each
jurisdiction where the conduct of its business or the nature of its activities makes such
qualification necessary. If Borrower is a limited liability company, limited partnership or
general partnership, each general partner or managing member, as applicable, of Borrower which is a
corporation is duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.



     (b) Power. Borrower and, if applicable, each General Partner has full power and
authority to execute, deliver and perform, as applicable, the Loan Documents to which it is a
party, to make the borrowings thereunder, to execute and deliver the Note and to grant to Lender a
first priority, perfected and continuing lien on and security interest in the Collateral.



     (c) Authorization of Borrower. The execution, delivery and performance of the Loan
Documents to which Borrower is a party, the making of the borrowings thereunder, the execution and
delivery of the Note, the grant of the lien and security interest on and in the Collateral pursuant
to the Loan Documents to which Borrower is a party and the consummation of the Loan are within the
powers of Borrower and have been duly authorized by Borrower and, if



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applicable, the General Partners, by all requisite action (and Borrower hereby represents that
no approval or action which has not already been obtained of any member, limited partner or
shareholder, as applicable, of Borrower is required to authorize any of the Loan Documents to which
Borrower is a party) and will constitute the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with their terms, except as enforcement may be stayed or
limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity (whether considered in proceedings at law or in
equity) and will not (i) violate any provision of its Organizational Documents, or, to its
knowledge, any law, judgment, order, rule or regulation of any court, arbitration panel or other
Governmental Authority, domestic or foreign, or other Person affecting or binding upon Borrower or
the Collateral, or (ii) violate any provision of any indenture, agreement, mortgage, deed of trust,
contract or other instrument to which Borrower or, if applicable, any General Partner is a party or
by which any of their respective property, assets or revenues are bound, or be in conflict with,
result in an acceleration of any obligation or a breach of or constitute (with notice or lapse of
time or both) a default or require any payment or prepayment under, any such indenture, agreement,
mortgage, deed of trust, contract or other instrument, or (iii) result in the creation or
imposition of any lien, except those in favor of Lender as provided in the Loan Documents to which
it is a party.



     (d) Consent. Neither Borrower nor, if applicable, any General Partner, is required to
obtain any consent, approval or authorization from, or to file any declaration or statement with,
any Governmental Authority or other agency in connection with or as a condition to the execution,
delivery or performance of this Agreement, the Note or the other Loan Documents which has not been
so obtained or filed.



     (e) Interest Rate. The rate of interest paid under the Note and the method and manner
of the calculation thereof do not violate any usury or other law or applicable Legal Requirement.



     (f) Other Agreements. Borrower is not a party to or otherwise bound by any agreements
or instruments which, individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect. Neither Borrower nor, if applicable, any General Partner, is in violation of its
organizational documents or other restriction or any agreement or instrument by which it is bound,
or any judgment, decree, writ, injunction, order or award of any arbitrator, court or Governmental
Authority, or any Legal Requirement, in each case, applicable to Borrower, except for such
violations that would not have a Material Adverse Effect.



     (g) Maintenance of Existence. (i) Borrower is familiar with the criteria of the
Rating Agency required to qualify as a special-purpose bankruptcy-remote entity and Borrower and,
if applicable, each General Partner at all times since their formation have been duly formed and
existing at all times and at all times has preserved and shall preserve and has kept and shall keep
in full force and effect their existence as a Single Purpose Entity.




     (ii) Borrower and, if applicable, each General Partner, at all times since their
organization have complied, and will continue to comply in all material respects, with the
provisions of its certificate of limited partnership and agreement of limited partnership or
certificate of incorporation and by-laws or articles of organization, certificate of
formation and operating agreement, as applicable, and the laws of its jurisdiction of



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organization relating to partnerships, corporations or limited liability companies, as
applicable.




     (iii) Borrower and, if applicable, each General Partner have done or caused to be done
and will do all things reasonably necessary to observe organizational formalities and
preserve their existence and Borrower and, if applicable, each General Partner will not
hereafter amend, modify or otherwise change the certificate of limited partnership and
agreement of limited partnership or certificate of incorporation and by-laws or articles of
organization, certificate of formation and operating agreement, as applicable, or other
organizational documents of Borrower and, if applicable, each General Partner, except for
non-material amendments which do not modify the Single Purpose Entity provisions.




     (iv) Borrower and, if applicable, each General Partner, have at all times accurately
maintained, and will continue to accurately maintain in all material respects, their
respective financial statements, accounting records and other partnership, company or
corporate documents separate from those of any other Person and Borrower and/or, if
applicable General Partner, have filed and will file its own tax returns or, if Borrower
and/or, if applicable, General Partner is part of a consolidated group for purposes of
filing tax returns, Borrower and General Partner, as applicable, has been shown and will be
shown as separate members of such group. Borrower and, if applicable, each General Partner
have not at any time since their formation commingled, and will not commingle, their
respective assets with those of any other Person and each has maintained and will maintain
their assets in such a manner such that it will not be costly or difficult to segregate,
ascertain or identify their individual assets from those of any other Person. Borrower and,
if applicable, each General Partner has not permitted and will not permit any Affiliate
independent access to their bank accounts. Borrower and, if applicable, each General
Partner have at all times since their formation accurately maintained and utilized, and will
continue to accurately maintain and utilize, their own separate bank accounts, payroll and
separate books of account, stationery, invoices and checks.




     (v) Borrower and, if applicable, each General Partner, have at all times paid, and will
continue to pay, their own liabilities from their own separate assets and each has allocated
and charged and shall each allocate and charge fairly and reasonably any overhead which
Borrower and, if applicable, any General Partner, shares with any other Person, including,
without limitation, for office space and services performed by any employee of another
Person.




     (vi) Borrower and, if applicable, each General Partner, have at all times identified
themselves, and will continue to identify themselves, in all dealings with the public, under
their own names and as separate and distinct entities and have corrected and shall correct
any known misunderstanding regarding their status as separate and distinct entities.
Borrower and, if applicable, each General Partner, have not at any time identified
themselves, and will not identify themselves, as being a division of any other Person.



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     (vii) Borrower and, if applicable, each General Partner, have been at all times, and
will continue to be, adequately capitalized in light of the nature of their respective
businesses.




     (viii) Borrower and, if applicable, each General Partner, (A) have not owned, do not
own and will not own any assets or property other than the Collateral, (B) have not engaged
and will not engage in any business other than the ownership, management and servicing of
the Collateral, (C) have not incurred and will not incur any debt, secured or unsecured,
direct or contingent (including guaranteeing any obligation), other than, with respect to
Borrower the Loan, (D) have not pledged and will not pledge their assets for the benefit of
any other Person, and (E) have not made and will not make any loans or advances to any
Person (including any Affiliate).




     (ix) Neither Borrower nor, if applicable, any General Partner will hereafter change its
name or principal place of business.




     (x) Neither Borrower nor, if applicable, any General Partner has, and neither of such
Persons will have, any subsidiaries (other than Borrower, Owner, Senior Mez Borrower and
Intermediate Mez Borrower).




     (xi) Borrower has preserved and maintained and will preserve and maintain its existence
as a Delaware limited liability company and all material rights, privileges, tradenames and
franchises. General Partner, if applicable, has preserved and maintained and will preserve
and maintain its existence as a Delaware limited liability company and all material rights,
privileges, tradenames and franchises.




     (xii) Neither Borrower nor, if applicable, any General Partner, has merged or
consolidated with, and none will merge or consolidate with, and none has sold all or
substantially all of its respective assets to any Person, and none will sell all or
substantially all of its respective assets to any Person, and none has liquidated, wound up
or dissolved itself (or suffered any liquidation, winding up or dissolution) and none will
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution). Neither Borrower nor, if applicable, any General Partner has acquired nor
will acquire any business or assets from, or capital stock or other ownership interest of,
or be a party to any acquisition of, any Person (other than, with respect to General
Partners, if applicable, its interest in Borrower).




     (xiii) Borrower and, if applicable, each General Partner, have not at any time since
their formation assumed, guaranteed or held themselves out to be responsible for, and will
not assume, guarantee or hold themselves out to be responsible for the liabilities or the
decisions or actions respecting the daily business affairs of their partners, shareholders
or members or any predecessor company, corporation or partnership, each as applicable, any
Affiliates, or any other Persons other than the Loan and other loans which have been paid in
full, and liens granted thereunder fully discharged, prior to the date hereof. Neither
Borrower nor, if applicable, each General Partner, has at any time since their formation
acquired, nor will acquire, obligations or securities of its partners or shareholders,
members or any predecessor company, corporation or partnership, each as



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applicable, or any Affiliates (other than, with respect to General Partner, its
interest in Borrower). Borrower and, if applicable, each General Partner, have not at any
time since their formation made, and will not make, loans to its partners, members or
shareholders or any predecessor company, corporation or partnership, each as applicable, or
any Affiliates of any of such Persons. Borrower and, if applicable, each General Partner,
have no known material contingent liabilities nor do they have any material financial
liabilities under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which such Person is a party or by which it is otherwise bound other than
under the Loan Documents.




     (xiv) Neither Borrower nor, if applicable, General Partner, has at any time since its
formation entered into and was not a party to, and, will not enter into or be a party to,
any transaction with its Affiliates, members, partners or shareholders, as applicable, or
any Affiliates thereof except in the ordinary course of business of such Person on terms
which are no less favorable to such Person than would be obtained in a comparable arm’s
length transaction with an unrelated third party.




     (xv) If Borrower is a limited partnership or a limited liability company, the General
Partner shall be a corporation or limited liability company whose sole asset is its interest
in Borrower and the General Partner will at all times comply, and will cause Borrower to
comply, with each of the representations, warranties, and covenants contained in this
Section 2.02(g) as if such representation, warranty or covenant was made directly by such
General Partner.




     (xvi) Borrower shall at all times cause there to be at least two duly appointed members
(each, an “Independent Director”) of the board of directors or board of managers or
other governing board or body, as applicable, of, if Borrower is a corporation, Borrower or
if Borrower is a limited partnership, of the General Partner, and if Borrower is a limited
liability company, of the General Partner or of Borrower reasonably satisfactory to Lender
who shall not have been at the time of such individual’s appointment, and may not be or have
been at any time (A) a shareholder, officer, director, attorney, counsel, partner, member or
employee of Borrower or any of the foregoing Persons or Affiliates thereof, (B) a customer
or creditor of, or supplier or service provider to, Borrower or any of its shareholders,
partners, members or their Affiliates, (C) a member of the immediate family of any Person
referred to in (A) or (B) above or (D) a Person Controlling, Controlled by or under common
Control with any Person referred to in (A) through (C) above. A natural person who
otherwise satisfies the foregoing definition except for being the Independent Director of a
Single Purpose Entity Affiliated with Borrower or General Partner shall not be disqualified
from serving as an Independent Director if such individual is at the time of initial
appointment, or at any time while serving as the Independent Director, an Independent
Director of a Single Purpose Entity Affiliated with Borrower or General Partner if such
individual is an independent director provided by a nationally-recognized company that
provides professional independent directors.




     (xvii) Borrower and, if applicable, each General Partner, shall not cause or permit the
board of directors or board of managers or other governing board or body, as



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applicable, of Borrower or, if applicable, each General Partner, to take any action
which, under the terms of any certificate of incorporation, by-laws, limited liability
company agreement, certificate of formation, operating agreement or articles of
organization, requires a vote of the board of directors or board of managers or the
governing board or body of Borrower or, if applicable, the General Partner and also requires
the vote of the Independent Directors therewith, unless at the time of such action there
shall be at least two members who are Independent Directors.




     (xviii) Borrower and, if applicable, each General Partner has paid and shall pay the
salaries of their own employees and has maintained and shall maintain a sufficient number of
employees in light of their contemplated business operations




     (xix) Borrower shall, and shall cause its Affiliates to, and Borrower has and has
caused its Affiliates to, conduct its business so that the assumptions made with respect to
Borrower and, if applicable, each General Partner, in that certain opinion letter relating
to substantive non-consolidation dated the date hereof (the “Insolvency Opinion”)
delivered in connection with the Loan shall be true and correct in all respects.


Notwithstanding anything to the contrary contained in this Section 2.02(g), provided Borrower is a
Delaware single member limited liability company which satisfies the single purpose bankruptcy
remote entity requirements of each Rating Agency for a single member limited liability company, the
foregoing provisions of this Section 2.02(g) shall not apply to the General Partner.




     (h) No Default. No Event of Default or, to Borrower’s knowledge, Default has occurred
and is continuing or would occur as a result of the consummation of the transactions contemplated
by the Loan Documents. Borrower is not in default in the payment or performance of any of its
Contractual Obligations in any material respect.



     (i) Governmental Consents and Approvals. Borrower and, if applicable, each General
Partner, have obtained or made all necessary (i) consents, approvals and authorizations, and
registrations and filings of or with all Governmental Authorities and (ii) consents, approvals,
waivers and notifications of partners, stockholders, members, creditors, lessors and other
nongovernmental Persons, in each case, which are required to be obtained or made by Borrower or, if
applicable, the General Partner, in connection with the execution and delivery of, and the
performance by Borrower of its obligations under, the Loan Documents.



     (j) Investment Company Act Status, etc. Borrower is not (i) an “investment company,”
or a company “controlled” by an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any
other federal or state law or regulation which purports to restrict or regulate its ability to
borrow money.



     (k) Compliance with Law. To Borrower’s knowledge, Borrower is and shall remain in
compliance with all Legal Requirements to which it or the Collateral are subject, including,



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without limitation, all Environmental Statutes (except as previously disclosed in the
Environmental Report), the Americans with Disabilities Act (except as previously disclosed in the
engineering report relating to the Property delivered to Lender in connection with the origination
of the Loan), the Occupational Safety and Health Act of 1970 and ERISA.



     (l) Transaction Brokerage Fees. Borrower has not dealt with any financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. All brokerage fees, commissions and other expenses payable in
connection with the transactions contemplated by the Loan Documents have been paid in full by
Borrower contemporaneously with the execution of the Loan Documents and the funding of the Loan.
Borrower hereby agrees to indemnify and hold Lender harmless for, from and against any and all
claims, liabilities, costs and expenses of any kind in any way relating to or arising from (i) a
claim by any Person that such Person acted on behalf of Borrower in connection with the
transactions contemplated herein or (ii) any breach of the foregoing representation. The
provisions of this subsection (l) shall survive the repayment of the Loan.



     (m) Federal Reserve Regulations. No part of the proceeds of the Loan will be used for
the purpose of “purchasing” or “carrying” any “margin stock” within the meaning of Regulations T, U
or X of the Board of Governors of the Federal Reserve System or for any other purpose which would
be inconsistent with such Regulations T, U or X or any other Regulations of such Board of
Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of
the Loan Documents.



     (n) Pending Litigation. There are no actions, suits or proceedings pending or, to the
best knowledge of Borrower, threatened against or affecting Borrower, Guarantor or the Premises in
any court or before any Governmental Authority which if adversely determined either individually or
collectively has or is reasonably likely to have a Material Adverse Effect.



     (o) Solvency; No Bankruptcy. Each of Borrower and, if applicable, the General
Partner, (i) is and has at all times been Solvent and will remain Solvent immediately upon the
consummation of the transactions contemplated by the Loan Documents and (ii) is free from
bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of
creditors and is not contemplating the filing of a petition under any state or federal bankruptcy
or insolvency laws or the liquidation of all or a major portion of such Person’s assets or property
and Borrower has no knowledge of any Person contemplating the filing of any such petition against
it or, if applicable, the General Partner. None of the transactions contemplated hereby will be or
have been made with an intent to hinder, delay or defraud any present or future creditors of
Borrower and Borrower has received reasonably equivalent value in exchange for its obligations
under the Loan Documents. Borrower’s assets do not, and immediately upon consummation of the
transaction contemplated in the Loan Documents will not, constitute unreasonably small capital to
carry out its business as presently conducted or as proposed to be conducted. Borrower does not
intend to, nor believe that it will, incur debts and liabilities beyond its ability to pay such
debts as they may mature.



     (p) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower to, inter
alia, (i) acquire an interest in the Collateral and (ii) pay certain transaction costs incurred by
Borrower in connection with the Loan. No portion of the proceeds of the Loan will be used for



10









 







family, personal, agricultural or household use.



     (q) Tax Filings. Borrower and, if applicable, each General Partner, have filed all
federal, state and local tax returns required to be filed and have paid or made adequate provision
for the payment of all federal, state and local taxes, charges and assessments payable by Borrower
and, if applicable, the General Partners. Borrower and, if applicable, the General Partners,
believe that their respective tax returns properly reflect the income and taxes of Borrower and
said General Partner, if any, for the periods covered thereby, subject only to reasonable
adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.



     (r) Not Foreign Person. Borrower is not a “foreign person” within the meaning of
§1445(f)(3) of the Code.



     (s) ERISA (i) Neither Borrower nor Guarantor is, or is acting on behalf of: (a) an
“employee benefit plan” within the meaning of Section 3(3) of ERISA, that is subject to Part 4 of
Title I of ERISA; (b) a “plan” within the meaning of section 4975(e)(1) of the Code that is subject
to section 4975 of the Code or (c) any other entity that is deemed under applicable law to hold the
assets of a plan described in (a) or (b) and this representation shall be deemed to be continuing
in nature for all periods that this Agreement is in effect. Each Plan is in compliance with, and
has been administered in all material respects in compliance with, its terms and the applicable
provisions of ERISA, the Code and any other applicable Legal Requirement, except to the extent the
foregoing could not have a Material Adverse Effect, and no event or condition has occurred and is
continuing as to which Borrower would be under an obligation to furnish a report to Lender under
clause (ii)(A) of this Section. With respect to each Plan maintained or contributed to by
Borrower, Guarantor or any ERISA Affiliate thereof (a) there is no actual or contingent material
liability of Borrower, Guarantor or any ERISA Affiliate under Title IV of ERISA or Section 412 of
the Code to any person or entity, including the Pension Benefit Guaranty Corporation, IRS, any such
Plan or participants (or their beneficiaries) in any such Plan (other than the obligation to pay
routine benefit claims when due under the terms of such Plan), (b) the assets of Borrower or
Guarantor have not been subject to a lien under ERISA or the Code and (c) there is no basis for
such material liability or the assertion of any such lien with respect to the assets of Borrower or
Guarantor as the result of or after the consummation of the transactions contemplated by this
Agreement. Except to the extent the following could not have a Material Adverse Effect, no Welfare
Plan provides or will provide benefits, including, without limitation, death or medical benefits
(whether or not insured) with respect to any current or former employee of Borrower or Guarantor
beyond his or her retirement or other termination of service other than (A) coverage mandated by
applicable law, (B) death or disability benefits that have been fully provided for by fully paid up
insurance or (C) severance benefits.



          (ii) Borrower will furnish to Lender as soon as possible, and in any event within ten (10) days
after Borrower knows or has reason to believe that any of the events or conditions specified below
with respect to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, an Officer’s
Certificate setting forth details respecting such event or condition and the action, if any, that
Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or
notice required to be filed with or given to PBGC (or any other relevant Governmental Authority))
by Borrower or an ERISA Affiliate with respect to such




11









 







event or condition, if such report or notice is required to be filed with the PBGC or any
other relevant Governmental Authority:





          (A) any reportable event, as defined in Section 4043 of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not by
regulation waived the requirement of Section 4043(a) of ERISA that it be notified
within thirty (30) days of the occurrence of such event (provided that a failure to
meet the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA, including, without limitation, the failure to make on or before its due date
a required installment under Section 412(m) of the Code and of Section 302(e) of
ERISA, shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code), and any request for a waiver under
Section 412(d) of the Code for any Plan;




          (B) the distribution under Section 4041 of ERISA of a notice of intent to
terminate any Plan or any action taken by Borrower or an ERISA Affiliate to
terminate any Plan;




          (C) the institution by PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan
that such action has been taken by PBGC with respect to such Multiemployer Plan;




          (D) the complete or partial withdrawal from a Multiemployer Plan by Borrower or
any ERISA Affiliate that results in material liability under Section 4201 or 4204 of
ERISA (including the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by Borrower or any ERISA Affiliate of notice from
a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;




          (E) the institution of a proceeding by a fiduciary of any Multiemployer Plan
against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within thirty (30) days;




          (F) the adoption of an amendment to any Plan that, pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA
Affiliate fails to timely provide security to the Plan in accordance with the
provisions of said Sections;




          (G) the imposition of a lien or a security interest in connection with a Plan;
or




          (H) Borrower or Guarantor permits any Welfare Plan to provide benefits,
including without limitation, medical benefits (whether or not insured), with
respect to any current or former employee of Borrower or Guarantor beyond



12









 







his or her retirement or other termination of service other than (1) coverage
mandated by applicable law, (2) death or disability benefits that have been fully
provided for by paid up insurance or otherwise or (3) severance benefits.



          (iii) Borrower shall not knowingly engage in or permit any transaction in connection with which
Borrower or Guarantor could be subject to either a material civil penalty or tax assessed pursuant
to Section 502(i) or 502(l) of ERISA or Section 4975 of the Code, to the extent it could have a
Material Adverse Effect, permit any Welfare Plan to provide benefits, including without limitation,
medical benefits (whether or not insured), with respect to any current or former employee of
Borrower or Guarantor beyond his or her retirement or other termination of service other than (A)
coverage mandated by applicable law, (B) death or disability benefits that have been fully provided
for by paid up insurance or otherwise or (C) severance benefits, permit the assets of Borrower or
Guarantor to become “plan assets”, as defined under ERISA Section 3(42) and regulations promulgated
thereunder or, to the extent it could have a Material Adverse Effect, adopt, amend (except as may
be required by applicable law) or increase the amount of any benefit or amount payable under, or
permit any ERISA Affiliate to adopt, amend (except as may be required by applicable law) or
increase the amount of any benefit or amount payable under, any employee benefit plan (including,
without limitation, any employee welfare benefit plan) or other plan, policy or arrangement, except
for normal increases in the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits expense to Borrower, Guarantor or any
ERISA Affiliate.




     (t) Labor Matters. Borrower is not a party to any collective bargaining agreements
and has no employees.



     (u) Borrower’s Legal Status. Borrower’s exact legal name that is indicated on the
signature page hereto, organizational identification number and place of business or, if more than
one, its chief executive office, as well as Borrower’s mailing address, if different, which were
identified by Borrower to Lender and contained in this Agreement, are true, accurate and complete.
Borrower will not change its name, its place of business or, if more than one place of business,
its chief executive office, or its mailing address or organizational identification number if it
has one without giving Lender at least thirty (30) days prior written notice of such change, if
Borrower does not have an organizational identification number and later obtains one, Borrower
shall promptly notify Lender of such organizational identification number and Borrower will not
change its type of organization, jurisdiction of organization or other legal structure.



     (v) Owner’s Legal Status. (A) (i) The fee owner or leasehold owner, as applicable, of
the Premises and the maker of the Mortgage Note is and shall be Owner, (ii) there are no defaults
existing under the Mortgage Loan Documents, and, to the best of Borrower’s knowledge, there is no
event which, but for the passage of time or the giving of notice, or both, would constitute an
event of default under the Mortgage Loan Documents, (iii) the Mortgage Loan Documents and the
provisions thereof have not been amended, modified or altered in any manner whatsoever, (iv) the
Mortgage constitutes a valid and enforceable first lien covering the Premises subject only to items
set forth as exceptions to or subordinate matters in the title insurance policy insuring the lien
of the Mortgage, none of which, individually or in the aggregate, materially interfere with the
benefits of the security intended to be provided by the



13









 







Mortgage, materially and adversely affect the value of the Premises, impair the use or
operation of the Premises for the use currently being made thereof or impair Borrower’s ability to
pay its obligations in a timely manner (such items being the “Permitted Encumbrances”), (v)
the Premises are improved and income-producing and the improvements located thereon have not been
damaged by fire or other casualty, (vi) no condemnation or other eminent domain proceedings have
been commenced with respect to the Premises and Borrower has no knowledge that any such proceedings
are contemplated, (vii) Borrower knows of no fact or circumstance which would affect the
enforceability, validity or priority of the Mortgage Loan Documents, or which would affect the
ability or willingness of Owner and any other Person liable under the Mortgage Loan Documents to
continue to perform and observe the terms, covenants and provisions of the Mortgage Loan Documents,
(viii) the unpaid principal balance of the Mortgage Note as of the date of this Agreement is as set
forth on Exhibit B attached hereto.



          (B) (i) there are no defaults existing under the Senior Mez Note, the Intermediate Mez Note,
the Senior Mez Loan Agreement, the Intermediate Mez Loan Agreement, the other Senior Mez Loan
Documents or the other Intermediate Mez Loan Documents and, to the best of Borrower’s knowledge,
there is no event which, but for the passage of time or the giving of notice, or both, would
constitute an event of default under the Senior Mez Loan Documents or the Intermediate Mez Loan
Documents, (ii) none of the Senior Mez Loan Documents or the Intermediate Mez Loan Documents or the
provisions thereof have been amended, modified or altered in any manner whatsoever, (iii) Borrower
knows of no fact or circumstance which would affect the enforceability, validity or priority of the
Senior Mez Loan Documents or the Intermediate Mez Loan Documents, or which would affect the ability
or willingness of Senior Mez Borrower, Intermediate Mez Borrower and any other Person liable under
the Senior Mez Loan Documents or the Intermediate Mez Loan Documents to continue to perform and
observe the terms, covenants and provisions of the Senior Mez Loan Documents and the Intermediate
Mez Loan Documents, (iv) the unpaid principal balance of the Senior Mez Note and the Intermediate
Mez Note as of the date of this Agreement are as set forth on Exhibit B attached hereto.




     (w) Title. Borrower (i) is the record and beneficial owner of, and has good and
marketable title to, (x) the Equity Interests set forth in Schedule 1 attached hereto and
(y) all of the other Collateral owned by Borrower as of the date hereof, and (ii) will have good
and marketable title to the Equity Interests and all other Collateral hereafter acquired, in any
case, free and clear of all claims, liens, options and encumbrances of any kind, and Borrower has
the right and authority to pledge and assign its portion of the Equity Interests and grant a
security interest therein as herein provided.



     (x) Securities Laws. The transactions contemplated by this Agreement do not violate
and do not require that any filing, registration or other act be taken with respect to any and all
laws pertaining to the registration or transfer of securities, including without limitation the
Securities Act of 1933, as amended, and the Securities and Exchange Act of 1934, as amended, and
any and all rules and regulations promulgated thereunder (collectively, the “Securities
Laws”), as such laws are amended and in effect from time to time, and none of the Equity
Interests in the Partnerships or LLCs are represented by any “certificated security” as that term
is defined in Section 8-102 of the UCC. Borrower shall at all times comply with the Securities
Laws as the same pertain to all or any portion of the Collateral or any of the transactions



14









 







contemplated by this Agreement. Lender agrees not to take any action with respect to the
Collateral that, without the consent of Borrower, requires Borrower to file a registration
statement with the SEC or apply to qualify a sale of a security under the securities laws of any
state.



     (y) Ownership Structure. The ownership chart attached hereto as Schedule 2 is
true, correct and complete as of the Closing Date. Except as set forth on Schedule 2, no
other Person has any direct or indirect interest in Owner, Senior Mez Borrower, Intermediate Mez
Borrower or Borrower.



     (z) Control of Owner. Borrower has the power and authority and the requisite
ownership interests to control the actions of Owner and at all times during the term of the Loan
shall maintain the power and authority to control the actions of Owner.



     (aa) Representations and Warranties of Owner. (i) All of the representations and
warranties of Owner or any Affiliate of Owner under the Mortgage Loan Documents are true, complete
and correct in all material respects, (ii) all of the representations and warranties of Senior Mez
Borrower or any Affiliate of Senior Mez Borrower under the Senior Mez Loan Documents are true,
complete and correct in all material respects and (iii) all of the representations and warranties
of Intermediate Mez Borrower or any Affiliate of Intermediate Mez Borrower under the Intermediate
Mez Loan Documents are true, complete and correct in all material respects.



     (bb) Management Agreement. The Management Agreement is in full force and effect.
There is no default, breach or violation existing under the Management Agreement, and no event has
occurred (other than payments due but not yet delinquent) that, with the passage of time or the
giving of notice, or both, would constitute a default, breach or violation thereunder, by either
party thereto.



     (cc) Operating Company Status. Borrower qualifies as an “operating company,” as such
term is defined in the regulation issued by the U.S. Department of Labor known as the “plan assets
regulation,” 29 C.F.R. §2510.3-101 and, as long as the Loan is outstanding, Borrower will remain at
all times an operating company, as so defined.



     (dd) Affiliation. Neither Borrower nor Operating Tenant, nor any Affiliate of
Borrower or Operating Tenant is an Affiliate of Lender.



     (ee) Insurance. Borrower has obtained and delivered, or has caused Owner to obtain
and deliver, to Lender certified copies of all insurance policies reflecting the insurance
coverages, amounts and other requirements set forth in this Agreement. Borrower has not, and to
the best of Borrower’s knowledge no other Person has, done by act or omission anything which would
impair the coverage of any such policy.



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



15









 







any of the Collateral.



     (gg) Financial Information. All financial data that has been delivered by Borrower to
Lender (i) is true, complete and correct in all material respects, (ii) accurately represents the
financial condition and results of operations in all material respects of the Persons covered
thereby as of the date on which the same shall have been furnished, and (iii) in the case of
audited financial statements, has been prepared in accordance with GAAP and the Uniform System of
Accounts (or such other accounting basis as is reasonably acceptable to Lender) throughout the
periods covered thereby. As of the date hereof, neither Borrower nor, if applicable, any General
Partner, has any material contingent liability, material liability for taxes or other unusual or
forward commitment not reflected in such financial statements delivered to Lender. Since the date
of the last financial statements delivered by Borrower to Lender, except as otherwise disclosed in
such financial statements or notes thereto, there has been no change in the assets, liabilities or
financial position of Borrower, Owner nor, if applicable, any General Partner, or in the results of
operations of Borrower or Owner which would have a Material Adverse Effect. None of Borrower,
Owner nor, if applicable, any General Partner, has incurred any obligation or liability, contingent
or otherwise not reflected in such financial statements which would have a Material Adverse Effect.



     (hh) Collateral. Borrower (i) represents and warrants to Lender that the Collateral
constitutes a “general intangible” (as defined in Section 9-102(a)(42) of the UCC); and (ii)
Borrower covenants and agrees that (A) the Collateral is not and will not be dealt in or traded on
securities exchanges or securities markets, (B) the terms of the Collateral do not and will not
provide that they are securities governed by the UCC, (C) the Collateral is not and will not be
investment company securities within the meaning of Section 8-103 of the UCC and (D) Borrower shall
not cause or permit any interests in the Collateral to be certificated and delivered to any Person
other than Lender.



     (ii) Lockbox Account.



          (i) Pursuant to the irrevocable direction letter delivered by Borrower to Intermediate Mez
Borrower on the Closing Date, Borrower shall direct Intermediate Mez Borrower to cause all
Remaining Rents after payments due under the Intermediate Mez Loan Documents have been paid to be
deposited into the Lockbox Account;



          (ii) there are no other accounts maintained by Owner, Borrower or any other Person with
respect to the collection of rents, revenues, proceeds or other income from the Premises or for the
collection of Rents, except for accounts established by the Manager pursuant to the Management
Agreement, the Collection Account and the Central Account and the Lockbox Account and lockbox
accounts established pursuant to the Senior Mez Loan Agreement and the Intermediate Mez Loan
Agreement; and



          (iii) so long as any of the Debt shall be outstanding, neither Borrower, Owner nor any other
Person shall open any other accounts with respect to the collection of rents, revenues, proceeds or
other income from the Premises or for the collection of Rents (other than accounts permitted
pursuant to the terms of the Mortgage which are opened in the name of Manager).



16









 





     (jj) Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws. (i)
None of Borrower, General Partner, any Guarantor, or any Person who owns any equity interest in or
Controls Borrower, General Partner or any Guarantor currently is identified on the OFAC List or
otherwise qualifies as a Prohibited Person, and Borrower has implemented procedures, approved by
General Partner, to ensure that no Person who now or hereafter owns an equity interest in Borrower
or General Partner is a Prohibited Person or Controlled by a Prohibited Person, (ii) no proceeds of
the Loan will be used to fund any operations in, finance any investments or activities in or make
any payments to, Prohibited Persons, and (iii) none of Borrower, General Partner, or any Guarantor
are in violation of any Legal Requirements relating to anti-money laundering or anti-terrorism,
including, without limitation, Legal Requirements related to transacting business with Prohibited
Persons or the requirements of the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related
regulations issued thereunder, including temporary regulations, all as amended from time to time.
Notwithstanding the foregoing, with respect to the holders of shares in publicly traded
corporations which hold an equity interest in Borrower, General Partner or Guarantor and which
holders of shares in publicly traded corporations do not Control Borrower, General Partner or
Guarantor, the representations contained in clauses (i) and (iii) of the preceding sentence are
made to the knowledge of Borrower. No tenant at the Premises currently is identified on the OFAC
List or otherwise qualifies as a Prohibited Person, and, to the best of Borrower’s knowledge, no
tenant at the Premises is owned or Controlled by a Prohibited Person. Borrower has determined that
Manager has implemented procedures, approved by Borrower, to ensure that no tenant at the Premises
is a Prohibited Person or owned or Controlled by a Prohibited Person.



     (kk) Perfected Security Interest. Upon the filing of the UCC-1 financing statements
with the Delaware Secretary of State, Lender will have a valid, and duly perfected first priority,
security interest in the Collateral enforceable as such against all creditors of Borrower and any
Persons purporting to purchase any Pledged Interests and Proceeds from Borrower.



     Section 2.03. Further Acts, Etc. Borrower will, at the cost of Borrower, and without
expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, assignments, notices of assignments, transfers and assurances as Lender shall, from
time to time, reasonably require for the better assuring, conveying, assigning, transferring, and
confirming unto Lender the property, security interest and rights hereby given, granted, bargained,
sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out or
facilitating the performance of the terms of this Agreement or for filing, registering or recording
this Agreement and, on demand, will execute and deliver and hereby authorizes Lender to execute in
the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so,
one or more financing statements, chattel mortgages or comparable security instruments to evidence
more effectively the lien hereof upon the Collateral. Without limiting the generality of the
foregoing, Borrower will: (i) if any Collateral shall be evidenced by a promissory note or other
instrument or chattel paper, deliver and pledge to Lender hereunder such note or instrument or
chattel paper duly indorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance reasonably satisfactory to Lender; (ii) execute or authenticate and file
such financing or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary



17









 







or desirable and as Lender may request, in order to perfect and preserve the security interest
granted or purported to be granted by Borrower hereunder; (iii) take all action necessary to ensure
that Lender has control of any Collateral consisting of deposit accounts, electronic chattel paper,
investment property and letter-of-credit rights as provided in Sections 9-104, 9-105, 9-106 and
9-107 of the UCC; and (iv) deliver to Lender evidence that all other action that Lender may
reasonably deem necessary or desirable in order to perfect and protect the security interest
granted or purported to be granted by Borrower under this Agreement has been taken. Borrower
grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of
protecting, perfecting, preserving and realizing upon the interests granted pursuant to this
Agreement and to effect the intent hereof, all as fully and effectually as Borrower might or could
do; and Borrower hereby ratifies all that Lender shall lawfully do or cause to be done by virtue
hereof; provided, however, that Lender shall not exercise such power of attorney unless and until
Borrower fails to take the required action within the five (5) Business Day time period stated
above unless the failure to so exercise, could, in Lender’s reasonable judgment, result in a
Material Adverse Effect. Upon (a) receipt of an affidavit of an officer of Lender as to the loss,
theft, destruction or mutilation of the Note or any other Loan Document which is not of public
record, (b) receipt of an indemnity of Lender related to losses resulting solely from the issuance
of a replacement note or other applicable Loan Document and (c) in the case of any such mutilation,
upon surrender and cancellation of such Note or other applicable Loan Document, Borrower will
issue, in lieu thereof, a replacement Note or other applicable Loan Document, dated the date of
such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount
thereof and otherwise of like tenor.



     Section 2.04. Recording of Agreement, etc. Borrower forthwith upon the execution and
delivery of this Agreement and thereafter, from time to time, will, at the request of Lender, cause
this Agreement, and any security instrument creating a lien or security interest or evidencing the
lien hereof upon the Collateral and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or future law in order
to publish notice of and fully protect the lien or security interest hereof upon, and the interest
of Lender in, the Collateral. Borrower will pay all filing, registration or recording fees, and
all expenses incident to the preparation, execution and acknowledgment of this Agreement, any
additional security instrument with respect to the Collateral and any instrument of further
assurance, 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 this Agreement, and any
security agreement supplemental hereto, or any instrument of further assurance, except where
prohibited by law to do so, in which event Lender may declare the Loan to be immediately due and
payable. Borrower shall hold harmless and indemnify Lender, and its successors and assigns,
against any liability incurred as a result of the imposition of any tax on the making and recording
of this Agreement.



     Section 2.05. Cost of Defending and Upholding Lien. If any action or proceeding is
commenced to which Lender is made a party relating to the Loan Documents and/or the Collateral or
Lender’s interest therein or in which it becomes necessary to defend or uphold the lien of this
Agreement or any other Loan Document, Borrower shall, on demand, reimburse Lender for all expenses
(including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Lender in
connection therewith, and such sum, together with interest thereon at the Default Rate from and
after such demand until fully paid, shall constitute a part of



18









 







the Loan.



     Section 2.06. Financial Reports. Borrower shall keep accurate and complete books,
records and accounts in accordance with generally accepted accounting principles (“GAAP”)
(or such other accounting basis reasonably acceptable to Lender) consistently applied with respect
to the financial affairs of Borrower, including, but not limited to, the financial affairs of
Borrower which relate to the Collateral and all sums due or which may become due thereunder.
Borrower shall, within thirty (30) days after request and at its sole cost and expense, deliver to
Lender any of such books and records relating to the operation of the Property and the financial
affairs of Borrower as may be reasonably requested by Lender. Lender shall have the right from
time to time at all times 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. Borrower will furnish Lender annually, within
one hundred twenty (120) days following the end of each Fiscal Year of Borrower, with a complete
copy of Borrower’s financial statement covering all of the financial affairs of Borrower for such
Fiscal Year and containing a statement of revenues and expenses, a statement of assets and
liabilities and a statement of Borrower’s equity. Together with Borrower’s annual financial
statements, Borrower shall furnish to Lender an Officer’s Certificate certifying as of the date
thereof (i) that the annual financial statements accurately represent the results of operations and
financial condition of Borrower all in accordance with GAAP (or such other accounting basis
reasonably acceptable to Lender) consistently applied, (ii) whether there exists an event or
circumstance which constitutes, or which upon notice or lapse of time or both would constitute, a
Default under the Note or any other Loan Document executed and delivered by Borrower, and if such
event or circumstance exists, the nature thereof, the period of time it has existed and the action
then being taken to remedy such event or circumstance and (iii) audited financial statements of
Ashford Hospitality Trust Inc., which are audited by a nationally recognized Independent certified
public accountant that is acceptable to Lender in accordance with GAAP (or such other accounting
basis reasonably acceptable to Lender) consistently applied. Borrower shall at all times, whether
or not the Mortgage Loan is outstanding, deliver or shall cause Owner to deliver to Lender (x) a
copy of all financial statements, reports, books, records and accounts required to be delivered to
Mortgage Lender pursuant to the terms of the Mortgage Loan Documents within the time frames set
forth in the Mortgage Loan Documents for the delivery of such financial statements, reports, books,
records and accounts and (y) at any during which (A) an O&M Operative Period exists or (B) the Rent
under Space Leases exceeds five percent (5%) of the annual Operating Income, annually, within
twenty (20) days following the end of each year and within twenty (20) days following receipt of
such request therefor, a true, complete and correct rent roll for the Premises, including a list of
which tenants are in default under their respective Major Space Leases, dated as of the date of
Lender’s request, identifying each tenant that has filed a bankruptcy, insolvency, or
reorganization proceeding since delivery of the last such rent roll, and the arrearages for such
tenant, if any, and such rent roll shall be accompanied by an Officer’s Certificate, dated as of
the date of the delivery of such rent roll, certifying that such rent roll is true, correct and
complete in all material respects as of its date. Borrower acknowledges that notwithstanding
anything to the contrary contained herein or in the Note, all extension fees will be treated as
additional interest.



     Section 2.07. Litigation. Borrower will give prompt written notice to Lender of any
litigation or governmental proceedings pending or threatened (in writing) against Borrower,



19









 







Owner or Guarantor which might have a Material Adverse Effect and of any claim, option, lien
or encumbrance upon or against all or a portion of the Collateral.



     Section 2.08. Estoppel Certificates. Borrower (a) shall, or shall cause Owner to,
from time to time, request from Mortgage Lender such certificates of estoppel with respect to
compliance by Owner with the terms of the Mortgage Loan Documents as may be requested by Lender and
required to be given by Mortgage Lender pursuant to the Mortgage Loan Documents; (b) shall, or
shall cause Intermediate Mez Borrower to, from time to time, request from Intermediate Mez Lender
such certificates of estoppel with respect to compliance by Intermediate Mez Borrower with the
terms of the Intermediate Mez Loan Documents as may be reasonably requested by Lender and required
to be given by Intermediate Mez Lender pursuant to the Intermediate Mez Loan Documents; and (c)
shall, or shall cause Senior Mez Borrower to, from time to time, request from Senior Mez Lender
such certificates of estoppel with respect to compliance by Senior Mez Borrower with the terms of
the Senior Mez Loan Documents as may be reasonably requested by Lender and required to be given by
Senior Mez Lender pursuant to the Senior Mez Loan Documents.



     Section 2.09. Budget. Borrower shall submit to Lender for Lender’s written approval
(provided that such approval shall only be required in the event that Borrower or any Affiliate of
Borrower has the right to approve any such budget pursuant to the terms of the Management
Agreement) not to be unreasonably withheld, an annual budget (the “Annual Budget”) within
ten (10) Business Days after receipt thereof from Manager, in form satisfactory to Lender setting
forth in reasonable detail budgeted monthly operating income and monthly operating capital and
other expenses for the Premises. In the event Lender shall have the right to approve such Annual
Budget and Lender objects to the proposed Annual Budget submitted by Borrower, Lender shall advise
Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower
a reasonably detailed description of such objections) and Borrower shall, within three (3) days
after receipt of notice of any such objections, revise such Annual Budget and resubmit the same to
Lender. Lender shall advise Borrower of any objections to such revised Annual Budget within ten
(10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall revise the same in accordance with the process described herein
until Lender approves an Annual Budget, provided, however, that if Lender shall not advise Borrower
of its objections to any proposed Annual Budget within the applicable time period set forth in this
Section, then such proposed Annual Budget shall be deemed approved by Lender. If Lender has the
right to approve the Annual Budget pursuant to the terms of the Management Agreement, until such
time that Lender approves a proposed Annual Budget, the most recently Approved Annual Budget shall,
except as otherwise provided in the Management Agreement, apply; provided that, such Approved
Annual Budget shall be adjusted to reflect actual increases in Basic Carrying Costs and utilities
expenses. In the event that Owner must incur an Extraordinary Expense, then Borrower shall
promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense
which, if Borrower has the right to approve such expenditures pursuant to the terms of the
Management Agreement, shall be subject to Lender’s approval, which approval may be granted or
denied in Lender’s reasonable discretion.



     Section 2.10. Failure To Deliver Financial Reports. In the event that Borrower fails
to deliver any of the financial statements, reports or other information required to be delivered
to



20









 







Lender pursuant to this Agreement on or prior to their due dates, and any such failure shall
continue for ten (10) days following notice thereof from Lender, Borrower shall pay to Lender on
each Payment Date for each month or portion thereof that any such financial statement, report or
other information remains undelivered, an administrative fee in the amount of Two Thousand Five
Hundred Dollars ($2,500) in the aggregate for all failures occurring in any applicable month.
Borrower agrees that such administrative fee (i) is a fair and reasonable fee necessary to
compensate Lender for its additional administrative costs and increased costs relating to
Borrower’s failure to deliver the aforementioned statements, reports or other items as and when
required hereunder and (ii) is not a penalty.



     Section 2.11. Transfers, Etc. (a) Borrower shall not, without the prior consent of
Lender, in any manner allow a Transfer (other than a Permitted Transfer (provided no transfer
pursuant to clause (c) of the definition thereof shall result in the transfer of direct interests
in Owner, Intermediate Mez Borrower or Senior Mez Borrower)) to occur or enter into any agreement
which expressly restricts Borrower from making amendments, modifications or waivers to the Loan
Documents. Without the express prior written consent of Lender, Borrower shall not, and shall not
cause or permit Owner, Intermediate Mez Borrower or Senior Mez Borrower to, enter into any
consensual sale or other similar transaction with respect to the Property or impair or otherwise
adversely affect the interests of Lender in the Collateral or any portion thereof or any interest
therein other than in connection with a Release pursuant to Section 15.02 of the Mortgage and
Section 2.11(b) hereof.



     (b) Notwithstanding the provisions of Section 2.11(a), any Release made in accordance with the
terms of Section 15.02 of the Mortgage, the transfer of interests by Senior Mez Borrower pursuant
to Section 2.11 of the Senior Mez Loan Agreement and the transfer of interests by Intermediate Mez
Borrower pursuant to Section 2.11 of the Intermediate Mez Loan Agreement, shall be a permitted
Transfer hereunder and shall not require the consent of Lender provided that (i) no Event of
Default shall have occurred and be continuing, (ii) Borrower and each General Partner is and shall
continue after such Release to be in compliance with the requirements of Section 2.02(g) hereof,
(iii) Owner and Operating Tenant are and shall continue after such Release to be in compliance with
the requirements of Section 2.02(g) of the Mortgage, (iv) Lender shall have received no less than
thirty (30) days prior written notice of such Release, (v) the Release shall have been consummated
in accordance with the terms of the Mortgage, and (vi) upon or prior to such Release, Borrower
shall repay a portion of the principal amount of the Loan in an amount equal to 110% of the Mez
Allocated Loan Amount with respect to the Cross-collateralized Property to be released in
connection with such Release together with any sums, if any, required to be paid pursuant to
Section 6.01(b)(v) hereof.



     Section 2.12. Sums Held In Trust. To the extent Borrower receives any sums it is not
otherwise entitled to receive pursuant to the terms of this Agreement, Borrower shall hold all such
sums sufficient to discharge all sums due or to become due on the Debt, in trust for use in payment
of the Debt.



     Section 2.13. Notification of Defaults. Borrower shall promptly (and in all events
within one (1) Business Day of obtaining knowledge thereof) notify Lender of the occurrence of any
default under the Mortgage Loan, the Intermediate Mez Loan or the Senior Mez Loan or of the
occurrence of any event, which but for the passage of time or the giving of notice or both, would



21









 







constitute a default under the Mortgage Loan, the Intermediate Mez Loan or the Senior Mez
Loan.



     Section 2.14. Compliance With Mortgage Loan Documents. (a) Borrower shall cause Owner
to comply with all of the terms, covenants and conditions set forth in the Mortgage Loan Documents,
notwithstanding any waiver or future amendment of such covenants by Mortgage Lender. Borrower
acknowledges that the obligation to comply with such covenants is separate from, and may be
enforced independently from, the obligations of Owner under the Mortgage Loan Documents, and, to
the extent such term, covenants and conditions require any consents, approvals or waivers by
Mortgage Lender, Lender shall have the same rights to consent, approve or waive. The provisions of
Sections 3.01, 4.01, 7.02(a) through (c) and 8.01 of the Mortgage are hereby incorporated by
reference as if fully restated herein and shall constitute the direct obligation of Borrower to
either perform or to cause Owner to perform such covenants on behalf of Lender.



     (b) Borrower shall cause Senior Mez Borrower to comply with all of the terms, covenants and
conditions set forth in the Senior Mez Loan Documents, notwithstanding any waiver or future
amendment of such covenants by Senior Mez Lender. Borrower acknowledges that the obligation to
comply with such covenants is separate from, and may be enforced independently from, the
obligations of the Senior Mez Borrower under the Senior Mez Loan Documents.



     (c) Borrower shall cause Intermediate Mez Borrower to comply with all of the terms, covenants
and conditions set forth in the Intermediate Mez Loan Documents, notwithstanding any waiver or
future amendment of such covenants by Intermediate Mez Lender. Borrower acknowledges that the
obligation to comply with such covenants is separate from, and may be enforced independently from,
the obligations of the Intermediate Mez Borrower under the Intermediate Mez Loan Documents.



     Section 2.15. No Change of Accounts. Borrower shall not permit (a) Owner to change
the Collection Account or the Central Account, without the prior written consent of Lender and
Mortgage Lender, (b) Senior Mez Borrower to change the lockbox account established pursuant to the
Senior Mez Loan Agreement without the prior written consent of Lender, not to be unreasonably
withheld, and Junior Mez Lender or (c) Intermediate Mez Borrower to change the lockbox account
established pursuant to the Intermediate Mez Loan Agreement without the prior written consent of
Lender, not to be unreasonably withheld.



     Section 2.16. Confirmation of Loan Documents, Etc. (a) After request by Lender,
Borrower, within fifteen (15) days and at its expense, will furnish or will cause Owner, Senior
Mezz Borrower and Intermediate Mez Borrower to furnish to Lender a statement, duly acknowledged and
certified, setting forth with respect to this Agreement, the Note, the Senior Mez Note, the
Intermediate Mez Note and the Mortgage Note, as applicable, (i) the amount of the original
principal amount, and the unpaid principal amount, (ii) the rate of interest, (iii) the date
payments of interest and/or principal were last paid, (iv) any offsets or defenses to payment, and
if any are alleged, the nature thereof, (v) that no modifications have taken place, or if modified,
giving particulars of such modification and (vi) that there has occurred and is then continuing no
Default or if such Default exists, the nature thereof, the period of time it has



22









 







existed, and the action being taken to remedy such Default.



     (b) Within fifteen (15) days after written request by Borrower, Lender shall furnish to
Borrower a written statement confirming the Principal Amount of the Loan, the maturity date of the
Note and the date to which interest has been paid.



     Section 2.17. Corporate Actions. Without the prior written consent of Lender,
Borrower will not and will not cause or allow the Corporations, LLCs or Partnerships at any time,
to (and, without limiting the foregoing, will not vote to enable, or take any other action to
permit, the Corporations, LLCs or Partnerships to):



     (a) make any Distribution or payment during the continuance of an Event of Default or
otherwise in violation of this Agreement or any of the other Loan Documents; or



     (b) purchase or redeem or obligate itself to purchase or redeem any Equity Interests, cancel
any Equity Interests or issue or authorize to be issued any additional Equity Interests; or



     (c) merge into or merge or consolidate with any corporation, partnership or limited liability
company or entity or cause itself to dissolve or liquidate its assets; or



     (d) enter into, or cause or permit any affiliate of any of the Corporations, LLCs or
Partnerships to enter into, (x) any transaction with a Person or entity affiliated with or related
to itself, except upon arms-length terms and conditions, or (y) any transaction which is motivated
by an intent to evade this Agreement; or



     (e) breach any of the covenants or obligations of the Corporations, LLCs or Partnerships
pursuant to this Agreement.



     Section 2.18. Conduct of Operations. To the extent that such matters are within the
control of Borrower pursuant to the terms of the Organizational Documents and applicable laws,
Borrower shall cause the Corporations, LLCs and Partnerships to conduct their operations and to
manage, protect and preserve their assets and to act in a commercially reasonable manner to
preserve the value of the Collateral.



     Section 2.19. Voting Rights; Etc. (a) So long as an Event of Default shall not have
occurred and be continuing, Borrower shall be permitted (i) to receive any and all regular
Distributions and dividends paid in cash and in the ordinary course of business of the
Partnerships, the LLCs and the Corporations with respect to the Equity Interests and (ii) to
exercise all voting and other rights with respect to the Equity Interests as long as no vote shall
be cast, or right exercised or other action taken which would, directly or indirectly, materially
impair the value of any Collateral or which would be inconsistent with or result in a default under
this Agreement or any of the other Loan Documents. Upon the receipt of a written request from
Borrower, Lender shall execute and deliver (or cause to be executed and delivered) to Borrower all
such proxies and other instruments as Borrower may reasonably request for the purpose of enabling
Borrower to exercise the voting and other rights which it is entitled to exercise and to receive
the dividends or interest payments which it is authorized to receive and retain pursuant to this
Agreement. Upon the occurrence and during the continuance of an Event of Default, the aforesaid
rights shall immediately and automatically vest in Lender.



23









 





     (b) If Borrower shall receive, by virtue of Borrower’s being or having been an owner of any
Equity Interest, (i) any Distributions or dividends payable in cash (except such Distributions and
dividends permitted to be retained by Borrower pursuant to sub-section (a) above) or in securities
or other property, or (ii) any Distributions or dividends in connection with a partial or total
liquidation or dissolution or a reclassification, increase or reduction of capital, capital surplus
or paid-in capital, Borrower shall receive the same in trust for Lender, segregate the same from
its other assets and promptly deliver the same to Lender in the exact form received, with any
necessary endorsement and/or appropriate powers or other instruments of assignment or conveyance,
to be held by Lender as Collateral pursuant to this Agreement.



     Section 2.20. Admission of New Equity. Borrower will not agree to admit any new or
substitute shareholders, members or partners into the Corporations, LLCs or Partnerships or
transfer its interests in the Corporations, LLCs or Partnerships unless such new shareholder,
member or partner executes and delivers, and agrees to be bound by, an agreement, in form and
content substantially identical to this Agreement, pursuant to which such new shareholder, member
or partner pledges its interests in the Corporations, LLCs or Partnerships to Lender and such
admission is otherwise in accordance with the terms of the applicable Organizational Documents and
the Loan Documents.



     Section 2.21. Proceeds of Collateral. Upon the occurrence and during the continuance
of an Event of Default, all Proceeds of the Collateral received by Borrower shall be promptly
delivered to Lender, in the same form as received, with the addition only of such endorsements and
assignments as may be necessary to transfer title to Lender, and pending such delivery, such
Proceeds shall be held in trust for Lender; and such Proceeds shall be applied to the Debt in such
order and manner as Lender shall direct in its sole discretion.



     Section 2.22. Admission of Lender As Shareholder, Member, Partner. In the event that
Lender forecloses on the Collateral, notwithstanding anything to the contrary in the Organizational
Documents, the Person that acquires the Collateral in connection with such foreclosure (whether
Lender, a designee or Affiliate of Lender or any other Person) shall automatically be admitted as a
shareholder, member or partner of the Corporations, LLCs or Partnerships, respectively, and shall
be entitled to receive all benefits and exercise all rights in connection therewith pursuant to the
Organizational Documents; provided, however, that such Person (whether Lender, a designee or
Affiliate of Lender or any other Person) shall have no liability for matters in connection with the
Equity Interests arising or occurring, directly or indirectly, prior to such Person becoming a
shareholder, member or partner of the Corporations, LLCs or Partnerships.



     Section 2.23. Purchase of Mortgage Loan, Etc. (a) Neither Borrower nor any Affiliate
thereof or any other Person acting upon their direction or request shall, directly or indirectly,
acquire or agree to acquire, obtain, purchase or control the Mortgage Loan, or any portion thereof
or any interest therein, or any direct or indirect ownership interest in the holder of, or
participant in, the Mortgage Loan in any manner whatsoever. If, solely by operation of applicable
subrogation law, Borrower or any Affiliate thereof shall be in breach of or fail to comply with the
foregoing, then such breach or failure shall not be an Event of Default provided that
Borrower (a) shall immediately upon obtaining knowledge thereof notify Lender of such failure or
breach, and (b) shall cause Borrower and Affiliates thereof acquiring any interest in the



24









 







Mortgage Loan Documents (i) not to enforce the Mortgage Loan Documents, and (ii) upon the
request of Lender, to the extent any Borrower or such Affiliate has the power or authority to do
so, to promptly (A) cancel, reconvey and release its interest in the Mortgage Loan Documents, (B)
discontinue and terminate any enforcement proceeding(s) under the Mortgage Loan Documents and (C)
assign and transfer its interest in the Mortgage Loan Documents to Lender.



     (b) Neither Senior Mez Borrower nor any Affiliate thereof or any other Person acting upon
their direction or request shall, directly or indirectly, acquire or agree to acquire, obtain,
purchase or control the Senior Mez 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 Mez Loan in
any manner whatsoever. If, solely by operation of applicable subrogation law, Senior Mez Borrower
or any Affiliate thereof shall be in breach of or fail to comply with the foregoing, then such
breach or failure shall not be an Event of Default provided that Senior Mez Borrower (a)
shall immediately upon obtaining knowledge thereof notify Lender of such failure or breach, and (b)
shall cause Senior Mez Borrower and Affiliates thereof acquiring any interest in the Senior Mez
Loan Documents (i) not to enforce the Senior Mez Loan Documents, and (ii) upon the request of
Lender, to the extent any Senior Mez Borrower or such Affiliate has the power or authority to do
so, to promptly (A) cancel, reconvey and release its interest in the Senior Mez Loan Documents, (B)
discontinue and terminate any enforcement proceeding(s) under the Senior Mez Loan Documents and (C)
assign and transfer its interest in the Senior Mez Loan Documents to Lender.



     (c) Neither Intermediate Mez Borrower nor any Affiliate thereof or any other Person acting
upon their direction or request shall, directly or indirectly, acquire or agree to acquire, obtain,
purchase or control the Intermediate Mez Loan, or any portion thereof or any interest therein, or
any direct or indirect ownership interest in the holder of, or participant in, the Intermediate Mez
Loan in any manner whatsoever. If, solely by operation of applicable subrogation law, Intermeidate
Mez Borrower or any Affiliate thereof shall be in breach of or fail to comply with the foregoing,
then such breach or failure shall not be an Event of Default provided that Intermediate Mez
Borrower (a) shall immediately upon obtaining knowledge thereof notify Lender of such failure or
breach, and (b) shall cause Intermediate Mez Borrower and Affiliates thereof acquiring any interest
in the Intermediate Mez Loan Documents (i) not to enforce the Intermediate Mez Loan Documents, and
(ii) upon the request of Lender, to the extent any Intermediate Mez Borrower or such Affiliate has
the power or authority to do so, to promptly (A) cancel, reconvey and release its interest in the
Intermediate Mez Loan Documents, (B) discontinue and terminate any enforcement proceeding(s) under
the Intermediate Mez Loan Documents and (C) assign and transfer its interest in the Intermediate
Mez Loan Documents to Lender.



     Section 2.24. Deed-In-Lieu, etc. Without the prior written consent of Lender,
Borrower shall not, and shall not cause or permit Owner to, enter into any deed-in-lieu or
consensual foreclosure or transfer or assignment with or for the benefit of Mortgage Lender or any
of Mortgage Lender’s Affiliates or designees. Without the express prior written consent of Lender,
Borrower shall not, and shall not cause or permit Owner to, enter into any consensual sale or
transfer or assignment or other similar transaction, impair or otherwise adversely affect the
interests of Lender in the Collateral or any portion thereof or any interest therein.



25









 





     Section 2.25. Intercreditor Agreement. Borrower acknowledges and agrees that Lender,
Intermediate Mez Lender, Senior Mez Lender and Mortgage Lender have entered into an intercreditor
agreement regarding their respective rights under the Mortgage Loan, Intermediate Mez Loan, Senior
Mez Loan and Loan (the “Intercreditor Agreement”). Borrower acknowledges and agrees that:
(a) no Person other than Lender, Intermediate Mez Lender, Senior Mez Lender and Mortgage Lender has
any rights whatsoever, direct or indirect, beneficial or otherwise, under the Intercreditor
Agreement and Borrower is not a third party beneficiary thereof; (b) Lender, Intermediate Mez
Lender, Senior Mez Lender and Mortgage Lender may amend, modify, cancel, terminate, supplement or
waive the Intercreditor Agreement at any time without notice to, or the consent of Borrower, Owner
or any other Person, and (c) except as expressly set forth in this Agreement, any restriction or
other agreement between Lender, Intermediate Mez Lender, Senior Mez Lender and Mortgage Lender set
forth in the Intercreditor Agreement is personal between Lender, Intermediate Mez Lender, Senior
Mez Lender and Mortgage Lender and, as between Lender, on the one hand, and Borrower, on the other
hand, no such agreement or restriction will be deemed to benefit or otherwise modify any of the
rights of Lender under the Loan Documents.



     Section 2.26. Payment of Impositions. Borrower shall pay and discharge all taxes now
or hereafter imposed on it, or its income or profits, on any of its property or upon the liens
provided for herein prior to the date on which penalties attach thereto; provided that Borrower
shall have the right to contest the validity or amount of any such tax in good faith and by proper
proceedings. Borrower shall promptly pay any valid, final judgment enforcing any such tax and
cause the same to be satisfied of record.



     Section 2.27. Central Cash Management. (a) All amounts paid by the issuer of the
Rate Cap Agreement (the “Counterparty”) to Borrower or Lender, together with all rents,
issues, profits, insurance proceeds, condemnation proceeds, refinancing proceeds and all other sums
received with respect to the Premises or distributed with respect to the Equity Interests after all
sums which are then due and payable have been paid to Mortgage Lender pursuant to the terms of the
Mortgage Loan Documents, to Senior Mez Lender pursuant to the terms of the Senior Mez Loan
Agreement and to Intermediate Mez Lender pursuant to the terms of the Intermediate Mez Loan
Agreement (collectively, “Remaining Rents”), shall be paid by federal wire transfer or
automatic clearing house funds (“ACH”) to Lender and shall be deposited immediately into an
Eligible Account located at a bank satisfactory to Lender (the “Lockbox Account”). Lender
has established the Lockbox Account in the name of Lender as secured party. The Lockbox Account
shall be under the sole dominion and control of Lender. The Lockbox Account shall contain the Debt
Service Payment Account (an “Account” and together with the other accounts now or hereafter
required to be established pursuant to this Section 2.27, collectively, the “Accounts”) to
which certain funds shall be allocated and from which disbursements shall be made pursuant to the
terms of the Lockbox Agreement. Borrower hereby irrevocably directs and authorizes Lender to
withdraw funds from the Lockbox Account, all in accordance with the terms and conditions of the
Lockbox Agreement. Borrower shall have no right of withdrawal in respect of the Lockbox Account.
Each transfer of funds to be made hereunder shall be made only to the extent that funds are on
deposit in the Lockbox Account, and Lender shall have no responsibility to make additional funds
available in the event that funds on deposit are insufficient. Subject to the rights of Senior Mez
Lender pursuant to the terms of the Senior Mez Loan Agreement and Intermediate Mez Lender pursuant
to the terms of the Intermediate Mez Loan Agreement,



26









 







Borrower shall enter into or shall cause Owner to enter into a substitute cash management
agreement and related lockbox agreement (collectively, the “Substitute CMA Agreements”)
with substantially the same terms as the agreements entered into as of the date hereof in
connection with the Mortgage Loan as a condition to the satisfaction of the Mortgage Loan or if
Mortgage Lender is not requiring that sums be deposited into any Sub-Accounts or Escrow Accounts.
Such substitute agreements shall provide that all Remaining Rents shall be deposited into the
Lockbox Account for disbursement in accordance with the terms of the Substitute CMA Agreements, the
Lockbox Agreement (as amended to conform with the Substitute CMA Agreements) and this Agreement.
Additionally, on or before the Closing Date, Borrower shall establish or cause Owner to establish
such escrow and reserve accounts and deposit such amounts into such accounts as required pursuant
to the terms of the Mortgage Loan Documents. After the occurrence and during the continuance of an
Event of Default, the funds on deposit in the Lockbox Account, and all other funds received by
Lender in respect of the Loan, shall be disbursed and applied in such order and such manner as
Lender shall elect in its sole discretion. If Borrower shall receive any Remaining Rents other
than in accordance with this Agreement, Borrower shall hold all such payments in trust for Lender,
will not co-mingle such payments with other funds of Borrower, and will immediately pay and deliver
in kind, all such payments directly to Lender for application by Lender in accordance with this
Agreement.



     (b) Borrower shall maintain the Rate Cap Agreement at all times during the term of the Loan
and pay all fees, charges and expenses incurred in connection therewith. Borrower shall comply
with all of its obligations under the terms of the Rate Cap Agreement. All amounts paid by the
Counterparty to Borrower or Lender shall be deposited immediately into the Lockbox Account.
Borrower shall take all actions reasonably requested by Lender to enforce Lender’s rights under the
Rate Cap Agreement in the event of a default by the Counterparty. In the event that (a) the
long-term unsecured debt obligations of the Counterparty are downgraded by the Rating Agency below
“A+” or its equivalent or (b) the Counterparty shall default in any of its obligations under the
Rate Cap Agreement, Borrower shall, at the request of Lender, promptly but in all events within
five (5) Business Days, replace the Rate Cap Agreement with an agreement having identical payment
terms and maturity as the Rate Cap Agreement and which is otherwise in form and substance
substantially similar to the Rate Cap Agreement and otherwise acceptable to Lender with a cap
provider, the long-term unsecured debt of which is rated at least “AA-” (or its equivalent) by each
Rating Agency, or which will allow each Rating Agency to reaffirm their then current ratings of all
rated certificates issued in connection with the Securitization. In the event that Borrower fails
to maintain the Rate Cap Agreement as provided in this Section, Lender may purchase the Rate Cap
Agreement and the cost incurred by Lender in connection therewith shall be paid by Borrower to
Lender with interest thereon at the Default Rate from the date such cost is incurred until such
cost is paid by Borrower to Lender.



     (c) Subject to the rights of Senior Mez Lender and Intermediate Mez Lender, (i) during the
existence of an Event of Default or (ii) if Owner would be required to deposit sums into the
Sub-Accounts or Escrow Accounts pursuant to the terms of the Mortgage (as it exists as of the
Closing Date), but such sums are not being deposited into the Sub-Accounts or Escrow Accounts,
Borrower shall establish and maintain one or more sub-accounts of the Lockbox Account into which
Remaining Rents shall be deposited for the purposes of paying Basic Carrying Costs, Recurring
Replacement Expenditures and Operating Expenses. In connection therewith, Borrower and Lender
shall modify the Lockbox Agreement to provide that, if sums



27









 







are required to be deposited into the Lockbox Account pursuant to this Section 2.27(c), such
funds shall be allocated in the order of priority set forth in Section 5.05 of the Mortgage and
Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to
execute any such amendment to the Lockbox Agreement. The amounts to be deposited in such
sub-accounts shall equal the amounts required to be deposited in the Sub-Accounts and Escrow
Accounts pursuant to the terms of the Mortgage (as in effect on the Closing Date or as amended with
Lender’s approval) and sums deposited into such sub-accounts may be released on the same terms and
conditions as set forth in the Mortgage (as in effect on the Closing Date or as amended with
Lender’s approval).



     (d) Borrower hereby agrees for the benefit of itself, Senior Mez Borrower, Intermediate Mez
Borrower and Owner that all payments actually received by Lender shall be deemed payments to
Borrower by Senior Mez Borrower, Intermediate Mez Borrower and Owner. Lender shall apply any and
all such payments actually received by Lender for application in accordance with this Agreement.
After payment of all sums due and payable with respect to the Loan, Lender shall return to Borrower
that portion of any payments actually received by Lender from Borrower, Senior Mez Borrower,
Intermediate Mez Borrower or Owner which is required to be paid to Borrower pursuant to the Loan
Documents together with, in the event of a Release made in accordance with the provisions of
Section 2.11(b) hereof, any funds held by Lender pursuant to Section 2.27(c) hereof which are
allocable to the portion of the Property which is the subject of the Release.



     Section 2.28. Certain Additional Rights of Lender. Notwithstanding anything to the
contrary which may be contained in this Agreement, Lender shall have:



     (a) the right to routinely consult on a regular basis (no less frequently than quarterly) with
and advise Borrower’s management regarding the significant business activities and business and
financial developments of Borrower, provided, however, that such consultations
shall not include discussions of environmental compliance programs or disposal of hazardous
substances, and, provided, further, that Lender shall have the right to call
special meetings at any reasonable times;



     (b) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to restrict financing to be obtained in connection with future property
transactions, refinancing of any acquisition financings, and unsecured debt unless the Loan has
been paid in full or such transactions, financings or debt are incurred in connection with a
portion of the Property which was the subject a release pursuant to Section 2.11 hereof;



     (c) the right, without restricting any other right of Lender under this Agreement (including
any similar right), to restrict, upon the occurrence of an Event of Default, Borrower’s payments of
management, consulting, director or similar fees to Affiliates of Borrower (or their personnel);



     (d) Intentionally Omitted;



     (e) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to approve any acquisition by Borrower of any other significant



28









 







property (other than personal property required for the day to day operation of the Premises);



     (f) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), in the event of an Event of Default, to vote the owners’ interests in Borrower
pursuant to irrevocable proxies granted, at the request of Borrower in advance for this purpose;
and



     (g) the right, without restricting any other rights of Lender under this Agreement (including
any similar right), to restrict the transfer of voting interests in Borrower held by its members,
and the right to restrict the transfer of interests in such member, except for any transfer that is
a Permitted Transfer (provided no transfer pursuant to clause (c) of the definition thereof shall
result in the transfer of direct interests in Owner, Intermediate Mez Borrower or Senior Mez
Borrower).



The rights contained in this Section 2.28 may be exercised by any Person which owns or Controls,
directly or indirectly, substantially all of the interests in Lender or the Loan.



     Section 2.29. Refinancing, Liens, etc. Borrower shall not and shall not permit Senior
Mez Borrower, Intermediate Mez Borrower or Owner to, without the prior written consent of Lender,
which consent may be withheld, delayed or conditioned in the sole discretion of Lender, give its
consent or approval or agree to any of the following:



     (a) (i) any refinancing of the Mortgage Loan, Intermediate Mez Loan or the Senior Mez Loan in
whole unless the Loan is repaid in accordance with the terms hereof simultaneously therewith, (ii)
any prepayment in full of the Mortgage Loan, Intermediate Mez Loan or the Senior Mez Loan except in
connection with a Release made in accordance with Section 2.11 hereof, (iii) any Transfer (for
purposes of this Section 2.29(a) only, as defined in the Mortgage (as in effect on the Closing Date
or as amended with Lender’s approval)) of the Premises (other than a Permitted Transfer (provided
no transfer pursuant to clause (c) of the definition thereof shall result in the transfer of direct
interests in Owner, Intermediate Mez Borrower or Senior Mez Borrower)) unless a Release occurs
simultaneously therewith in accordance with Section 2.11 hereof, or (iv) any action in connection
with or in furtherance of the foregoing;



     (b) placing or permitting to attach any additional liens or encumbrances on the Premises
(except for liens and encumbrances permitted under the Mortgage Loan Documents, Intermediate Mez
Loan Documents or the Senior Mez Loan Documents (as in effect on the Closing Date or as amended
with Lender’s approval) not requiring the consent of Mortgage Lender, the Intermediate Mez Lender
or the Senior Mez Lender); or



     (c) any modification, amendment, consolidation, spread, restatement or waiver of any provision
of the Mortgage Loan Documents, Intermediate Mez Documents or Senior Mez Documents.



     Section 2.30. Insurance. (a) The insurance described in Section 3.01 of the Mortgage
and Section 2.30(c) hereof (except policies for worker’s compensation) shall be in the form (other
than with respect to Sections 3.01(a)(vi) and (vii) of the Mortgage when insurance in those two
sub-sections is placed with a governmental agency or instrumentality on such agency’s forms) and
amount and with deductibles as, from time to time, shall be reasonably acceptable to



29









 







Lender, under valid and enforceable policies issued by financially responsible insurers
authorized to do business in the State where the Premises is located, with a general policyholder’s
service rating of not less than A and a financial rating of not less than XIII as rated in the most
currently available Best’s Insurance Reports (or the equivalent, if such rating system shall
hereafter be altered or replaced) and shall have a claims paying ability rating and/or financial
strength rating, as applicable, of not less than “AA” (or its equivalent), or such lower claims
paying ability rating and/or financial strength rating, as applicable, as Lender shall, in its sole
and absolute discretion, consent to, from a Rating Agency (one of which after a Securitization in
which Standard & Poor’s rates any securities issued in connection with such Securitization, shall
be Standard & Poor’s). All such policies (except policies for worker’s compensation) shall name
Lender as an additional named insured (subject to the rights of Mortgage Lender, Intermediate Mez
Lender and Senior Mez Lender), with respect to the insurance required pursuant to Section
3.01(a)(iii) of the Mortgage, shall provide, subsequent to the satisfaction of the Mortgage Loan,
for loss payable to Lender (subject to the rights of Intermediate Mez Lender and Senior Mez Lender)
and shall contain (or have attached): (i) standard “non-contributory mortgagee” endorsement or its
equivalent relating, inter alia, to recovery by Lender notwithstanding the
negligent or willful acts or omissions of Borrower; (ii) a waiver of subrogation endorsement as to
Lender; (iii) an endorsement indicating that neither Lender nor Borrower shall be or be deemed to
be a co-insurer with respect to any casualty risk insured by such policies and shall provide for a
deductible per loss of an amount not more than $25,000, and (iv) a provision that such policies
shall not be canceled, terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty (30) days’ prior
written notice to Lender in each instance. Not less than thirty (30) days prior to the expiration
dates of the insurance policies obtained pursuant to this Agreement certificates evidencing such
renewals bearing notations evidencing the payment of premiums or accompanied by other reasonable
evidence of such payment (which premiums shall not be paid by Borrower or Owner through or by any
financing arrangement which would entitle an insurer to terminate a policy) shall be delivered by
Borrower to Lender. Borrower shall not carry separate insurance, concurrent in kind or form or
contributing in the event of loss, with any insurance required under Section 3.01 of the Mortgage
or Section 2.30(c) hereof.



     (b) If Borrower fails to maintain and deliver to Lender the original policies or certificates
of insurance required by this Agreement, Lender may, at its option, procure such insurance, and
Borrower shall pay, or as the case may be, reimburse Lender for, all premiums thereon promptly,
upon demand by Lender, with interest thereon at the Default Rate from the date paid by Lender to
the date of repayment and such sum shall constitute a part of the Debt.



     (c) Borrower shall deliver, or shall cause Owner to deliver, to Lender such other insurance as
may from time to time be required by Lender and which is then customarily required by Institutional
Lenders for similar properties similarly situated, against other insurable hazards, including, but
not limited to, malicious mischief, vandalism, acts of terrorism, windstorm and/or earthquake, due
regard to be given to the size and type of the Premises, Improvements, Fixtures and Equipment and
their location, construction and use. Additionally, Borrower shall carry such insurance coverage
as Lender may from time to time require if the failure to carry such insurance may result in a
downgrade, qualification or withdrawal of any class of securities issued in connection with a
Securitization.



30









 





     Section 2.31. Casualty. Borrower shall give Lender prompt notice of any loss or
damage to the Premises the cost to repair which could reasonably be expected to be in excess of
$250,000 in the aggregate and, subject to the rights of the Mortgage Lender under the Mortgage Loan
Documents, Intermediate Mez Lender under the Intermediate Mex Loan Documents and Senior Mez Lender
under the Senior Mez Loan Documents (which shall in all respects supercede the rights of Lender
under this Section 2.31):



     (a) After the Mortgage Loan, the Intermediate Mez Loan and the Senior Mez Loan have been paid
in full, (i) in the event of any loss or damage covered by any insurance, Lender shall apply any
insurance proceeds in the same manner such proceeds would be required to be applied by Mortgage
Lender under the Mortgage and other Mortgage Loan Documents and (ii) Borrower shall not adjust,
compromise or settle any claim for such proceeds without the prior written consent of Lender, which
shall not be unreasonably withheld or delayed and Lender shall have the right, at Borrower’s sole
cost and expense, to participate in any settlement or adjustment of Insurance Proceeds; provided,
however, that, except during the continuance of an Event of Default, Lender’s consent shall not be
required with respect to the adjustment, compromising or settlement of any claim for proceeds in an
amount less than $1,000,000. The expenses incurred by Lender in the adjustment and collection of
such proceeds of insurance shall be additional Debt of Borrower, and shall be reimbursed to Lender
upon demand or, at Lender’s option, in the event and to the extent sufficient proceeds are
available, deducted by Lender from such proceeds of insurance prior to any other application
thereof. If the Mortgage Loan, the Intermediate Mez Loan and the Senior Mez Loan have been paid in
full, each insurance company which has issued insurance is hereby authorized and directed to make
payment for all losses covered by such insurance to Lender alone, and not to Lender and Borrower,
Intermediate Mez Borrower, Senior Mez Borrower or Owner jointly. Borrower agrees to execute and
cause Owner, Intermediate Mez Borrower and Senior Mez Borrower to execute all documents and make
all deliveries required in order to permit adjustment and payment of insurance proceeds as provided
above.



     (b) Subject to the prior rights of Mortgage Lender, Intermediate Mez Lender and Senior Mez
Lender, Borrower hereby assigns to Lender the proceeds of all insurance (other than worker’s
compensation and liability insurance) obtained pursuant to this Agreement, all of which proceeds
shall be payable to Lender as collateral and further security for the payment of the Debt and the
performance of Borrower’s obligations hereunder and under the other Loan Documents, and Borrower
hereby authorizes and directs the issuer of any such insurance to, subject to the rights of
Mortgage Lender, Intermediate Mez Lender and Senior Mez Lender, make payment of such proceeds
directly to Lender. Lender may, in its sole discretion, apply the proceeds of insurance received
upon any casualty to any one or more of the following: (i) the payment of the Debt, whether or not
then due, in any proportion or priority as Lender, in its discretion, may elect, (ii) the repair or
restoration of the Property, (iii) the cure of any Default or (iv) the reimbursement of the costs
and expenses of Lender incurred pursuant to the terms hereof. Nothing herein contained shall be
deemed to excuse Borrower from repairing or maintaining or causing Owner to repair or maintain the
Property as provided in this Agreement or restoring or causing Owner to restore all damage or
destruction to the Property, regardless of the sufficiency of the proceeds, and the application or
release by Lender of any proceeds shall not cure or waive any Default or notice thereof.



     Section 2.32. Management of Premises. (a) Borrower shall cause Owner to operate and



31









 







manage the Property or cause the Property to be operated and managed in a manner which is
consistent with the Approved Manager Standard. Borrower covenants and agrees with Lender that (a)
the Premises will be managed at all times by an Approved Manager pursuant to the management
agreement approved by Lender (the “Management Agreement”), such approval not to be
unreasonably withheld or delayed, (b) after Borrower has knowledge of a fifty percent (50%) or more
change in control of the ownership of Manager, Borrower will promptly give Lender notice thereof (a
“Manager Control Notice”) and (c) the Management Agreement may be terminated by Lender at
any time (i) for cause to the extent provided in the Management Agreement (including, but not
limited to, Manager’s gross negligence, misappropriation of funds, willful misconduct or fraud)
following the occurrence of an Event of Default of the type set forth in Section 3.01(a) through
(c), or (ii) to the extent provided in the Management Agreement, following the receipt of a Manager
Control Notice and Borrower shall cause Owner to appoint a substitute Approved Manager.
Notwithstanding the foregoing, transfers of publicly traded stock of Manager on a national stock
exchange or on the NASDAQ Stock Market in the normal course or business and not in connection with
a tender offer or sale or Manager or substantially all of the assets of Manager shall not require
the giving of a Manager Control Notice. Borrower may from time to time cause Owner to appoint a
successor manager to manage the Premises, provided that any such successor manager shall be an
Approved Manager. Borrower further covenants and agrees that Borrower shall cause Owner to require
the Manager (or any successor managers) to maintain at all times during the term of the Loan
worker’s compensation insurance as required by Governmental Authorities.



     (b) Borrower shall not allow Owner to enter into any new or replacement Franchise Agreement
without obtaining the prior written consent of Lender, such consent not to be unreasonably
withheld, conditioned or delayed (provided that any Franchise Agreement which is on a form in all
material respects (including, without limitation, all fees due thereunder) the same as the form of
any Franchise Agreement which is contained in the uniform franchise offering circular for any
Approved Franchisor shall be deemed an acceptable form), and shall cause Owner to (i) pay or shall
cause to be paid all sums required to be paid by Borrower under any Franchise Agreement and
Operating Lease, (ii) diligently perform and observe all of the material terms, covenants and
conditions of any Franchise Agreement on the part of Owner to be performed and observed to the end
that all things shall be done which are necessary to keep unimpaired the rights of Owner under any
Franchise Agreement and Operating Lease, (iii) promptly notify Lender of the giving of any notice
to Owner or Borrower of any material default by Owner in the performance or observance of any of
the terms, covenants or conditions of and Franchise Agreement or Operating Lease on the part of
Owner to be performed and observed and deliver to Lender a true copy of each such notice, and (iv)
promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures
plan, report and estimate received by it under the Franchise Agreement or the Management Agreement
or the Operating Lease. Borrower shall not, without the prior consent of the Lender, such consent
not to be unreasonably withheld, conditioned or delayed, allow Owner to surrender any Franchise
Agreement or Operating Lease or terminate or cancel any Franchise Agreement or modify, change,
supplement, alter or amend any Franchise Agreement or Operating Lease, in any material respect,
either orally or in writing, and Borrower hereby assigns to Lender as further security for the
payment of the Debt and for the performance and observance of the terms, covenants and conditions
of this Security Instrument, all the rights, privileges and prerogatives of Borrower to surrender
any Franchise Agreement or Operating Lease or to terminate, cancel, modify, change,



32









 







supplement, alter or amend any Franchise Agreement or Operating Lease in any respect, and any
such surrender of any Franchise Agreement or termination, cancellation, modification, change,
supplement, alteration or amendment of any Franchise Agreement or Operating Lease without the prior
consent of Lender shall be void and of no force and effect, provided, however, Borrower may allow
Owner to terminate any Franchise Agreement if Owner enters into a new Franchise Agreement with an
Approved Franchisor pursuant to a Franchise Agreement which is reasonably acceptable to Lender. If
Owner shall default in the performance or observance of any material term, covenant or condition of
any Franchise Agreement or Operating Lease on the part of Owner to be performed or observed, then,
without limiting the generality of the other provisions of this Agreement, and without waiving or
releasing Borrower from any of its obligations hereunder, Lender shall have the right, but shall be
under no obligation, to pay any sums and to perform any act or take any action as may be
appropriate to cause all the terms, covenants and conditions of any Franchise Agreement or
Operating Lease on the part of Borrower to be performed or observed to be promptly performed or
observed on behalf of Borrower, to the end that the rights of Borrower in, to and under any
Franchise Agreement and Operating Lease shall be kept unimpaired and free from default. Lender and
any Person designated by Lender shall have, and are hereby granted, the right to enter upon the
Property at any time and from time to time for the purpose of taking any such action. If the
franchisor under any Franchise Agreement or lessee under an Operating Lease shall deliver to Lender
a copy of any notice sent to Borrower of default under any Franchise Agreement or Operating Lease,
as applicable, such notice shall constitute full protection to Lender for any action to be taken by
Lender in good faith, in reliance thereon. Borrower shall, from time to time, use its best efforts
to obtain from the franchisor or lessee under any Franchise Agreement such certificates of estoppel
with respect to compliance by Borrower with the terms of any Franchise Agreement as may be
requested by Lender. Borrower shall exercise or cause Owner to exercise each individual option, if
any, to extend or renew the term of any Franchise Agreement within four (4) months of the last day
upon which any such option may be exercised, unless Lender consents to the non-renewal of such
Franchise Agreement in writing, and Borrower hereby expressly authorizes and appoints Lender its
attorney-in-fact to exercise any such option in the name of and upon behalf of Borrower or Owner,
which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest,
provided, however, that Lender shall not exercise such power of attorney unless and until Borrower
fails to take the actions required herein.



     Section 2.33. Power of Attorney. Borrower hereby irrevocably appoints and instructs
Lender as its attorney-in-fact, with full authority in the place and stead of Borrower and in the
name of Borrower, Lender or otherwise, from time to time in Lender’s discretion to take any and all
actions necessary and proper, to carry out the intent of this Agreement and (a) to perfect and
protect the lien, pledge, assignment and security interest of Lender created hereunder, (b) from
and during the continuance of an Event of Default, (i) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral, (ii) to file any claims or take any action or institute any
proceedings for the collection of any of the Collateral or otherwise to enforce the rights of
Lender with respect to any of the Collateral, and (iii) in connection with the exercise of any
power, right, privilege or remedy pursuant to this Agreement, to make all necessary assignments,
transfers and deliveries of the Collateral and rights and to execute all applications,
certificates, instruments, assignments and other documents and papers, (c) to collect and receive
any insurance proceeds paid with respect to any portion of the insurance policies required to be



33









 







maintained hereunder, and to endorse any checks, drafts or other instruments representing any
insurance proceeds whether payable by reason of loss thereunder or otherwise, (d) to exercise any
option to extend or renew the term of any Ground Lease in the name of and on behalf of Borrower or
Owner and (e) from and during the continuance of an Event of Default, to file and prosecute, to the
exclusion of Borrower and Owner, any proofs of claim, complaints, motions, applications, notices
and other documents, in any case in respect of any Ground Lessor under the Bankruptcy Code.
Borrower hereby ratifies, approves and confirms all actions taken by Lender and its
attorneys-in-fact pursuant to this Section 2.33. Neither Lender nor any said Lender or
attorney-in-fact will be liable for any acts of commission or omission nor for any error of
judgment or mistake of fact or law with respect to its dealings with the Collateral. This power of
attorney, being coupled with an interest, is irrevocable until the date upon which the Debt has
been indefeasibly satisfied in full. Without limiting the foregoing, if Borrower fails to perform
any agreement or obligation contained herein, Lender may itself perform, or cause performance of,
where necessary or advisable in the name or on behalf of Borrower, and at the expense of Borrower,
as applicable.



     Section 2.34. Leases. (a) Borrower covenants and agrees that, from the date hereof
and until payment in full of the Debt, Borrower shall, or shall cause Owner to, comply with the
terms and provisions of Section 7.02(a) through (c) of the Mortgage as provided in Section 2.14
hereof, and, to the extent such term, covenants and conditions require any consents, approvals or
waivers by Mortgage Lender, Lender shall have the same rights to consent, approve or waive.



     (b) Subject to the rights of Mortgage Lender in respect of the Rents under the Mortgage Loan
Documents, the rights of Intermediate Mez Lender in respect of the Rents under the Intermediate Mez
Loan Documents and the rights of Senior Mez Lender in respect of the Rents under the Senior Mez
Loan Documents, at any time that (i) payments are not being made to the Central Account, or (ii)
following repayment of the Mortgage Loan, then Lender shall have the immediate right to notify the
bank in which the Collection Account is located to make payments directly to the Lockbox Account.
Subject to the rights of Mortgage Lender under the Mortgage Loan Documents, Intermediate Mez Lender
under the Intermediate Mez Loan Documetns and Senior Mez Lender under the Senior Mez Loan
Documents, security and other refundable deposits of tenants, whether held in cash or any other
form, shall, after and during the continuance of an Event of Default, be turned over to Lender
(together with any undisbursed interest earned thereon) upon Lender’s request therefor to be held
by Lender subject to the terms of the Leases. Any letter of credit or other instrument which
Borrower or Owner holds in lieu of cash security deposit shall be maintained in full force and
effect in the full amount of such deposits unless replaced by cash deposits as herein-above
described and shall in all respects comply with any applicable Legal Requirements and otherwise be
satisfactory to Lender. Borrower shall, upon request, provide Lender with evidence satisfactory to
Lender of Borrower’s, Intermediate Mez Borrower’s, Senior Mez Borrower’s and Owner’s compliance
with the foregoing.



     (c) Borrower (i) shall cause Owner or Operating Tenant to observe and perform all of its
material obligations under the Leases pursuant to applicable Legal Requirements and shall not do or
permit to be done anything to impair the value of the Major Space Leases; (ii) shall cause Owner to
promptly send copies to Lender of all notices of material default which Owner shall receive under
the Major Space Leases; (iii) shall, consistent with the Approved Manager



34









 







Standard, enforce all of the terms, covenants and conditions contained in the Leases to be
observed or performed; (iv) shall not permit Owner to collect any of the Rents under the Major
Space Leases more than one (1) month in advance (except that Owner may collect in advance such
security deposits as are permitted pursuant to applicable Legal Requirements and are commercially
reasonable in the prevailing market); (v) shall not permit Owner to cancel or terminate any of the
Leases or accept a surrender thereof in any manner inconsistent with the Approved Manager Standard;
(vi) shall not permit Owner to alter, modify or change the terms of any guaranty of any Major Space
Lease or cancel or terminate any such guaranty in a manner inconsistent with the Approved Manager
Standard; (vii) shall cause Owner, in accordance with the Approved Manager Standard, to make all
reasonable efforts to seek lessees for space as it becomes vacant and enter into Leases in
accordance with the terms hereof; and (viii) shall not permit Owner to materially modify, alter or
amend any Major Space Lease or Property Agreement without Lender’s consent, which consent will not
be unreasonably withheld or delayed. Borrower shall, and shall cause Intermediate Mez Borrower,
Senior Mez Borrower and Owner to, promptly send copies to Lender of all notices of material default
which any of Intermediate Mez Borrower, Senior Mez Borrower or Owner shall receive under the
Leases.



     Section 2.35. Condemnation. In the event that all or any portion of the Premises
shall be damaged or taken through condemnation (which term shall include any damage or taking by
any governmental authority, quasi-governmental authority, any party having the power of
condemnation, or any transfer by private sale in lieu thereof), or any such condemnation shall be
threatened, Borrower shall give prompt written notice to Lender. Lender acknowledges that Owner’s
rights to any condemnation award is subject to the terms of the Mortgage, the Intermediate Mez Loan
Documents and the Senior Mez Loan Documents. Notwithstanding the foregoing, Borrower may not and
shall not permit Owner, Intermediate Mez Borrower or Senior Mez Borrower to settle or compromise
any claim, action or proceeding relating to such damage or condemnation without the prior written
consent of Lender, which shall not be unreasonably withheld, delayed or denied; provided, further,
that any of Owner, Intermediate Mez Borrower or Senior Mez Borrower may settle, adjust and
compromise any such claim, action or proceeding which is of an amount less than five percent (5%)
of the Allocated Loan Amount provided no Event of Default has occurred. Any proceeds remaining
after the application of any award to reconstruct or repair the Premises or to the payment of the
Mortgage Loan, Intermediate Mez Loan and the Senior Mez Loan shall be paid to Lender and applied to
the payment of the Debt whether or not then due. In the event that Owner is permitted pursuant to
the terms of the Mortgage to reconstruct, restore or repair the Premises following a condemnation
of any portion of the Premises, Borrower shall cause Owner to promptly and diligently repair and
restore the Premises in the manner and within the time periods required by the Mortgage, the Leases
and any other agreements affecting the Premises. In the event that Owner is permitted pursuant to
the terms of the Mortgage to elect not to reconstruct, restore or repair the Premises following a
condemnation of any portion of the Premises, Borrower shall not permit Owner to elect not to
reconstruct, restore or repair the Property without the prior written consent of Lender.



     Section 2.36. Ground Lease.



     (a) Borrower will, and will cause Owner to, comply in all material respects with the terms and
conditions of any Ground Lease. Borrower will not, and will not permit Owner to, do or permit
anything to be done, the doing of which, or refrain from doing anything, the omission



35









 







of which, will impair or tend to impair the security of the Premises under the Ground Leases
or will be grounds for declaring a forfeiture of any Ground Lease. Borrower shall, and shall cause
Owner to, promptly send copies of all notices of default which Owner may receive under any Ground
Lease to Lender.



     (b) Borrower shall, and shall cause Owner to, enforce the Ground Leases and not terminate,
modify, cancel, change, supplement, alter or amend any Ground Lease, or waive, excuse, condone or
in any way release or discharge any Ground Lessor of or from any of the material covenants and
conditions to be performed or observed by such Ground Lessor.



     (c) Lender shall have the right, but not the obligation, to perform any obligations of
Borrower or Owner under the terms of any Ground Lease during the continuance of an Event of
Default. All costs and expenses (including, without limitation, reasonable attorneys’ fees and
expenses) so incurred, shall be treated as an advance secured by this Agreement, shall bear
interest thereon at the Default Rate from the date of payment by Lender until paid in full and
shall be paid by Borrower to Lender during the continuance of an Event of Default on demand. No
performance by Lender of any obligations of Borrower or Owner shall constitute a waiver of any
Event of Default arising by reason of Borrower’s or Owner’s failure to perform the same. If Lender
shall make any payment or perform any act or take action in accordance with this Section 2.36(c),
Lender will notify Borrower of the making of any such payment, the performance of any such act, or
the taking of any such action.



     (d) Borrower shall cause Owner to exercise each individual option, if any, to extend or renew
the term of any Ground Lease not less than thirty (30) days prior to the last day upon which any
such option may be exercised (and in all events within five (5) days after demand by Lender made at
any time within one (1) year of the last day upon which any such option may be exercised), and
Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such
option on behalf of Owner to so exercise such option if Borrower fails to cause Owner to exercise
as herein required, which power of attorney shall be irrevocable and shall be deemed to be coupled
with an interest. Borrower shall give Lender notice of Owner’s exercise of any such option to
extend or renew the term of any Ground Lease within five (5) days of the exercise of any such
option.



     (e) Subject to Mortgage Lender’s rights under the Mortgage Loan, Intermediate Mez Lender’s
rights under the Intermediate Mez Loan and Senior Mez Lender’s rights under the Senior Mez Loan,
Borrower shall cause Owner to assign, transfer and set over to Lender all of Borrower’s claims and
rights to the payment of damages arising from any rejection by any Ground Lessor of any Ground
Lease under the Bankruptcy Code. Borrower shall notify Lender promptly (and in any event within
ten (10) days) of any claim, suit, action or proceeding relating to the rejection of any Ground
Lease. Subject to Mortgage Lender’s rights under the Mortgage Loan, Intermediate Mez Lender’s
rights under the Intermediate Mez Loan and Senior Mez Lender’s rights under the Senior Mez Loan,
the Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an
interest, with exclusive power to file and prosecute, to the exclusion of Borrower, any proofs of
claim, complaints, motions, applications, notices and other documents, in any case in respect of
any Ground Lessor under the Bankruptcy Code during the continuance of an Event of Default.
Borrower may make any compromise or settlement in connection with such proceedings (subject to
Lender’s reasonable approval); provided, however,



36









 







that Lender, subject to Mortgage Lender’s rights under the Mortgage Loan, Intermediate Mez
Lender’s rights under the Intermediate Mez Loan and Senior Mez Lender’s rights under the Senior Mez
Loan, shall be authorized and entitled to compromise or settle any such proceeding if such
compromise or settlement is made after the occurrence and during the continuance of an Event of
Default. Borrower shall promptly execute and deliver to Lender any and all instruments reasonably
required in connection with any such proceeding after request therefor by Lender. Except as set
forth above, Borrower shall not, nor permit Owner to, adjust, compromise, settle or enter into any
agreement with respect to such proceedings without the prior written consent of Lender, which
consent shall not be unreasonably withheld or delayed.



     (f) Borrower shall not permit Owner to, without Lender’s prior written consent, elect to treat
any Ground Lease as terminated under Section 365(h)(1) of the Bankruptcy Code. Any such election
made without Lender’s prior written consent shall be void.



     (g) If pursuant to Section 365(h)(2) of the Bankruptcy Code, Owner seeks to offset against the
rent reserved in any Ground Lease the amount of any damages caused by the non-performance by any
Ground Lessor of any of such Ground Lessor’s obligations under the applicable Ground Lease after
the rejection by such Ground Lessor of the Ground Lease under the Bankruptcy Code, Borrower shall,
prior to Owner effecting such offset, notify Lender of its intention to do so, setting forth the
amounts proposed to be so offset and the basis therefor. If Lender has failed to object as
aforesaid within ten (10) days after notice from Borrower in accordance with the first sentence of
this Section 2.35(g), Borrower may permit Owner to proceed to effect such offset in the amounts set
forth in Borrower’s notice. Neither Lender’s failure to object as aforesaid nor any objection or
other communication between Lender and Borrower relating to such offset shall constitute an
approval of any such offset by Lender. Borrower shall indemnify and save Lender harmless from and
against any and all claims, demands, actions, suits, proceedings, damages, losses, costs and
expenses of every nature whatsoever (including, without limitation, reasonable attorneys’ fees and
disbursements) arising from or relating to any such offset by Owner against the rent reserved in
the Ground Lease.



     (h) Borrower shall immediately, after obtaining knowledge thereof, notify Lender of any filing
by or against any Ground Lessor of a petition under the Bankruptcy Code. Borrower shall thereafter
forthwith give written notice of such filing to Lender, setting forth any information available to
Borrower or Owner as to the date of such filing, the court in which such petition was filed, and
the relief sought therein. Borrower shall promptly deliver to Lender following receipt any and all
notices, summonses, pleadings, applications and other documents received by Borrower or Owner in
connection with any such petition and any proceedings relating thereto.



     (i) Borrower shall, and shall cause Owner to, perform all other covenants with respect to any
Ground Lease as set forth in the Mortgage for so long as any portion of the Debt remains
outstanding (regardless of whether the Mortgage Loan remains outstanding).



ARTICLE III. EVENTS OF DEFAULT/REMEDIES




     Section 3.01. Events of Default. The Loan shall become immediately due at the option
of Lender upon any one or more of the following events (“Event of Default”):



37









 





     (a) if the final payment or prepayment premium, if any, due under the Note shall not be paid
on Maturity;



     (b) if any monthly payment of interest and/or principal due under the Note (other than the
sums described in (a) above) shall not be fully paid on the date upon which the same is due and
payable thereunder; provided, that the failure of any such amount to be paid when due shall not be
an Event of Default if adequate funds were on deposit in the Lockbox Account (or would have been on
deposit therein if Lender had timely allocated such funds thereto from the Lockbox Account in
accordance with the provisions of Section 2.27 hereof);



     (c) if payment of any sum (other than the sums described in (a) above or (b) above) required
to be paid pursuant to the Note, this Agreement or any other Loan Document shall not be paid within
five (5) Business Days after Lender delivers written notice to Borrower that same is due and
payable thereunder or hereunder;



     (d) if Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant,
Guarantor or, if Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant
or Guarantor is a partnership, any general partner of Borrower, Intermediate Mez Borrower, Senior
Mez Borrower, Owner, Operating Tenant or Guarantor, or, if Borrower, Intermediate Mez Borrower,
Senior Mez Borrower, Owner, Operating Tenant or Guarantor is a limited liability company, any
member of Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant or
Guarantor, shall institute or cause to be instituted any proceeding for the termination or
dissolution of Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant,
Guarantor or any such general partner or member;



     (e) if a default beyond applicable notice and grace periods shall occur under any of the
Mortgage Loan Documents, Intermediate Mez Loan Documents or the Senior Mez Loan Documents, or any
other event or condition shall exist, if the Mortgage Lender, Intermediate Mez Lender or Senior Mez
Lender has accelerated the maturity of any portion of the Mortgage Loan, the Intermediate Mez Loan
or the Senior Mez Loan for any reason;



     (f) if Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner or Guarantor attempts
to assign its rights under this Agreement or any other Loan Document or any interest herein or
therein, or if any Transfer other than a Permitted Transfer (provided no transfer pursuant to
clause (c) of the definition thereof shall result in the transfer of direct interests in Owner,
Intermediate Mez Borrower or Senior Mez Borrower) occurs other than in accordance with the
provisions hereof;



     (g) if any representation or warranty of Borrower, Intermediate Mez Borrower, Senior Mez
Borrower, Owner or Guarantor made herein or in any other Loan Document or in any certificate,
report, financial statement or other instrument or agreement furnished to Lender shall prove false
or misleading in any material respect, as of the date made; provided, however, that if such
representation or warranty which was false or misleading in any material respect is, by its nature,
curable and is not reasonably likely to have a Material Adverse Effect, and such representation or
warranty was not, to the best of Borrower’s knowledge, false or misleading in any material respect
when made, then the same shall not constitute an Event of Default unless



38









 







Borrower has not cured the same within five (5) Business Days after receipt by Borrower of
notice from Lender in writing of such breach;



     (h) if Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant,
Guarantor or, if Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant
or Guarantor is a partnership, any general partner of Borrower, Intermediate Mez Borrower, Senior
Mez Borrower, Owner, Operating Tenant or Guarantor, or, if Borrower, Intermediate Mez Borrower,
Senior Mez Borrower, Owner, Operating Tenant or Guarantor is a limited liability company, any
member of Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant or
Guarantor, shall make an assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due;



     (i) if a receiver, liquidator or trustee of Borrower, Intermediate Mez Borrower, Senior Mez
Borrower, Owner, Operating Tenant or Guarantor or any general partner of Borrower, Intermediate Mez
Borrower, Senior Mez Borrower, Owner, Operating Tenant or Guarantor shall be appointed or if
Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant or Guarantor or
their respective general partners shall be adjudicated a bankrupt or insolvent, or if any petition
for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower,
Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant, Guarantor or their
respective general partners or if any proceeding for the dissolution or liquidation of Borrower,
Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant, Guarantor or their
respective general partners shall be instituted; however, if such appointment, adjudication,
petition or proceeding was involuntary and not consented to by Borrower, Intermediate Mez Borrower,
Senior Mez Borrower, Owner, Operating Tenant, Guarantor or their respective general partners, as
applicable, upon the same not being discharged, stayed or dismissed within ninety (90) days or if
Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, Operating Tenant, Guarantor or
their respective general partners shall generally not be paying its debts as they become due;



     (j) if Borrower consummates a transaction which would cause this Agreement or Lender’s rights
under this Agreement, the Note or any other Loan Document to constitute a non-exempt prohibited
transaction under ERISA or result in a violation of a state statute regulating government plans
subjecting Lender to liability for a violation of ERISA or a state statute;



     (k) if a default by Borrower or Owner beyond applicable notice and grace periods, if any,
occurs under the Franchise Agreement or Operating Lease, or if the Franchise Agreement or Operating
Lease is terminated, or if, without Lender’s prior written consent, there is a material change to
the Franchise Agreement or Operating Lease unless, with respect to any default under or
termination of the Franchise Agreement, Borrower or Owner enters into a replacement Franchise
Agreement within thirty (30) days of the termination or receipt of notice of any such default, as
applicable, in accordance with the terms hereof;



     (l) if a default beyond applicable notice and grace periods shall occur under any loan and
security agreement executed by Borrower or any Affiliate of Borrower which secures, in whole or in
part, the Debt;



39









 





     (m) if any pledge or security interest made or granted or purported to be made or granted
pursuant to this Agreement or any of the other Loan Documents shall cease to be in full force and
effect or shall not be enforceable or shall not be of the effect or have the priority stated herein
or therein for such pledge or security interest; or



     (n) if a default shall occur under any of the other terms, covenants or conditions of the
Note, this Agreement or any other Loan Document, other than as set forth in (a) through (m) above,
for ten (10) days after notice from Lender in the case of any default which can be cured by the
payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any
other default or an additional ninety (90) days if Borrower is diligently and continuously
effectuating a cure of a curable non-monetary default, other than as set forth in (a) through (m)
above.



     Section 3.02. Remedies. (a) Upon the occurrence and during the continuance of any
Event of Default, Lender may, in addition to any other rights or remedies available to it hereunder
or under any other Loan Document, at law or in equity, take such action, without notice or demand,
as it reasonably deems advisable to protect and enforce its rights against Borrower and in and to
the Collateral, including, but not limited to, the following actions, each of which may be pursued
singly, concurrently or otherwise, at such time and in such order as Lender may determine, in its
sole discretion, without impairing or otherwise affecting any other rights and remedies of Lender
hereunder, at law or in equity: (i) declare all or any portion of the unpaid Loan to be
immediately due and payable; provided, however, that upon the occurrence of any of the events
specified in Section 3.01(i), the entire Loan will be immediately due and payable without notice or
demand or any other declaration of the amounts due and payable; or (ii) bring an action to
foreclose this Agreement and thereupon Lender may (A) exercise all rights and powers of Borrower
with respect to the Collateral or any part thereof, whether in the name of Borrower or otherwise
and (B) apply the receipts from the Collateral to the payment of the Debt, after deducting
therefrom all expenses (including, without limitation, reasonable attorneys’ fees and disbursements
and all applicable transfer taxes) reasonably incurred in connection therewith, as well as just and
reasonable compensation for the services of Lender’s third-party agents; or (iii) sell the
Collateral or institute proceedings for the complete foreclosure of this Agreement, or take such
other action as may be allowed pursuant to Legal Requirements, at law or in equity, for the
enforcement of this Agreement; or (iv) pursue any or all such other rights or remedies as Lender
may have under applicable law or in equity (including, without limitation, all rights and remedies
to a secured party under the UCC); provided, however, that the provisions of this Section shall not
be construed to extend or modify any of the notice requirements or grace periods provided for
hereunder or under any of the other Loan Documents.



     (b) In addition to the remedies described in subsection (a) above, if any Event of Default
shall occur, so long as such Event of Default shall be continuing, (i) Lender and/or its nominees
or designees shall have the right to receive any and all dividends, payments or Distributions paid
with respect to the Equity Interests and the other Collateral, as applicable, and make application
thereof in accordance with this Agreement (and any dividends and other payments received in trust
by Borrower for the benefit of Lender shall be segregated from the other funds of Borrower) and
(ii) at Lender’s election, all Equity Interests shall be transferred to Lender and/or one (1) or
more nominee(s) or designee(s) thereof, and Lender and/or such nominee(s) or designee(s) may in the
name of Borrower or in Lender’s and/or such



40









 







nominee’s(s’) or designee’s(s’) own name, collect all payments and assets due Borrower
pursuant to the Equity Interests and/or the applicable Organizational Documents, and Lender and/or
such nominee(s) or designee(s) may thereafter exercise (A) all voting and other rights pertaining
to the Equity Interests and/or the other Collateral under the Organizational Documents, and (B) any
and all rights of conversion, exchange, subscription and any other rights, privileges or options
pertaining to the Equity Interests as if they were the absolute owners thereof (including the right
to exchange at their discretion any and all of the Equity Interests upon the merger, consolidation,
reorganization, recapitalization or other change in the structure of any Corporation, LLC or
Partnership), or upon the exercise by Borrower or Lender and/or such nominee(s) or designee(s) of
any right, privilege or option pertaining to such Equity Interests, and, in connection therewith,
the right to deposit and deliver evidences of the Equity Interests with any committee, depository,
transfer agent, registrar or other designated agency (upon such terms and conditions as they may
determine), all without liability except to account for property actually received by them, but
neither Lender nor any such nominee or designee shall have any duty to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or delay in so doing.
Further, unless and until Lender and/or such nominee(s) or designee(s) succeeds to actual ownership
thereof, pursuant to the exercise of Lender’s remedies described in subsection (a) above, neither
Lender nor any such nominee or designee shall be obligated to perform or discharge any obligation,
duty or liability in connection with the Equity Interests or the other Collateral. The rights of
Lender hereunder shall not be conditioned or contingent upon the pursuit by Lender of any other
right or remedy against Borrower or any guarantor of any of the Debt, or against any other Person
which may be or become liable in respect of all or any part of the Debt or against any other
collateral security therefor, guarantee thereof or right of offset with respect thereto. Neither
Lender nor any of its nominees or designees shall be liable for any failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so, nor shall they be
under any obligation to sell or otherwise dispose of any Collateral upon the request of Borrower or
any other Person or to take any other action whatsoever with regard to the Collateral or any part
thereof.



     (c) Following the occurrence and during the continuance of an Event of Default, Lender may, at
its election, and in addition to any other remedies available hereunder, in its sole and absolute
discretion, no such duty being imposed hereby, pay, purchase, contest or compromise any
encumbrance, charge or lien which is prior or superior to its security interest in the Collateral
and pay all expenses incurred therewith (any payment or expense so incurred shall be deemed a part
of the Debt and shall be immediately due and payable and secured hereby), all of which shall be
deemed authorized by Borrower. All such expenses not paid when due shall accrue interest at the
Default Rate.



     (d) Without limiting the generality of the other provisions of this Agreement, Lender is
hereby authorized by Borrower, but not obligated, in the event of any Event of Default hereunder
giving rise to Lender’s rights to sell or otherwise dispose of the Collateral, and after the giving
of any notices required herein, to sell all or any part of the Collateral at private sale, subject
to an investment letter or in any other manner which will not require the Collateral, or any part
thereof, to be registered in accordance with the Securities Act of 1933, as amended (the
“Securities Act”), or other applicable rules and regulations promulgated thereunder, or any
other law or regulation, at the best price reasonably obtainable by Lender at any such private sale
or other disposition in the manner mentioned above, and Borrower specifically acknowledges that



41









 







any such disposition shall be commercially reasonable under the UCC even though any such
private sales may be at prices and on terms less favorable than those obtainable through a public
sale without such restrictions, and agrees that Lender shall have no obligation to engage in public
sales and no obligation to delay the sale of any Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of public sale required by registration under
the Securities Act or under applicable state securities laws, even if such issuer would, or should
agree to, so register it. Lender is also hereby authorized by Borrower, but not obligated, to take
such actions, give such notices, obtain such consents, and do such other things as Lender may deem
required or appropriate in the event of a sale or disposition of any of the Collateral. If Lender
determines to exercise its right to sell any or all of the Collateral, upon written request,
Borrower shall and shall cause each issuer of any Pledged Interests or other Equity Interests owned
by Borrower to be sold hereunder from time to time to furnish to Lender all such information as
Lender may request in order to determine the number of shares and other instruments included in the
Collateral which may be sold by Lender in exempt transactions under the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder, as the same are from
time to time in effect. Borrower clearly understands that Lender may at its discretion approach a
restricted number of potential purchasers and that a sale under such circumstances may yield a
lower price for the Collateral, or any part or parts thereof, than would otherwise be obtainable if
same were registered and sold in the open market. Borrower agrees: (i) in the event Lender shall,
upon an Event of Default hereunder, sell the Collateral, or any portion thereof, at such private
sale or sales, Lender shall have the right to rely upon the advice and opinion of any member firm
of the National Security Exchange as to the best price reasonably obtainable upon such private sale
thereof; and (ii) that such reliance shall be conclusive evidence that Lender handled such matter
in a commercially reasonable manner under the UCC.



     (e) In order to permit Lender to exercise the voting and other consensual rights which it may
be entitled to exercise pursuant to this Agreement and to receive all dividends and other
Distributions which it may be entitled to receive under this Agreement, (i) Borrower shall promptly
execute and deliver (or cause to be executed and delivered) to Lender all such proxies, dividend
payment orders and other instruments as Lender may from time to time reasonably request and (ii)
WITHOUT LIMITING THE EFFECT OF THE IMMEDIATELY PRECEDING CLAUSE (i), BORROWER HEREBY GRANTS TO
LENDER AN IRREVOCABLE PROXY TO VOTE THE PLEDGED INTERESTS AND OTHER EQUITY INTERESTS PLEDGED BY
BORROWER AND TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF THE
PLEDGED INTERESTS OR OTHER EQUITY INTERESTS WOULD BE ENTITLED (INCLUDING WITHOUT LIMITATION GIVING
OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, MEMBERS OR PARTNERS, AS APPLICABLE, CALLING
SPECIAL MEETINGS OF SHAREHOLDERS, MEMBERS OR PARTNERS, AS APPLICABLE, AND VOTING AT SUCH MEETINGS),
WHICH PROXY IS COUPLED WITH AN INTEREST AND SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE
NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY PLEDGED INTERESTS ON THE RECORD BOOKS OF THE
ISSUER THEREOF) BY ANY OTHER PERSON (INCLUDING THE ISSUER OF THE PLEDGED INTERESTS OR ANY OFFICER
OR AGENT THEREOF), UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT



42









 







AND WHICH PROXY SHALL ONLY TERMINATE UPON THE PAYMENT IN FULL OF THE DEBT OTHER THAN THE
SURVIVING OBLIGATIONS (WHICH, HOWEVER, SHALL REMAIN SUBJECT TO THE PREFERENTIAL PAYMENT
PROVISIONS).



     (f) Any time after an Event of Default Lender shall have the power to sell the Collateral or
any part thereof at public auction, in such manner, at such time and place, upon such terms and
conditions, and upon such public notice as Lender may deem best for the interest of Lender, or as
may be required or permitted by applicable law, consisting of advertisement in a newspaper of
general circulation in the jurisdiction and for such period as applicable law may require and at
such other times and by such other methods, if any, as may be required by law to convey the
Collateral to and at the cost of the purchaser, who shall not be liable to see to the application
of the purchase money. Notwithstanding anything contained in this Agreement or in any other Loan
Document, the proceeds or avails of any sale made under or by virtue of this Section, together with
any other sums which then may be held by Lender under this Agreement, whether under the provisions
of this Section or otherwise, shall be applied as follows:




First: To the payment of the third-party costs and expenses reasonably incurred in
connection with any such sale (including, without limitation, any transfer taxes)
and to advances, fees and expenses, including, without limitation, reasonable fees
and expenses of Lender’s legal counsel as applicable, and of any judicial
proceedings wherein the same may be made, and of all expenses, liabilities and
advances reasonably made or incurred by Lender under this Agreement, together with
interest as provided herein on all such advances made by Lender;




Second: To the payment of the whole amount then due, owing and unpaid under the
Note for principal and interest thereon, with interest on such unpaid principal at
the Default Rate from the date of the occurrence of the earliest Event of Default
that formed a basis for such sale until the same is paid;




Third: To the payment of any other portion of the Loan required to be paid by
Borrower pursuant to any provision of this Agreement, the Note, or any of the other
Loan Documents; and




Fourth: The surplus, if any, to Borrower unless otherwise required by Legal
Requirements.


Lender and any receiver or custodian of the Collateral or any part thereof shall be liable to
account for only those rents, issues, proceeds and profits, as applicable, actually received by it.




     (g) Lender may adjourn from time to time any sale by it to be made under or by virtue of this
Agreement by announcement at the time and place appointed for such sale or for such adjourned sale
or sales and, except as otherwise provided by any applicable provision of Legal Requirements,
Lender, without further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.



     (h) Upon the completion of any sale or sales made by Lender under or by virtue of this
Section, Lender, or any officer of any court empowered to do so, shall execute and deliver to



43









 







the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient
instruments, granting, conveying, assigning and transferring all estate, right, title and interest
in and to the Collateral. Lender is hereby irrevocably appointed the true and lawful
attorney-in-fact of Borrower (coupled with an interest), in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries and for that purpose Lender may
execute all necessary instruments of conveyance, assignment, transfer and delivery, and may
substitute one or more Persons with like power, Borrower hereby ratifying and confirming all that
its said attorney-in-fact or such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, Borrower, if so requested by Lender, shall ratify and confirm any such sale or sales
by executing and delivering to Lender, or to such purchaser or purchasers all such instruments as
may be advisable, in the sole judgment of Lender, for such purpose, and as may be designated in
such request. Any such sale or sales made under or by virtue of this Section shall operate to
divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in
equity, of Borrower in and to the Collateral, and shall, to the fullest extent permitted under
Legal Requirements, be a perpetual bar, both at law and in equity against Borrower and against any
and all Persons claiming or who may claim the same, or any part thereof, from, through or under
Borrower.



     (i) In the event of any sale made under or by virtue of this Section, the entire Loan
immediately thereupon shall, anything in the Loan Documents to the contrary notwithstanding, become
due and payable.



     (j) Upon any sale made under or by virtue of this Section (whether made under the power of
sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of
foreclosure and sale), Lender may bid for and acquire the Collateral or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Loan
the net sales price after deducting therefrom the expenses of the sale (including, without
limitation, transfer taxes) and the costs of the action.



     (k) No recovery of any judgment by Lender and no levy of an execution under any judgment upon
the Collateral or upon any other property of Borrower shall release the lien of this Agreement upon
the Collateral or any part thereof, or any liens, rights, powers or remedies of Lender hereunder,
but such liens, rights, powers and remedies of Lender shall continue unimpaired until all amounts
due under the Note, this Agreement and the other Loan Documents are paid in full.



     (l) Upon the exercise by Lender of any power, right, privilege, or remedy pursuant to this
Agreement which requires any consent, approval, registration, qualification, or authorization of
any Governmental Authority, Borrower agrees to execute and deliver, or will cause the execution and
delivery of, all applications, certificates, instruments, assignments and other documents and
papers that Lender or any purchaser of the Collateral may be required to obtain for such
governmental consent, approval, registration, qualification, or authorization and Lender is hereby
irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an interest),
in its name and stead, to execute all such applications, certificates, instruments, assignments and
other documents and papers.



     (m) Lender may comply with any applicable Legal Requirements in connection with



44









 







the disposition of the Collateral, and Lender’s compliance therewith will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.



     (n) Lender may sell the Collateral without giving any warranties as to the Collateral. Lender
may specifically disclaim any warranties of title, possession, quiet enjoyment or the like. This
procedure will not be considered to adversely affect the commercial reasonableness of any sale of
the Collateral.



     (o) If Lender sells any of the Collateral upon credit, Borrower will be credited only with
payments actually made by the purchaser, received by Lender and applied to the indebtedness of the
purchaser. In the event the purchaser of the Collateral fails to fully pay for the Collateral,
Lender may resell the Collateral and Borrower will be credited with the proceeds of such sale.



     Section 3.03. No Conditions Precedent to Exercise of Lender’s Remedies. Borrower
waives any and all legal requirements that Lender institute any action or proceeding at law or in
equity against Borrower or any other party or exhaust its remedies against Borrower or any other
party in respect of any other security held by Lender for the Debt or any portion thereof as a
condition precedent to exercising its right and remedies pursuant to this Agreement.



     Section 3.04. Additional Security. Borrower authorizes Lender without notice or
demand and without affecting its liability under this Agreement or under the Note (i) to take and
hold security in addition to the security interest in the Collateral granted by Borrower to Lender
pursuant to this Agreement, for the payment of the Debt or any part thereof, and to exchange, waive
or release any such other security and (ii) to release or substitute Borrower.



     Section 3.05. Rights and Remedies Continue. Until the Debt shall have been paid in
full, all rights, powers and remedies granted to Lender under this Agreement shall continue to
exist and may be exercised by Lender at any time and from time to time irrespective of the fact
that the Debt or any part thereof may have become barred by any statute of limitations or that the
liability of Borrower therefor may have ceased.



     Section 3.06. Right to Terminate Proceedings. Lender may terminate or rescind any
proceeding or other action brought in connection with its exercise of the remedies provided in
Section 3.02 at any time before the conclusion thereof, as determined in Lender’s sole discretion
and without prejudice to Lender.



     Section 3.07. No Waiver or Release. The failure of Lender to exercise any right,
remedy or option provided in the Loan Documents shall not be deemed a waiver of such right, remedy
or option or of any covenant or obligation contained in the Loan Documents. No acceptance by
Lender of any payment after the occurrence of an Event of Default and no payment by Lender of any
payment or obligation for which Borrower is liable hereunder shall be deemed to waive or cure any
Event of Default. No sale of all or any portion of the Collateral, no forbearance on the part of
Lender, and no extension of time for the payment of the whole or any portion of the Loan or any
other indulgence given by Lender to Borrower or any other Person, shall operate to release or in
any manner affect the interest of Lender in the Collateral or the liability of Borrower to pay the
Loan. No waiver by Lender shall be effective unless it is in writing and then only to



45









 







the extent specifically stated.



     Section 3.08. Payment of Debt After Default. If following the occurrence of any Event
of Default, Borrower shall tender payment of an amount sufficient to satisfy the Debt in whole or
in part at any time prior to a UCC sale of the Collateral, and if at the time of such tender
prepayment of the principal balance of the Note is not permitted by the Note and this Agreement,
Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal to interest which
would have accrued on the principal balance of the Note at an interest rate equal to the LIBOR
Margin for the Note plus the greater of (x) the then current LIBOR Rate and (y) the then current
average yield for “This Week” as published by the Federal Reserve Board during the most recent full
week preceding the date on which Borrower tenders such payment in Federal Reserve Statistical
Release H.15 (519) for instruments having a ten (10) year maturity, from the date of such tender to
the earlier of (a) the Maturity Date or (b) the first day of the period during which prepayment of
the principal balance of the Note would have been permitted together with a prepayment
consideration equal to the prepayment consideration which would have been payable as of the first
day of the period during which prepayment would have been permitted. If at the time of such
tender, prepayment of the principal balance of the Note is permitted, such tender by Borrower shall
be deemed to be a voluntary prepayment of the principal balance of the Note and Borrower shall, in
addition to the entire Debt, also pay to Lender the applicable prepayment consideration specified
in the Note and this Agreement. Notwithstanding the foregoing, Lender acknowledges that the Loan
may be prepaid at any time in accordance with the terms of Section 6.01 hereof.



     Section 3.09. No Impairment; No Releases. The interests and rights of Lender under
the Loan Documents shall not be impaired by any indulgence, including (a) any renewal, extension or
modification which Lender may grant with respect to the Loan; (b) any surrender, compromise,
release, renewal, extension, exchange or substitution which Lender may grant with respect to the
Loan Documents or any portion thereof; or (c) any release or indulgence granted to any maker,
endorser, or surety of the Loan.



     Section 3.10. Interest After Default. If any amount due under the Note, this
Agreement or any of the other Loan Documents is not paid within any applicable notice and grace
period after same is due, whether such date is the stated due date, any accelerated due date or any
other date or at any other time specified under any of the terms hereof or thereof, then, in such
event, Borrower shall pay interest on the amount not so paid from and after the date on which such
amount first becomes due at the Default Rate; and such interest shall be due and payable at such
rate until the earlier of the cure of all Events of Default or the payment of the entire amount due
to Lender, whether or not any action shall have been taken or proceeding commenced to recover the
same or to foreclose this Agreement. All unpaid and accrued interest shall be secured by this
Agreement as part of the Debt. Nothing in this Section or in any other provision of this Agreement
shall constitute an extension of the time for payment of the Debt.



     Section 3.11. Late Payment Charge. If any portion of the Debt (other than the
principal portion of the Debt due on Maturity) is not paid in full on or before the date on which
it is due and payable hereunder, Borrower shall pay to Lender an amount equal to five percent (5%)
of such unpaid portion of the Debt (“Late Charge”) to defray the expense incurred by Lender
in handling and processing such delinquent payment, and such amount shall constitute a part of the



46









 







Debt.



     Section 3.12. Recovery of Sums Required To Be Paid. Lender shall have the right from
time to time to take action to recover any sum or sums which constitute a part of the Debt as the
same become due and payable hereunder (after the expiration of any grace period or the giving of
any notice herein provided, if any), without regard to whether or not the balance of the Debt shall
be due, and without prejudice to the right of Lender thereafter to bring an action of foreclosure,
or any other action, for a default or defaults by Borrower existing at the time such earlier action
was commenced.



     Section 3.13. Control By Lender After Default. Notwithstanding the appointment of any
custodian, receiver, liquidator or trustee of Borrower, or of any of its property, or of the
Collateral or any part thereof, to the extent permitted by Legal Requirements, Lender shall be
entitled to obtain possession and control of all Collateral.



ARTICLE IV. INDEMNIFICATION




     Section 4.01. Indemnification Covering Property. In addition, and without limitation,
to any other provision of this Agreement or any other Loan Document, Borrower shall protect,
indemnify and save harmless Lender and its successors and assigns, and each of their agents,
employees, officers, directors, stockholders, partners and members (collectively, “Indemnified
Parties”) for, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent
or otherwise, whether incurred or imposed within or outside the judicial process, including,
without limitation, reasonable attorneys’ fees and disbursements imposed upon or incurred by or
asserted against any of the Indemnified Parties by reason of (a) ownership of this Agreement or the
Collateral; (b) any accident, injury to or death of any person or loss of or damage to property
occurring in, on or about the Premises or the Collateral or any part thereof or on the adjoining
sidewalks, curbs, parking areas, streets or ways; (c) any use, nonuse or condition in, on or about,
or possession, alteration, repair, operation, maintenance or management of, the Premises or any
part thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (d) any failure
on the part of Borrower to perform or comply with any of the terms of this Agreement; (e)
performance of any labor or services or the furnishing of any materials or other property in
respect of the Premises or any part thereof; (f) any claim by brokers, finders or similar Persons
claiming to be entitled to a commission in connection with any Lease or other transaction involving
the Premises or any part thereof; (g) any Imposition including, without limitation, any Imposition
attributable to the execution, delivery, filing, or recording of any Loan Document, Lease or
memorandum thereof; (h) any lien or claim arising on or against the Premises or any part thereof
under any Legal Requirement or any liability asserted against any of the Indemnified Parties with
respect thereto; (i) any claim arising out of or in any way relating to any tax or other imposition
on the making and/or recording of this Agreement, the Note or any of the other Loan Documents; (j)
a Default under Sections 2.02(f), 2.02(g), 2.02(k) or 2.02(s) hereof, (k) the failure of any Person
to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients
of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in
connection with the Loan, or to supply a copy thereof in a timely fashion to the recipient of the
proceeds of the Loan; (l) the claims of any lessee or any Person acting through or under any lessee
or otherwise arising under or as a consequence of any



47









 







Lease; or (m) the actual or alleged presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threat of release of any Hazardous Materials in, on, over, under,
from or affecting the Premises. Notwithstanding the foregoing provisions of this Section to the
contrary, Borrower shall have no obligation to indemnify the Indemnified Parties pursuant to this
Section for liabilities, obligations, claims, damages, penalties, causes of action, costs and
expenses relative to the foregoing which result from Lender’s, and its successors’ or assigns’,
willful misconduct or gross negligence or with respect to matters which first occur after Lender
has taken title to the Property through a foreclosure or delivery of a deed in lieu thereof. Any
amounts payable to Lender by reason of the application of this Section shall constitute a part of
the Loan secured by this Agreement and the other Loan Documents and shall become immediately due
and payable and shall bear interest at the Default Rate from the date the liability, obligation,
claim, cost or expense is sustained by Lender, as applicable, until paid. The provisions of this
Section shall survive the termination of this Agreement whether by repayment of the Loan,
foreclosure of this Agreement, assignment or otherwise. In case any action, suit or proceeding is
brought against any of the Indemnified Parties by reason of any occurrence of the type set forth in
(a) through (m) above, Borrower shall, at Borrower’s expense, resist and defend such action, suit
or proceeding or will cause the same to be resisted and defended by counsel at Borrower’s expense
for the insurer of the liability or by counsel designated by Borrower (unless reasonably
disapproved by Lender promptly after Lender has been notified of such counsel); provided,
however, that nothing herein shall compromise the right of Lender (or any other Indemnified
Party) to appoint its own counsel at Borrower’s expense for its defense with respect to any action
which, in the reasonable opinion of Lender or such other Indemnified Party, as applicable, presents
a conflict or potential conflict between Lender or such other Indemnified Party that would make
such separate representation advisable. Any Indemnified Party will give Borrower prompt notice
after such Indemnified Party obtains actual knowledge of any potential claim by such Indemnified
Party for indemnification hereunder. The Indemnified Parties shall not settle or compromise any
action, proceeding or claim as to which it is indemnified hereunder without notice to Borrower.
Notwithstanding the foregoing, so long as no Default has occurred and is continuing and Borrower is
resisting and defending such action, suit or proceeding as provided above in a prudent and
commercially reasonable manner, in order to obtain the benefit of this Section 4.01 with respect to
such action, suit or proceeding, Lender and the Indemnified Parties agree that they shall not
settle such action, suit or proceeding without obtaining Borrower’s consent which Borrower agrees
not to unreasonably withhold, condition or delay; provided, however, (x) if
Borrower is not diligently defending such action, suit or proceeding in a prudent and commercially
reasonable manner as provided above and Lender has provided Borrower with thirty (30) days’ prior
written notice, or shorter period if mandated by the requirements of the applicable law, and
Borrower has failed to correct such failure, or (y) failure to settle could, in Lender’s reasonable
judgment, expose Lender to criminal liability, Lender may settle such action, suit or proceeding
without the consent of Borrower and be entitled to the benefits of this Section 4.01 with respect
to the settlement of such action, suit or proceeding



ARTICLE V. SECURITY AGREEMENT




     Section 5.01. Security Agreement. (a) This Agreement is a “security agreement”
within the meaning of the UCC. If an Event of Default shall occur, Lender, in addition to any
other rights and remedies which it may have, shall have and may exercise immediately and without
demand, any and all rights and remedies granted to a secured party upon default under the UCC,



48









 







including, without limiting the generality of the foregoing, the right to take possession of
the Collateral or any part thereof, and to take such other measures as Lender may deem necessary
for the care, protection and preservation of the Collateral. Upon request or demand of Lender
following an Event of Default, Borrower shall, at its expense, assemble the Collateral and make it
available to Lender at a convenient place acceptable to Lender. Borrower shall pay to Lender on
demand any and all expenses, including reasonable legal expenses and attorneys’ fees and all
transfer taxes, incurred or paid by Lender in protecting its interest in the Collateral and in
enforcing its rights hereunder with respect to the Collateral. Any notice of sale, disposition or
other intended action by Lender with respect to the Collateral given to Borrower in accordance with
the provisions hereof at least ten (10) days prior to such action shall constitute reasonable
notice to Borrower.



     (b) Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any financing or other
statements signed only by Lender, as secured party, or, to the extent permitted under the UCC,
unsigned, in connection with the Collateral covered by this Agreement. Such financing statements
may, at the option of Lender, describe the Collateral as “all assets” or “all personal property” of
Borrower.



     (c) Borrower will furnish to Lender from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection with the Collateral
as Lender may reasonably request, all in reasonable detail.



     (d) The powers conferred on Lender hereunder are solely to protect Lender’s interest in the
Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for moneys actually received by it
hereunder, Lender shall have no duty (and neither Lender nor any of its partners, members,
officers, directors, employees or agents shall be responsible to Borrower for any act or failure to
act) as to any Collateral, as to ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relating to any Collateral, whether or not Lender
has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to any Collateral. Lender shall
be deemed to have exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to that which it
accords its own property.



ARTICLE VI. PREPAYMENT




     Section 6.01. Prepayment. (a) Except as set forth in Section 6.01(b) hereof, no
prepayment of the Debt may be made in whole or in part.



     (b) At any time, Borrower may prepay the Loan, in whole or in part, as of the last day of an
Interest Accrual Period, it being acknowledged that Borrower may prepay the Loan on a day other
than the last day of an Interest Accrual Period, provided that Borrower pays all interest which
would otherwise be due to Lender through the end of such Interest Accrual Period, in accordance
with the following provisions:



49









 





     (i) Lender shall have received from Borrower, not less than thirty (30) days’, nor more than
ninety (90) days’, prior written notice specifying the date proposed for such prepayment and the
amount which is to be prepaid (which notice shall be revocable by Borrower up to two (2) times
during the term of the Loan by giving Lender not less than one (1) Business Day prior written
notice of such revocation, provided that Borrower shall remain obligated to pay Lender’s costs and
expenses including, without limitation, breakage costs incurred by Lender in connection with such
revocation).



     (ii) Borrower shall also pay to Lender all interest due through and including the last day of
the Interest Accrual Period in which such prepayment is being made, together with any and all other
amounts due and owing pursuant to the terms of the Note, this Agreement or the other Loan
Documents.



     (iii) Any partial prepayment shall be in a minimum amount not less than $25,000 and shall be
in whole multiples of $1,000 in excess thereof.



     (iv) Any partial prepayment of the Principal Amount, including, without limitation,
Unscheduled Payments, shall be applied to the installments of principal last due hereunder and
shall not release or relieve Borrower from the obligation to pay the regularly scheduled
installments of principal and interest becoming due under the Note.



     (v) Borrower shall pay to Lender, together with such prepayment and all other amounts due in
connection therewith, a non-refundable amount which shall be deemed earned by Lender upon the
funding of the Loan and shall not count to or be credited to payment of the Principal Amount, any
interest thereon or any other amounts payable under the Note, this Agreement or any of the other
Loan Document, equal to .70% of the Principal Amount being repaid if such prepayment occurs prior
to the Payment Date occurring in November, 2007 and .50% of the Principal Amount being prepaid if
the prepayment occurs on or after the Payment Date occurring in November, 2007 but prior to the
Payment occurring in April, 2008. The Loan may be prepaid after the Payment Date occurring in
April, 2008 without such additional fee or charge, provided, however, that a portion of the
Principal Amount not to exceed $14,438,820 in the aggregate may be prepaid at any time without
payment of any sum otherwise due under this clause 6.01(b)(v) and a portion of the Principal Amount
up to $43,233,000 in the aggregate may be prepaid on or prior to the Payment Date occurring in May,
2007 without payment of any sums otherwise due under this clause 6.01(b)(v) if the Loan is prepaid
with the proceeds of a fixed rate mortgage loan secured by one or more Cross-collateralized
Properties made by Wachovia Bank, National Association.



ARTICLE VII. MISCELLANEOUS




     Section 7.01. Notices. Any notice, demand, statement, request or consent made
hereunder shall be in writing and delivered personally or sent to the party to whom the notice,
demand or request is being made by Federal Express or other nationally recognized overnight
delivery service, as follows and shall be deemed given (a) when delivered personally, (b) on the
date of sending by telefax if sent during normal business hours on a Business Day (otherwise on the
next Business Day) provided that any notice given by telefax is also given by at least one other
method provided herein, or (c) one (1) Business Day after being deposited with Federal



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     Express or such other nationally recognized delivery service:



	 	 	 	 	 
	 

	 	If to Lender:
	 	Wachovia Bank, National Association

Commercial Real Estate Services

8739 Research Drive URP-4

NC 1075

Charlotte, NC 28262

Loan Number: 502859548

Attention: Portfolio Management

Fax No.: (704) 715-0036
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Proskauer Rose llp

1585 Broadway

New York, New York 10036

Attn: David J. Weinberger, Esq.

Fax No.: (212) 969-2900
	 
	 	 	 	 
	 

	 	If to Borrower:
	 	c/o Ashford Hospitality Trust, Inc.

14185 Dallas Parkway, Suite 1100

Dallas, Texas 75254-4308

Attn: David Brooks

Facsimile: (972) 778-9270

E-mail: dbrooks@ahreit.com
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Akin Gump Strauss Hauer & Feld LLP

590 Madison Avenue

New York, New York 10022-2524

Attn: Peter Miller, Esq.

Facsimile: (212) 872-1002

E-mail: pamiller@akingump.com,





or such other address as Borrower or Lender shall hereafter specify by not less than ten (10) days
prior written notice as provided herein; provided, however, that notwithstanding any provision of
this Section to the contrary, such notice of change of address shall be deemed given only upon
actual receipt thereof. Rejection or other refusal to accept or the inability to deliver because
of changed addresses of which no notice was given as herein required shall be deemed to be receipt
of the notice, demand, statement, request or consent.




     Section 7.02. Exhibits Incorporated. The information set forth on the cover hereof,
and the Exhibits annexed hereto, are hereby incorporated herein as a part of this Agreement with
the same effect as if set forth in the body hereof.



     Section 7.03. Severable Provisions. If any term, covenant or condition of the Loan
Documents including, without limitation, the Note or this Agreement, is held to be invalid, illegal
or unenforceable in any respect, such Loan Document shall be construed without such provision.



     Section 7.04. Cumulative Rights. The rights, powers and remedies of Lender under this



51









 







Agreement 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 herein to the exclusion of any other provision. Lender shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled, subject to the terms of
this Agreement, to every right and remedy now or hereafter afforded by law.



     Section 7.05. Duplicate Originals. This Agreement may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to constitute but one and the
same instrument.



     Section 7.06. Waiver of Notice. Borrower shall not be entitled to any notices of any
nature whatsoever from Lender except with respect to matters for which this Agreement specifically
and expressly provides for the giving of notice by Lender to Borrower and except with respect to
matters for which Borrower is not, pursuant to applicable legal requirements permitted to waive the
giving of notice.



     Section 7.07. Joint and Several Liability. If Borrower consists of more than one
Person, the obligations and liabilities of each such Person hereunder shall be joint and several.



     Section 7.08. No Oral Change. The terms of this Agreement, together with the terms of
the Note and the other Loan Documents constitute the entire understanding and agreement of the
parties hereto and supersede all prior agreements, understandings and negotiations between Borrower
and Lender with respect to the Loan. This Agreement, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the
part of Borrower or Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge or termination is
sought.



     Section 7.09. WAIVER OF COUNTERCLAIMS, ETC. BORROWER HEREBY WAIVES THE RIGHT TO
ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT
AGAINST IT BY LENDER OR ITS AGENTS, AND WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY
EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT
HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE DEBT.



     Section 7.10. Headings; Construction of Documents, etc. The headings and captions of
various paragraphs of this Agreement are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the provisions hereof.
Borrower acknowledges that it was represented by competent counsel in connection with the
negotiation and drafting of this Agreement and the other Loan Documents and that neither this
Agreement nor the other Loan Documents shall be subject to the principle of construing the meaning
against the Person who drafted same.



     Section 7.11. Sole Discretion of Lender. Whenever Lender exercises any right given to



52









 







it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and
conclusive, except as may be otherwise specifically provided herein.



     Section 7.12. APPLICABLE LAW. THIS AGREEMENT WAS NEGOTIATED IN NEW YORK, AND MADE BY
BORROWER AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE WERE
DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE
AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.



     Section 7.13. Actions and Proceedings. Lender has the right to appear in and defend
any action or proceeding brought with respect to the Collateral in its own name or, if required by
Legal Requirements or, if in Lender’s reasonable judgment, it is necessary, in the name and on
behalf of Borrower, which Lender believes will adversely affect the Collateral or this Agreement
and to bring any action or proceedings, in its name or in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in the Note, this
Agreement and the other Loan Documents.



     Section 7.14. Usury Laws. This Agreement and the Note are subject to the express
condition, and it is the expressed intent of the parties, that at no time shall Borrower be
obligated or required to pay interest on the principal balance due under the Note at a rate which
could subject the holder of the Note to either civil or criminal liability as a result of being in
excess of the maximum interest rate which Borrower is permitted by law to contract or agree to pay.
If by the terms of this Agreement or the Note, Borrower is at any time required or obligated to
pay interest on the principal balance due under the Note at a rate in excess of such maximum rate,
such rate of interest 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 Note. No application to the principal balance of the Note pursuant to
this Section shall give rise to any requirement to pay any prepayment fee or charge of any kind due
hereunder, if any.



     Section 7.15. Remedies of Borrower. In the event that a claim or adjudication is made
that Lender has acted unreasonably or unreasonably delayed acting in any case where by law or under
the Note, this Agreement or the Loan Documents, it has an obligation to act reasonably or promptly,
Lender shall not be liable for any monetary damages, and Borrower’s remedies shall be limited to
injunctive relief or declaratory judgment.



     Section 7.16. Offsets, Counterclaims and Defenses. Any assignee of this Agreement and



53









 







the Note shall take the same free and clear of all offsets, counterclaims or defenses which
are unrelated to the Note or this Agreement which Borrower may otherwise have against any assignor
of this Agreement and the Note and no such unrelated counterclaim or defense shall be interposed or
asserted by Borrower in any action or proceeding brought by any such assignee upon this Agreement
or the Note and any such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.



     Section 7.17. Restoration of Rights. In case Lender shall have proceeded to enforce
any right under this Agreement and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, in every such case, Borrower and Lender
shall be restored to their former positions and rights hereunder with respect to the Collateral
subject to the lien hereof.



     Section 7.18. Waiver of Statute of Limitations. The pleadings of any statute of
limitations as a defense to any and all obligations secured by this Agreement are hereby waived to
the full extent permitted by Legal Requirements.



     Section 7.19. Advances. This Agreement shall cover any and all advances made pursuant
to the Loan Documents, rearrangements and renewals of the Loan and all extensions in the time of
payment thereof, even though such advances, extensions or renewals be evidenced by new promissory
notes or other instruments hereafter executed and irrespective of whether filed or recorded.
Likewise, the execution of this Agreement shall not impair or affect any other security which may
be given to secure the payment of the Loan, and all such additional security shall be considered as
cumulative. The taking of additional security, execution of partial releases of the security, or
any extension of time of payment of the Loan shall not diminish the force, effect or lien of this
Agreement and shall not affect or impair the liability of Borrower and shall not affect or impair
the liability of any maker, surety, or endorser for the payment of the Loan.



     Section 7.20. Application of Default Rate Not a Waiver. Application of the Default
Rate shall not be deemed to constitute a waiver of any Default or Event of Default or any rights or
remedies of Lender under this Agreement, any other Loan Document or applicable Legal Requirements,
or a consent to any extension of time for the payment or performance of any obligation with respect
to which the Default Rate may be invoked.



     Section 7.21. Intervening Lien. To the fullest extent permitted by law, any agreement
hereafter made pursuant to this Agreement shall be superior to the rights of the holder of any
intervening lien.



     Section 7.22. No Joint Venture or Partnership. Borrower and Lender intend that the
relationship created hereunder be solely that of pledgor and pledgee or borrower and lender, as the
case may be. Nothing herein is intended to create a joint venture or partnership relationship
between Borrower and Lender nor to grant Lender any interest in the Collateral other than that of
pledgee or lender.



     Section 7.23. Time of the Essence. Time shall be of the essence in the performance of
all obligations of Borrower hereunder.




54










 





     Section 7.24. Borrower’s Obligations Absolute. Borrower acknowledges that Lender
and/or certain Affiliates of Lender are engaged in the business of financing, owning, operating,
leasing, managing, and brokering real estate and in other business ventures which may be viewed as
adverse to or competitive with the business, prospect, profits, operations or condition (financial
or otherwise) of Borrower. Except as set forth to the contrary in the Loan Documents, all sums
payable by Borrower hereunder shall be paid without notice or demand, counterclaim, set-off,
deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the
obligations and liabilities of Borrower hereunder shall in no way be released, discharged, or
otherwise affected (except as expressly provided herein) by reason of: (a) any bankruptcy
proceeding relating to Owner, Intermediate Mez Borrower, Senior Mez Borrower, Borrower, Operating Tenant, any General Partner,
or any guarantor or indemnitor, or any action taken with respect to this Agreement or any other
Loan Document by any trustee or receiver of Owner, Intermediate Mez Borrower, Senior Mez Borrower, Operating Tenant, Borrower
or any such General Partner, guarantor or indemnitor, or by any court, in any such proceeding; (b)
any claim which Borrower has or might have against Lender; (c) any default or failure on the part
of Lender to perform or comply with any of the terms hereof or of any other agreement with
Borrower; or (d) any other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Borrower shall have notice or knowledge of any of the foregoing.



     Section 7.25. Publicity. All promotional news releases, publicity or advertising by
Borrower or its Affiliates through any media intended to reach the general public shall not refer
to the Loan Documents or the financing evidenced by the Loan Documents, or to Lender or to any of
its Affiliates without the prior written approval of Lender or such Affiliate, as applicable, in
each instance, such approval not to be unreasonably withheld or delayed. Notwithstanding anything
herein to the contrary, Borrower shall be authorized to provide information relating to the Loan
Documents or the financing evidenced by the Loan Documents, or to Lender or to any of its
Affiliates, to rating agencies, underwriters, potential securities investors, auditors, regulatory
authorities and to any Persons which may be entitled to such information by operation of law and
without limiting the foregoing to issue press releases and make Form 8-K and other securities
filings containing the above-described information as it or its counsel reasonably deems required
by law. Lender shall be authorized to provide information relating to the Collateral, the Loan and
matters relating thereto to rating agencies, underwriters, potential
securities investors, auditors, regulatory authorities and to any Persons which may be
entitled to such information by operation of law and may use basic transaction information
(including, without limitation, the name of Borrower, the name and address of the Property and the
Loan Amount) in press releases or other marketing materials.



     Section 7.26. Intentionally Omitted.



     Section 7.27. Sale of Loan, Participations, Securitization. (a) Nothing contained
in this Agreement shall be construed as preventing Lender, at any time after the date hereof, from
selling, pledging, assigning or transferring the Note and in connection with any such sale, pledge,
assignment or transfer from assigning this Agreement and transferring possession of the Collateral,
if any, in Lender’s possession, to the purchaser of the Note. Upon any sale, pledge, assignment or
transfer of the Note and upon assignment of this Agreement and a transfer in connection therewith
of possession of the Collateral, if any, in Lender’s possession to the purchaser of the Note,
Lender shall be released and discharged from any liability or



55









 







responsibility with respect to the
Loan Documents and references to “Lender” in this Agreement shall, with respect to any
matters thereafter occurring, be deemed to be references to the purchaser of the Note.



     (b) Borrower acknowledges that Lender may on or after the Closing Date sell and assign
participation interests in and to the Loan, or pledge, hypothecate or encumber, or sell and assign
all or any portion of the Loan, to or with such domestic or foreign banks, insurance companies,
pension funds, trusts or other institutional lenders or other Persons, parties or investors
(including, without limitation, grantor trusts, owner trusts, special purpose corporations, real
estate investment trusts or other similar or comparable investment vehicles) as may be selected by
Lender in its sole and absolute discretion and on terms and conditions satisfactory to Lender in
its sole and absolute discretion. Borrower and all Affiliates of Borrower shall cooperate in all
respects with Lender in connection with the sale of participation interests in, or the pledge,
hypothecation or encumbrance or sale of all or any portion of, the Loan, and shall, in connection
therewith, execute and deliver such estoppels, certificates, instruments and documents as may be
reasonably requested by Lender. Borrower grants to Lender the right to distribute financial and
other information concerning Borrower, Owner, the Premises, the Collateral, and all other pertinent
information with respect to the Loan to any Person who has purchased a participation interest in
the Loan, or who has purchased the Loan, or who has made a loan to Lender secured by the Loan or
who has expressed an interest in purchasing a participation interest in the Loan, or expressed an
interest in purchasing the Loan or the making of a loan to Lender secured by the Loan. If
requested by Lender, Borrower shall execute and deliver, and shall cause each Affiliate of Borrower
to execute and deliver, at no cost or expense to Borrower, such documents and instruments as may be
necessary to split the Loan into two or more loans evidenced by separate sets of notes and secured
by separate sets of other related Loan Documents to the full extent required by Lender to
facilitate the sale of participation interests in the Loan or the sale of the Loan or the making of
a loan to Lender secured by the Loan, it being agreed that (a) the Loan Documents securing the Loan
as so split will have such priority of lien as may be specified by Lender and (b) the retained
interest of Lender in the Loan as so split shall be allocated to or among one or more of such
separate loans in a manner specified by Lender in its sole and absolute discretion, (c) the
aggregate principal amount of such separate loans shall equal the outstanding principal balance of
the Loan immediately prior to the creation of such
separate loans, (d) the weighted average interest rate of all such separate notes shall on the
date created equal the interest rate which was applicable to the Loan immediately prior to the
creation of such separate notes (it being acknowledged by Borrower that if an Event of Default
occurs during the term of the Loan, whether or not it is subsequently cured, the weighted average
interest rates of the separate notes may increase (i.e. the Loan may have “rate creep”)), (e) the
debt service payments on all such separate notes shall on the date created equal the debt service
payment which was and would be due under the Loan immediately prior to the creation of such
separate notes (it being acknowledged that if an Event of Default occurs during the term of the
Loan, whether or not it is subsequently cured, the weighted average interest rates of the separate
notes may increase (i.e. the Loan may have “rate creep”)) and (f) the other terms and provisions of
each of the separate notes shall be identical in substance and substantially similar in form to the
Loan Documents. From and after the effective date of any assignment of all or any portion of the
Loan to any Person (an “Assignee”) (a) such Assignee shall be a party hereto and to each of
the other Loan Documents to the extent of the applicable percentage or percentages assigned to such
Assignee and, except as otherwise specified herein, shall succeed to the rights and



56









 







obligations of
Lender hereunder in respect of such applicable percentage or percentages and (b) Lender shall
relinquish its rights and be released from its obligations hereunder and under the Loan Documents
to the extent of such applicable percentage or percentages. The liabilities of Lender and each of
the other Assignees shall be separate and not joint and several. Neither Lender nor any Assignee
shall be responsible for the obligations of any other Assignee. Borrower acknowledges that the
information provided by Borrower to Lender may be incorporated into the offering documents for a
Securitization and to the fullest extent permitted, Borrower irrevocably waives all rights, if any,
to prohibit such disclosures including, without limitation, any right of privacy. Lender and each
Rating Agency shall be entitled to rely on the information supplied by, or on behalf of, Borrower
and Borrower indemnifies Lender as to any liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses, (including, without limitation, reasonable attorney’s fees
and expenses, whether incurred within or outside the judicial process) that arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact contained in such
information or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated in such information or necessary in order to make the
statements in such information, or in light of the circumstances under which they were made, not
misleading.



     (c) Lender, at its option, may elect to effect a Securitization by means of the issuance of
certificates of interest therein or notes secured thereby (the “Securities”) rated by one
or more Rating Agencies. In such event and upon request by Lender to seek to effect such a
Securitization, Borrower shall promptly thereafter cooperate in all reasonable respects with Lender
in the Securitization including, without limitation, providing such information as may be requested
in connection with the preparation of a private placement memorandum or registration statement
required to privately place or publicly distribute the Securities in a manner which does not
conflict with federal or state securities laws.



     Section 7.28. Expenses. Borrower shall reimburse Lender upon receipt of notice for
all reasonable costs and expenses (including reasonable attorneys’ fees and disbursements) incurred
by Lender in connection with (i) the preparation, negotiation, execution and delivery of the Loan
Documents and the consummation of the transactions contemplated thereby; (ii) Borrower’s, its
Affiliates’ and Lender’s ongoing performance under and compliance with the Loan Documents,
including confirming compliance with environmental and insurance requirements; (iii) the
negotiation, preparation, execution, delivery and administration of any consents, amendments,
waivers or other modifications of or under any Loan Document and any other documents or matters
requested by Lender; (iv) filing and recording of any Loan Documents; (v) surveys, inspections and
appraisals; (vi) enforcing or preserving any rights, in response to third party claims or the
prosecuting or defending of any action or proceeding or other litigation, in each case against,
under or affecting Borrower, Intermediate Mez Borrower, Senior Mez Borrower, Owner, the Loan Documents, the Collateral, the
Premises, or any other security given for the Loan; and (vii) enforcing any obligations of or
collecting any payments due from Borrower, Intermediate Mez Borrower, Senior Mez Borrower, or Owner under any Loan Document or
with respect to the Collateral, the Premises or in connection with any refinancing or restructuring
of the Loan in the nature of a “work-out”, or any insolvency or bankruptcy proceedings. Any costs
and expenses due and payable to Lender hereunder which are not paid by Borrower within ten (10)
days after demand may be paid from any amounts in the Lockbox Account. The obligations and
liabilities of Borrower under this Section shall survive the Maturity Date and the exercise by



57









 




Lender of any of its rights or remedies under the Loan Documents.




     Section 7.29. Mortgage Loan Defaults.



     (a) Without limiting the generality of the other provisions of this Agreement, and without
waiving or releasing Borrower from any of its obligations hereunder, if there shall occur any Event
of Default under the Mortgage Loan Documents (without regard to any other defenses or offset rights
Owner may have against Mortgage Lender) or under the Intermediate Mez Documents (without regard to
any defenses or offset rights Intermediate Mez Borrower may have against Intermediate Mez Lender or
under the Senior Mez Documents (without regard to any defenses or offset rights Senior Mez Borrower
may have against Senior Mez Lender, Borrower hereby expressly agrees that Lender shall have the
immediate right, without notice to or demand on Borrower or Owner or Intermediate Mez Borrower or
Senior Mez Borrower, but shall be under no obligation: (i) to pay all or any part of the Mortgage
Loan, Intermediate Mez Loan and/or Senior Mez Loan, and any other sums, that are then due and
payable and to perform any act or take any action on behalf of Owner, Intermediate Mez Borrower
and/or Senior Mez Borrower, as applicable, as may be appropriate, to cause all of the terms,
covenants and conditions of the Mortgage Loan Documents, Intermediate Mez Loan Documents and/or
Senior Mez Loan Documents on the part of Owner, Intermediate Mez Borrower and/or Senior Mez
Borrower, as applicable, to be performed or observed thereunder to be promptly performed or
observed; and (ii) to pay any other amounts and take any other action as Lender, in its sole and
absolute discretion, shall deem advisable to protect or preserve the rights and interests of Lender
in the Loan and/or the Collateral. Lender shall have no obligation to complete any cure or
attempted cure undertaken or commenced by Lender. All sums so paid and the third party costs and
expenses actually incurred by Lender in exercising rights under this Section (including, without
limitation, reasonable attorneys’ and other professional fees), with interest at the Default Rate,
for the period from the date of demand by Lender to Borrower for such payments to the date of
payment to Lender, shall constitute a portion of the Debt, shall be secured by this Agreement and
shall be due and payable to Lender within two (2) Business Days following demand therefor. In the
event that Lender makes any payment in respect of the Mortgage Loan, Intermediate Mez Loan and/or
Senior Mez Loan, Lender shall be subrogated to all of the rights of Mortgage Lender, Intermediate
Mez Borrower or Senior Mez Borrower under the Mortgage Loan Documents against the Property and
Owner, the Intermediate Mez Borrower and/or Senior Mez Borrower, as applicable, in addition to all
other rights Lender may have under the Loan Documents or applicable law.



     (b) Subject to the rights of tenants under Leases, Borrower hereby grants, and shall cause
Owner to grant, Lender and any Person designated by Lender the right to enter upon the Property at
any time for the purpose of carrying out the rights granted to Lender under this Section 7.29.
Borrower shall not, and shall not cause or permit Owner or any other Person to impede, interfere
with, hinder or delay, any effort or action on the part of Lender to cure any Event of Default
under the Mortgage Loan. the Intermediate Mez Loan and/or the Senior Mez Loan as permitted by this
Section 7.29, or to otherwise protect or preserve Lender’s interests in the Loan and the
Collateral, including the Property in accordance with the provisions of this Agreement and the
other Loan Documents.



     (c) Borrower hereby indemnifies Lender from and against all liabilities, obligations,




58









 




losses, damages, penalties, assessments, actions, or causes of action, judgments, suits,
claims, demands, costs, expenses (including, without limitation, reasonable attorneys’ and other
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 the foregoing actions described in Section 7.29(a) or (b) except to the extent they are
caused by the gross negligence or willful misconduct of Lender. Lender shall have no obligation to
Borrower, Owner or any other Person to make any such payment or performance.




     (d) If Lender shall receive a copy of any notice of default under the Mortgage Loan Documents
sent by Mortgage Lender to Owner or under the Intermediate Mez Loan Documents sent by Intermediate
Mez Lender to Intermediate Mez Borrower or under the Senior Mez Loan Documents sent by Senior Mez
Lender to Senior Mez Borrower, such notice shall constitute full protection to Lender for any
action taken or omitted to be taken by Lender, in good faith, in reliance thereon. As a material
inducement to Lender’s making the Loan, Borrower hereby absolutely and unconditionally releases and
waives all claims against Lender arising out of Lender’s exercise of its rights and remedies
provided in this Section other than claims arising out of the fraud, illegal acts, gross negligence
or willful misconduct of Lender.



     Section 7.30. Discussions With Mortgage Lender; Etc. In connection with the exercise
of its rights set forth in the Loan Documents, Lender shall have the right at any time to discuss
the Premises, the Mortgage Loan, the Loan, the Intermediate Mez Loan, the Senior Mez Loan or any
other matter directly with Mortgage Lender, Intermediate Mez Lender, Senior Mez Lender or Mortgage
Lender’s consultants, agents or representatives without notice to or permission from Borrower, nor
shall Lender have any obligation to disclose such discussions or the contents thereof with
Borrower.



     Section 7.31. Independent Approval Rights. If any action, proposed action or other
decision is consented to or approved by Mortgage Lender, Intermediate Mez Lender or Senior Mez
Lender, such consent or approval shall not be binding or controlling on Lender if Lender has such
consent and/or approval rights under this Agreement. Borrower hereby acknowledges and agrees that
(a) the risks of Mortgage Lender in making the Mortgage Loan, the risks of Intermediate Mez Lender
in making the Intermediate Mez Loan and the risks of Senior Mez Lender in making the Senior Mez
Loan are different from the risks of Lender in making the Loan, (b) in determining whether to
grant, deny, withhold or condition any requested consent or approval Mortgage Lender, Intermediate
Mez Lender, Senior Mez Lender and Lender may reasonably reach different conclusions, and (c) Lender
has an absolute independent right to grant, deny, withhold or condition any requested consent or
approval based on its own point of view in accordance with the terms hereof. Further, the denial
by Lender of a requested consent or approval in accordance with the Loan Documents 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 Mortgage Loan, Intermediate Mez Loan and/or the
Senior Mez Loan, and Borrower hereby waives any claim of liability against Lender arising from any
such denial.



     Section 7.32. Reinstatement. This Agreement and each other Loan Document shall
continue to be effective or be reinstated, as the case may be, if at any time payment and
performance of the Debt or any part thereof, is, pursuant to applicable law, rescinded or reduced
in amount, or must otherwise be restored or returned by Borrower, whether as a “voidable















 







preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had
not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Debt shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.



ARTICLE VIII. EXCULPATION




     Section 8.01. Exculpation. Notwithstanding anything in this Agreement or in any
other Loan Document to the contrary, except as otherwise set forth in this Section 8.01 to the
contrary, Lender shall not enforce the liability and obligation of Borrower or any Person holding a
direct or indirect interest in Borrower (a) if Borrower or any of its direct or indirect owners is
a partnership, its or their direct or indirect constituent partners or any of their respective
partners, (b) if Borrower or any of its direct or indirect owners is a trust, its or their
beneficiaries or any of their respective Partners (as hereinafter defined), (c) if Borrower or any
of its direct or indirect owners is a corporation, any of its or their direct or indirect
shareholders, directors, principals, officers or employees, or (d) if Borrower or any of its direct
or indirect owners is a limited liability company, any of its or their direct or indirect members
(the Persons described in the foregoing clauses (a) — (d), as the case may be, are hereinafter
referred to as the “Partners”) to perform and observe the obligations contained in this
Agreement or any of the other Loan Documents by any action or proceeding, including, without
limitation, any action or proceeding wherein a money judgment shall be sought against Borrower or
the Partners, except that Lender may bring a UCC sale, action for specific performance, or other
appropriate action or proceeding (including, without limitation, an action to obtain a deficiency
judgment) against Borrower solely for the purpose of enabling Lender to realize upon (i) Borrower’s
interest in the Collateral, (ii) subject to the rights of
Mortgage Lender, Intermediate Mez Lender and Senior Mez Lender,
the Rent to the extent received by Borrower during the existence of an Event of Default (all Rent
covered by this clause (ii) being hereinafter referred to as the “Recourse Distributions”)
and not applied towards Debt Service or the operation and maintenance of the Property and (iii) any
other collateral then subject to the Loan Documents (the collateral described in the foregoing
clauses (i) — (iii) is hereinafter referred to as the “Default Collateral”);
provided, however, that any judgment in any such action or proceeding shall be
enforceable against Borrower and the Partners only to the extent of any such Default Collateral.
The provisions of this Section shall not, however, (a) impair the validity of the Debt evidenced by
the Note or in any way affect or impair the lien of this Agreement or any of the other Loan
Documents or the right of Lender to enforce this Agreement during the existence of an Event of
Default the cure of which has not been accepted by Lender; (b) impair the right of Lender to name
Borrower as a party defendant in any action or suit for judicial foreclosure and sale under this
Agreement; (c) affect the validity or enforceability of the Note, this Agreement, or any of the
other Loan Documents, or impair the right of Lender to seek a personal judgment against the
Guarantor to the extent and for the
obligations guaranteed in the Guaranty; (d) impair the right of Lender to obtain the
appointment of a receiver; (e) impair the right of Lender to bring suit for a monetary judgment
against Borrower with respect to fraud or material misrepresentation by Borrower, or any Affiliate
of Borrower in connection with this Agreement, the Note or the other Loan Documents, and the
foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor
to the extent of Guarantor’s liability under the Guaranty delivered by Guarantor with respect to
same; (f) impair the right of Lender to bring suit for a monetary judgment to obtain the Recourse
Distributions received by Borrower or any of its Affiliates including, without



60









 







limitation, the
right to bring suit for a monetary judgement to proceed against any Guarantor, to the extent of
Guarantor’s liability under any guaranty delivered by Guarantor, and the foregoing provisions shall
not modify, diminish or discharge the liability of Borrower or Guarantor with respect to same; (g)
impair the right of Lender to bring suit for a monetary judgment against Borrower with respect to
Borrower’s or Owner’s misappropriation of tenant security deposits or Rent collected more than one
(1) month in advance, and the foregoing provisions shall not modify, diminish or discharge the
liability of Borrower or Guarantor to the extent of Guarantor’s liability under any guaranty
delivered by Guarantor with respect to same; (h) impair the right of Lender to obtain insurance
proceeds due to Lender pursuant to this Agreement; (i) impair the right of Lender to enforce the
provisions of Sections 2.02(g) and 4.01, inclusive of this Agreement, even after repayment in full
by Borrower of the Debt or to bring suit for a monetary judgment against Borrower with respect to
any obligation set forth in said Sections; (j) prevent or in any way hinder Lender from exercising,
or constitute a defense, or counterclaim, or other basis for relief in respect of the exercise of,
any other remedy against any or all of the collateral securing the Note as provided in the Loan
Documents; (k) impair the right of Lender to bring suit for a monetary judgment against Borrower
with respect to any misapplication or conversion of Loss Proceeds, and the foregoing provisions
shall not modify, diminish or discharge the liability of Borrower or Guarantor to the extent of
Guarantor’s liability under any guaranty delivered by Guarantor with respect to same; (l) impair
the right of Lender to sue for, seek or demand a deficiency judgment against Borrower solely for
the purpose of foreclosing the Premises or any part thereof, or realizing upon the Default
Collateral; provided, however, that any such deficiency judgment referred to in
this clause (l) shall be enforceable against Borrower and Guarantor only to the extent of any of
the Default Collateral; (m) impair the ability of Lender to bring suit for monetary judgment
against Borrower with respect to arson or physical waste to or of the Collateral or damage to the
collateral resulting from the gross negligence or willful misconduct of Borrower or, to the extent
that there is sufficient cash flow, failure to pay any Imposition, or in lieu thereof, deposit a
sum equal to any Impositions into the Basic Carrying Costs Sub-Account ; (n) impair the right of
Lender to bring a suit for a monetary judgment against Borrower in the event of the exercise of any
right or remedy under any federal, state or local forfeiture laws resulting in the loss of the lien
of this Agreement, or the priority thereof, against the Collateral; (o) be deemed a waiver of any
right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision 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; (p) impair the right of Lender to bring suit for monetary
judgment against Borrower with respect to any losses resulting from any claims, actions or
proceedings initiated by Borrower (or any Affiliate of Borrower) alleging that the relationship of
Borrower and Lender is that of joint venturers, partners, tenants in common, joint tenants or any
relationship other than that of debtor and creditor; (q) impair the right of Lender to bring suit
for a monetary judgment against
Borrower in the event of a Transfer in violation of the provisions of this Agreement; (r)
impair the right of Lender to bring suit for a monetary judgment in the event that Borrower moves
its principal place of business or its books and records relating to the Collateral which are
governed by the UCC, or changes its name, its jurisdiction of organization, type of organization or
other legal structure or, if it has one, organizational identification number, without first giving
Lender thirty (30) days prior written notice; or (s) impair the right of Lender to bring suit for a
monetary judgment in the event that Borrower changes its name or otherwise does anything which
would make the information set forth in any UCC Financing Statements relating to the Collateral



61









 







materially misleading without giving Lender thirty (30) days prior written notice thereof. The
provisions of this Section shall be inapplicable to Borrower if (a) any proceeding, action,
petition or filing under the Bankruptcy Code, or any similar state or federal law now or hereafter
in effect relating to bankruptcy, reorganization or insolvency, or the arrangement or adjustment of
debts, shall be (A) filed by Borrower, Owner or Guarantor or (B) filed against Borrower, Owner or
Guarantor and consented to or acquiesced in by Borrower or Owner or any Affiliate of Borrower,
Owner or Guarantor, or if Borrower, Owner or Guarantor or any Affiliate of Borrower, Owner or
Guarantor shall institute any proceeding for Borrower’s or Owner’s dissolution or liquidation, or
Borrower, Owner or Guarantor shall make an assignment for the benefit of creditors or (b) Borrower
or any Affiliate contests in bad faith or in any material way interferes with in bad faith,
directly or indirectly (collectively, a “Contest”) any UCC sale or other material remedy
exercised by Lender upon the occurrence of an Event of Default under the Loan Documents whether by
making any motion, bringing any counterclaim (other than a compulsory counterclaim), claiming any
defense, seeking any injunction or other restraint, commencing any action, or otherwise in bad
faith (provided that if any such Person obtains a non-appealable order successfully asserting a
Contest, Borrower shall have no liability under this clause (b)) or (c) Borrower (i) fails to cause
Owner to deliver notice of default under any Ground Lease to Lender or any other Person designated
in writing by Lender or (ii) fails to prevent Owner from amending or modifying any Ground Lease
without the prior written consent of Lender, in which event Lender shall have recourse against all
of the assets of Borrower including, without limitation, any right, title and interest of Borrower
in and to the Collateral.



* * * * *




62









 





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



	 	 	 	 	 	 	 
	Borrower’s Organizational Identification	 	ASHFORD SAPPHIRE JUNIOR
HOLDER I
	Number: 4305184	 	LLC, a Delaware limited liability company,
	 	 	Borrower
	 
	 	 	 	 	 	 
	 

	 	By:

	/s/ David A. Brooks
 


	 	 
	 

	 	 
	Name:	David A. Brooks	 	 
	 

	 	 
	Title:	Vice President	 	 
	 
	 	 	 	 	 	 
	Borrower’s Organizational Identification	 	ASHFORD SAPPHIRE JUNIOR
HOLDER II
	Number: 4305185	 	LLC, a Delaware limited liability company,
	 	 	Borrower
	 
	 	 	 	 	 	 
	 

	 	By: 

	/s/ David A. Brooks
 


	 	 
	 

	 	
	Name: 	David A. Brooks	 	 
	 

	 	
	Title:	Vice President	 	 







 









 








EXHIBIT A




Description of the Premises





A-1









 








EXHIBIT B




Unpaid Principal Balance of Mortgage Loan: $315,000,000




Unpaid Principal Balance of Senior Mez Loan: $80,122,000




Unpaid Principal Balance of Intermediate Mez Loan: $80,000,000




B-1















 





EXHIBIT C




CERTAIN DEFINED TERMS




     “Accounts” shall have the meaning set forth in Section 2.27.



     “ACH” shall have the meaning set forth in Section 2.27.



     “Affiliate” of any specified Person shall mean any other Person directly or indirectly
Controlling or Controlled by or under direct or indirect common Control with such specified Person.



     “Agreement” shall have the meaning set forth in the recitals hereto.



     “Bankruptcy Code” shall mean 11 U.S.C. §101 et seq., as amended from time to time.



     “Borrower” shall mean Borrower named herein and its successors and assigns.



     “Business Day” shall mean any day other than (a) a Saturday or Sunday, or (b) a day on
which banking and savings and loan institutions in the State of New York or the State of North
Carolina are authorized or obligated by law or executive order to be closed, or at any time during
which the Loan is an asset of a Securitization, the cities, states and/or commonwealths used in the
comparable definition of “Business Day” in the Securitization documents.



     “Closing Date” shall mean the date of the Note.



     “Code” shall mean the Internal Revenue Code of 1986, as amended 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.



     “Collateral” shall mean (a) the Equity Interests, (b) all additional Equity Interests
acquired by Borrower, (c) all rights of Borrower, if any, as creditor of the Pledged Entities, (d)
any and all Remaining Rents from time to time available in the Lockbox Account and Borrower’s
rights to receive from Owner all Remaining Rents required, by the terms of the Mortgage as now in
effect or amended with the consent of Lender, to be deposited by the Mortgage Lender into the
Lockbox Account; (e) the Accounts and all cash, checks, drafts, securities entitlements,
securities, securities accounts, funds or other accounts maintained or deposited with Lender and
other investment property, certificates, instruments and other property, including, without
limitation, all deposits and/or wire transfers from time to time deposited or held in, credited to
or made to Accounts; (f) all interest, dividends, cash, instruments, securities, securities
entitlements and other investment property, and other property from time to time received,
receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing or
purchased with funds from the Accounts; (g) all of Borrower’s interests in the Rate Cap Agreement;
(h) all rights of Borrower in, to and under Owner’s, Intermediate Mez Borrower’s, and Senior Mez
Borrower’s certificate of formation, limited liability company agreement and all other
organizational documents of Owner, Intermediate Mez Borrower and Senior Mez Borrower (collectively,
the “Owner Organizational Documents”), or any other agreement or instrument relating to the
Pledged Interests, including, without limitation, (i) all



C-1









 







rights of Borrower to receive moneys due and to become due under or pursuant to Owner
Organizational Documents, (ii) all rights of Borrower to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to Owner Organizational Documents, (iii) all claims of
Borrower for damages arising out of or for breach of or default under Owner Organizational
Documents, and (iv) any right of Borrower to perform thereunder and to compel performance and
otherwise exercise all rights and remedies thereunder; and (i) all Proceeds. The inclusion of
Proceeds in the Agreement does not authorize Borrower to sell, dispose of or otherwise use the
Collateral in any manner not specifically authorized hereby.



     “Condemnation Proceeds” shall mean all of the proceeds in respect of any Taking or
purchase in lieu thereof.



     “Contractual Obligation” shall mean, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or undertaking to which such Person is a
party or by which it or any of the property owned by it is bound.



     “Control” means, when used with respect to any specific Person, the
possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person whether through ownership of voting securities,
beneficial interests, by contract or otherwise. The definition is to be construed to apply
equally to variations of the word “Control” including “Controlled,” “Controlling” or
“Controlled by.”



     “Corporations” shall mean the corporations identified on Schedule 1 hereto.



     “Counterparty” shall have the meaning set forth in Section 2.27.



     “Debt” shall have the meaning set forth in the recitals hereto.



     “Default” shall mean any Event of Default or event which would constitute an Event of
Default if all requirements in connection therewith for the giving of notice, the lapse of time,
and the happening of any further condition, event or act, had been satisfied.



     “Default Rate” shall mean the lesser of (a) the highest rate allowable at law and (b)
five percent (5%) above the interest rate set forth in the Note.



     “Default Rate Interest” shall mean, to the extent the Default Rate becomes applicable,
interest in excess of the interest which would have accrued on (a) the principal amount of the Loan
which is outstanding from time to time and (b) any accrued but unpaid interest, if the Default Rate
was not applicable.



     “Distributions” shall mean all dividends, distributions, liquidation proceeds, cash,
profits, instruments and other property and economic benefits to which Borrower is entitled with
respect to any one or more Equity Interests, whether or not received by or otherwise distributed to
Borrower, in each case whether cash or non-cash and whether such dividends, distributions,
liquidation proceeds, cash, profits, instruments and other property and economic benefits are paid
or distributed by the Pledged Entities in respect of operating profits, sales, exchanges,
refinancings, condemnations or insured losses of the relevant Pledged Entity’s assets, the



C-2









 







liquidation of such Pledge Entity’s assets and affairs, management fees, guaranteed payments,
repayment of loans, or reimbursement of expenses or otherwise in respect of or in exchange for any
or all of the Equity Interests.



     “DTC” shall have the meaning set forth in Section 2.01.



     “Eligible Account” shall mean a segregated account which is either (a) an account or
accounts maintained with a federal or state chartered depository institution or trust company the
long term unsecured debt obligations of which are rated by each of the Rating Agencies (or, if not
rated by Fitch, Inc. (“Fitch”), otherwise acceptable to Fitch, as confirmed in writing that
such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any certificates issued in connection with a Securitization) in
its second highest rating category at all times (or, in the case of the Basic Carrying Costs Escrow
Account, the long term unsecured debt obligations of which are rated at least “AA” (or its
equivalent)) by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to
Fitch, as confirmed in writing that such account would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings assigned to any certificates
issued in connection with a Securitization) or, if the funds in such account are to be held in such
account for less than thirty (30) days, the short term obligations of which are rated by each of
the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in
writing that such account would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any certificates issued in connection with a
Securitization) in its second highest rating category at all times or (b) a segregated trust
account or accounts maintained with a federal or state chartered depository institution or trust
company acting in its fiduciary capacity which, in the case of a state chartered depository
institution is subject to regulations substantially similar to 12 C.F.R. § 9.10(b), having in
either case a combined capital and surplus of at least $100,000,000 and subject to supervision or
examination by federal and state authority, or otherwise acceptable (as evidenced by a written
confirmation from each Rating Agency that such account would not, in and of itself, cause a
downgrade, qualification or withdrawal of the then current ratings assigned to any certificates
issued in connection with a Securitization) to each Rating Agency, which may be an account
maintained by Lender or its agents. Eligible Accounts may bear interest. The title of each
Eligible Account shall indicate that the funds held therein are held in trust for the uses and
purposes set forth herein.



     “Equity Interests” shall mean the LLC Interests, the Partnership Interests and the
Pledged Interests.



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder. Section references to ERISA are to
ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent
provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.



     “ERISA Affiliate” shall mean any corporation or trade or business that is a member of
any group of organizations (a) described in Section 414(b) or (c) of the Code of which Borrower is
a member and (b) solely for purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and



C-3









 







Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower
is a member.



     “Event of Default” shall have the meaning set forth in Section 3.01.



     “Fiscal Year” shall mean the twelve (12) month period commencing on January 1 and
ending on December 31 during each year of the term of this Agreement, or such other fiscal year of
Borrower as Borrower may select from time to time with the prior written consent of Lender.



     “General Partner” shall mean, if Borrower is a partnership, each general partner of
Borrower and, if Borrower is a limited liability company, each managing member of Borrower and in
each case, if applicable, each general partner or managing member of such general partner or
managing member. In the event that Borrower or any General Partner is a single member limited
liability company, the term “General Partner” shall include such single member.



     “Governmental Authority” shall mean, with respect to any Person, any federal or State
government or other political subdivision thereof and any entity, including any regulatory or
administrative authority or court, exercising executive, legislative, judicial, regulatory or
administrative or quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal, in each case having jurisdiction over such applicable Person or such
Person’s property and any stock exchange on which shares of capital stock of such Person are listed
or admitted for trading.



     “Guarantor” shall mean any Person guaranteeing, in whole or in part, the obligations
of Borrower under the Loan Documents.



     “Independent” shall mean, when used with respect to any Person, a Person who (a) is in
fact independent, (b) does not have any direct financial interest or any material indirect
financial interest in Borrower, or in any Affiliate of Borrower or any constituent partner,
shareholder, member or beneficiary of Borrower, (c) is not connected with Borrower or any Affiliate
of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower as an
officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar
functions and (d) is not a member of the immediate family of a Person defined in (b) or (c) above.
Whenever it is herein provided that any Independent Person’s opinion or certificate shall be
provided, such opinion or certificate shall state that the Person executing the same has read this
definition and is Independent within the meaning hereof.



     “Insurance Proceeds” shall mean all of the proceeds received under the insurance
policies required to be maintained by Owner pursuant to Article III of the Mortgage.



     “Interest Shortfall” shall mean any shortfall in the amount of interest required to be
paid with respect to the Loan on any Payment Date.



     “Late Charge” shall have the meaning set forth in Section 3.11 hereof.



     “Legal Requirement” shall mean as to any Person, the certificate of incorporation,
by-laws, certificate of limited partnership, agreement of limited partnership or other
organizational or governing documents of such Person, and any law, statute, order, ordinance,
judgment, decree,



C-4









 







injunction, treaty, rule or regulation or determination of an arbitrator or a court or other
Governmental Authority and all covenants, agreements, restrictions and encumbrances contained in
any instruments, in each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.



     “Lender” shall mean Lender named herein and its successors and assigns.



     “LIBOR Rate” shall have the meaning set forth in the Note.



     “LLC Interests” shall mean, with respect to Borrower, all membership, equity or
ownership and/or other interests now or hereafter owned by Borrower in the LLCs, and including all
of Borrower’s right, title and interest in and to: (a) any and all now existing and hereafter
acquired membership, equity or ownership interest of Borrower in the LLCs, whether in capital,
profits or otherwise; (b) any and all now existing and hereafter arising rights of Borrower to
receive Distributions or payments from the LLCs, whether in cash or in kind and whether such
Distributions or payments are on account of Borrower’s interest as owner of a membership, equity or
ownership interest of the LLCs or as a creditor of the LLCs or otherwise, and all other economic
rights and interests of any nature of Borrower in the LLCs; (c) any and all now existing and
hereafter acquired management and voting rights of Borrower of, in, or with respect to the LLCs,
whether as an owner of a membership, equity or ownership interest in the LLCs or otherwise, and
whether provided for under the Operating Agreements and/or applicable law, and all other rights of
and benefits to Borrower of any nature arising or accruing under the Operating Agreements; (d) any
and all now existing and hereafter acquired rights of Borrower to any specific property owned by
the LLCs; (e) if the LLC Interests are evidenced in certificate form, the LLC Interests shall
include all such certificates, delivered to Lender accompanied by Powers duly executed in blank;
and (f) all Proceeds of the foregoing Collateral.



     “LLCs” shall mean the limited liability companies identified on Schedule 1
hereto.



     “Loan” shall have the meaning set forth in the recitals hereto.



     “Loan Documents” shall have the meaning set forth in the recitals hereto.



     “Loan Year” shall mean each 365 day period (or 366 day period if the month of February
in a leap year is included) commencing on the first day of the month following the Closing Date
(provided, however, that the first Loan Year shall also include the period from the Closing Date to
the end of the month in which the Closing Date occurs).



     “Lockbox Account” shall have the meaning set forth in Section 2.27.



     “Lockbox Agreement” shall mean that certain mezzanine lockbox agreement dated as of
the date hereof between Borrower and Lender.



     “Material Adverse Effect” shall mean any event or condition that has a material
adverse effect on (a) the Collateral or the Property, (b) the business, prospects, profits,
management, operations or condition (financial or otherwise) of Borrower, Intermediate Mez
Borrower, Senior Mez Borrower or Owner, (c) the enforceability, validity, perfection or priority of
the lien of any



C-5









 







Loan Document or (d) the ability of Borrower to perform any obligations under any Loan
Document.



     “Maturity” shall mean the Maturity Date set forth in the Note or such other date
pursuant to the Loan Documents on which the final payment of principal, and premium, if any, on the
Note becomes due and payable as therein or herein provided, whether at stated maturity or by
declaration of acceleration, or otherwise.



     “Maturity Date” shall have the meaning set forth in the Note.



     “Mez Allocated Loan Amount” shall mean the portion of the Loan Amount allocated to
each Cross-collateralized Property as set forth on Exhibit E annexed hereto and made a part
hereof.



     “Mortgage” shall have the meaning set forth in the recitals hereto.



     “Mortgage Lender” shall have the meaning set forth in the recitals hereto.



     “Mortgage Loan” shall have the meaning set forth in the recitals hereto.



     “Mortgage Note” shall have the meaning set forth in the recitals hereto.



     “Mortgage Securitization” shall mean a public or private offering of securities by
Mortgage Lender or any of its Affiliates or their respective successors and assigns which are
collateralized, in whole or in part, by the Mortgage Loan.



     “Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been, or were required to have been, made by Borrower,
Guarantor or any ERISA Affiliate and which is covered by Title IV of ERISA.



     “Note” shall have the meaning set forth in the recitals hereto.



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



     “Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which
is signed on behalf of Borrower by an authorized representative of Borrower which states that the
items set forth in such certificate are true, accurate and complete in all respects.



     “Operating Agreements” shall mean the operating agreements and articles of
organization, certificates of formation or other formation documents and all other agreements,
certificates and other documents provided to and approved by Lender and which govern the existence,
operation and ownership of the LLCs, as the same are in effect as of the date hereof and as the
same hereafter may be modified from time to time in accordance with this Agreement.



C-6









 





     “Organizational Documents” shall mean (i) the articles or certificate of incorporation
(including any amendments thereto or restatements thereof), bylaws and any certificate or statement
of designation of the Corporations, (ii) the Operating Agreements and (iii) the Partnership
Agreements.



     “Owner” shall have the meaning set for in the recitals hereto.



     “Partnership Agreements” shall mean the partnership agreements together with all
agreements, certificates and other documents provided to and approved by Lender and which govern
the existence, operation and ownership of the Partnerships.



     “Partnership Interests” shall mean all partnership, equity or ownership and/or other
interests now or hereafter owned by Borrower in the Partnerships, and including all of Borrower’s
right, title and interest in and to: (a) any and all now existing and hereafter acquired
membership, equity or ownership interest of Borrower in the Partnerships whether in capital,
profits or otherwise; (b) any and all now existing and hereafter arising rights of Borrower to
receive Distributions or payments from the Partnerships, whether in cash or in kind and whether
such Distributions or payments are on account of Borrower’s interest as an owner of a partnership,
equity or ownership interest in the Partnerships or as a creditor of the Partnerships or otherwise,
and all other economic rights and interests of any nature of Borrower in the Partnerships; (c) any
and all now existing and hereafter acquired management and voting rights of Borrower of, in, or
with respect to the Partnerships, whether as an owner of a partnership, equity or ownership
interest in the Partnerships or otherwise, and whether provided for under the Partnership
Agreements and/or applicable law, and all other rights of and benefits to Borrower of any nature
arising or accruing under the Partnership Agreements; (d) any and all now existing and hereafter
acquired rights of Borrower to any specific property owned by the Partnerships; (e) if the
Partnership Interests are evidenced in certificate form, the Partnership Interests shall include
all such certificates, delivered to Lender accompanied by Powers duly executed in blank; and (f)
all Proceeds of the foregoing Collateral.



     “Partnerships” shall mean the partnerships identified on Schedule 1 attached
hereto.



     “PBGC” shall mean the Pension Benefit Guaranty Corporation established under ERISA, or
any successor thereto.



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



     “Plan” shall mean an employee benefit or other plan established or maintained by
Borrower or any ERISA Affiliate during the five-year period ended prior to the date of this
Agreement or to which Borrower or any ERISA Affiliate makes, is obligated to make or has, within
the five year period ended prior to the date of this Agreement, been required to make contributions
(whether or not covered by Title IV of ERISA or Section 302 of ERISA or Section 401(a) or 412 of
the Code), other than a Multiemployer Plan.



     “Pledged Entities” shall mean the Corporations, the LLCs and the Partnerships.



C-7









 





     “Pledged Interests” shall mean with respect to Borrower, (a) all shares of capital
stock of the Corporations, now owned or hereafter acquired by Borrower, and the certificates
representing the shares of such capital stock and any interest of Borrower in the entries on the
books of any financial intermediary pertaining to such shares (such now-owned shares being
identified on Schedule 1 attached hereto), and all options and warrants for the purchase of
shares of the stock of the Corporations now or hereafter held in the name of Borrower, (b) all
certificated LLC Interests or Partnership Interests, now owned or hereafter acquired by Borrower,
and the certificates representing such interests and any interest of Borrower in the entries on the
books of any financial intermediary pertaining to such certificated interests (such now-owned
certificated interests being identified on Schedule 1 attached hereto), and all options and
warrants for the purchase of certificated interests in such LLCs or Partnership now or hereafter
held in the name of Borrower, (c) all additional shares of stock or certificated interests of the
Corporations, LLCs, or Partnerships from time to time acquired by Borrower in any manner, and the
certificates representing such additional shares and any interest of Borrower in the entries on the
books of any financial intermediary pertaining to such shares and interests, and all securities
convertible into and options, warrants, dividends, cash, instruments and other rights and options
from time to time received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares, (including all rights to request or cause the issuer thereof to register
any or all of the Collateral under federal and state securities laws to the maximum extent possible
under any agreement for such registration rights, and all put rights, tag-along rights or other
rights pertaining to the sale or other transfer of such Collateral, together in each case with all
rights under any agreements, articles or certificates of incorporation or otherwise pertaining to
such rights; and (d) all voting rights and rights to cash and non-cash dividends, securities,
securities entitlements and other investment property, instruments and other property from time to
time received, receivable or otherwise distributed in respect of, or in exchange for, any or all of
the foregoing Collateral, and (e) all Proceeds of the foregoing Collateral.



     “Powers” shall mean transfer powers in the form of Schedule 3 attached hereto.



     “Premises” shall have the meaning set forth in the recitals hereto.



     “Principal Amount” shall mean the Loan Amount as such amount may be reduced
from time to time pursuant to the terms of this Agreement, the Note or the other Loan
Documents.



     “Proceeds” shall (a) mean all “proceeds” (as such term is defined in the UCC) and
“products” (as such term is defined in the UCC) with respect to the Collateral and (b) include,
without limitation: whatever is receivable or received when Collateral is sold, collected,
exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary; all
rights to payment, including return premiums, with respect to any insurance relating thereto; all
interest, dividends and other property receivable or received on account of the Collateral or
proceeds thereof, (including all Distributions or other income from the Equity Interests, all
collections thereon or all Distributions with respect thereto); and proceeds of any indemnity or
guaranty payable to Borrower or Lender from time to time with respect to any Collateral.



C-8









 





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



     “Rate Cap Agreement” shall mean that certain interest rate protection agreement
(together with the confirmation and schedules relating thereto) with a notional amount which shall
not at any time be less than the Principal Amount and a LIBOR Rate strike price equal to six
percent (6%) entered into by Borrower in accordance with the terms hereof or of the other Loan
Documents and any similar interest rate cap or collar agreements subsequently entered into in
replacement or substitution therefor by Borrower with respect to the Loan.



     “Rating Agency” shall mean each of Standard & Poor’s Ratings Services, Inc., a
division of The McGraw-Hill Company, Inc. (“Standard & Poor’s”), Fitch, Inc. and Moody’s
Investors Service, Inc. (“Moody’s”) and any successor to any of them; provided, however,
that at any time after a Securitization, “Rating Agency” shall mean those of the foregoing
rating agencies that from time to time rate the securities issued in connection with such
Securitization.



     “Remaining Rents” shall have the meaning set forth in Section 2.27.



     “Securities Act” shall have the meaning set forth in Section 3.02(d).



     “Securitization” shall mean a public or private offering of securities by Lender or
any of its Affiliates or their respective successors and assigns which are collateralized, in whole
or in part, by this Agreement.



     “Single Purpose Entity” shall mean a corporation, partnership, joint venture, limited
liability company, trust or unincorporated association, which is formed or organized solely for the
purpose of holding, directly, an ownership interest in the Collateral, does not engage in any
business unrelated to the Collateral, does not have any assets other than those related to its
interest in the Collateral or any indebtedness other than as permitted by this Agreement or the
other Loan Documents, has its own separate books and records and has its own accounts, in each case
which are separate and apart from the books and records and accounts of any other Person, holds
itself out as being a Person separate and apart from any other Person and which otherwise satisfies
the criteria of the Rating Agency for a special-purpose bankruptcy-remote entity.



     “Solvent” shall mean, as to any Person, that (a) the sum of the assets of such Person,
at a fair valuation, exceeds its liabilities, including contingent liabilities, (b) such Person has
sufficient capital with which to conduct its business as presently conducted and as proposed to be
conducted and (c) such Person has not incurred debts, and does not intend to incur debts, beyond
its ability to pay such debts as they mature. For purposes of this definition, “debt”
means any liability on a claim, and “claim” means (a) a right to payment, whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, or (b) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured. With respect to any such contingent liabilities, such
liabilities shall be computed in accordance with GAAP at the amount which, in light of all the
facts and



C-9









 







circumstances existing at the time, represents the amount which can reasonably be expected to
become an actual or matured liability.



     “Substitute CMA Agreement” shall have the meaning set forth in Section 2.27.



     “Transfer” shall mean any conveying, assigning, selling, mortgaging, encumbering,
pledging, hypothecating, granting of a security interest in, granting of options with respect to or
other disposition (directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise and whether or not for consideration or of record) of all or any portion of any legal or
beneficial interest in the Collateral, Borrower, Intermediate Mez Borrower, Senior Mez Borrower,
Owner, the Premises or any other portion of the Property.



     “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York;
provided that, if perfection or the effect of perfection or non-perfection or the priority of any
security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions hereof relating to such
perfection, effect of perfection or non-perfection or priority.



     “Unscheduled Payments” shall mean insurance proceeds that have been applied to the
repayment of the Debt, any funds representing a voluntary or involuntary principal prepayment and
proceeds of any foreclosure action or UCC sale.



     “Welfare Plan” shall mean an employee welfare benefit plan as defined in Section 3(1)
of ERISA established or maintained by Borrower, Guarantor or any ERISA Affiliate or that covers any
current or former employee of Borrower, Guarantor or any ERISA Affiliate.




C-10









 








EXHIBIT D




Owners




	 	 	 	 	 
	Property	 	Owner	 	Operating Tenant
	Hilton Birmingham Perimeter Park

8 Perimeter Drive S.

Birmingham, AL 35243-2326

	 	Ashford Birmingham LP
	 	None
	 	 	 	 	 
	BWI Airport Marriott

1742 W. Nursery Road

Linthicum Heights, MD 21090-2906

	 	Ashford BWI Hotel, LP
	 	None
	 	 	 	 	 
	Hyatt Regency Coral Gables

50 Alhambra Piz

Coral Gables, FL 33134-5228

	 	Ashford Coral Gables LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Residence Inn Kansas City

2975 Main Street

Kansas City, MO 64108-3321

	 	Ashford Kansas City LP
	 	None
	 	 	 	 	 
	Residence Inn Torrance

3701 Torrance Blvd.

Los Angeles, CA 90503-4805

	 	Ashford Torrance LP
	 	None
	 	 	 	 	 
	Residence Inn Las Vegas Hughes
Center

370 Hughes Center Drive

Las Vegas, NV 89109-4814

	 	Ashford LV Hughes Center
LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Residence Inn Atlanta Perimeter
West

6096 Barfield Road,

Perimeter West Atlanta, GA 

30328-4408

	 	Ashford Atlanta
Perimeter LP
	 	None
	 	 	 	 	 
	Hampton Inn Lawrenceville

1135 Lakes Parkway

Lawrenceville, GA 30043

	 	Ashford Lawrenceville LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Doubletree Guest Suites

50 S. Front Street

Columbus, OH 43215

	 	Ashford Columbus LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Hilton Santa Fe

100 Sandoval Street

Santa Fe, NM 87501

	 	Ashford Santa Fe LP
	 	Ashford TRS
Sapphire LLC






D-1









 






	 	 	 	 	 
	Property	 	Owner	 	Operating Tenant
	Homewood Suites Mobile

530 Providence Park Drive

Mobile, AL 36695

	 	Ashford Mobile LP
	 	Ashford TRS Sapphire LLC
	 	 	 	 	 
	Hyatt Anaheim

11999 Harbor Blvd.

Garden Grove, CA 92840

	 	Ashford Anaheim LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Sea Turtle Inn

One Ocean Blvd.

Atlantic Beach, FL 32233

	 	Ashford Atlantic Beach LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	JW Marriott San Francisco

500 Post Street

San Francisco, CA 94102

	 	Ashford San Francisco LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Fairfield Inn Kennesaw

3425 Busbee Drive

Kennesaw, GA

	 	Ashford Kennesaw I LP
	 	Ashford TRS
Sapphire LLC
	 
	Springhill Suites BWI

899 Elkridge Landing Rd.

BWI Airport, Maryland 21090

	 	Ashford BWI Airport LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Springhill Suites Kennesaw

3399 Town Point Drive 

Kennesaw, GA 30144

	 	Ashford Kennesaw II LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Radisson Holtsville

1730 North Ocean Ave. 

Holtsville, NY 11742

	 	Ashford Holtsville LP
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Sheraton Milford

11 Beaver Street

Milford, MA 01757

	 	Ashford Milford Limited
Partnership
	 	Ashford TRS
Sapphire LLC
	 	 	 	 	 
	Radisson Rockland

929 Hingham Street

Rockland, MA 02370

	 	Rockland Massachusetts
Hotel Limited
Partnership
	 	Ashford TRS
Sapphire LLC






D-2









 





EXHIBIT E




Mez Allocated Loan Amounts




	 	 	 	 	 	 	 
	Asset	 	Property 	 	Amount
	1	 	Hilton Birmingham Perimeter Park
	 	$	3,240,369	 
	4	 	BWI Airport Marriot
	 	$	8,632,337	 
	10	 	Hyatt Regency Coral Gables
	 	$	6,507,398	 
	22	 	Residence Inn Kansas City
	 	$	1,052,742	 
	23	 	Residence Inn Torrance
	 	$	6,802,108	 
	25	 	Residence Inn Las Vegas Hughes Center
	 	$	8,891,739	 
	29	 	Residence Inn Atlanta Perimeter West
	 	$	1,693,321	 
	34	 	Hampton Inn Lawrenceville
	 	$	977,083	 
	35	 	Doubletree Guest Suites Columbus
	 	$	1,517,504	 
	37	 	Hilton Santa Fe
	 	$	3,201,458	 
	38	 	Homewood Suites Mobile
	 	$	1,627,750	 
	39	 	Hyatt Anaheim
	 	$	15,457,503	 
	40	 	Sea Turtle Inn
	 	$	3,721,704	 
	41	 	JW Marriott San Francisco
	 	$	8,135,869	 
	42	 	Fairfield Inn Kennesaw
	 	$	1,353,937	 
	44	 	Springhill Suites BWI
	 	$	2,954,306	 
	45	 	Springhill Suites Kennesaw
	 	$	1,381,318	 
	46	 	Radisson Holtsville
	 	$	1,030,404	 
	47	 	Sheraton Milford
	 	$	946,098	 
	48	 	Radisson Rockland
	 	$	875,051	 







D-3









 








Schedule 1




Corporations, Limited Liability Companies and Partnerships



100% of all membership, equity and ownership interests in Ashford Sapphire Junior Mezz I LLC, a
Delaware limited liability company and Ashford Sapphire Junior Mezz II LLC, a Delaware limited
liability company.





 









 








Schedule 2




Ownership Chart





 









 








Schedule 3




Stock Power




A transfer power in form and substance acceptable to Lender.




 









 








CONSENT AND WAIVER




     As a material inducement for Lender to enter into the Loan and Security Agreement (“Loan
Agreement”) dated as of the 11th day of April, 2007 between ASHFORD SAPPHIRE JUNIOR HOLDER I LLC, a
Delaware limited liability company, having an address at 14185 Dallas Parkway, Suite 1100, Dallas,
Texas 75254-4308 and ASHFORD SAPPHIRE JUNIOR HOLDER II LLC, a Delaware limited liability company,
having an address at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254-4308 (collectively,
“Borrower”) and WACHOVIA BANK, NATIONAL ASSOCIATION, having an address at Wachovia Bank,
National Association, Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075,
Charlotte, North Carolina 28262 (“Lender”), and for valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the undersigned, as of the 11th day of April,
2007, hereby consents to the pledge of the Collateral contained in the Loan Agreement and ratifies
all encumbrances and terms contained therein.



     The undersigned agrees that, by acceptance of the Loan Agreement, Lender assumes no
obligations with respect to the Pledged Entities or to the constituent members, partners, or
shareholders in the Pledged Entities and, without the prior written consent of Lender, the
undersigned shall not: (a) terminate or materially amend or modify the Organizational Documents of
the Pledged Entities or consent thereto; or (b) take any action that would operate to dilute the
interest of Borrower in the Pledged Entities.



     The undersigned agrees that, upon written notice from Lender stating that an Event of Default
has occurred under the Loan Agreement, all Distributions, dividends, or other sums payable to
Borrower in connection with the Pledged Entities shall be made payable to and delivered to Lender.
The undersigned further agrees that, upon written notice from Lender that it has foreclosed upon
the Collateral described in the Loan Agreement following an Event of Default, Borrower shall be
removed as a manager, managing member or general partner in the Pledged Entity, as applicable, and
replaced with the assignee designated in such notice, which assignee shall be Lender or its
nominee. In connection therewith, the undersigned agrees to request (and use reasonable efforts to
ensure) that Lender is provided with a written statement of Borrower’s defaults under the
Organizational Documents and agrees that Lender be entitled to rely on such statement in
determining whether to become a substitute member, shareholder or partner in the applicable Pledged
Entity. If Lender so requests, the undersigned covenants and agrees to consent to the execution of
an amendment to the Organizational Documents to reflect any such assignee’s substitution in place
of Borrower, as applicable.



     The undersigned further consents and agrees to (a) Borrower’s assignment to Lender for
security purposes, of Borrower’s Equity Interests, (b) any foreclosure and/or subsequent sale by
Lender or its nominee of its rights with respect to such Equity Interests and the substitution of
Lender or nominee of its rights with respect to such Equity Interests, (c) the exercise of any
remedy by Lender or its nominee under the Loan Agreement and (d) notwithstanding anything to the
contrary contained in the Organizational Documents of the Pledged Entities, Lender, its nominee or
any third-party purchaser at a foreclosure sale becoming a member, partner or shareholder, or a
substitute manager, managing member or general partner, as applicable, in a Pledged Entity, with
all of the rights enjoyed by Borrower prior to such foreclosure. Any such foreclosure will not
require any further consent of the undersigned or any other member,



 









 







shareholder, or partner in the applicable Pledged Entity and will not cause the dissolution of
any LLC or Partnership.



     The undersigned agrees that neither the execution and delivery of the Loan Agreement, the
enforcement by Lender of any of its rights thereunder, nor the transfer (or agreement to transfer)
by Lender of any of its rights in the Pledged Entities or under the Loan Agreement shall constitute
a default under the Organizational Documents, and the undersigned expressly waives any rights it
may have under the Organizational Documents as a result of the foregoing. The undersigned hereby
waives any and all rights under the Organizational Documents which, whether exercised by the
undersigned or not, would prevent, inhibit or interfere with the granting of a security interest in
the Collateral to Lender, the foreclosure of such security interest in the Collateral by Lender or
the full realization by Lender of any of its other rights under the Loan Agreement.



     The undersigned acknowledges that Lender is materially relying on the undersigned’s execution
of this Consent and Waiver in entering into the Loan Agreement and the other Loan Documents.



     All capitalized terms not otherwise defined herein shall have the meaning set forth in the
Loan Agreement.



********************




 









 








     IN WITNESS WHEREOF, the undersigned has duly executed this consent and waiver as of this 11th
day of April, 2007.



	 	 	 	 	 
	 	ASHFORD SAPPHIRE JUNIOR MEZZ I LLC, a Delaware
limited liability company

 	 
	 	By:  	/s/ David A. Brooks
 	 
	 	 	Name:  	David A. Brooks 	 
	 	 	Title:  	Vice President 	 
	 
	 	ASHFORD SAPPHIRE JUNIOR MEZZ II LLC, a
Delaware limited liability company

 	 
	 	By:  	/s/ David A. Brooks
 	 
	 	 	Name:  	David A. Brooks 	 
	 	 	Title:  	Vice President