Document:

Exhibit 10.83

 

EXECUTION COPY

 

 

$1,065,000,000 TERM
FACILITY

 

CREDIT AGREEMENT

 

by and among

 

CNL HOSPITALITY
PARTNERS, LP

CNL RESORT HOSPITALITY, LP

and

CNL RESORT HOLDINGS GP, LLC

as the Borrowers

CNL HOSPITALITY PROPERTIES, INC.

as Guarantor

DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH,

and

THE INSTITUTIONS FROM TIME TO TIME PARTY HERETO

as Lenders

 

DEUTSCHE BANK AG,

as the Administrative Agent for the Lenders

 

DEUTSCHE BANK
SECURITIES INC.,

as the Lead Arranger

Dated as of April 2, 2004

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I. CREDIT FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Loan Amount

  	
   

  
	
  1.2

  	
  Funding of Loan

  	
   

  
	
  1.3

  	
  Repayment
  of Principal

  	
   

  
	
  1.4

  	
  Loan Extension.

  	
   

  
	
  1.5

  	
  Interest

  	
   

  
	
  1.6

  	
  Joint
  Borrower Provisions.

  	
   

  
	
   

  	
   

  
	
  ARTICLE II. INTEREST RATE AND YIELD-RELATED
  PROVISIONS

  	
   

  
	
   

  	
   

  
	
  2.1

  	
  Interest Rate

  	
   

  
	
  2.2

  	
  Payment of
  Interest

  	
   

  
	
  2.3

  	
  Inability
  to Determine Rate

  	
   

  
	
  2.4

  	
  Illegality

  	
   

  
	
  2.5

  	
  Funding

  	
   

  
	
  2.6

  	
  Requirements
  of Law Increased Costs.

  	
   

  
	
  2.7

  	
  Obligation of Lenders to
  Mitigate: Replacement of Lenders

  	
   

  
	
  2.8

  	
  Funding
  Indemnification

  	
   

  
	
  2.9

  	
  Taxes.

  	
   

  
	
  2.10

  	
  Post-Default
  Interest

  	
   

  
	
  2.11

  	
  Computations

  	
   

  
	
   

  	
   

  
	
  ARTICLE III. PAYMENTS

  	
   

  
	
   

  	
   

  
	
  3.1

  	
  Evidence
  of Indebtedness

  	
   

  
	
  3.2

  	
  Nature
  and Place of Payments

  	
   

  
	
  3.3

  	
  Prepayments.

  	
   

  
	
  3.4

  	
  Allocation
  of Payments Received.

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV. CREDIT SUPPORT

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  Guaranties

  	
   

  
	
  4.2

  	
  Pledge Agreements

  	
   

  
	
   

  	
   

  
	
  ARTICLE V. CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  
	
  5.1

  	
  Conditions
  to Funding of Loan

  	
   

  
	
  5.2

  	
  Outside Closing
  Date

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI. REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  6.1

  	
  Financial
  Condition

  	
   

  
	
  6.2

  	
  No Material
  Adverse Effect

  	
   

  
	
  6.3

  	
  Compliance
  with Laws and Agreements

  	
   

  

 

 

	
  6.4

  	
  Organization,
  Power; Authorization; Enforceability.

  	
   

  
	
  6.5

  	
  No Conflict

  	
   

  
	
  6.6

  	
  No
  Material Litigation

  	
   

  
	
  6.7

  	
  Taxes

  	
   

  
	
  6.8

  	
  Investment Company Act

  	
   

  
	
  6.9

  	
  Subsidiary Entities

  	
   

  
	
  6.10

  	
  Federal
  Reserve Board Regulations

  	
   

  
	
  6.11

  	
  ERISA Compliance

  	
   

  
	
  6.12

  	
  Assets and Liens

  	
   

  
	
  6.13

  	
  Securities Acts

  	
   

  
	
  6.14

  	
  Consents. Etc.

  	
   

  
	
  6.15

  	
  Hazardous
  Materials

  	
   

  
	
  6.16

  	
  Regulated Entities

  	
   

  
	
  6.17

  	
  Copyrights.
  Patents, Trademarks and Licenses, etc.

  	
   

  
	
  6.18

  	
  REIT Status

  	
   

  
	
  6.19

  	
  Insurance

  	
   

  
	
  6.20

  	
  Full Disclosure

  	
   

  
	
  6.21

  	
  Indebtedness

  	
   

  
	
  6.22

  	
  Real Property

  	
   

  
	
  6.23

  	
  Brokers

  	
   

  
	
  6.24

  	
  No Default

  	
   

  
	
  6.25

  	
  Solvency

  	
   

  
	
  6.26

  	
  Advisory Agreement

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII. AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  7.1

  	
  Financial
  Statements

  	
   

  
	
  7.2

  	
  Certificates: Reports:
  Other Information

  	
   

  
	
  7.3

  	
  Maintenance
  of Existence and Properties

  	
   

  
	
  7.4

  	
  Inspection of
  Property: Books and Records: Discussions

  	
   

  
	
  7.5

  	
  Notices

  	
   

  
	
  7.6

  	
  Expenses

  	
   

  
	
  7.7

  	
  Payment of indemnified
  Taxes and Other Taxes and Charges

  	
   

  
	
  7.8

  	
  Insurance

  	
   

  
	
  7.9

  	
  Hazardous
  Materials

  	
   

  
	
  7.10

  	
  Compliance
  with Laws and Contractual Obligations: Payment of Taxes

  	
   

  
	
  7.11

  	
  Further
  Assurances

  	
   

  
	
  7.12

  	
  Single Purpose
  Entities

  	
   

  
	
  7.13

  	
  REIT Status

  	
   

  
	
  7.14

  	
  Use of Proceeds

  	
   

  
	
  7.15

  	
  Subordination.

  	
   

  
	
  7.16

  	
  Management of
  CNL Resort Properties;

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII.

  	
   

  
	
   

  	
   

  
	
  8.1

  	
  Liens

  	
   

  

 

3

 

	
  8.2

  	
  Indebtedness

  	
   

  
	
  8.3

  	
  Fundamental
  Change.

  	
   

  
	
  8.4

  	
  Dispositions

  	
   

  
	
  8.5

  	
  Investments

  	
   

  
	
  8.6

  	
  Transactions with Partners
  and Affiliates

  	
   

  
	
  8.7

  	
  Margin
  Regulations; Securities Laws

  	
   

  
	
  8.8

  	
  Organizational
  Documents

  	
   

  
	
  8.9

  	
  Fiscal Year

  	
   

  
	
  8.10

  	
  Advisory.
  Management, and Operating Lease Agreements

  	
   

  
	
  8.11

  	
  Distributions

  	
   

  
	
  8.12

  	
  Financial
  Covenants of Borrower Parties.

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX. EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  
	
  9.1

  	
  Event of Default

  	
   

  
	
  9.2

  	
  Remedies

  	
   

  
	
   

  	
   

  
	
  ARTICLE X. THE ADMINISTRATIVE AGENT

  	
   

  
	
   

  	
   

  
	
  10.1

  	
  Appointment

  	
   

  
	
  10.2

  	
  Delegation of
  Duties

  	
   

  
	
  10.3

  	
  Exculpatory
  Provisions

  	
   

  
	
  10.4

  	
  Reliance by
  the Agents

  	
   

  
	
  10.5

  	
  Notice of Default

  	
   

  
	
  10.6

  	
  Non-Reliance on Agents
  and Other Lenders

  	
   

  
	
  10.7

  	
  Indemnification

  	
   

  
	
  10.8

  	
  Agents in Their
  Individual Capacity

  	
   

  
	
  10.9

  	
  Successor
  Administrative Agent

  	
   

  
	
  10.10

  	
  Limitations on Agents Liability

  	
   

  
	
   

  	
   

  
	
  ARTICLE XI. MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  
	
  11.1

  	
  No
  Assignment by Borrowers

  	
   

  
	
  11.2

  	
  Modification

  	
   

  
	
  11.3

  	
  Cumulative
  Rights; No Waiver

  	
   

  
	
  11.4

  	
  Entire Agreement

  	
   

  
	
  11.5

  	
  Survival

  	
   

  
	
  11.6

  	
  Notices

  	
   

  
	
  11.7

  	
  Governing Law

  	
   

  
	
  11.8

  	
  Assignments,
  Participations. Syndication. Etc.

  	
   

  
	
  11.9

  	
  Counterparts

  	
   

  
	
  11.10

  	
  Sharing of Payments

  	
   

  
	
  11.11

  	
  Confidentiality

  	
   

  
	
  11.12

  	
  Consent to Jurisdiction

  	
   

  
	
  11.13

  	
  Waiver of Jury Trial

  	
   

  
	
  11.14

  	
  Indemnity

  	
   

  
	
  11.15

  	
  Telephonic Instruction

  	
   

  

 

4

 

	
  11.16

  	
  Marshalling; Payments Set
  Aside

  	
   

  
	
  11.17

  	
  Set-off

  	
   

  
	
  11.18

  	
  Severability

  	
   

  
	
  11.19

  	
  No Third Parties Benefited

  	
   

  
	
  11.20

  	
  Time

  	
   

  

 

5

 

	
  ANNEXES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex 1

  	
  Glossary

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 4.2

  	
  Pledged Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.6

  	
  Material Litigation

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.11

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.14

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.15

  	
  Hazardous Materials

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.19

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.21

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 6.22

  	
  Projects

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 8.1

  	
  Additional Permitted Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 8.4

  	
  Minimum Release Prepayments (CNL Resort
  Dispositions)

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 8.6

  	
  Transactions with Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 11.6

  	
  Addresses for Notices, Etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule G-1

  	
  Reserved

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule G-2

  	
  CNL Resort Properties

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule G-3

  	
  Qualified Managers

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule G-4

  	
  Designated Entities

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule G-5

  	
  Not Applicable

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule G-6

  	
  CNL Resort Entities Chart

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule G-7

  	
  CNL Resort TRS Lessees

  	
   

  

 

6

 

	
  EXHIBITS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Reserved

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  Form of Assignment and Assumption Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  Form of Closing Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
  Form of Compliance Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit E

  	
  Form of Note

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit F

  	
  Form of Pledge Agreement

  	
   

  

 

7

 

CREDIT AGREEMENT

 

THIS CREDIT
AGREEMENT (the “Agreement”) is made and dated as of the 2nd day of
April, 2004, by and among CNL HOSPITALITY PARTNERS, LP, a limited partnership
organized under the laws of the state of Delaware (“CNL Partners”), CNL
RESORT HOSPITALITY, LP, a limited partnership organized under the laws of
Delaware (“CNL Resort”), CNL RESORT HOLDINGS GP, LLC, a limited
liability company organized under the laws of Delaware (“CNL Resort GP,”
and along with CNL Resort, “CNL Resort Holdings” and CNL Resort Holdings, along
with CNL Partners, are referred to herein, jointly and severally, as the “Borrowers”);
CNL HOSPITALITY PROPERTIES, INC., a Maryland corporation (“CNL”); THE
LENDERS FROM TIME TO TIME PARTY HERETO (collectively and severally, the “Lenders”);
and DEUTSCHE BANK AG (“DBAG”), as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”).

 

RECITALS

 

A.            The Borrowers have
requested the Lenders to extend credit to the Borrowers in the form of a single
disbursement term loan and that DBAG agree to act as administrative agent for
the benefit of the Lenders with respect to such credit extension.

 

B.            The Lenders party
hereto have agreed to extend such credit facility and DBAG has agreed to act as
administrative agent on behalf of the Lenders on the terms and subject to the
conditions set forth herein and in the other Loan Documents (as that term and
capitalized terms are defined in, or the location of the definitions thereof
referenced in, the Glossary attached hereto as Annex I and by this
reference incorporated herein).

 

NOW,
THEREFORE, in consideration of the above Recitals and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

AGREEMENT

 

ARTICLE I.

CREDIT FACILITY

 

1.1           Loan Amount.

 

On the terms
and subject to the conditions set forth herein, the Lenders severally agree
that they shall fund their respective Percentage Shares of a term loan (the
“Loan”), in the amount of $1,065,000,000 (the “Facility Amount”).
Principal amounts on the Loan that are repaid or prepaid by Borrowers may not
be reborrowed.

 

1.2           Funding of  Loan.

 

Each Lender
shall make its Percentage Share of the Loan available to the

 

8

 

Administrative Agent, in same-day funds, on the Closing Date at the
Contact Office, ABA 02 1-00-1033 for the Administrative Agent’s Account No.
602-00-1 19, Ref: CNL Hospitality Partners, no later than 12:00 p.m. (New York
time) on the Closing Date.

 

1.3           Repayment of Principal.

 

Subject to (i)
the mandatory prepayment provisions of Section 3.3(2), (ii) the Loan
extension provisions of Section 1.4 below, and (iii) any earlier
acceleration of the Loan following an Event of Default, the principal balance
of the Loan shall be payable in full on the date nine (9) months following the
Closing Date (the “Initial Maturity”).

 

1.4           Loan Extension.

 

(1)           Provided that no
Potential Default or Event of Default shall have occurred and be continuing,
the Borrowers shall have the option, to be exercised by giving written notice
to the Administrative Agent at least fifteen (15)
Business Days prior to the Initial Maturity Date, subject to the
terms and conditions set forth in this Agreement, to extend the Initial
Maturity Date by three (3) months to the date twelve (12) months following the
Closing Date (the “Extended Maturity Date”). The request by the
Borrowers for the extension of the Initial Maturity Date shall constitute a
representation and warranty by the Borrower Parties that no Potential Default
or Event of Default then exists and that all of the conditions set forth in Section
1 .4(2) below shall have been satisfied on the Initial Maturity Date.

 

(2)           The obligations of the
Administrative Agent and the Lenders to extend the Initial Maturity Date as
provided in Section 1 .4(1) shall be subject to the prior satisfaction
of each of the following conditions precedent as determined by the
Administrative Agent in its good faith judgment: (A) on the Initial Maturity
Date there shall exist no Potential Default or Event of Default; (B) the
Borrowers shall have paid to the Administrative Agent for the ratable benefit
of the Lenders an extension fee (the “Extension Fee”) equal to one-eighth
of one percent (0.125%) of the outstanding principal balance of the Loan on the
Initial Maturity Date (which fee Borrowers hereby agree shall be fully earned
and nonrefundable under any circumstances when paid); (C) the representations
and warranties made by the Borrower Parties in the Loan Documents shall have
been true and correct in all material respects when made and shall also be true
and correct in all material respects on the Initial Maturity Date (provided,
however, that any factual matters disclosed in the Schedules referenced in Article
6 shall be subject to update in accordance with clause (D) below); (D) the
Borrower Parties shall have delivered updates to the Administrative Agent of
all the Schedules set forth in Article 6 hereof and such updated
Schedules shall not disclose any conditions which would have a CNL Core Entity
Material Adverse Effect or a CNL Resort Material Adverse Effect, in each case
as determined by Administrative Agent in its reasonable judgment; (E) the
Borrowers shall have delivered to the Administrative Agent a Compliance
Certificate demonstrating that the Borrower Parties are in compliance with the
covenants set forth in Article 8 (F) Borrowers shall have paid all
reasonable out-of-pocket costs and expenses incurred by the Administrative
Agent and

 

9

 

all reasonable fees and expenses paid to
third party consultants (including reasonable attorneys’ fees and expenses) by
Administrative Agent in connection with such extension; and (G) the Guarantor
and each Pledgor shall have acknowledged and ratified that their respective
obligations under the Guaranty and the Pledge Agreements remain in full force
and effect, and continue to guaranty or secure (as applicable) the Obligations
under the Loan Documents, as extended.

 

(3)           The Administrative
Agent shall notify each of the Lenders in the event that the Initial Maturity
Date is extended as provided in this Section 1.4.

 

1.5           Interest.

 

Interest shall be payable on the outstanding principal balance of the
Loan at the rates and on the dates set forth in Sections 2.1 and 2.2
below.

 

1.6           Joint Borrower Provisions.

 

(1)           Each Borrower hereby
irrevocably designates, appoints and authorizes the other Borrowers as its
agent and attorney-in-fact to take actions under this Agreement and any other
Loan Document, together with such powers as are reasonably incidental thereto,
The Administrative Agent and the Lenders shall be entitled to rely, and shall
be fully protected in relying, upon any communication from or to any of the
Borrowers (including, without limitation, any notice, consent or other
instructions from any of the Borrowers) without any confirming communication
from or to the other Borrowers; provided, however, that upon notice to any
Borrower (which notice shall be given at the sole and absolute discretion of
the Administrative Agent), the Administrative Agent shall be entitled to fail
or refuse to take any action under this Agreement or any other Loan Document
(to the extent such action requires communication, including, without
limitation, any notice, consent or other instructions, from any of the
Borrowers), unless the Administrative Agent has received confirming
communications from all Borrowers. Any action taken by one Borrower under this
Agreement and any other Loan Document shall be conclusively binding upon the
other Borrowers.

 

(2)           Each Borrower agrees
that it is jointly and severally liable to the Administrative Agent and the
Lenders for the payment of all Obligations and that such liability is
independent of the liability and obligation of the other Borrowers with respect
thereto, whether such Obligations are due or not due, absolute or contingent,
liquidated or unliquidated or whether such Obligations otherwise become unenforceable
against the other Borrowers. Any payment by a Borrower of an Obligation shall
not reduce its liability and obligation with respect to all other Obligations
hereunder. A separate action or actions may be brought and prosecuted against
one of the Borrowers whether action is brought against the other Borrowers or
whether the other Borrowers are joined in such action or actions. Each Borrower
authorizes the Administrative Agent, on behalf of the Lenders, without notice
or demand and without affecting its liability and obligations hereunder, from
time to time, to (i) receive and hold security for the payment of the
Obligations and exchange, enforce, waive, release, fail to perfect, sell or
otherwise

 

10

 

dispose of any such security, (ii) apply such
security and direct the order or manner of sale thereof as the Administrative
Agent in its discretion may determine, and (iii) release or substitute any one
or more of endorser, guarantor or co-obligors of the Obligations.

 

(3)           Each Borrower waives
any right to require the Administrative Agent or the Lenders to (i) proceed
against the other Borrowers, (ii) proceed against or exhaust any security, or
(iii) pursue any other remedy in the Administrative Agent’s or the Lenders’
power whatsoever. Each Borrower waives any defense arising by reason of any
disability or other defense of the other Borrowers, or the cessation from any
cause whatsoever of the liability of the other Borrowers, or any claim that
such Borrower’s Obligations exceed or are more burdensome than those of the
other Borrowers. Until the Obligations shall have been finally, irrevocably,
indefeasibly paid in full, each Borrower waives any right of subrogation,
reimbursement, indemnification or contribution (contractual, statutory, or
otherwise) including, without limitation, any claim or right of subrogation
under the Bankruptcy Code (Title 11, United States Code) or any successor
statute, arising from the existence or performance of this Agreement, and each
Borrower waives any right to enforce any remedy which the Administrative Agent
and/or the Lenders now have or may hereafter have against the other Borrowers
and waives any benefit of, and any right to participate in, any security
hereafter held by the Administrative Agent, on behalf of the Lenders for the
Obligations. Each Borrower waives all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Agreement and of the existence, creation or
incurring of new or additional Obligations by the other Borrowers.

 

(4)           Each Borrower
acknowledges and agrees that it will have the sole responsibility for obtaining
from the other Borrowers such information concerning the other Borrowers’
financial conditions or business operations as such Borrower may require, and
that the Administrative Agent and the Lenders have no duty at any time to
disclose to any Borrower any information relating to the other Borrowers,
including, without limitation, information regarding its business, operations
or financial condition.

 

(5)           Notwithstanding
anything to the contrary contained in this Agreement or in any other Loan
Document, if any amount paid on account of the Obligations is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid by any Lender or the Administrative Agent or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (such payment, a “Preferential Payment”), then, to the extent
of such Preferential Payment, the Obligations or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made.

 

ARTICLE
II.

INTEREST RATE
AND YIELD-RELATED PROVISIONS

 

2.1           Interest Rate.

 

The
outstanding principal balance of the Loan shall bear interest from the date

 

11

 

disbursed to but not including the date of payment calculated at a per
annum rate equal to (subject to the provisions of Sections 2.3, ~4 and
~j.Q below) the Applicable LIBO Rate for the then-current Interest Period.

 

2.2           Payment of Interest.

 

The Borrowers
shall pay interest on the Loan on the last day of each Interest Period, as set
forth on an interest billing delivered by the Administrative Agent to the
Borrowers (which delivery may be by facsimile transmission) no later than 1:00
p.m. (New York time) on the second (2nd) Business Day prior to such date.

 

2.3           Inability  to Determine Rate.

 

In the event
that the Administrative Agent shall have reasonably determined (which
determination shall be conclusive and binding upon the Borrowers) that by
reason of circumstances affecting the interbank market, adequate and reasonable
means do not exist for ascertaining the LIBO Rate for any Interest Period, the
Administrative Agent shall forthwith give telephonic notice of such
determination to each Lender and to the Borrowers. If such notice is given, the
outstanding principal balance of the Loan shall bear interest during each day
of any affected Interest Period at the Applicable Base Rate. The Administrative
Agent shall withdraw such notice in the event that the circumstances giving
rise thereto no longer pertain and that adequate and reasonable means exist for
ascertaining the LIBO Rate for the relevant Interest Period, and, following
withdrawal of such notice by the Administrative Agent, the outstanding
principal balance of the Loan shall bear interest pursuant to Section 2.1
above.

 

2.4           Illegality.

 

Notwithstanding
any other provisions herein, if any law, regulation, treaty or directive issued
by any Governmental Authority or any change therein or in the interpretation or
application thereof, shall make it unlawful for any Lender to maintain the Loan
based on the LIBO Rate as contemplated by this Agreement, the Loan shall
automatically bear interest at the Applicable Base Rate at the end of the
then-current Interest Period or within such earlier period as may be required
by law. In the event of a conversion to interest based on the Base Rate prior
to the end of the then-current Interest Period, the Borrowers hereby agree
promptly to pay any Lender affected thereby, upon demand, the amounts required
pursuant to Section 2.8 below, it being agreed and understood that such
conversion shall constitute a prepayment for all purposes hereof. The
provisions hereof shall survive the termination of this Agreement and payment
of all other Obligations.

 

2.5           Funding.

 

Each Lender
shall be entitled to fund all or any portion of its Percentage Share of the
Loan in any manner it may determine in its sole discretion, including, without
limitation, in the Grand Cayman inter-bank market, the London inter-bank market
and within the United States, but all calculations and transactions hereunder
shall be

 

12

 

conducted as though all Lenders actually fund the Loan through the
purchase of offshore dollar deposits in the amount of such Lender’s Percentage
Share of the Loan with a maturity corresponding to the applicable Interest
Period.

 

2.6           Requirements of Law Increased Costs.

 

(1)           In the event that any
applicable law, order, regulation, treaty or directive issued by any central
bank or other governmental authority, agency or instrumentality or in the
governmental or judicial interpretation or application thereof, or compliance
by any Lender with any request or directive (whether or not having the force of
law) issued by any central baiik or other governmental authority, agency or
instrumentality:

 

(A)          Does or shall subject
any Lender to any Taxes of any kind whatsoever with respect to this Agreement
or the Loan, or change the basis of determining the Taxes imposed on payments
to such Lender of principal, fee, interest or any other amount payable
hereunder (except for change in the rate of tax on the overall net income of
such Lender);

 

(B)           Does or shall impose,
modify or hold applicable any reserve, capital requirement, special deposit,
compulsory loan or similar requirements against assets held by, or deposits or
other liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of such
Lender which are not otherwise included in the determination of interest
payable on the Obligations; or

 

(C)           Does or shall impose on
such Lender any other condition;

 

and the result
of any of the foregoing is to increase the cost to such Lender of making,
renewing or maintaining its Percentage Share of the Loan or to reduce any
amount receivable in respect thereof or the rate of return on the capital of
such Lender or any corporation controlling such Lender, then, in any such case,
the Borrowers shall, without duplication of amounts payable pursuant to Section
2.9, promptly pay to such Lender, upon its written demand made through the
Administrative Agent, any additional amounts necessary to compensate such
Lender for such additional cost or reduced amounts receivable or rate of return
as determined by such Lender with respect to this Agreement or such Lender’s
Percentage Share of the Loan, so long as such Lender requires substantially all
obligors under other commitments of this type made available by such Lender to
similarly so compensate such Lender.

 

(2)           If a Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.6,
it shall promptly notify the Borrowers of the event by reason of which it has
become so entitled. A certificate as to any additional amounts so claimed
payable containing the calculation thereof in reasonable detail submitted by a
Lender to the Borrowers, accompanied by a certification that such Lender has
required substantially all obligors under other commitments of this type made
available by such Lender to similarly so compensate such Lender, shall
constitute prima facie evidence

 

13

 

thereof.

 

(3)           Failure or delay on the
part of any Lender to demand compensation pursuant to this Section 2.6
shall not constitute a waiver of such Lender’s right to demand such
compensation. The provisions of this Section 2.6 shall survive the
termination of this Agreement and payment of the Loan and all other
Obligations.

 

2.7           Obligation of Lenders to Mitigate:
Replacement of Lenders.

 

Each Lender
agrees that:

 

(1)           As promptly as
reasonably practicable after the officer of such Lender responsible for
administering such Lender’s Percentage Share of the Loan becomes aware of any
event or condition that would entitle such Lender to receive payments under Section
2.6 above or Section 2.9 below or to cease maintaining the Loan
based on the LIBO Rate under Section 2.4 above, such Lender will use
reasonable efforts: (i) to maintain its Percentage Share of the Loan through
another lending office of such Lender or (ii) take such other measures as such
Lender may deem reasonable, if as a result thereof the additional amounts which
would otherwise be required to be paid to such Lender pursuant to Section
2.6 above or pursuant to Section 2.9 below would be materially
reduced or eliminated or the conditions rendering such Lender incapable of
maintaining the Loan based on the LIBO Rate under Section 2.4 above no
longer would be applicable, and if, as determined by such Lender in its sole
discretion, the maintaining of such Lender’s Percentage Share of the Loan
through such other lending office or in accordance with such other measures, as
the case may be, would not otherwise materially adversely affect the Loan or
the interests of such Lender.

 

(2)           If the Borrowers
receive a notice pursuant to Section 2.6 above or pursuant to Section
2.9 below or a notice pursuant to Section 2.4 above stating that a
Lender is unable to maintain the Loan based on the LIBO Rate (for reasons not
generally applicable to the Required Lenders), so long as (i) no Potential
Default or Event of Default shall have occurred and be continuing, (ii) the
Borrowers have obtained a commitment from another Lender or an Eligible
Assignee to purchase at par such Lender’s Percentage Share of the Loan and
accrued interest and fees and to assume all obligations of the Lender to be replaced under the Loan Documents and (iii) such Lender
to be replaced is unwilling to withdraw the notice delivered to the Borrowers,
upon thirty (30) days’ prior written notice to such Lender and the
Administrative Agent, the Borrowers may require, at the Borrowers’ expense, the
Lender giving such notice to assign, without recourse, all of its Percentage
Share of the Loan and accrued interest and fees to such other Lender or
Eligible Assignee pursuant to the provisions of Section 11.8 below.

 

2.8           Funding Indemnification.

 

In addition to
all other payment obligations hereunder, in the event: (1) the Loan is prepaid
in full or in part prior to the last day of the applicable Interest Period,

 

14

 

whether following a voluntary prepayment, a mandatory prepayment or
otherwise, or (2) the Borrowers shall fail to borrow the Loan on the Closing
Date, then the Borrowers shall immediately pay to each Lender, through the
Administrative Agent, an additional premium sum compensating such Lender for
losses, costs and expenses incurred by such Lender in connection with such
prepayment or such failure to borrow. Without limiting the foregoing, such
compensation shall include an amount equal to the present value (using as the
discount rate an interest rate equal to the rate determined under (2) below) of
the excess, if any, of(i) the amount of interest which otherwise would have
accrued on the principal amount so paid or prepaid (or not borrowed) (the “Incremental
Payment”) for the period from the date of such payment or prepayment (or
failure to borrow) to the last day of the then current Interest Period (or, in
the case of a failure to borrow, to the last day of the Interest Period which
would have commenced on the date specified therefor in the relevant notice) at
the Applicable LIBO Rate provided for herein with respect to such Incremental
Payment, over (2) the amount of interest that would have accrued (as reasonably
determined by such Lender), based upon the interest rate established in the
London interbank market for Dollar deposits, on amounts comparable to the
Incremental Payment and maturities comparable to such period. A determination of
any Lender as to the amounts payable pursuant to this Section 2.8 shall
be conclusive absent manifest error.

 

2.9           Taxes.

 

(1)           Any and all payments by
or on account of any obligation of the Borrowers hereunder or under any other
Loan Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrowers shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.9) the Administrative Agent or Lender (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrowers shall make such deductions and
(iii) the Borrowers shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

 

(2)           In addition, the
Borrowers shall pay any Other Taxes to the relevant Governmental Authority in
accordance with applicable law.

 

(3)           The Borrowers shall
indemnify the Administrative Agent and each Lender, within ten (10) Business
Days after written demand therefor, for the full amount of any indemnified Taxes
or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted
on or attributable to amounts payable under this Section 2.9) paid by
the Administrative Agent or such Lender, as the case may be, and any penalties,
interest (except to the extent such penalties and/or interest arise as a result
of a Lender’s delay in dealing with any such Indemnified Tax) and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability

 

15

 

delivered to the Borrowers by a Lender or by
the Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

 

(4)           As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by the Borrowers to a
Governmental Authority, the Borrowers shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.

 

(5)           Each Foreign Lender
shall deliver to the Borrowers (with copies to the Administrative Agent) on or
before the date hereof (or in the case of a Foreign Lender who became a Lender
by way of an assignment, on or before the date of the assignment) or at least
five (5)  Business Days prior to
the first date for any payment herewith to such Lender, and from time to time
as required for renewal under applicable law, such certificates, documents or
other evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including, without limitation, Internal Revenue Service Form W-8BEN or
W-ECI, as appropriate, and any other certificate or statement of exemption
required by Section 87 1(h) or Section 88 1(c) of the Code or any subsequent
version thereof, properly completed and duly executed by such Lender
establishing that payments to such Lender hereunder are not subject to
withholding or are subject to a reduced rate of withholding under the Code or
applicable tax treaty (“Evidence of No Withholding”). Each Foreign
Lender shall promptly notify the Borrowers and the Administrative Agent of any
change in its applicable lending office and upon written request of the
Borrowers or the Administrative Agent shall, prior to the immediately following
due date of any payment by the Borrowers hereunder or under any other Loan
Document, deliver Evidence of No Withholding to the Borrowers and the
Administrative Agent. The Borrowers shall be entitled to rely on such forms in
their possession until receipt of any revised or successor form pursuant to
this Section 2.9(5). if a Lender fails to provide Evidence of
No Withholding as required pursuant to this Section 2.9(5),  then (i) the Borrowers (or the Administrative Agent) shall
be entitled to deduct or withhold from payments to Administrative Agent or such
Lender as a result of such failure, as required by law, and (ii) the Borrowers
shall not be required to make payments of additional amounts with respect to
such withheld Taxes pursuant to Section 2.9(1) to the extent such
withholding is required solely by reason of the failure of such Lender to
provide the necessary Evidence of No Withholding. A Foreign Lender shall not be
required to deliver any form or statement pursuant to Section 2.9(5) that such
Foreign Lender is not legally able to deliver.

 

2.10         Post-Default Interest.

 

During such
time as there shall have occurred and be continuing an Event of Default, all
Obligations outstanding shall, at the election of the Administrative Agent,
bear interest at a per annum rate equal to three percent (3.0%) above the
Applicable LIBO Rate during the applicable calculation period.

 

16

 

2.11         Computations.

 

All
computations of interest and fees payable hereunder shall be based upon a year
of 360 days for the actual number of days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year).

 

ARTICLE III.

PAYMENTS

 

3.1           Evidence of Indebtedness.

 

The obligation
of the Borrowers to repay the Loan shall be evidenced by notations on the books
and records of the Lenders. Such books and records shall constitute prima facie
evidence thereof. Any failure to record the interest rate applicable thereto or
any other information regarding the Obligations, or any error in doing so,
shall not limit or otherwise affect the obligation of the Borrowers with
respect to any of the Obligations. Upon the request of a Lender, the Borrowers
shall promptly execute and deliver to such Lender a Note evidencing such Lender’s
Percentage Share of the Loan.

 

3.2           Nature and Place of Payments.

 

All payments
made on account of the Obligations shall be made by the Borrowers, without
setoff or counterclaim, in lawful money of the United States of America in
immediately available same day funds, free and clear of and without deduction
for any Indemnified Taxes or Other Taxes, fees or other charges of any nature
whatsoever imposed by any taxing authority and must be received by the
Administrative Agent by 1:00 p.m. (New York time) on the day of payment, it
being expressly agreed and understood that if a payment is received after 1:00
p.m. (New York time) by the Administrative Agent, such payment will be
considered to have been made by the Borrowers on the next succeeding Business
Day and interest thereon shall be payable by the Borrowers at the rate
otherwise applicable thereto during such extension. All payments on account of
the Obligations shall be made to the Administrative Agent through the Contact
Office. If any payment required to be made by the Borrowers hereunder becomes
due and payable on a day other than a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and interest thereon shall be
payable at the then applicable rate during such extension.

 

3.3           Prepayments.

 

(1)           Upon not less than five
(5) Business Days’ prior written notice to the Administrative Agent (which
shall promptly provide telephonic notice of the receipt thereof to each of the
Lenders), the Borrowers may voluntarily prepay principal amounts outstanding
under the Loan in whole or in part; provided, however, that voluntary
prepayments shall be in the minimum amount of $1,000,000 and integral multiples
of $100,000 in excess thereof. Voluntary prepayments of principal pursuant to this
Section 3.3(1), shall not relieve Borrowers from the obligation to make
prepayments pursuant to Section 3.3(2).

 

(2)           Subject to Section
3.3(3) and Section 3.3(4), the Borrowers shall

 

17

 

remit to the Administrative Agent as a
mandatory prepayment for application against the outstanding principal balance
of the Loan:

 

(A)          Concurrently with the
consummation of any Disposition, Financing, or Securities issuance, that dollar
amount equal to one hundred percent (100%) of Net Cash Proceeds in respect of
any Disposition or Financing of any Properties of any CNL Entity, or the
issuance of debt or equity Securities by such Persons (but in all events any
such debt or equity issuance shall otherwise comply with the terms of this
Agreement); provided, however, that with respect to a Securities issuance only,
to the extent the outstanding principal balance of the Loan is less than
$600,000,000 after giving effect to the application of all or part of the Net
Cash Proceeds of such issuance towards prepayment of the Loan, the Borrowers
shall only be required to remit as a mandatory prepayment that dollar amount
equal to fifty percent (50%)  of
the remaining Net Cash Proceeds in respect of such issuance or any subsequent
issuance of Securities (but in all events any such issuance shall otherwise
comply with the terms of this Agreement); provided, further, that during each
calendar quarter up to $35,000,000 of Net Cash Proceeds from the issuance of
equity Securities may be paid as Distributions to the shareholders of CNL
without any mandatory prepayment as otherwise provided herein, but: (i) in no
event shall such Distributions exceed $75,000,000 over the term of the
Facility; and (ii) if a Noticed Event of Default shall have occurred,
Distributions may only be made to the extent permitted in Section 8.11.

 

(B)           With respect to any
principal payments received by any CNL Entity in respect of any Disposition
Promissory Note, (i) promptly, but in no event more than three (3) Business
Days after the subject payment, one hundred percent (100%) of any such
principal payments; provided, however, that no such payment need be made to
Administrative Agent pursuant to this clause (i) until the aggregate of all
principal sums then paid in respect of such Disposition Promissory Notes, and
not previously paid to Administrative Agent pursuant to clause (ii) below,
exceed $1,000,000; and (ii) on the first day of each January, April, July, and
October, that dollar amount equal to one hundred percent (100%) of any
principal payments made with respect to any Disposition Promissory Note during
the immediately preceding fiscal quarter, less any sums paid to the
Administrative Agent during such preceding fiscal quarter pursuant to clause
(i) above.

 

(C)           With respect to any
payments to be made to or on behalf of any CNL Entity as compensation for such
CNL Entity entering into a management, franchise, or similar agreement with
respect to any CNL Resort Property (whether or not such compensation is paid upon
execution, in a lump sum, over time, or pursuant to a deferred payment
arrangement, but not including any rent guaranty, credit support or
enhancement, or similar arrangement entered into by the CNL Resort Property
Owner in the Ordinary Course of Business), promptly, but in no event more than
three (3) Business Days after entering into such compensation arrangement, one
hundred percent (100%) of any such compensation.

 

(3)           The Borrowers shall pay
in connection with any prepayment

 

18

 

hereunder, whether voluntary or mandatory,
all interest accrued but unpaid on that portion of the Loan to which such
prepayment is applied, and all amounts payable pursuant to Section 2.8
above, concurrently with payment of any principal amounts.

 

3.4           Allocation of Payments Received.

 

(1)           Prior to the occurrence
of an Event of Default and acceleration of the Obligations, and unless
otherwise expressly provided herein, all amounts received by the Administrative
Agent on account of the Obligations shall be disbursed by the Administrative
Agent to the Lenders pro rata in accordance with their respective Percentage
Shares, by wire transfer of like funds received on the date of receipt if
received by the Administrative Agent before 1:00 p.m. (New York time) or if
received later, by 1:00 p.m. (New York time) on the next succeeding Business
Day, without further interest payable by the Administrative Agent.

 

(2)           Following the
occurrence of an Event of Default and acceleration of the Obligations, all
amounts received by the Administrative Agent on account of the Obligations,
shall be promptly disbursed by the Administrative Agent as follows:

 

(A)          First, to the payment of
expenses incurred by the Administrative Agent in the performance of its duties
and the enforcement of the rights of the Lenders under the Loan Documents,
including, without limitation, all costs and expenses of collection, reasonable
attorneys’ fees (including all allocated costs of internal counsel), court
costs and other amounts payable as provided in Section 7.6 below;

 

(B)           Then, to the Lenders,
pro rata in accordance with their respective Percentage Shares, until interest
accrued on the Loan has been paid in full;

 

(C)           Then, to the Lenders,
pro rata in accordance with their respective Percentage Shares, until principal
under the Loan has been paid in full;

 

(D)          Then, to the Lenders,
pro rata to each Lender in accordance with the amount expressed in a
percentage, which the amount of remaining Obligations owed to such Lender bears
to all remaining Obligations held by all Lenders, until all other Obligations
have been paid in full.

 

(3)           The order of priority
set forth in Section 3.4(2) and the related provisions of this Agreement
are set forth solely to determine the rights and priorities of the
Administrative Agent and the other Lenders as among themselves. The order of
priority set forth in clauses (B) through (D) of Section 3.4(2) may at
any time and from time to time be changed by the Required Lenders without
necessity of notice to or consent of or approval by the Borrowers or any other
Person. The order of priority set forth in clause (A) of Section 3.4(2)
may be changed only with the prior written consent of the Administrative Agent.

 

19

 

ARTICLE IV.

CREDIT SUPPORT

 

4.1           Guaranties.

 

As credit
support for the Obligations, on or before the Closing Date, CNL shall execute
and deliver to the Administrative Agent the Guaranty.

 

4.2           Pledge Agreements.

 

As credit
support for the Obligations, on or before the Closing Date, (i) CNL Partners
shall execute and deliver to the Administrative Agent a Pledge Agreement
pursuant to which it shall pledge to the Administrative Agent, all of its
direct ownership interests in CNL Resort and CNL Resort GP; and (ii) CNL
Hospitality GP Corp. and CNL Hospitality LP Corp shall execute and deliver to
the Administrative Agent a Pledge Agreement pursuant to which they shall pledge
to the Administrative Agent, all of their direct ownership interests in CNL Partners;
and (iii) CNL shall execute and deliver to the Administrative Agent a Pledge
Agreement pursuant to which it shall pledge to the Administrative Agent, all of
its direct ownership interests in its Wholly-Owned Subsidiaries listed on Schedule
4.2 (such listed Subsidiaries, along with CNL Resort, CNL Resort GP, and
CNL Partners (each in their capacities as pledged entities) being the “Pledged
Subsidiaries” and all other Wholly-Owned Subsidiaries of CNL shall be
referred to herein as the “Excluded Wholly-Owned Subsidiaries”).

 

ARTICLE V.

CONDITIONS
PRECEDENT

 

5.1           Conditions to Funding of Loan.

 

As conditions
precedent to the agreement of the Lenders to fund their respective Percentage
Shares of the Loan:

 

(1)           The Borrowers and CNL
shall have delivered or shall have caused to be delivered to the Administrative
Agent, in form and substance satisfactory to the Lenders and their counsel and
duly executed by the appropriate Persons (with sufficient copies for each of
the Lenders), each of the following:

 

(A)          This Agreement;

 

(B)           To the extent requested
by any Lender pursuant to Section 3.1 above, a Note payable to such
Lender;

 

(C)           The Guaranty;

 

(D)          The Pledge Agreements;

 

(E)           A certificate of the
Secretary or Assistant Secretary of the general partner or managing member (or
other executive representative) of those Borrower Parties which are
partnerships or limited liability companies attaching copies or other proper
evidence of resolutions duly adopted by the Board of Directors of such general
partner or managing member approving the execution, delivery and

 

20

 

performance of the Loan Documents on behalf
of such Borrower Parties and certifying the names and true signatures of the
officers of such general partner or managing member authorized to sign the Loan
Documents to which such Borrower Parties are party;

 

(F)           A certificate or
certificates of the Secretary or an Assistant Secretary of those Borrower
Parties which are corporations attaching copies or other proper evidence of
resolutions duly adopted by the Board of Directors of such Borrower Parties
approving the execution, delivery and performance of the Loan Documents to
which such Borrower Parties are party and certifying the names and true
signatures of the officers of each of such Borrower Parties authorized to sign
the Loan Documents on behalf of such Borrower Parties;

 

(G)           The following opinions
of counsel for the Borrower Parties, each in form and substance reasonably
acceptable to the Administrative Agent and the Lenders: (i) opinions of
Lowndes, Drosdick, Doster, Kantor & Reed, P.A. as to corporate,
partnership, enforceability and other matters regarding the Borrower Parties
and certain Pledgors under New York and Florida law, (ii) an opinion of Tydings
and Rosenberg LLP as to corporate matters regarding CNL under Maryland law,
(iii) an opinion of Greenberg Traurig as to corporate, partnership, security
and other matters under Delaware law and as to the KSL Acquisition and KSL
Conversion; and (iv) an opinion of Greenberg Traurig as to the qualification of
CNL as a REIT under the Code, that CNL will be organized and operated in a
manner so as to continue to qualify as a REIT subsequent to the KSL Acquisition
and the KSL Conversion, and certain related opinions.

 

(H)          Copies of the
Organizational Documents of each of the Borrower Parties, certified by the
Secretary of State of the state of formation of such Person as of a recent
date;

 

(I)            Copies of the
Organizational Documents of each of the Pledged Subsidiaries, certified by the
Secretary or an Assistant Secretary of such Person (or if such Person is a
limited partnership or limited liability company, an authorized representative
of its general partner or manager or other executive representative) as of the
date of this Agreement as being accurate and complete;

 

(J)            A certificate of
authority and good standing or analogous documentation as of a recent date for
each of the Borrower Parties and the Pledged Subsidiaries, for each state in
which such Person is organized, formed or incorporated, as applicable, and each
state with respect to which the failure to be in good standing will have or is
reasonably likely to have a Material Adverse Effect with respect to such
Person;

 

(K)          From a Responsible
Officer of each of the Borrower Parties, a Closing Certificate dated as of the
Closing Date;

 

(L)           Confirmation from the
Administrative Agent that all fees

 

21

 

required to be paid by the Borrowers on or
before the Closing Date (including pursuant to the Fee Letter) have been, or
will upon the funding of the Loan be, paid in full;

 

(M)         Evidence satisfactory to
the Administrative Agent that all reasonable costs and expenses of the
Administrative Agent and the Lenders, including, without limitation, fees of
outside counsel and fees of third party consultants and appraisers, required to
be paid by the Borrowers on or prior to the Closing Date have been, or will
upon the funding of the Loan be, paid in full;

 

(2)           Each of the requirements
set forth on Schedule 5.1(2) attached hereto shall have been met to the
satisfaction of the Administrative Agent and the Lenders.

 

(3)           All representations and
warranties of the Borrower Parties set forth herein and in the other Loan
Documents shall be accurate and complete in all material respects as if made on
and as of the Closing Date (unless any such representation and warranty speaks
as of a particular date, in which case it shall be accurate and complete in all
material respects as of such date).

 

(4)           There shall not have
occurred and be continuing as of the Closing Date any Event of Default or
Potential Default.

 

(5)           All acts and
conditions (including, without limitation, the obtaining of any third party
consents and necessary regulatory approvals and the making of any required
filings, recordings or registrations) required to be done and performed and to
have happened precedent to (i) the execution, delivery and performance of the
Loan Documents by each of the Borrower Parties; (ii) the consummation of the
KSL Acquisition; and (iii) and the consummation of the KSL Conversion shall
have been done and performed.

 

(6)           All documentation,
including, without limitation, documentation for corporate and legal
proceedings in connection with the transactions contemplated by the Loan
Documents shall be satisfactory in form and substance to the Administrative
Agent, the Lenders and their counsel.

 

5.2           Outside Closing Date.

 

If all
conditions precedent set forth in Section 5.1 above shall not have been
met to the satisfaction of the Administrative Agent and the Lenders on or
before April 30, 2004, then the agreement of the Lenders to fund their
respective Percentage Shares of the Loan shall terminate and this Agreement
shall automatically be deemed of no further force or effect (except to the
extent terms and provisions of this Agreement specifically provide that they
shall survive termination hereof).

 

ARTICLE VI.

REPRESENTATIONS
AND WARRANTIES

 

As an
inducement to the Administrative Agent and each Lender to enter into this

 

22

 

Agreement and for the Lenders to advance their respective Percentage
Shares of the Loan, each of the Borrower Parties, collectively and severally,
represent and warrant, as of the Closing Date (or such later date as otherwise
expressly provided in this Agreement) to the Administrative Agent and each
Lender that:

 

6.1           Financial Condition.

 

Complete and
accurate copies of the following financial statements and materials have been
delivered to the Administrative Agent: (i) audited financial statements of CNL
for 2002 and 2003 (the “Initial Financial Statements”) and (ii) a pro
forma balance sheet and income statement (“Pro Forma Statement”) dated
December 31, 2003 reflecting the pro forma combined performance of the
Consolidated Entities and the CNL Resort Principal Entities.

 

All financial
statements included in the Initial Financial Statements were prepared in all
material respects in conformity with GAAP, except as otherwise noted therein,
and fairly present in all material respects the respective consolidated
financial positions, and the consolidated results of operations and cash flows
for each of the periods covered thereby of CNL and its consolidated
Subsidiaries as at the respective dates thereof. None of the Borrower Parties
or any of their Subsidiaries has any Contingent Obligation, contingent
liability or liability for any taxes, long-term leases or commitments, not
reflected in its audited financial statements delivered to the Administrative
Agent on or prior to the Closing Date or otherwise disclosed to the
Administrative Agent and the Lenders in writing, which will have or is
reasonably likely to have a Material Adverse Effect. The Pro Forma Statement
has been prepared in good faith based upon reasonable assumptions.

 

6.2           No Material Adverse Effect.

 

Since the
Statement Date no event has occurred which has resulted in, or is reasonably
likely to have, a Material Adverse Effect.

 

6.3           Compliance with Laws and Agreements.

 

Each of the
CNL Entities is in compliance with all Requirements of Law and Contractual
Obligations, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

6.4           Organization,
Power; Authorization; Enforceability.

 

(1)           Each Borrower Party and
Designated Entity (A) is either a corporation, a limited partnership or a
limited liability company duly incorporated, formed or organized, validly
existing, and in good standing under the laws of the State of its
incorporation, organization and/or formation, (B) is duly qualified to do
business and is in good standing under the laws of each jurisdiction in which
failure to be so qualified and in good standing will have or is reasonably
expected to have a Material Adverse Effect, and (C) has all requisite
corporate, partnership or limited liability company power and authority to own,
operate and encumber its Property and to

 

23

 

conduct its business as presently conducted
and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by this Agreement. Each of CNL
Partners and CNL Resort is a partnership for purposes of federal income
taxation and for purposes of the tax laws of any state or locality in which it
is subject to taxation based on its income.

 

(2)           True, correct and
complete copies of the Organizational Documents of each Borrower Party and
Designated Entity, and of all documents evidencing or governing the KSL
Acquisition and KSL Conversion (collectively, the “KSL
Acquisition/Conversion Documents”), have been delivered to the
Administrative Agent and have not been Modified except to the extent indicated
therein. All of the Organization Documents are in full force and effect, and
there are no defaults under such Organizational Documents (including with
respect to any restrictions on Indebtedness contained therein) or the KSL
Acquisition/Conversion Documents, and no events which, with the passage of time
or giving of notice or both, would constitute a default under such
Organizational Documents (including with respect to any restrictions on
Indebtedness contained therein) or the KSL Acquisition/Conversion Documents.

 

(3)           The Borrower Parties and
Pledgors have the requisite power and authority to execute, deliver and perform
this Agreement and each of the other Loan Documents which are required to be
executed on their behalf. The execution, delivery and performance of each of
the Loan Documents which must be executed in connection with this Agreement by
any Borrower Party or Pledgor and to which any Borrower Party or Pledgor is a
party and the consummation of the transactions contemplated thereby are within
such Person’s partnership, company, or corporate powers, have been duly
authorized by all necessary partnership, company, or corporate action and such
authorization has not been rescinded. No other partnership, company, or
corporate action or proceedings on the part of any such Person is necessary to
consummate such transactions,

 

(4)           Each of the Loan
Documents to which any Borrower Party or Pledgor is a party has been duly
executed and delivered on behalf of such Person and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms (subject to bankruptcy, insolvency, reorganization, or other laws
affecting creditors’ rights generally and to principles of equity, regardless
of whether considered in a proceeding in equity or at law), is in full force and
effect and all the terms, provisions, agreements and conditions set forth
therein and required to be performed or complied with by such Person on or
before the Closing Date have been performed or complied with, and no Potential
Default or Event of Default exists thereunder.

 

6.5           No Conflict.

 

The execution,
delivery and performance of the Loan Documents, the borrowing hereunder and the
use of the proceeds thereof, and the KSL Acquisition/Conversion Documents will
not violate any material Requirement of Law or any Organizational Document, any
Hotel Management Agreement or Franchise Agreement identified in Schedule 6.5 attached hereto, or any material
Contractual

 

24

 

Obligation of any of the CNL Entities; or create or result in the
creation of any Lien on any material assets of any of the CNL Entities other
than the Liens created by the Loan Documents.

 

6.6           No Material Litigation.

 

Except as
disclosed on Schedule 6.6 hereto, no litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower Parties, threatened by or against any CNL Entity or
against any such Person’s Properties or revenues which is likely to be
adversely determined and which, if adversely determined, either individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.

 

6.7           Taxes.

 

All tax
returns, reports and similar statements or filings of the CNL Entities have
been timely filed. Except for Permitted Encumbrances, all taxes, assessments,
fees and other charges of Governmental Authorities upon such Persons and upon
or relating to their respective Properties, assets, receipts, sales, use,
payroll, employment, income, licenses and franchises which are shown in such
returns or reports to be due and payable have been paid, except to the extent
(i) such taxes, assessments, fees and other charges of Governmental Authorities
are subject to a Good Faith Contest; or (ii) the non-payment of such taxes,
assessments, fees and other charges of Governmental Authorities would not,
individually or in the aggregate, result in a Material Adverse Effect. The
Borrower Parties have no knowledge of any proposed tax assessment against any
CNL Entity that will have or is reasonably likely to have a Material Adverse
Effect.

 

6.8           Investment Company Act.

 

None of the
Borrower Parties or Pledgors, nor any Person controlling such entities is an
“investment company” or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940 (as amended from time
to time).

 

6.9           Subsidiary Entities.

 

The Borrower
Parties have fully disclosed to Lenders all material aspects of the ownership
structure of the Borrower Parties and their respective Subsidiary Entities, and
have disclosed to Lenders (1)the correct legal name, the type of organization,
and the jurisdiction of incorporation or organization of each Subsidiary
Entity, and (2) the class of outstanding Capital Stock of such Persons along
with the percentage thereof owned by the Borrower Parties and their
Subsidiaries. None of such issued and outstanding Capital Stock or Securities
of any CNL Entity is subject to any vesting, redemption, or repurchase
agreement, and there are no warrants or options outstanding with respect to
such Securities, except as disclosed to Administrative Agent in writing prior
to the Closing Date. The outstanding Capital Stock of each Subsidiary

 

25

 

Entity is duly authorized, validly issued, fully paid and
nonassessable. Each CNL Core Entity: (A) is a corporation, limited liability
company, or partnership, which is duly organized, validly existing and, if
applicable, in good standing under the laws of the jurisdiction of its
organization, (B) is duly qualified to do business and, if applicable, is in
good standing under the laws of each jurisdiction in which failure to be so
qualified and in good standing would limit its ability to use the courts of
such jurisdiction to enforce Contractual Obligations to which it is a party,
and (C) has all requisite power and authority to own, operate and encumber its
Property and to conduct its business as presently conducted and as proposed to
be conducted hereafter.

 

6.10         Federal Reserve Board Regulations.

 

None of the
Borrower Parties or Pledgors is engaged or will engage, principally or as one
of its important activities, in the business of extending credit for the
purpose of “purchasing” or “carrying” any “Margin Stock” within the respective
meanings of such terms under Regulations U, T and X. No part of the proceeds of
the Loan will be used for “purchasing” or “carrying” “Margin Stock” as so
defined or for any purpose which violates, or which would be inconsistent with,
the provisions of, the Regulations of the Board of Governors of the Federal
Reserve System.

 

6.11         ERISA Compliance.

 

Except as
disclosed on Schedule 6.11:

 

(1)           Each Plan is in
compliance with the applicable provisions of ERISA, the Code and other federal
or state law failure to comply with which would reasonably be likely to result
in a Material Adverse Effect. Each Plan which is intended to qualify under
Section 40 1(a) of the Code has received a favorable determination letter from
the IRS, and to the best knowledge of the Borrower Parties, nothing has
occurred which would cause the loss of such qualification.

 

(2)           There are no pending
or, to the best knowledge of the Borrower Parties, threatened claims, actions
or lawsuits, or action by any Governmental Authority, with respect to any Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect.

 

(3)           No ERISA Event has
occurred or is reasonably expected to occur with respect to any Pension Plan
or, to the best knowledge of the Borrower Parties, Multiemployer Plan which has
resulted or could reasonably be expected to result in a Material Adverse
Effect.

 

(4)           No Pension Plan has any
Unfunded Pension Liability which has resulted or could reasonably be expected
to result in a Material Adverse Effect.

 

(5)           None of the
Borrower Parties or their respective Subsidiaries, nor any ERISA Affiliate has
incurred, nor reasonably expects to incur, any liability under

 

26

 

Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section 4007 of ERISA)
which has resulted or could reasonably be expected to result in a Material
Adverse Effect.

 

(6)           None of the Borrower
Parties or their respective Subsidiaries, nor any ERISA Affiliate has incurred
nor reasonably expects to incur any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan which has resulted or could reasonably be expected to result in a Material
Adverse Effect.

 

(7)           None of the Borrower
Parties or their respective Subsidiaries, nor any ERISA Affiliate has
transferred any Unfunded Pension Liability to any person or otherwise engaged
in a transaction that is subject to Section 4069 or 42 12(c) of ERISA which has
resulted or could reasonably be expected to result in a Material Adverse
Effect.

 

6.12         Assets and Liens.

 

Each of the
CNL Entities has good and marketable title to all Property and assets reflected
in the financial statements referred to in Section 6.1 above, except
Property and assets sold or otherwise disposed of in the Ordinary Course of
Business subsequent to the respective dates thereof, None of the CNL Entities
has outstanding Liens on any of its Properties or assets nor are there any
security agreements to which it is a party, except for Liens permitted in
accordance with Section 8. 1.

 

(1)           The CNL Resort Property
Owners have good and marketable title to the CNL Resort Properties identified
in Schedule G-2, free and clear of all Liens whatsoever except for Liens
permitted in accordance with Section 8.1. None of the Permitted
Encumbrances with respect to the CNL Resort Properties have a CNL Resort
Material Adverse Effect.

 

6.13         Securities Acts.

 

None of the
CNL Entities have issued any unregistered securities in violation of the
registration requirements of Section 5 of
the Securities Act of 1933, (as amended from time to time, the “Ac!”) or any
other law, nor are they in violation of any rule, regulation or requirement
under the Act, or the Securities Exchange Act of 1934, (as amended from time to
time) other than violations which could not reasonably be expected to have a
Material Adverse Effect. None of the CNL Entities (including, but limited to
the Borrower Parties’ best knowledge with respect to, the CNL Resort Entities)
is required to qualify an indenture under the Trust Indenture Act of 1939, (as
amended from time to time) in connection with its execution and delivery of
this Agreement or the incurrence of Indebtedness hereunder.

 

6.14         Consents. Etc.

 

Except as
disclosed in Schedule 6.14, no consent, approval or authorization of,

 

27

 

or registration, declaration or filing with any Governmental Authority
or any other Person is required (i) to consummate the KSL Acquisition or the
KSL Conversion, (ii) in connection with the execution and delivery of the Loan
Documents by the Borrower Parties and Pledgors, (iii) in connection with the
execution and delivery of the KSL Acquisition/Conversion Documents by any CNL
Entities; or (iv) the performance of or compliance with the terms, provisions
and conditions of the Loan Documents or the KSL Acquisition/Conversion
Documents by such Persons, other than those that have been obtained or will be
obtained by the legally required time.

 

6.15         Hazardous Materials.

 

The CNL
Entities (including, but limited to the Borrower Parties’ best knowledge with
respect to, the CNL Resort Entities) have in place and have materially adhered
to an established enterprise-wide environmental liability and hazardous
materials policy requiring commercially reasonable efforts to investigate the
past and present environmental condition and use of all Properties as they are
acquired, and to maintain material compliance with all material Hazardous
Materials Laws. Based on such investigation (to the extent applicable), except
as otherwise disclosed on Schedule 6.15,to the best knowledge of the Borrower Parties: (1) no Hazardous Materials
have been discharged, disposed of, or otherwise released on, under, or from the
Real Properties so as to be reasonably expected to result in both (A) a
violation of Hazardous Materials Laws, and (B) a CNL Resort Material Adverse
Effect or a CNL Core Entity Material Adverse Effect; (2) the CNL Entities have
obtained all material environmental, health and safety permits and licenses
necessary for their respective operations, and all such permits are in good
standing and the holder of each such permit is currently in compliance with all
terms and conditions of such permits, except to the extent the failure to
obtain such permits or comply therewith is not reasonably expected to result in
(i) a CNL Resort Material Adverse Effect, or (ii) a material violation of
Hazardous Materials Laws which would be reasonably expected to have a CNL Core
Entity Material Adverse Effect; (3) none of the Real Properties owned by a CNL
Entity is listed or proposed for listing on the National Priorities List (“~”)
pursuant to CERCLA or on the Comprehensive Environmental Response Compensation
Liability Information System List (“CERCLIS”) or any similar applicable state
list of sites requiring remedial action under any Hazardous Materials Laws; (4)
no CNL Entity has sent or directly arranged for the transport of any hazardous
waste to any site listed or proposed for listing on the NPL, CERCLIS or any
similar state list if doing so could reasonably be expected to result in a CNL
Resort Material Adverse Effect or a CNL Core Entity Material Adverse Effect;
(5) there is not now on or in any Real Property: (a) any landfill or surface
impoundment; (b) any underground storage tanks; (c) any asbestos-containing
material; or (d) any polychlorinated biphenyls (PCB), which in the case of any
of clauses (a) through (d) could reasonably result in a violation of any
Hazardous Materials Laws and a CNL Resort Material Adverse Effect or a CNL Core
Entity Material Adverse Effect; (6) no environmental Lien has attached to any
Real Properties; and (7) no other event has occurred with respect to the
presence of Hazardous Materials on or under any Real Property owned by any CNL
Entity, which would reasonably be expected to result in losses or liabilities
in excess of $10 million in the aggregate.

 

28

 

6.16         Regulated Entities.

 

None of the
CNL Entities: (1) is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other Federal or state statute or
regulation limiting its ability to incur Indebtedness, or (2) is a “foreign
person” within the meaning of Section 1445 of the Code.

 

6.17         Copyrights.
Patents, Trademarks and Licenses, etc.

 

The CNL
Entities own or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are necessary for the
operation of their respective businesses, without conflict with the rights of
any other Person, except to the extent that any such conflict or infringements,
individually or in the aggregate, which would not result, or be expected to
result, in a Material Adverse Effect. No slogan or other advertising device,
product, process, method, substance, part or other material now employed, or
now contemplated to be employed, by the CNL Entities infringes upon any rights
held by any other Person, except for any infringements, individually or in the
aggregate, which would not result, or be expected to result, in a Material
Adverse Effect.

 

6.18         REIT Status.

 

CNL (1) is
organized and operated so as to qualify as a real estate investment trust
(“REIT”) within the meaning of Section 856 et seq. of the Code for its taxable
year ending December 31, 2004, (2) has qualified as a REIT for each of its
taxable years beginning with its first taxable year ended December 31, 1997,
(3) will continue to qualify as a RELT subsequent to the KSL Acquisition and
the KSL Conversion and (4) has not engaged in any “prohibited transaction” as
defined in Section 857(b)(6)(B)(iii)  of
the Code other than any such transaction that would not have a CNL Core Entity
Material Adverse Effect.

 

6.19         Insurance.

 

Schedule 6.19 accurately describes the overall
company wide insurance coverages for the CNL Entities as of the Closing Date.
Such insurance coverages are currently in full force and effect, in compliance
with the requirements of section 7.8 hereof.

 

6.20         Full Disclosure.

 

The
information provided to the Administrative Agent and the Lenders by or on
behalf of the Borrower Parties relating to the CNL Entities and the
transactions contemplated under the Loan Documents (including without
limitation and any information provided in connection with Schedule 5.1(2))
shall not result in any Core Material Inaccuracy.

 

29

 

6.21         Indebtedness.

 

Schedule 6.21 sets forth, as of March 31,
2004, all Indebtedness for borrowed money of each of the CNL Entities (other
than Indebtedness among CNL Entities), and, except as set forth on such Schedule
6.21, there are rio defaults in the payment of principal or interest on any
such Indebtedness, and no payments thereunder have been deferred or extended
beyond their stated maturity, and there has been no material change in the type
or amount of such Indebtedness since December 31, 2003.

 

6.22         Real Property.

 

Set forth on Schedule
6.22 is a list, as of the date of this Agreement, of all of the Projects of
the CNL Entities (and with respect to the CNL Resort Property Owners, the
hotels and resorts owned by such Persons), indicating in each case the identity
of the owner, lessee and manager and the location of the respective property.

 

6.23         Brokers.

 

None of the
Borrower Parties has dealt with any broker or finder with respect to the
transactions embodied in this Agreement and the other Loan Documents.

 

6.24         No Default.

 

No Potential
Default or Event of Default has occurred and is continuing.

 

6.25         Solvency.

 

After giving
effect to the Loan, and the disbursement of the proceeds thereof pursuant to
the Borrowers’ instructions, the Borrower Parties and Pledgors are each
Solvent.

 

6.26         Advisory Agreement.

 

The advisory
agreement between CNL and CNL Hospitality Corp. (the “Advisory Agreement”)
relating to management services for CNL (i) is currently scheduled to terminate
on March 31, 2005 (subject to annual optional extensions pursuant to the terms
thereto), (ii) is in full force and effect, and (iii) has not been Modified
except as disclosed in writing to the Administrative Agent and the Lenders
prior to the Closing Date.

 

ARTICLE VII.

AFFIRMATIVE
COVENANTS

 

As an
inducement to the Administrative Agent and each Lender to enter into this
Agreement and for the Lenders to advance their respective Percentage Shares of
the Loan, each of the Borrower Parties, collectively and severally, hereby
covenants and agrees with the Administrative Agent and each Lender that, as
long as any Obligations remain unpaid:

 

30

 

7.1           Financial Statements.

 

The Borrower
Parties shall maintain, for themselves, and shall cause each of the CNL
Entities to maintain a system of accounting established and administered in
accordance with sound business practices to permit preparation of consolidated
financial statements in conformity with GAAP. Each of the financial statements
and reports described below shall be prepared from such system and records and
in form reasonably satisfactory to the Administrative Agent, and shall be
provided to Administrative Agent:

 

(1)           As soon as practicable,
and in any event within ninety (90) days after the close of each fiscal year of
CNL, the consolidated balance sheet of CNL and its Subsidiaries as of the end
of such fiscal year and the related consolidated statements of income,
stockholders’ equity and cash flow of CNL and its Subsidiaries for such fiscal
year, setting forth in each case in comparative form the consolidated or
combined figures, as the case may be, for the previous fiscal year, all in
reasonable detail and accompanied by a report thereon of Price Waterhouse
Coopers or other independent certified public accountants of recognized
national standing selected by the Borrowers and reasonably satisfactory to the
Administrative Agent, which report shall be unqualified (except for
qualifications that the Required Lenders do not, in their discretion, consider
material) and shall state that such consolidated financial statements fairly
present the financial position of CNL and its Subsidiaries as at the date
indicated and the results of their operations and cash flow for the periods
indicated in conformity with GAAP (except as otherwise stated therein) and that
the examination by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards;

 

(2)           As soon as practicable,
and in any event within forty-five (45) days after the close of each of the
first three fiscal quarters of each fiscal year of CNL, for CNL and its
Subsidiaries, unaudited balance sheets as at the close of each such period and
the related combined statements of income and cash flow of CNL and its
Subsidiaries for such quarter and the portion of the fiscal year ended at the
end of such quarter, setting forth in each case in comparative form the
consolidated or combined figures, as the case may be, for the corresponding
periods of the prior fiscal year, all in reasonable detail and in conformity
with GAAP (except as otherwise stated therein), together with a representation
by a Responsible Financial Officer, as of the date of such financial
statements, that such financial statements have been prepared in accordance
with GAAP (provided, however, that such financial statements may not include all
of the information and footnotes required by GAAP for complete financial
information) and reflect all adjustments that are, in the opinion of
management, necessary for a fair presentation of the financial information
contained therein;

 

(3)           Together with each
delivery of any quarterly or annual report pursuant to paragraphs (1) through
(2) of this Section 7.1, CNL shall deliver a Compliance Certificate
signed by CNL’s Responsible Financial Officer representing and certifying (1)
that the Responsible Financial Officer signatory thereto has reviewed the terms
of the Loan Documents, and has made, or caused to be made under his/her

 

31

 

supervision, a review in reasonable detail of
the transactions and consolidated financial condition of CNL and its
Subsidiaries, during the fiscal quarter covered by such reports, that such
review has not disclosed the existence during or at the end of such fiscal
quarter, and that such officer does not have knowledge of the existence as at
the date of such Compliance Certificate, of any condition or event which
constitutes an Event of Default or Potential Default or mandatory prepayment
event, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Borrowers, CNL or
their Subsidiaries has taken, is taking and proposes to take with respect
thereto, (2) the calculations (with such specificity as the Administrative
Agent may reasonably request) for the period then ended which demonstrate
compliance with the covenants and financial ratios set forth in Article 8,
(3) a schedule of Total Liabilities in respect of borrowed money in the level
of detail disclosed in CNL’s Form lO-Q filings with the Securities and Exchange
Commission, as well as such other information regarding such Indebtedness as
may be reasonably requested by the Administrative Agent, and (4) a schedule of
EBITDA.

 

(4)           To the extent not
otherwise delivered pursuant to this Section 7.1, copies of all financial
statements and financial information delivered by any Borrower Party or CNL
Resort Principal Entity (or, upon Administrative Agent’s request, any
Subsidiary Entity of such Persons) from time to time to the holders of any
Indebtedness for borrowed money of such Persons, except, as to property level
information obtained from third parties, to the extent precluded by
confidentiality undertakings made in favor of such third parties in the
Ordinary Course of Business of the subject Subsidiary Entity; and

 

(5)           Copies of all proxy
statements, financial statements, and reports which any Borrower Party sends to
its stockholders or limited partners, and copies of all regular, periodic and
special reports, and all registration statements under the Act which any
Borrower Party files with the Securities and Exchange Commission or any
Governmental Authority which may be substituted therefor, or with any national
securities exchange; provided, however, that there shall not be required to be
delivered hereunder such copies for any Lender of prospectuses relating to
future series of offerings under registration statements filed under Rule 415
of the Act or other items which such Lender has indicated in writing to the
Borrower Parties from time to time need not be delivered to such Lender.

 

(6)           Notwithstanding the
foregoing, it is understood and agreed that to the extent CNL files documents
with the Securities and Exchange Commission and such documents contain the same
information as required by subsections (1), (2), (3) (only with respect to
subclause (3)), (4) and (5) above, CNL may deliver copies, which copies may be
delivered electronically, of such forms with respect to the relevant time
periods in lieu of the deliveries specified in such clauses.

 

7.2           Certificates: Reports: Other
Information.

 

The Borrower
Parties shall furnish or cause to be furnished to the Administrative Agent and
each of the Lenders directly:

 

(1)           As soon as available,
but not later than thirty (30) days after the

 

32

 

end of each calendar month, a statement of
income and expenses and a statement of cash flow for each of the CNL Resort
Properties;

 

(2)           Upon Administrative
Agent’s request, which shall occur no more frequently than each calendar quarter,
the Borrower Parties shall deliver to the Administrative Agent an update to
Schedule 6.19 reflecting the current status of CNL’s insurance program.

 

(3)           Promptly, such
additional financial and other information, including, without limitation,
information regarding the CNL Entities, any of such entities’ assets and
Properties, the KSL Conversion, and the KSL Acquisition as Administrative Agent
or any Lender may from time to time reasonably request, including, without
limitation, such information as is necessary for any Lender to participate out
any of its interests in the Obligations.

 

7.3           Maintenance of Existence and
Properties.

 

The Borrower
Parties shall, and shall cause each of the CNL Entities to, at all times: (1)
maintain its corporate existence or existence as a limited partnership or
limited liability company, as applicable (except where such failure is cured
within three (3) Business Days, or with respect to a CNL Entity other than the
Borrower Parties, where such failure does not, and would not be reasonably
expected to, result in a CNL Core Entity Material Adverse Effect); provided
that a CNL Entity, other than the Borrower Parties or other Designated
Entities, (A) may change its form of organization from one type of legal entity
to another to the extent otherwise permitted in this Agreement; (B) may effect
a dissolution if such actions are taken subsequent to a Disposition of
substantially all of its assets as otherwise permitted under this Agreement
(including Section 8.4) and (C) may merge or consolidate with any Person
as otherwise not prohibited by this Agreement (including Section 8.3);
(2) maintain in full force and effect all rights, privileges, licenses,
approvals, franchises, Properties and assets necessary to the conduct of its
business; (3) remain qualified to do business and maintain its good standing in
each jurisdiction in which failure to be so qualified and in good standing will
have a Material Adverse Effect; and (4) not permit, commit or suffer any waste
or abandonment of any Project that will have a Material Adverse Effect.

 

7.4           Inspection of Property: Books and
Records: Discussions.

 

The Borrower
Parties shall, and shall cause each of the CNL Entities, to keep proper books
of record and account in which full, true and correct entries in conformity
with GAAP and all material Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities, and shall permit
representatives of the Administrative Agent or any Lender to visit and inspect
any of its properties and examine and make copies or abstracts from any of its
books and records at any reasonable time during normal business hours and as
often as may reasonably be desired by the Administrative Agent or any Lender,
and to discuss the business, operations, properties and financial and other
condition of the CNL Entities with officers and employees of such Persons, and
with their independent certified public

 

33

 

accountants (provided that representatives of such Persons may be
present at and participate in any such discussion). Administrative Agent and
Lender’s inspection rights shall be limited, however, so that the same do not
violate any rights of third-party managers or tenants of any Real Property,
including without limitation confidentiality undertakings entered into in the
Ordinary Course of Business of the CNL Entity which owns such Real Property.

 

7.5           Notices.

 

The Borrowers
shall promptly, but in any event within five Business Days after obtaining
knowledge thereof, give written notice to the Administrative Agent and each
Lender directly of:

 

(1)           The occurrence of any
Potential Default or Event of Default and what action the Borrowers have taken,
are taking, or are proposing to take in response thereto;

 

(2)           The institution of, or
written threat of, any action, suit, proceeding, governmental investigation or
arbitration against or affecting the CNL Entities and not previously disclosed
pursuant to this Section 7.5, which action, Suit, proceeding,
governmental investigation or arbitration (i) exposes, or in the case of
multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances
expose, such Persons, in the Borrowers’ reasonable judgment, to liability in an
amount aggregating $10,000,000 or more and is or are not covered by insurance,
or (ii) seeks injunctive or other relief which, if obtained, may have a
Material Adverse Effect, providing such other information as may be reasonably
available to enable Administrative Agent and its counsel to evaluate such
matters. The Borrowers, upon request of the Administrative Agent, shall
promptly give written notice of the status of any action, suit, proceeding,
governmental investigation or arbitration.

 

(3)           Any labor dispute to
which any of the CNL Entities may become a party (including, without
limitation, any strikes, lockouts or other disputes relating to any Property of
such Persons’ and other facilities) which could result in a Material Adverse
Effect.

 

(4)           The bankruptcy or
cessation of operations of any hotel operator or hotel management company which
manages Projects contributing more than 5% of
the Consolidated Entities Net Income.

 

(5)           The Disposition of any
Project contributing more than 5% of the Consolidated Entities Net Income (in
which event, such notice shall be accompanied by a Compliance Certificate).

 

(6)           Any event not disclosed
pursuant to paragraphs (1) through (4) above which could reasonably be expected
to result in a Material Adverse Effect.

 

34

 

7.6           Expenses.

 

The Borrowers
shall pay all reasonable out-of-pocket expenses (including reasonable fees and
disbursements of outside counsel): (I) of the Administrative Agent incident to
the preparation, negotiation and administration of the Loan Documents,
including any proposed Modifications or waivers with respect thereto, the due
diligence review undertaken in connection therewith, and the syndication of the
Loan (but such expenses shall not include any fees paid to the syndicate
members), and the preservation and protection of the rights of the Lenders and
the Administrative Agent under the Loan Documents, and (2) of the
Administrative Agent and each of the Lenders incident to the enforcement of
payment of the Obligations, whether by judicial proceedings or otherwise,
including, without limitation, in connection with bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceedings involving
any Borrower Party or a “workout” of the Obligations. The obligations of the
Borrowers under this Section 7.6 shall survive payment of all other
Obligations.

 

7.7           Payment of indemnified Taxes and
Other Taxes and Charges.

 

The Borrower
Parties shall, and shall cause each of the CNL Entities to, file all tax
returns required to be filed in any jurisdiction and, if applicable, and except
with respect to taxes subject to any Good Faith Contest, pay and discharge all
Indemnified Taxes and Other Taxes imposed upon it or any of its Properties or
in respect of any of its franchises, business, income or property before any
material penalty shall be incurred with respect to such Indemnified Taxes and
Other Taxes.

 

7.8           Insurance.

 

The Borrowers
shall maintain for themselves and their Subsidiaries, or shall cause each of
their Subsidiaries to maintain in full force and effect the insurance coverages
and programs described on Schedule 6.19 or substantially similar
policies and programs as are reasonably acceptable to the Administrative Agent.

 

7.9           Hazardous Materials.

 

The Borrower
Parties shall do, and shall cause each of the CNL Entities which own Real
Properties to do the following:

 

(1)           Keep and maintain all
Real Properties in material compliance with any Hazardous Materials Laws unless
the failure to so comply would not reasonably be expected to result in a CNL
Resort Material Adverse Effect or a CNL Core Entity Material Adverse Effect.

 

(2)           Promptly cause the
removal of any Hazardous Materials discharged, disposed of, or otherwise
released in, on or under any Real Properties that are in violation of any
Hazardous Materials Laws and which would be reasonably expected to result in a
CNL Resort Material Adverse Effect or a CNL Core Entity Material Adverse Effect,
and cause any remediation required by any Hazardous Material Laws or
Governmental Authority to be performed (though no such action shall be required
if any action is subject to a good faith contest) where a failure to perform

 

35

 

such action would be reasonably expected to
result in a CNL Resort Material Adverse Effect or a CNL Core Entity Material
Adverse Effect.

 

(3)           Promptly advise the
Administrative Agent and each Lender in writing of any of the following: (i)
any Hazardous Material Claims known to Borrowers which would be reasonably
expected to result in a CNL Resort Material Adverse Effect or a CNL Core Entity
Material Adverse Effect; (ii) the receipt of any notice of any alleged
violation of Hazardous Materials Laws with respect to a Real Property (and the
Borrowers shall promptly provide the Administrative Agent and Lenders with a
copy of such notice of violation), provided that such alleged violation, if
true (and if any release of the Hazardous Materials alleged therein were not
promptly remediated), would result in a breach of subsections (1) or (2) above;
and (iii) the discovery of any occurrence or condition on any Real Properties
that could cause such Real Properties or any part thereof to be in violation of
clauses (1) or, if not promptly remediated, (2) above. If the Administrative
Agent andlor any Lender shall be joined in any legal proceedings or actions
initiated in connection with any Hazardous Materials Claims, each Borrower
Party shall indemnify, defend, and hold harmless such Person with respect to
any liabilities and out-of-pocket expenses arising with respect thereto,
including reasonable attorneys’ fees and disbursements.

 

(4)           Comply with each of the
covenants set forth in subsections (1), (2) and (3) of this Section 7.9
with respect to all other Properties of the CNL Entities unless the failure to
so comply would not reasonably be expected to result in a Material Adverse
Effect.

 

7.10         Compliance with Laws and
Contractual Obligations: Payment of Taxes.

 

The Borrower
Parties shall, and shall cause each of the CNL Core Entities to, in each case
where a failure to comply could have a CNL Resort Material Adverse Effect or a
CNL Core Entity Material Adverse Effect: (1) comply, in all material respects,
with all material Requirements of Law of any Governmental Authority having
jurisdiction over it or its business, (2) comply, in all material respects,
with all material Contractual Obligations and (3) comply with its respective
Organizational Documents (including with respect to any restrictions on
Indebtedness contained therein).

 

7.11         Further Assurances.

 

The Borrower
Parties shall, and shall cause each of the CNL Entities to, promptly upon
request by the Administrative Agent or any Lender, do any acts or, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further deeds, conveyances, security agreements,
mortgages, assignments, estoppel certificates, financing statements and
continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the Administrative
Agent or such Lender, as the case may be, may reasonably require from time to
time in order (i) to carry out more effectively the purposes of this Agreement
or any other Loan Document, and (ii) to assure, convey, grant, assign,
transfer, preserve, protect and confirm to the Administrative Agent and

 

36

 

Lenders the rights granted or now or hereafter intended to be granted
to the Lenders under any Loan Document or under any other document executed in
connection therewith.

 

7.12         Single Purpose Entities.

 

Each of CNL
Resort and CNL Resort GP shall each be maintained as a Single Purpose Entity
(but shall not be required to maintain Independent Directors) and each of the
CNL Resort Property Owners shall comply in all material respects with all
single purpose entity requirements set forth in the CNL Resort CMBS Documents,
including the maintenance of Independent Directors (as defined and otherwise
required in the CNL Resort CMBS Documents).

 

7.13         REIT Status.

 

CNL shall
maintain its status as a REIT and (i) all of the representations and warranties
set forth in clauses (1), (2), (3) and (4) of Section 6.18 shall remain
true and correct at all times. CNL shall timely disclose to Administrative
Agent all public information made available regarding its activities relating
to any public offering of Securities of CNL and, subject to any limitations
under applicable state or federal securities laws, shall keep Administrative
Agent reasonably advised of its activities in this regard during the term of
the Loan CNL Partners will do or cause to be done all things necessary to cause
it to be treated as either a partnership or a disregarded entity for purposes
of federal income taxation and the tax laws of any state or locality in which
CNL Partners is subject to taxation based on its income.

 

7.14         Use of Proceeds.

 

The proceeds
of the Loan shall be used to finance the KSL Acquisition.

 

7.15         Subordination.

 

(1)           Each Borrower Party
(each a “Subordinated Creditor”) hereby absolutely and irrevocably
subordinates, both in right of payment and in time of payment, (a) in the case
of CNL, any and all present or future obligations and liabilities of the
Borrowers to CNL, and (b) in the case of the Borrowers, any and all present and
future obligations and liabilities of CNL to the Borrowers (such obligations
and liabilities referred to in clauses (a) or (b) being “Subordinated Debt”),
to the prior payment in full in cash of the Obligations or the obligations of
CNL under the Guaranty, as applicable. Each Subordinated Creditor agrees to
make no claim for, or receive payment with respect to, such Subordinated Debt
until all Obligations and such obligations have been fully discharged in cash.
Notwithstanding the foregoing, the Borrowers shall be entitled to declare and
pay dividends or make distributions to equity holders with respect to their
Capital Stock, as long as no Noticed Event of Default then exists (but subject
to Sections 8.11 and 8.12), and the Borrower Parties may at any time
prior to a Noticed Event of Default repay intercompany advances between and
among themselves and their Wholly-Owned Subsidiaries.

 

37

 

(2)           All amounts and other
assets that may from time to time be paid or distributed to or otherwise
received by any Subordinated Creditor in respect of Subordinated Debt in
violation of this Section 7.15 shall be segregated and held in trust by
the Subordinated Creditor for the benefit of the Lenders and promptly paid over
to the Administrative Agent.

 

(3)           Each Subordinated
Creditor further agrees not to assign all or any part of the Subordinated Debt
unless the Administrative Agent is given prior notice and such assignment is
expressly made subject to the terms of this Agreement. If the Administrative
Agent so requests, (a) all instruments evidencing the Subordinated Debt shall
be duly endorsed and delivered to the Administrative Agent, (b) all security
for the Subordinated Debt shall be duly assigned and delivered to
Administrative Agent for the benefit of the Lenders, (c) the Subordinated Debt
shall be enforced, collected and held by the relevant Subordinated Creditor as
trustee for the Lenders and shall be paid over to the Administrative Agent for
the benefit of the Lenders on account of the Obligations, and (d) the
Subordinated Creditors shall execute, file and record such documents and
instruments and take such other action as the Administrative Agent deems
necessary or appropriate to perfect, preserve and enforce the Lenders’ rights
in and to the Subordinated Debt and any security therefor. If any Subordinated
Creditor fails to take any such action, the Administrative Agent, as
attorney-in-fact for such Subordinated Creditor, is hereby authorized to do so
in the name of the Subordinated Creditor. The foregoing power of attorney is
coupled with an interest and cannot be revoked.

 

(4)           In any bankruptcy or
other proceeding in which the filing of claims is required by Requirements of
Law, each Subordinated Creditor shall file all claims relating to the
Subordinated Debt that the Subordinated Creditor may have against the obligor
thereunder and shall assign to the Administrative Agent, for the benefit of the
Lenders, all rights relating to the Subordinated Debt thereunder. If any
Subordinated Creditor does not file any such claim, the Administrative Agent,
as attorney-in-fact for the Subordinated Creditor, is hereby authorized to do
so in the name of the Subordinated Creditor or, in the Administrative Agent’s
discretion, to assign the claim to a nominee and to cause proof of claim to be
filed in the name of the Administrative Agent or the Administrative Agent’s
nominee. The foregoing power of attorney is coupled with an interest and cannot
be revoked. The Administrative Agent or its nominee shall have the right, in
its reasonable discretion, to accept or reject any plan proposed in such
proceeding and to take any other action which a party filing a claim is
entitled to do. In all such cases, whether in administration, bankruptcy or
otherwise, the Person or Persons authorized to pay such claim shall pay to the
Administrative Agent for the benefit of the Lenders the amount payable on such
claim and, to the full extent necessary for that purpose, each Subordinated
Creditor hereby assigns to the Administrative Agent for the benefit of the
Lenders all of the Subordinated Creditor’s rights to any such payments or distributions;
provided, however, the Subordinated Creditor’s obligations hereunder shall not
be satisfied except to the extent that the Administrative Agent receives cash
by reason of any such payment or distribution.

 

(5)           Each of the
Subordinated Creditors hereby agrees that the Administrative Agent and the
Lenders may at any time in their discretion renew or extend the time of payment
of

 

38

 

the Obligations or exercise, fail to
exercise, waive or amend any other of their rights under this Agreement, any
Loan Document or any instrument evidencing or securing or delivered in
connection therewith, and in reference thereto may make and enter into such
agreements as to them may seem proper or desirable, all without notice to or
further assent from the Subordinated Creditors (except as otherwise expressly
required pursuant to this Agreement), and any such action shall not in any
manner impair or affect the subordination set forth in this Section 7.15
or any of the Administrative Agent’s or Lenders’ rights hereunder. The
Subordinated Creditors each hereby waive and agree not to assert against the
Administrative Agent or the Lenders any rights which a guarantor or surety
could exercise with respect to any indebtedness of any Borrower Party, but
nothing in this Section 7.15 shall constitute the Subordinated Creditors
a guarantor or surety.

 

7.16         Management of CNL Resort Properties;.

 

Each CNL
Resort Property shall be managed by a Qualified Manager pursuant to property
management, franchise or similar agreements in effect on the date hereof or
such agreements reasonably satisfactory to the Administrative Agent, which
shall not unreasonably withhold, condition or delay its approval of any new
replacement or long-term management agreement arrangement requested by CNL. The
applicable CNL Resort Property Owners shall comply with the material terms of
the CNL Resort CMBS Documents with respect to the management of the CNL Resort
Properties.

 

ARTICLE VIII.

 

NEGATIVE COVENANTS

 

As an
inducement to the Administrative Agent and each Lender to enter into this
Agreement and for the Lenders to advance their respective Percentage Shares of
the Loan, each of the Borrower Parties, jointly and severally, hereby covenants
and agrees with the Administrative Agent and each Lender that, as long as any
Obligations remain unpaid:

 

8.1           Liens.

 

The Borrower
Parties shall not, and shall not permit any of the CNL Entities to, create,
incur, assume or suffer to exist, any Lien upon any of its Property except:

 

(1)           Liens that secure
Indebtedness otherwise permitted under this Agreement (but no Indebtedness with
respect to the CNL Resort Properties, other than the CNL Resort CMBS Loan and
Indebtedness permitted under the CNL Resort CMBS Loan);

 

(2)           Permitted Encumbrances;

 

(3)           Liens which are the
subject of a Good Faith Contest; and

 

(4)           Liens listed on Schedule
8.1.

 

39

 

Notwithstanding
the foregoing, no Liens shall be permitted, directly or indirectly, on the
Capital Stock of any Borrower, CNL Resort Principal Entity, or any Wholly-Owned
Subsidiary of CNL (other than the Excluded Wholly-Owned Subsidiaries), except
Liens in favor of the Administrative Agent for the benefit of the Lenders as
contemplated hereunder.

 

8.2           Indebtedness.

 

The Borrower
Parties shall not, and shall not permit the CNL Entities to, incur any
Indebtedness other than the following, subject to the limitations set forth
below:

 

(1)           the Obligations;

 

(2)           the Indebtedness
described in Schedule 6.21 attached hereto;

 

(3)           a revolving credit
facility in an aggregate principal amount not to exceed $50,000,000 incurred by
one or more of the Borrower Parties or their Wholly-Owned Subsidiaries, secured
by pledges of Capital Stock of certain of their Subsidiaries (which pledges
shall not be required to be subordinated to the Pledge Agreements executed in
connection with the Loan), and incurred on the basis of such other terms and
conditions, all as are reasonably acceptable to the Administrative Agent;

 

(4)           trade debt and similar,
customary Real Property-level operating obligations and contingent obligations
(including obligations arising under operating leases and related management
agreements, required backup letters of credit and similar obligations typically
footnoted or considered contingent obligations under GAAP), all to the extent
payable in the Ordinary Course of Business of the CNL Entities (but in the case
of the CNL Resort Property Owners, no trade debt or other Indebtedness not
otherwise permitted under the CNL Resort CMBS Documents);

 

(5)           Indebtedness
incurred to fund future Investments described in Section 8.5(2) and 8.5(4)  provided, however, that (i) Capitalized
Lease Obligations relating to new Investments as described in Section 8.5(2)  shall not exceed $10 million in the
aggregate.

 

(6)           Any refinancing,
extension or renewal of Indebtedness otherwise permitted hereunder on
commercially reasonable terms, including without limitation any refinancing
vehicle for the RFS Partnership high-yield bonds or the ING line of credit,
provided further however that any such Financing transaction generating Net
Cash Proceeds shall be subject to Section 3.3(A) hereof and to the prior
written approval of Administrative Agent, not to be unreasonably withheld;

 

(7)           Indebtedness arising
under any Permitted Encumbrance;

 

(8)           Indebtedness among CNL
Entities, but only to the extent subordinated in accordance with Section 7.15.

 

provided, that
the Indebtedness described in clauses (1) to (7) above shall only be

 

40

 

permitted to
the extent that after taking into account such Indebtedness, the Borrower
Parties maintain compliance with the financial covenants set forth in Section
8.12 below.

 

8.3           Fundamental Change.

 

(1)           None of the Borrower
Parties shall, nor shall they permit any CNL Entity to, do any or all of the
following: merge or consolidate with any Person, or sell, assign, lease or
otherwise effect a Disposition, whether in one transaction or in a series of
transactions, of all or substantially all of its Properties and assets, whether
now owned or hereafter acquired, or enter into any agreement to do any of the
foregoing; provided, that (a) any Subsidiary of a Borrower Party may merge or
consolidate with another Subsidiary of a Borrower Party, and (b) any CNL Entity
may merge or consolidate with another Person to effect the acquisition of a
Project otherwise permitted under Section 8.5(3)  so long as, in each case: (i) such merger
shall not involve any Borrower Party, Designated Entity, or (without
Administrative Agent’s prior written consent, which shall not be unreasonably
withheld) any CNL Core Entity; and (ii) the entity resulting from such merger
or consolidation is a Wholly-Owned Subsidiary of a Borrower Party.

 

(2)           None of the Borrower
Parties shall, nor shall they permit any CNL Entity to, engage to any material
extent in any business other than such Person’s business as conducted on the
date hereof and businesses which are substantially similar, related or incidental
thereto.

 

8.4           Dispositions.

 

The Borrower
Parties shall not permit any of the following to occur:

 

(1)           Any Disposition of any
of the Capital Stock of any of the Borrowers or Pledged Subsidiaries;

 

(2)           Any Disposition,
directly or indirectly, of any of the Capital Stock of any CNL Resort Principal
Entity; or

 

(3)           Any Disposition of a
CNL Resort Property other than in compliance with the release provisions set
forth in the CNL Resort CMBS Documents and then only if mandatory prepayment of
the Loan is made in accordance with Section 3.3 and in the minimum amounts set
forth in Schedule 8.4 attached hereto.

 

(4)           Any Di~position by any
CNL Entity of any of its respective Properties if such Disposition (i) is not
pursuant to an arms length transaction for fair market value; or (ii) would
cause the Borrower Parties to be in violation of any of(a) the covenants set
forth in Section 8.12 or (b) the mandatory prepayment requirements set
forth in Section 3.3.

 

(5)           Any Disposition of
the Capital Stock of CNL which results in a Change in Control.

 

41

 

8.5           Investments.

 

The Borrower
Parties shall not, and shall not permit any of the CNL Entities to, directly or
indirectly make any Investment, except that such Persons may make an Investment
in the following, subject to the limitations set forth below:

 

(1)           Investments in cash and
Cash Equivalents;

 

(2)           Investments made in the
Ordinary Course of Business, provided that (i) construction, development,
renovation, and other similar capital expenditure programs (“Development
Investments”) with respect to any Real Property shall be deemed in the
Ordinary Course of Business for purposes of this Section 8.5(2) so long as
either (A) such Development Investment is made pursuant to projects or
contracts that have already been initiated or executed, respectively, as of the
Closing Date; or (B) the amount of such Investment with respect to any
individual Real Property does not exceed 10% of the gross revenues generated by
such Real Property; and (ii) any Indebtedness incurred in respect of such
Investment, including any Capitalized Lease Obligations, shall be limited as
provided in Section 8.2.

 

(3)           Investments consisting
of the acquisition of Projects, provided that if Indebtedness is incurred to
fund such an acquisition the principal amount of such Indebtedness shall not
exceed 60% of the value of such Project as reflected in a Qualified Appraisal;
and

 

(4)           Investment in the
purchase of the Advisor in accordance with Section 8.6.

 

8.6           Transactions with Partners and
Affiliates.

 

The Borrower
Parties shall not, and shall not permit any of the CNL Entities to directly or
indirectly enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with (i) a holder or holders of more than five
percent (5%) of any class of
equity Securities of CNL; or (ii) with any Affiliate of CNL which is not its
Subsidiary (a “Transactional Affiliate”), except as set forth on Schedule
8.6 or except upon fair arid reasonable terms no less favorable to the
Borrower Parties than would be obtained in a comparable arm’s-length
transaction with a Person not a Transactional Affiliate. Nothing herein shall
prohibit CNL from entering into and effectuating an agreement to purchase the
Advisor in connection with CNL becoming a Public Company, provided such
transaction (1) is recommended by a committee of independent members of the
Board of Directors of CNL, and (2) Lehman Brothers or another nationally
recognized investment banking firm has rendered a fairness opinion indicating
that the compensation paid to the Advisor in connection with such transaction
is fair to the Guarantor from a financial point of view.

 

8.7           Margin Regulations; Securities Laws.

 

Neither the
Borrowers nor any CNL Entity shall use all or any portion of the

 

42

 

proceeds of any credit extended under this Agreement to purchase or
carry Margin Stock.

 

8.8           Organizational Documents.

 

Without the
prior written consent of Administrative Agent and the Required Lenders, the
Borrower Parties shall not, and shall not permit the Designated Entities to,
Modify any of the terms or provisions in their respective Organizational
Documents, except: (a) any Modifications necessary for CNL Partners or CNL to
issue more Capital Stock (provided such issuance does not otherwise violate the
terms of this Agreement); or (b) Modifications necessary to clarify existing
provisions of such Organizational Documents; or (c) Modifications which would
have no adverse, substantive effect on the rights or interests of the Lenders
in conjunction with the Loan or under the Loan Documents; or (d) Modifications
in connection with the Reconstitution of the Board (which shall be submitted to
Administrative Agent for review at least 10 Business Days prior to such
Modifications becoming effective); or (e) Modifications in conjunction with CNL
becoming a Public Company, to the extent such Modifications have been approved
by the Administrative Agent, which approval shall not be unreasonably withheld.

 

8.9           Fiscal Year.

 

None of the
Borrower Parties shall change its Fiscal Year for accounting or tax purposes
from a period consisting of the 12- month period ending on December 31 of each
calendar year.

 

8.10         Advisory. Management, and Operating
Lease Agreements.

 

(1) The
Borrower Parties shall not, and shall not permit the CNL Entities to: (i)
Modify in any material respect the Advisory Agreement without the consent of
the Administrative Agent, or (ii) replace the Advisor as the advisor to CNL and
CNL Partners without the consent of the Administrative Agent, such consent not
to be unreasonably withheld if such replacement provider is an Affiliate of
CNL; provided that no consent shall be required in the event CNL acquires the
Advisor (and becomes an internally managed REIT) in accordance with Section
8.6.

 

(2)           The Borrower Parties
shall not, and shall not permit the CNL Resort Entities to: (i) Modify the
Management Agreements for the CNL Resort Properties without the consent of the
Administrative Agent, or (ii) Modify the CNL Resort Operating Leases without
the consent of the Administrative Agent, provided, in each instance, that
Administrative Agent shall not unreasonably withhold, condition or delay its
approval of any new replacement or long-term management agreement arrangement
and related Operating Lease revisions requested by CNL.

 

8.11         Distributions.

 

No Borrower
Party shall make (i) any Distribution if such Distribution would cause such
Person to be in violation of the mandatory prepayment requirements set

 

43

 

forth in Section 3.3 or (ii) in the event CNL has become a
Public Company, Distributions during any period while a Noticed Event of
Default has occurred and is continuing; or (iii) in the event CNL has not
become a Public Company, (A) any Distributions after the occurrence of a
monetary Event of Default (provided Administrative Agent has delivered written
notice thereof to the Borrower Parties); or (B) any Distributions after the occurrence
of any other Noticed Event of Default, unless such Distributions: (x) are
necessary to maintain CNL’s status as a REIT, or (y) are paid in accordance
with each of the following restrictions: (1) the Distribution is a payment of
dividends consistent with CNL’s dividend policy in effect as of the Closing
Date, (2) the Distribution does not exceed a dividend of $0.775 per share, and,
(3) to the extent such Distributions arc proposed in conjunction with a
Securities issuance, they do not exceed $35 million in any calendar quarter and
$75 million over the term of the Facility. Nothing contained in this Section
8.11 shall constitute a limitation on any remedies Administrative Agent or
Lenders may have under any guaranty or security instrument provided in
connection with the Loan (including the Guaranty and the Pledge Agreements),
other than the restrictions on the right to make Distributions as proved
herein.

 

8.12         Financial Covenants of Borrower Parties.

 

(1)           Minimum Net Worth.  At any time, Net Worth shall
not be less than $1,900,000,000.

 

(2)           Minimum Interest Coverage
Ratio.  As of the last
day of any Fiscal Quarter, the Interest Coverage Ratio shall not be less than
2.00.

 

(3)           Minimum Fixed Charge Coverage
Ratio.  As of the last
day of any Fiscal Quarter, the Fixed Charge Coverage Ratio shall not be less
than 1.75.

 

(4)           Maximum Leverage.  At any time during the
periods indicated below, the ratio of Total Liabilities to EBITDA shall not be
less than the ratios set forth below:

 

	
  Period

  	
   

  	
  Ratio

  
	
   

  	
   

  	
   

  
	
  From the Closing Date through the Initial
  Maturity Date

  	
   

  	
  8.5:1

  
	
   

  	
   

  	
   

  
	
  Upon extension of the Maturity Date, from
  the first day following the Initial Maturity Date to the Extended Maturity
  Date

  	
   

  	
  8:1

  

 

The ratio
described in clause (4) above shall be calculated on a pro forma basis
reflecting the KSL Acquisition.

 

44

 

ARTICLE IX.

EVENTS OF
DEFAULT

 

9.1           Event of Default.

 

Each of the
following shall constitute an event of default under this Agreement (an “Event
of Default”):

 

(1)           The Borrowers shall
fail to make any payment of principal or interest on the Loan on the date when
due, or shall fail to pay any other monetary Obligation (including any
mandatory prepayments under Section 3.3) within three days of the date when due;
or

 

(2)           Any representation or
warranty made by the Borrower Parties in any Loan Document or in connection
with any Loan Document either: (i) shall be inaccurate or incomplete in any
material respect on or as of the date made or deemed made, remains inaccurate,
and was known to be inaccurate by the Borrower Parties when made; or (ii)
constitutes a Core Material Inaccuracy; or

 

(3)           Any of the Borrower
Parties shall default in the observance or performance of any covenant or
agreement contained in Article 8 above (other than Section 8.12(4),
which shall be subject to a 30 day cure period, and Section 8.8, which shall be
subject to a three (3) day cure period) or Sections 7.3(1) (subject to
the cure period of three Business Days provided therein, if applicable), 7.5(1),
7.12, 7.13, 7.14, or 7.15; or

 

(4)           Any of the Borrower
Parties shall fail to observe or perform any other term or provision contained
in the Loan Documents and such failure shall continue for thirty (30) days
following the date a Responsible Officer of such Borrower Party knew of such
failure or Borrower Party received notice thereof from Administrative Agent; or

 

(5)           Any of the CNL
Entities shall default in any payment of principal of or interest on any
recourse Indebtedness (other than, in the case of the Borrowers, the
Obligations, but otherwise not including Indebtedness which is not recourse as
to payment of principal and interest to any of the CNL Core Entities) in an
aggregate unpaid amount for all such Persons in excess of $25,000,000, and,
prior to the election of the Lenders to accelerate the Obligations hereunder,
such recourse Indebtedness is not paid or the payment thereof waived or cured
in accordance with the terms of the documents, instruments and agreements
evidencing the same; or

 

(6)           Any of the CNL Entities
shall default in any payment of principal of or interest on any non-recourse
Indebtedness in an aggregate amount for all such Persons in excess of$
100,000,000, and, prior to the election of the Lenders to accelerate the Obligations
hereunder, such non-recourse Indebtedness is not paid or the payment thereof
waived or cured in accordance with the terms of the documents, instruments and
agreements evidencing the same; or

 

(7)           (1) Any of the CNL Core
Entities shall commence any case,

 

45

 

proceeding or other action (i) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (ii) seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any substantial part
of its assets, or making a general assignment for the benefit of its creditors;
or (2) there shall be commenced against any of the CNL Core Entities any case,
proceeding or other action of a nature referred to in clause (I) above which
(i) results in the entry of an order for relief or any such adjudication or
appointment, or (ii) remains undismissed, undischarged or unbonded for a period
of ninety (90) days; or (3) there shall be commenced against any of the CNL
Core Entities any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
substantially all of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, stayed, satisfied or
bonded pending appeal within ninety (90) days from the entry thereof; or (4)
any of the CNL Core Entities shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in (other than in
connection with a final settlement), any of the acts set forth in clause (1),
(2) or (3) above; or (5) any of
the CNL Entities shall generally not, or shall be unable to, or shall admit in
writing its inability to pay its debts as they become due; or

 

(8)           (1) An ERISA Event
shall occur with respect to a Pension Plan or Multiemployer Plan which has
resulted or could reasonably expected to result in liability of any of the
Borrower Parties under Title IV of ERISA to the Pension Plan, Multiemployer
Plan or the PBGC in an aggregate amount in excess of $20,000,000, (2) the
commencement or increase of contributions to, or the adoption of or the
amendment of a Pension Plan by any of the Borrower Parties or an ERISA
Affiliate which has result or could reasonably be expected to result in an
increase in Unfunded Pension Liability among all Pension Plans in an aggregate
amount in excess of $50,000,000 or (3) any of the Borrower Parties or an ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan, which has resulted or
could reasonably be expected to result in a Material Adverse Effect; or

 

(9)           One or more judgments
or decrees in an aggregate amount in excess of $15,000,000 (excluding judgments
and decrees covered by insurance, without giving effect to self-insurance or
deductibles) shall be entered and be outstanding at any date against any of the
CNL Entities and all such judgments or decrees shall not have been vacated,
discharged, stayed, satisfied or bonded pending appeal (or otherwise secured in
a manner satisfactory to Administrative Agent in its reasonable judgment)
within sixty (60) days from the entry thereof or in any event later than five
days prior to the date of any proposed sale thereunder; or

 

(10)         The Guarantor shall
attempt to rescind or revoke its Guaranty, with respect to future transactions
or otherwise, or shall fail to observe or perform any term or provision of the
Guaranty; or

 

46

 

(11)         CNL shall fail to
maintain its status as a REIT; or

 

(12)         Any Event of Default
shall occur under any of the other Loan Documents; or

 

(13)         There shall occur a
Change in Control.

 

9.2           Remedies.

 

If any Event
of Default shall occur, then automatically upon the occurrence of an Event of
Default under Section 9.1(7) above, and in all other cases, at the
request or with the consent of the Required Lenders: (i) the Administrative
Agent may (or at the direction of the Required Lenders shall) exercise, on
behalf of the Lenders, all rights and remedies under the Guaranty, the Pledge
Agreements, and any other collateral documents entered into with respect to the
Loan; (ii) the outstanding principal balance of the Loan and interest accrued
but unpaid thereon and all other Obligations shall become immediately due and
payable, without demand upon or presentment to any of the Borrower Parties,
which are expressly waived by the Borrower Parties, and (iii) the
Administrative Agent may (or at the direction of the Required Lenders, shall),
and, to the extent applicable, the Administrative Agent and the Lenders may
immediately exercise all rights, powers and remedies available to them at law,
in equity or otherwise, including, without limitation, under the other Loan
Documents, all of which rights, powers and remedies are cumulative and not
exclusive.

 

ARTICLE X.

THE
ADMINISTRATIVE AGENT

 

10.1         Appointment.

 

Each Lender
hereby irrevocably designates and appoints the Administrative Agent as the
agent of such Lender under the Loan Documents and each such Lender hereby
irrevocably authorizes the Administrative Agent, as the agent for such Lender,
to take such action on its behalf under the provisions of the Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of the Loan Documents, together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in the Loan Documents, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein or therein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Loan Documents or otherwise exist against
the Administrative Agent.

 

10.2         Delegation of Duties.

 

The
Administrative Agent may execute any of its duties under the Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall

 

47

 

not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.

 

10.3         Exculpatory Provisions.

 

None of the
Administrative Agent, the other Agents, nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (I)
liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with the Loan Documents (except for its or such
Person’s own gross negligence or willful misconduct), or (2) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties made by the Borrower Parties or any officer thereof contained in the
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under
or in connection with the Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Loan Documents or for any
failure of the Borrower Parties to perform their obligations hereunder. The
Administrative Agent and the other Agents shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, the Loan Documents or to
inspect the properties, books or records of the Borrower Parties.

 

10.4         Reliance by the Agents.

 

Each of the
Agents shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certification, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement,
order or other document or conversation reasonably believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrowers), independent accountants and other
experts selected by such Agent. As to the Lenders: (1) the Administrative Agent
shall be fully justified in failing or refusing to take any action under the
Loan Documents unless it shall first receive such advice or concurrence of one
hundred percent (100%) of the Lenders (or, if a provision of this Agreement
expressly provides that a lesser number of the Lenders may direct the action of
the Administrative Agent, such lesser number of Lenders) or it shall first be
indemnified to its satisfaction by the Lenders ratably in accordance with their
respective Percentage Shares against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any action
(except for liabilities and expenses resulting from the Administrative Agent’s
gross negligence or willful misconduct), and (2) the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
the Loan Documents in accordance with a request of one hundred percent (100%)
of the Lenders (or, if a provision of this Agreement expressly provides that
the Administrative Agent shall be required to act or refrain from acting at the
request of a lesser number of the Lenders, such lesser number of Lenders), and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders.

 

48

 

10.5         Notice of Default.

 

The
Administrative Agent shall not be deemed to have knowledge or notice of the occurrence
of any Potential Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrowers
referring to the Loan Documents, describing such Potential Default or Event of
Default and stating that such notice is a “notice of default.” In the event
that the Administrative Agent receives such a notice and a Potential Default
has occurred, the Administrative Agent shall promptly give notice thereof to
the Lenders. The Administrative Agent shall take such action with respect to
such Potential Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Potential Default or Event of Default as it shall deem
advisable in the best interest of the Lenders (except to the extent that this
Agreement, the Pledge Agreements or the Guaranty expressly require that such
action be taken or not taken by the Administrative Agent with the consent or
upon the authorization of the Required Lenders or such other group of Lenders,
in which case such action will be taken or not taken as directed by the
Required Lenders or such other group of Lenders or Lenders).

 

10.6         Non-Reliance on Agents and Other
Lenders.

 

Each Lender
expressly acknowledges that none of the Administrative Agent, the other Agents
nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or warranties to
it and that no act by the Administrative Agent or the other Agents hereinafter
taken, including any review of the affairs of the Borrower Parties, shall be
deemed to constitute any representation or warranty by the Administrative Agent
or the other Agents to any Lender. Each Lender represents to the Administrative
Agent and the other Agents that it has, independently and without reliance upon
the Administrative Agent, the other Agents or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower Parties and
made its own decision to make its loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent, the other Agents or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower Parties. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Administrative Agent hereunder,
the Administrative Agent and the other Agents shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Borrower Parties which may come into the possession of
the Administrative Agent or any other Agent or any of their respective
officers, directors,

 

49

 

employees, agents, attorneys- in-fact or affiliates.

 

10.7         Indemnification.

 

The Lenders
agree to indemnify the Administrative Agent and the other Agents in their
respective capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), ratably according
to the respective amounts of their Percentage Shares, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including without limitation at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Administrative
Agent or the other Agents in any way relating to or arising out of the Loan
Documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the
Administrative Agent or the other Agents under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such Liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent’s or any other Agent’s gross negligence or willful misconduct,
respectively. The provisions of this Section 10.7 shall survive the
payment of the Obligations and the termination of this Agreement.

 

10.8         Agents in Their Individual Capacity.

 

The
Administrative Agent, the other Agents and their affiliates may make loans to,
accept deposits from and generally engage in any kind of business with any of
the Borrower Parties or any of their respective Subsidiary Entities and
Affiliates as though the Administrative Agent and the other Agents were not,
respectively, the Administrative Agent, the Lead Arranger or an Agent
hereunder. With respect to such loans made or renewed by them and any Note
issued to them, the Administrative Agent and the other Agents shall have the
same rights and powers under the Loan Documents as any Lender and may exercise
the same as though it were not the Administrative Agent, the Lead Arranger or
an Agent, respectively, and the terms “Lender” and “Lenders” shall include the
Administrative Agent, the Lead Arranger and each other Agent in its individual
capacity.

 

10.9         Successor Administrative Agent.

 

The
Administrative Agent may resign as Administrative Agent under the Loan
Documents upon thirty (30) days’ notice to the Lenders. If the Administrative
Agent shall resign, then the Lenders (other than the Lender resigning as
Administrative Agent) shall (with, so long as there shall not exist and be
continuing an Event of Default, the consent of the Borrowers, such consent not
to be unreasonably withheld or delayed) appoint a successor agent or, if the
Lenders are unable to agree on the appointment of a successor agent, the
Administrative Agent shall appoint a successor agent for the Lenders whereupon
such successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term “Administrative Agent” shall mean such

 

50

 

successor agent effective upon its appointment, and the former
Administrative Agent’s rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any of
the Loan Documents or successors thereto. After any retiring Administrative
Agent’s resignation hereunder as Administrative Agent, the provisions of the
Loan Documents shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under the Loan Documents.

 

10.10       Limitations on Agents Liability.

 

The Lead
Arranger, in such capacity, shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement or the other Loan
Documents.

 

ARTICLE XI.

MISCELLANEOUS
PROVISIONS

 

11.1         No Assignment by  Borrowers.

 

None of the
Borrower Parties may assign its rights or obligations under this Agreement or
the other Loan Documents without the prior written consent of the
Administrative Agent and one hundred percent (100%) of the Lenders. Subject to
the foregoing, all provisions contained in this Agreement and the other Loan
Documents and in any document or agreement referred to herein or therein or
relating hereto or thereto shall inure to the benefit of the Administrative
Agent and each Lender, their respective successors and assigns, and shall be
binding upon each of the Borrower Parties and such Person’s successors and
assigns.

 

11.2         Modification.

 

Neither this
Agreement nor any other Loan Document may be Modified or waived unless such
Modification or waiver is in writing and signed by the Administrative Agent,
the Guarantor, the Borrowers and, except for the Modifications and waivers
requiring consent of one hundred percent (100%) of the Lenders referred to
below, the Required Lenders. No such Modification or waiver shall, without the
prior written consent of one hundred percent (100%) of the Lenders: (1) reduce
the principal of, or rate of interest on, the Loan or fees payable hereunder or
under the Fee Letter, (2) except as expressly contemplated by Section 11.8
below, modify the Percentage Share of any Lender, (3) Modify the definition of
“Required Lenders”, (4) extend or waive any scheduled payment date for any
principal, interest or fees, (5) release
CNL from its obligations under the Guaranty, release any Borrower from its
obligation to repay the Loan, release any of the pledgors under the Pledge
Agreements or release any portion of the collateral pledged under the Pledge
Agreements (except for such releases as may be specifically authorized by or
otherwise approved in accordance with this Credit Agreement), (6) Modify this Section
11.2, or (7) Modify any provision of the Loan Documents which by its terms
requires the consent or approval of one hundred percent (100%) of the Lenders.
It is expressly agreed and understood that the election by the

 

51

 

Required Lenders to accelerate amounts outstanding hereunder and/or to
terminate the obligation of the Lenders to make Loans hereunder shall not
constitute a Modification or waiver of any term or provision of this Agreement
or any other Loan Document. No Modification of any provision of the Loan
Documents relating to the Administrative Agent shall be effective without the
written consent of the Administrative Agent.

 

11.3         Cumulative Rights; No Waiver.

 

The rights,
powers and remedies of the Administrative Agent and the Lenders hereunder and
under the other Loan Documents are cumulative and in addition to all rights,
power and remedies provided under any and all agreements among the Borrower
Parties, the Administrative Agent and the Lenders relating hereto, at law, in
equity or otherwise. Any delay or failure by Administrative Agent and the
Lenders to exercise any right, power or remedy shall not constitute a waiver
thereof by the Administrative Agent or the Lenders, and no single or partial
exercise by the Administrative Agent or the Lenders of any right, power or
remedy shall preclude other or further exercise thereof or any exercise of any
other rights, powers or remedies.

 

11.4         Entire Agreement.

 

This Agreement,
the other Loan Documents and the schedules, appendices, documents and
agreements referred to herein and therein embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings relating to the subject matter hereof and thereof.

 

11.5         Survival.

 

All
representations, warranties, covenants and agreements contained in this
Agreement and the other Loan Documents on the part of the Borrower Parties
shall survive the termination of this Agreement and shall be effective until
the Obligations are paid and performed in full or longer as expressly provided
herein.

 

11.6         Notices.

 

All notices
given by any party to the others under this Agreement and the other Loan
Documents shall be in writing unless otherwise provided for herein, and any
such notice shall become effective (i) upon personal delivery thereof,
including, but not limited to, delivery by overnight mail and courier service,
(ii) four (4) days after it shall have been mailed by United States mail, first
class, certified or registered, with postage prepaid, or (iii) in the case of
notice by a telecommunications device, when properly transmitted, in each case
addressed to the party at the address set forth on Schedule 11.6
attached hereto. Any party may change the address to which notices are to be
sent by notice of such change to each other party given as provided herein.
Such notices shall be effective on the date received or, if mailed, on the
third Business Day following the date mailed.

 

52

 

11.7         Governing Law.

 

This Agreement
and the other Loan Documents shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to its choice of
law rules.

 

11.8         Assignments,
Participations. Syndication. Etc.

 

(1)           With the prior written
consent of the Administrative Agent, such consent not to be unreasonably
withheld or delayed, any Lender may at any time assign and delegate to one or
more Eligible Assignees (provided that no written consent of the Administrative
Agent shall be required in connection with any assignment and delegation by a
Lender to an Affiliate of such Lender or to another Lender or its Affiliate)
(each an “Assignee”) all or any part of such Lender’s Percentage Share
of the Loan and the other Obligations held by such Lender hereunder, in a
minimum amount of $1,000,000, which minimum amount may be an aggregated amount
in the event of simultaneous assignments to or by two or more funds under
common management (or if such Lender’s Percentage Share of the Loan is less
than $1,000,000, one hundred percent (100%) thereof); provided, however, that
CNL, the Borrowers and the Administrative Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Borrowers and the Administrative Agent by such
Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered
to the Borrowers and the Administrative Agent an Assignment and Acceptance
Agreement and (iii) the Assignee has paid to the Administrative Agent a
processing fee in the amount of $3500.

 

(A)          From and after the date
that the Administrative Agent notifies the assignor Lender and the Borrowers
that it has received an executed Assignment and Acceptance Agreement and
payment of the above-referenced processing fee: (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned to it pursuant
to such Assignment and Acceptance Agreement, shall have the rights and obligations
of a Lender under the Loan Documents, (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance Agreement,
relinquish its rights arid be released from its obligations under the Loan
Documents (but shall be entitled to indemnification as otherwise provided in
this Agreement with respect to any events occurring prior to the assignment)
and (iii) this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Percentage Shares resulting therefrom.

 

(2)           Within five Business
Days after its receipt of notice by the Administrative Agent that it has
received an executed Assignment and Acceptance Agreement and payment of the
processing fee (which notice shall also be sent by the Administrative Agent to
each Lender), the Borrowers shall, if requested by the Assignee, execute and
deliver to the Administrative Agent, a new Note evidencing such

 

53

 

Assignee’s Percentage Share of the Loan.

 

(3)           Any Lender may at any
time sell to one or more commercial banks or other Persons not Affiliates of
the Borrowers (a “Participant”) participating interests in the Loan and
the other interests of that Lender (the “originating Lender”) hereunder
and under the other Loan Documents; provided, however, that (i) the originating
Lender’s obligations under this Agreement shall remain unchanged, (ii) the
originating Lender shall remain solely responsible for the performance of such
obligations, and (iii) the Borrowers and the Administrative Agent shall
continue to deal solely and directly with the originating Lender in connection
with the originating Lender’s rights and obligations under this Agreement and
the other Loan Documents. In the case of any such participation, the
Participant shall be entitled to the benefit of Sections 2.5, 2.6, 2.8,
and 2.9 (and subject to the burdens of Sections 2.7, 2.9(5),
and 11.8 above) as though it were also a Lender thereunder, and if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, and Section 11.10 of
this Agreement shall apply to such Participant as if it were a Lender party
hereto.

 

(4)           Notwithstanding any
other provision contained in this Agreement or any other Loan Document to the
contrary, any Lender may assign all or any portion of its Percentage Share of
the Loan held by it to any Federal Reserve Lender or the United States Treasury
as collateral security pursuant to Regulation A of the Board of Governors of
the Federal Reserve System and any Operating Circular issued by such Federal
Reserve Lender, provided that any payment in respect of such assigned
Percentage Share of the Loan made by the Borrowers to or for the account of the
assigning and/or pledging Lender in accordance with the terms of this Agreement
shall satisfy the Borrowers’ obligations hereunder in respect to such assigned
Percentage Share of the Loan to the extent of such payment. No such assignment
shall release the assigning Lender from its obligations hereunder.

 

(5)           Subject to Section
11.8(1) above, the Lead Arranger may syndicate the Loan and the other
Obligations held by the Lenders hereunder before or after the Closing Date, and
the Lead Arranger (or its designated Affiliates) shall manage all aspects of
such syndication, including the number and identity of the potential Lenders
participating in the syndication and the Loan amounts and compensation offered
in connection therewith. Each Borrower Party agrees to take all actions as the
Lead Arranger (or its designated Affiliates) may reasonably request to assist
in the syndication, including: (i) making its senior management and
representatives available to participate in informational meetings with
potential Lenders at such times and places as the Lead Arranger (or its designated
Affiliates) may reasonably request; (ii) using its reasonable efforts to ensure
that the syndication efforts benefit from such Borrower Party’s lending
relationships; and (iii) providing the Lead Arranger (or its designated
Affiliates) with all information reasonably deemed necessary to successfully
complete the syndication.

 

(6)           Until the date the Lead
Arranger notifies the Borrowers that the

 

54

 

syndication of the Loan has been completed,
the Borrower Parties shall not, and shall not permit the CNL Entities to engage
any Person to effect any offering, placement or arrangement of debt securities
or any bank financing by or on behalf of any CNL Entity.

 

11.9         Counterparts.

 

This Agreement
and the other Loan Documents may be executed in any number of counterparts, all
of which together shall constitute one agreement.

 

11.10       Sharing of  Payments.

 

If any Lender
shall receive and retain any payment, whether by setoff, application of deposit
balance or security, or otherwise, in respect of the Obligations in excess of
such Lender’s Percentage Share thereof, then such Lender shall purchase from
the other Lenders for cash and at face value and without recourse, such
participation in the Obligations held by them as shall be necessary to cause
such excess payment to be shared ratably as aforesaid with each of them;
provided, that if such excess payment or part thereof is thereafter recovered
from such purchasing Lender, the related purchases from the other Lenders shall
be rescinded ratably and the purchase price restored as to the portion of such
excess payment so recovered, but without interest. Each Lender is hereby
authorized by the Borrower Parties to exercise any and all rights of setoff,
counterclaim or bankers’ lien against the full amount of the Obligations,
whether or not held by such Lender. Each Lender hereby agrees to exercise any
such rights first against the Obligations and only then to any other
Indebtedness f the Borrowers to such Lender.

 

11.11       Confidentiality.

 

Each Lender
agrees to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information provided to it by any of the
Borrower Parties or by the Administrative Agent on the Borrower Parties’
behalf, in connection with this Agreement or any other Loan Document, and
neither it nor any of its Affiliates shall use any such information for any
purpose or in any manner other than pursuant to the terms contemplated by this
Agreement, except to the extent such information: (1) was or becomes generally
available to the public other than as a result of a disclosure by any Lender or
any prospective Lender, or (2) was or becomes available from a source other
than the Borrower Parties not known to the Lenders to be in breach of an
obligation of confidentiality to the Borrower Parties in the disclosure of such
information. Nothing contained herein shall restrict any Lender from disclosing
such information (i) pursuant to any requirement of any Governmental Authority;
(ii) pursuant to subpoena or other court process; (iii) when required to do so
in accordance with the provisions of any applicable Requirement of Law; (iv) to
the extent reasonably required in connection with any litigation or proceeding
to which the Administrative Agent, any Lender or their respective Affiliates
may be party; (v) to the extent reasonably required in connection with the
exercise of any remedy hereunder or under any other Loan Document; (vi) to such
Lender’s independent auditors and other professional advisors; and (vii) to any
Participant or Assignee and to any prospective

 

55

 

Participant or Assignee, provided that each Participant and Assignee or
prospective Participant or Assignee first agrees to be bound by the provisions
of this Section 11.11.

 

11.12       Consent to Jurisdiction.

 

ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY
OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION
AND DELIVERY OF THIS CREDIT AGREEMENT, EACH OF THE BORROWER PARTIES, THE
ADMINISTRATIVE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON- EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
BORROWER PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE BORROWER PARTIES,
THE ADMINISTRATIVE AGENT AND THE LENDERS EACH AGREE THAT SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS MAY BE MADE BY ANY MEANS PERMITTED BY NEW YORK LAW.

 

11.13       Waiver of Jury Trial.

 

EACH OF THE
BORROWER PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDERS EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. EACH OF THE BORROWER PARTIES, THE ADMINISTRATIVE
AGENT AND THE LENDERS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH
OF SUCH PARTIES FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.

 

56

 

11.14       Indemnity.

 

Whether or not
the transactions contemplated hereby are consummated, each of the Borrower
Parties shall indemnify and hold the Administrative Agent, the other Agents and
each Lender and each of their respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an “Indemnified Person”)
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including reasonable attorney’s fees and expenses) of any kind
or nature whatsoever which may at any time (including at any time following
repayment of the Loan and the termination, resignation or replacement of the
Administrative Agent or replacement of any Lender) be imposed on, incurred by
or asserted against any such Person in any way relating to or arising out of
this Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any insolvency
proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loan or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the “Indemnified
Liabilities”) provided, however, that the Borrower Parties shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the gross negligence or willful misconduct of
such Indemnified Person. The agreements in this Section 11.14 shall
survive payment of all other Obligations.

 

11.15       Telephonic Instruction.

 

Any agreement
of the Administrative Agent and the Lenders herein to receive certain notices
by telephone is solely for the convenience and at the request of the Borrowers.
The Administrative Agent and the Lenders shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Borrowers
to give such notice and the Administrative Agent and the Lenders shall not have
any liability to the Borrowers or other Person on account of any action taken
or not taken by the Administrative Agent or the Lenders in reliance upon such
telephonic notice. The obligation of the Borrowers to repay the Loans shall not
be affected in any way or to any extent by any failure by the Administrative
Agent and the Lenders to receive written confirmation of any telephonic notice
or the receipt by the Administrative Agent and the Lenders of a confirmation
which is at variance with the terms understood by the Administrative Agent and
the Lenders to be contained in the telephonic notice.

 

11.16       Marshalling; Payments Set Aside.

 

Neither the
Administrative Agent nor the Lenders shall be under any obligation to marshal
any assets in favor of any of the Borrower Parties or any other Person or
against or in payment of any or all of the Obligations. To the extent that any
of the Borrower Parties makes a payment or payments to the Administrative Agent
or the Lenders, or the Administrative Agent or the Lenders enforce their Liens
or exercise their rights of set-off, and such payment or payments or the
proceeds of such enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by

 

57

 

the Administrative Agent in its discretion) to be repaid to a trustee,
receiver or any other party in connection with any insolvency proceeding, or
otherwise, then (1) to the extent of such recovery the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or set-off had not occurred, and (2) each Lender severally agrees to pay to the
Administrative Agent upon demand its ratable share of the total amount so
recovered from or repaid by the Administrative Agent.

 

11.17       Set-off.

 

In addition to
any rights and remedies of the Lenders provided by law, if an Event of Default
exists, each Lender is authorized at any time and from time to time, without
prior notice to the Borrower Parties, any such notice being waived by the
Borrower Parties to the fullest extent permitted by law, to set off and apply
in favor of the Lenders any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness at
any time owing to, such Lender to or for the credit or the account of the
Borrower Parties against any and all Obligations owing to the Lenders, now or
hereafter existing, irrespective of whether or not the Administrative Agent or
such Lender shall have made demand under this Agreement or any Loan Document
and although such Obligations may be contingent or unmatured. Each Lender
agrees promptly to (i) notify the Borrower Parties and the Administrative Agent
after any such set-off and application made by such Lender; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application and (ii) pay such amounts that are set-off to the
Administrative Agent for the ratable benefit of the Lenders.

 

11.18       Severability.

 

The illegality
or unenforceability of any provision of this Agreement or any other Loan
Document or any instrument or agreement required hereunder or thereunder shall
not in any way affect or impair the legality or enforceability of the remaining
provisions hereof or thereof.

 

11.19       No Third Parties  Benefited.

 

This Agreement
and the other Loan Documents are made and entered into for the sole protection
and legal benefit of the Borrower Parties, the Lenders and the Administrative
Agent, and their permitted successors and assigns, and no other Person shall be
a direct or indirect legal beneficiary of, or have any direct or indirect cause
of action or claim in connection with, this Agreement or any of the other Loan
Documents.

 

11.20       Time.

 

Time is of the
essence as to each term or provision of this Agreement and each of the other
Loan Documents.

 

[Signature Pages Followingl

 

58

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the day and year
first above written.

 

	
  BORROWERS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CNL
  HOSPITALITY PARTNERS, LP,

  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  CNL Hspitality GP Corp.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
  Its general partner

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul H. Williams

  	
   

  
	
   

  	
   

  	
  Name:  Paul H. Williams

  
	
   

  	
   

  	
   

  	
   Title:   Senior Vice
  President

  
	
   

  
	
   

  	
  CNL RESORT
  HOSPITALITY, LP

  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  CNL Resort Holdings GP, LLC,

  
	
   

  	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  	
  Its general
  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul H. Williams

  	
   

  
	
   

  	
   

  	
   

  	
  Name: 
  Paul H. Williams

  
	
   

  	
   

  	
   

  	
   Title:    Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  CNL RESORT
  HOLDINGS GP, LLC,

  a Delaware limited liability company

  
	
   

  
	
   

  	
  By:

  	
  /s/Paul H.
  Williams

  	
   

  
	
   

  	
  Name:  Paul H. Williams

  
	
   

  	
   Title:    Senior Vice President

  
	
   

  
	
  GUARANTOR:

  
	
   

  
	
   

  	
  CNL
  HOSPITALITY PROPERTIES, INC.,

  a Maryland corporation

  
	
   

  
	
   

  	
  By:

  	
  /s/ Paul H.,
  Williams

  	
   

  
	
   

  	
  Name:  Paul H. Williams

  
	
   

  	
   Title:   Senior Vice President

  
													

 

59

 

	
  LENDERS AND
  AGENTS

  	
  DEUTSCHE
  BANK AG,

  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven
  P. Lapham

  	
   

  
	
   

  	
  Name:   Steven P. Lapham

  
	
   

  	
   Title:    Managing
  Director

  
	
   

  
	
   

  	
  By:

  	
  /s/Brenda
  Casey

  	
   

  
	
   

  	
   

  	
  Name:   Brenda Casey

  
	
   

  	
   

  	
   Title:    Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  DEUTSCHE
  BANK AG CAYMAN

  ISLANDS BRANCH, as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Steven P.
  Lapham

  	
   

  
	
   

  	
  Name:  Steven P. Lapham

  
	
   

  	
  Title:   Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Brenda
  Casey

  	
   

  
	
   

  	
   

  	
  Name:  Brenda Casey

  
	
   

  	
   

  	
   Title:   Vice President

  
									

 

60

 

ANNEX I:
GLOSSARY

 

THIS GLOSSARY
is attached to and made a part of that certain Credit Agreement (the “Credit
Agreement”) dated as of April 2, 2004 by and among CNL HOSPITALITY PARTNERS
LP, a limited partnership organized under the laws of the state of Delaware (“CNL
Partners”) CNL RESORT HOSPITALITY, LP, a limited partnership organized
under the laws of Delaware (“CNL Resort”), CNL RESORT HOLDINGS GP, LLC,
a limited liability company organized under the laws of Delaware (“CNL
Resort GP”), and together with CNL Resort, “CNL Resort Holdings”),
(CNL Partners, CNL Resort and CNL Resort GP being referred to herein, jointly
and severally, as the “Borrowers”); CNL HOSPITALITY PROPERTIES, INC., a
Maryland corporation (“CNL”); THE LENDERS FROM TIME TO TIME PARTY HERETO
(collectively and severally, the “Lenders”); and DEUTSCHE BANK AG, as
administrative agent for the Lenders (in such capacity, the “Administrative
Agent”). For purposes of the Credit Agreement and the other Loan Documents,
the terms set forth below shall have the following meanings:

 

“Act” shall
have the meaning given such term in Section 6.13 of the Credit
Agreement.

 

“Administrative
Agent” shall have the meaning given such term in the preamble to the Credit
Agreement and shall include any successor to Deutsche Bank AG as the initial
“Administrative Agent” thereunder.

 

“Advisory
Agreement” shall have the meaning given such term in Section 6.26 of the
Credit Agreement.

 

“Affiliate”
shall mean, as to any Person, any other Person directly or indirectly
controlling, controlled by or under direct or indirect common control with,
such Person. “Control” as used herein means the power to direct the management
and policies of such Person. In the case of a Lender which is a fund that
invests in loans, any other fund that invests in loans which is managed by the
same investment advisor as such Lender, or by another Affiliate of such Lender
or such investment advisor, shall be deemed an Affiliate of such Lender.

 

“Agents”
shall mean the Administrative Agent, the Lead Arranger and any other Persons
acting in the capacity of an agent for the Lenders under the Credit Agreement,
together with their permitted successors and assigns.

 

“Applicable
Base Rate” shall mean the floating rate per annum equal to the daily
average Base Rate in effect during the applicable calculation period plus one
and one-half percent (1.50%).

 

“Applicable
LIBO Rate” shall mean, with respect to the applicable Interest Period, the
per annum rate equal to the Reserve Adjusted LIBO Rate plus the percentage (per
annum) set forth below which corresponds to the then current applicable period:

 

 

	
  Period

  	
   

  	
  LIBO
  Spread

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Closing Date through (and including) the
  Initial Maturity Date

  	
   

  	
  2.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  following the Initial Maturity Date

  	
   

  	
  3.50

  	
  %

  

 

“Assignee”
shall have the meaning given such term in Section 11.8 of the Credit
Agreement.

 

“Assignment
and Acceptance Agreement” shall mean an agreement in the form of that
attached to the Credit Agreement as Exhibit B.

 

“Base Rate”
shall mean on any day the higher of: (a) the Prime Rate in effect on such day,
and (b) the sum of the Federal Funds Rate in effect on such day plus one half
of one percent (0.50%).

 

“Borrower
Parties” shall mean, jointly and severally, each of the Borrowers and the
Guarantor.

 

“Borrowers”
shall mean, jointly and severally, CNL Partners, CNL Resort and CNL Resort GP.

 

“Bullet
Payment” shall mean any payment of the entire unpaid balance of any
Indebtedness at its final maturity other than the final payment with respect to
a loan that is fully amortized over its term.

 

“Business
Day” shall mean any day other than a Saturday, a Sunday or a day on which
banks in New York, New York are authorized or obligated to close their regular
banking business.

 

“Capitalized
Lease” of a Person means any lease of property by such Person as lessee
which would be capitalized on a balance sheet of such Person prepared in
accordance with GAAP.

 

“Capitalized
Lease Obligations” of a Person means the amount of the obligations of such
Person under Capitalized Leases which would be shown as a liability on a
balance sheet of such Person prepared in accordance with GAAP.

 

“Capitalized
Loan Fees” shall mean, with respect to the CNL Entities, and with respect
to any period, any upfront, closing or similar fees paid by such Person in
connection with the incurrence or refinancing of Indebtedness during such
period that are capitalized on the balance sheet of such Person.

 

“Capital
Stock” means (i) with respect to any Person that is a corporation, any and
all shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including, without limitation,
each class or series of common stock and preferred stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
investment units, partnership, membership or other equity interests of such
Person.

 

 

“Cash
Equivalents” shall mean, with respect to any Person: (a) securities issued,
guaranteed or insured by the United States of America or any of its agencies
with maturities of not more than one year from the date acquired; (b)
certificates of deposit with maturities of not more than one year from the date
acquired by a United States federal or state chartered commercial bank of
recognized standing, which has capital and unimpaired surplus in excess of
$500,000,000 and which bank or its holding company has a short-term commercial
paper rating of at least A-2 or the equivalent by S&P or at least P-2 or
equivalent by Moody’s; (c) reverse repurchase agreements with terms of not more
than seven days from the date acquired, for securities of the type described in
clause (a) above and entered into only with commercial banks having the
qualifications described in clause (b) above; (d) commercial paper issued by
any Person incorporated under the laws of the United States of America or any
State thereof and rated at least A-2 or the equivalent thereof by S&P or at
least P-2 or the equivalent thereof of Moody’s, in each case with maturities of
not more than one year from the date acquired; (e) investments in money market
funds registered under the Investment Company Act of 1940, which have net
assets of at least $500,000,000 and at least 85% of whose assets consist of
securities and other obligations of the type described in clauses (a) through
(d) above; and (1) other investments of comparable security and liquidity to
those enumerated in clauses (a) through (e) above.

 

“Change in
Control” shall mean, with respect to CNL, the occurrence of either of the
following: (1) a change in the beneficial ownership within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934 of the Capital Stock of CNL having general voting rights so that
more than twenty-five percent (25%) of the Capital Stock of CNL is held by a
Person, such Persons Affiliates, or two (2) or more Persons (or their
Affiliates) acting in concert, unless the Administrative Agent and the Required
Lenders have approved in advance in writing the identity of such Person or
Persons or (ii) the resignation or removal from the Board of Directors of fifty
percent (50%) or more of the members of CNL’s Board of Directors during any
twelve (12) month period for any reason other than death, disability or
voluntary retirement or personal reasons, unless otherwise approved in advance
in writing by the Required Lenders. “Change of Control” shall not be deemed to
occur (1) upon the issuance of new Capital Stock in CNL as long as (A) the
conditions set forth in clause (i) and (ii) are otherwise satisfied; and (B)
the aggregate proceeds raised by CNL in connection with such issuance do not
exceed $1.5 billion; or (2) as a result of the Reconstitution of the Board.

 

“Change in
Law” shall mean (a) the adoption of any law, rule or regulation after the
date of the Credit Agreement, (b) any change in any law, rule or regulation or
in the interpretation or application thereof by any Governmental Authority
after the date of the Credit Agreement or (c) compliance by any Lender (or by
any lending office of such Lender or by such Lender’s holding company, if any)
with any guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of the Credit Agreement.

 

“Closing
Certificate” shall mean a certificate in the form of that attached to the
Credit Agreement as Exhibit C.

 

“Closing
Date” shall mean the date as of which all conditions set forth in Section
5.! of the Credit Agreement shall have been satisfied or waived and the
Loan shall have been funded.

 

 

“CNL,” “CNL
Partners,” “CNL  Resort,” and “CNL  Resort GP”
shall each have the meanings given such terms in the preamble to the Credit
Agreement.

 

“CNL Core
Entities” shall mean any of the following: (i) any Borrower Party; (ii) any
Pledgor; (iii) any Pledged Subsidiary; (iv) any CNL Resort Principal Entity; or
(v) any other CNL Entity which either alone, or in combination with other CNL
Entities adversely affected by a breach of the subject representation,
covenant, or Event of Default under this Agreement (for example three CNL
Entities have commenced bankruptcy proceedings in default under Section
9.1(7)), generates 5% or more of the Consolidated Entities’ Net income.

 

“CNL  Core
Entity Material Adverse Effect” shall mean any of the following: (1) a
Material Adverse Effect; or (2) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of any CNL Core Entities.

 

“CNL
Entities” shall mean the Borrower Parties, the CNL Resort Principal
Entities, and all Subsidiary Entities of such Persons.

 

“CNL
Hospitality  GP” shall mean CNL Hospitality GP Corp., a Delaware
corporation.

 

“CNL
Hospitality LP” shall mean CNL Hospitality LP Corp., a Delaware
corporation.

 

“CNL
Principals” shall mean Jim Seniff, Robert Bourne, Tom Hutchison, and John
Griswold.

 

“CNL Resort
Affiliate Lessees” shall mean those certain CNL Resort Entities which are
the lessees under the CNL Resort Operating Leases, as further listed on
Schedule G-2 to the Credit Agreement.

 

“CNL Resort
CMBS Loan” shall mean that certain loan in the original amount of $794
million from German American Capital Corporation, as original lender, to
certain of the CNL Resort Property Owners, which loan is evidenced and secured
by the CNL Resort CMBS Documents.

 

“CNL Resort
CMBS Documents” shall mean (i) that certain Loan and Security Agreement
dated May 7, 2003 by and between German American Capital Corporation, as the
original lender, and certain of the CNL Resort Property Owners, as amended on
or prior to the Closing Date; (ii) all “Loan Documents” as defined in such Loan
and Security Agreement; and (iii) any and all other documents and agreements
evidencing or securing the CNL Resort CMBS Loan.

 

“CNL Resort
Entities” shall mean CNL Resort Holdings and each of its Subsidiary
Entities.

 

“CNL Resort
Holdings” shall have the meaning set forth in the preamble to the Credit
Agreement.

 

 

“CNL Resort
Material Adverse Effect” shall mean (1) with respect to (a) the CNL Resort
Property Owners taken as a whole, or (b) all other CNL Resort Principal
Entities taken as a whole, a material adverse change in, or a material adverse
effect upon, the operations, business, properties, condition (financial or
otherwise) or prospects of such Persons, or (2) a material impairment of the
ability of the relevant CNL Resort Property Owners to refinance the CNL Resort
CMBS Loan.

 

“CNL Resort
Operating Leases” shall mean those certain leases between CNL Resort
Property Owners and CNL Resort Affiliate Lessees described more fully in
Schedule G-7 attached hereto.

 

“CNL Resort
Portfolio” shall mean, collectively, the CNL Resort Properties.

 

“CNL Resort
Principal Entities” shall mean, jointly and severally, CNL Resort Holdings
and certain of their Subsidiaries listed in Schedule G-l to the Credit
Agreement.

 

“CNL Resort
Properties” shall mean each Real Property listed on Schedule G-2 to the
Credit Agreement.

 

“CNL Resort
Property Owners” shall mean the owners of the CNL Resort Properties listed
on Schedule G-2 to the Credit Agreement.

 

“Code” shall
mean the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder, as from time to time in effect. “Commitment
Letter” means the letter agreement, dated February 12, 2004, between
Deutsche Bank AG, Cayman Islands Branch, and CNL, relating to the commitment
with respect to the Loan.

 

“Compliance
Certificate” shall mean a certificate in the form of that attached to the
Credit Agreement as Exhibit D.

 

“Consolidated
Entities” means, collectively, (i) the Borrower Parties, (ii) CNL’s
Subsidiaries; and (iii) any other Person the accounts of which are consolidated
with those of CNL in the consolidated financial statements of CNL in accordance
with GAAP.

 

“Contact
Office” shall mean the office of Administrative Agent located at Deutsche
Bank AG, do .DB Services, MS JCYO5-05 1190 Hudson Street, Jersey City, NJ
07302, Fax: 201-593-2309, Attention: Mary Rodwell, or such other offices as the
Administrative Agent may notify the Borrowers and the Lenders from time to time
in writing.

 

“Contingent
Obligation” as to any Person shall mean, without duplication, (i) any
contingent obligation of such Person required to be shown on such Person’s
balance sheet in accordance with GAAP, and (ii) any obligation required to be
disclosed in the footnotes to such Person’s financial statements in accordance
with GAAP, guaranteeing partially or in whole any non-recourse Indebtedness,
lease, dividend or other obligation, exclusive of contractual indemnities
(including, without limitation, any indemnity or price-adjustment provision
relating to the purchase or sale of securities or other assets), of such Person
or of any other Person. The amount of any Contingent Obligation described in
clause (ii) shall be deemed to be (a) with

 

 

respect to a guaranty of interest or interest and principal, or
operating income guaranty, the sum of all payments required to be made
thereunder (which in the case of an operating income guaranty shall be deemed
to be equal to the debt service for the note secured thereby), calculated at
the interest rate applicable to such Indebtedness, through (1) in the case of
an interest or interest and principal guaranty, the stated date of maturity of
the obligation (and commencing on the date interest could first be payable
thereunder), or (2) in the case of an operating income guaranty, the date
through which such guaranty will remain in effect, and (b) with respect to all
guarantees not covered by the preceding clause (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of which
such guaranty is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as recorded on the balance sheet and on the footnotes to
the most recent financial statements of the applicable Person required to be
delivered pursuant hereto. Notwithstanding anything contained herein to the contrary,
guarantees of completion and non-recourse carve outs in secured loans shall not
be deemed to be Contingent Obligations unless and until a claim for payment has
been made thereunder, at which time any such guaranty of completion shall be
deemed to be a Contingent Obligation in an amount equal to any such claim.

 

“Contractual
Obligation” as to any Person shall mean 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 its property is bound.

 

“Core
Material Inaccuracy” shall mean that both of the following have
occurred:  (i) statements,
representations, or information made or provided to Administrative Agent or
Lenders in connection with the Loan by or on behalf of a Borrower Party is not
true, correct and complete or omits to state a fact necessary to make the
statements, representations, or information made or provided, in light of the
circumstances under which they are made or provided, not misleading, and (ii)
such inaccuracy results in or has a CNL Core Entity Material Adverse Effect.

 

“Credit
Agreement” shall mean the Credit Agreement defined in the introductory
paragraph of this Glossary, as the same may be Modified, extended or replaced
from time to time.

 

“Depreciation
and Amortization Expense” shall mean (without duplication), for any period,
the sum for such period of total depreciation and amortization expense, whether
paid or accrued, of the Consolidated Entities.

 

“Designated
Entities” shall mean the Persons listed on Schedule G-4 to the
Credit Agreement.

 

“Development
Investment” shall have the meaning set forth in Section 8.5(2).

 

“Disposition”
shall mean the sale, conveyance, pledge, hypothecation, ground lease,
encumbrance, creation of a security interest with respect to, or other
transfer, whether voluntary or involuntary, direct or indirect, of any legal or
beneficial interest in a Property, including any sale, conveyance, pledge,
hypothecation, ground lease, encumbrance, creation of a security interest with
respect to, or other transfer, at any tier, of any ownership interest in any
CNL Entity;

 

 

provided, however, that Disposition shall not include any Permitted
Encumbrances; provided further that such exclusion of Permitted Encumbrances
shall not apply to the Dispositions described in Sections 8.4(1) and 8.4(2)
of the Credit Agreement.

 

“Disposition
Promissory Note” shall mean any promissory note received as consideration
for the Disposition of a Property subject to Section 3.3 of the Credit
Agreement.

 

“Disqualified
Capital Stock” shall mean with respect to any Person any Capital Stock of
such Person (other than preferred stock of CNL issued and outstanding on the
Closing Date) that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or otherwise (including upon
the occurrence of any event), is required to be redeemed or is redeemable for
cash at the option of the holder thereof, in whole or in part (including by
operation of a sinking fund), or is exchangeable for Indebtedness (other than
at the option of such Person), in whole or in part, at any time.

 

“Distribution”
shall mean with respect to any Borrower Party: (i) any distribution of cash or
Cash Equivalent, directly or indirectly, to the partners or holders of Capital
Stock of such Persons, or any other distribution on or in respect of any
partnership, company or equity interests of such Persons; (ii) the declaration
or payment of any dividend on or in respect of any shares of any class of
Capital Stock of such Persons; OR (iii) the purchase, redemption, or other
retirement of any shares of any class of Capital Stock of such Persons,
directly or indirectly.

 

“EBITDA”
shall mean, for the twelve months then most recently ended, solely with respect
to the Consolidated Entities, (i) Net Income, plus (without duplication) (A)
Interest Expense, (B) Tax Expense, and (C) Depreciation and Amortization
Expense, in each case for such period.

 

“Eligible
Assignee” shall mean any of the following:

 

(a)           A commercial bank
organized under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $100,000,000;

 

(b)           A commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the “OECD”), or a
political subdivision of any such country, and having a combined capital and
surplus of at least $100,000,000 (provided that such bank is acting through a
branch or agency located in the country in which it is organized or another
country which is also a member of the OECD);

 

(c)           A Person that is
engaged in the business of commercial banking and that is: (1) an Affiliate of
a Lender, (2) an Affiliate of a Person of which a Lender is an Affiliate, or
(3) a Person of which a Lender is an Affiliate;

 

(d)           An insurance company,
mutual fund or other financial institution organized under the laws of the
United States, any state thereof, any other country which is a member of the
OECD or a political subdivision of any such country which

 

 

invests in bank loans and has a net worth of
$500,000,000; and

 

(e)           Any fund (other than a
mutual fund) which invests in bank loans and whose assets exceed $100,000,000;

 

provided,
however, that no Person shall be an “Eligible Assignee” unless at the time of
the proposed assignment to such Person: (i) such Person is able to make or
maintain, as applicable, its portion of the Loan in U.S. dollars, and (ii) such
Person is exempt from withholding of tax on interest and is able to deliver the
documents related thereto pursuant to Section 2.9(5) of the Credit
Agreement.

 

“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as Modified,
and the rules and regulations promulgated thereunder as from time to time in
effect.

 

“ERISA
Affiliate” shall mean any trade or business (whether or not incorporated)
under common control with any Consolidated Entity within the meaning of Section
414(b) or (c) of the Code (and Sections 414(m) and (a) for purposes of
provisions relating to Section 412 of the Code).

 

“ERISA
Event” shall mean (a) a Reportable Event with respect to a Pension Plan or
a Multiemployer Plan; (b) a withdrawal by any Consolidated Entity or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001 (a)(2)
of ERISA) or a cessation of operations which is treated as such a withdrawal
under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any
Consolidated Entity or any ERISA Affiliate from a Multiemployer Plan or
notification that a multiemployer is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a plan amendment as a
termination under Section 4041 or 4041A of ERISA or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
a failure by any Consolidated Entity to make required contributions to a
Pension Plan, Multiemployer Plan or other Plan subject to Section 412 of the
Code; (1) an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
(g) the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon any
Consolidated Entity or any ERISA Affiliate; or (h) an application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of
the Code with respect to any Plan.

 

“Eurodollar
Business Day” shall mean a Business Day on which commercial banks in
London, England are open for domestic and international business.

 

“Event of
Default” shall have the meaning given such term in Section 9 of the
Credit Agreement.

 

“Evidence
of No Withholding” shall have the meaning given such term in Section

 

 

2.9 of the Credit Agreement.

 

“Excluded
Taxes” shall mean, with respect to the Administrative Agent, any Lender, or
any other recipient of any payment to be made by or on account of any
obligation of the Borrowers hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by any
state, locality or foreign jurisdiction under the laws of which such recipient
is organized or in which it maintains an office or permanent establishment, (b)
any branch profits taxes imposed by the United States of America or any similar
tax imposed by any other jurisdiction in which the Borrowers are located and
(c) in the case of a Foreign Lender, any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party to the Credit Agreement or is attributable to such Foreign Lender’s
failure to comply with Section 2.9(5) of the Credit Agreement; provided,
however, Excluded Taxes shall not include any withholding tax resulting from
any inability to comply with Section 2.9(5) of the Credit Agreement solely by reason
of there having occurred a Change in Law.

 

“Excluded
Wholly-Owned Subsidiaries” shall have the meaning given such term in Section
4.2 of the Credit Agreement.

 

“Extended
Maturity Date” shall have the meaning given such term in Section 1.4(11
of the Credit Agreement.

 

“Extension
Fee” shall have the meaning given such term in Section 1.4(2) of the
Credit Agreement.

 

“Facility
Amount” shall have the meaning given such term in Section 1.1 of the
Credit Agreement.

 

“Federal
Funds Rate” shall mean for any day, an interest rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 1:00 p.m. (New York time) on such
day on such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by the Administrative
Agent in its sole discretion.

 

“Fee Letter”
shall mean the letter agreement dated February 12, 2004 between Deutsche Bank
AG, Cayman Islands Branch and CNL relating to fees.

 

“Financing”
shall mean any transaction pursuant to which new indebtedness is incurred in
respect of or secured by a Property subject to the mandatory payment provisions
of Section 3.3 of the Credit Agreement, but shall not include advances
under the revolving credit lines permitted under Section 8.2(3) of the
Credit Agreement.

 

 

“Fiscal
Ouarter” or “fiscal quarter” means any three-month period ending on
March 31, June 30, September 30 or December 31 of any Fiscal Year.

 

“Fiscal
Year” or “fiscal year” shall mean the 12-month period ending on
December 31 in each year or such other period as CNL may designate and the
Administrative Agent may approve in writing.

 

“Fixed
Charge Coverage Ratio” shall mean, at any time, the ratio of(i) EBITDA for
the twelve months then most recently ended, to (ii) Fixed Charges for such
period.

 

“Fixed
Charges” shall mean, for any period, solely with respect to the
Consolidated Entities, the sum of the amounts for such period of(i) scheduled
payments of principal of Indebtedness of the Consolidated Entities (other than
any Bullet Payment, including any Bullet Payment with respect to the Loan),
(ii) Interest Expense, (iii) payments of dividends in respect of Disqualified
Capital Stock; and (iv) to the extent not otherwise included in Interest
Expense, dividends and other distributions paid during such period by the
Borrower Parties with respect to preferred stock or preferred operating units.

 

“Foreign
Lender” shall mean any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrowers are located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

 

“GAAP”
shall mean generally accepted accounting principles in the United States of
America in effect from time to time; provided that for purposes of calculating
the covenants set forth in Section 8.12 of the Credit Agreement, GAAP
shall mean generally accepted accounting principles in the United States of
America in effect as of the Closing Date.

 

“Good Faith
Contest” means the contest of an item if(l) the item is diligently
contested in good faith, and, if appropriate, by proceedings timely instituted,
(2) adequate reserves are established if required by, and in accordance with,
GAAP with respect to the contested item, (3) during the period of such contest,
the enforcement of any contested item is effectively stayed and (4) the failure
to pay or comply with the contested item during the period of the contest is
not likely to result in a Material Adverse Effect.

 

“Governmental
Authority” shall mean any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any court or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

 

“Guarantor”
shall mean CNL.

 

“Guaranty”
shall mean the unconditional guaranty executed by CNL in favor of
Administrative Agent pursuant to the terms of the Credit Agreement, in a form
approved by the Administrative Agent.

 

“Hazardous
Materials” shall mean any flammable materials, explosives, radioactive

 

 

materials, hazardous wastes, toxic substances or related materials,
including, without limitation, any substances defined as or included in the
definitions of “hazardous substances,” “hazardous wastes,” “hazardous
materials,” or “toxic substances” under any applicable federal, state, or local
laws or regulations.

 

“Hazardous
Materials Claims” shall mean any enforcement, cleanup, removal or other
governmental or regulatory action or order with respect to the Property,
pursuant to any Hazardous Materials Laws, and/or any claim asserted in writing
by any third party relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials.

 

“Hazardous
Materials Laws” shall mean any applicable federal, state or local laws, ordinances
or regulations relating to Hazardous Materials.

 

“Hedging
Obligations” of a Person means any and all obligations of such Person or
any of its Subsidiaries, whether absolute or contingent and howsoever and
whenever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (a) any
and all agreements, devices or arrangements designed to protect at least one of
the parties thereto from the fluctuations of interest rates, commodity prices,
exchange rates or forward rates applicable to such party’s assets, liabilities
or exchange transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.

 

“Incremental
Payment” shall have the meaning given such term in Section 2.8 of
the Credit Agreement.

 

“Indebtedness”
of any Person shall mean without duplication, (a) all liabilities and
obligations of such Person, whether consolidated or representing the
proportionate interest in any other Person, (1) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof, and including construction loans),
(ii) evidenced by bonds, notes, debentures or similar instruments, (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except those incurred in the ordinary course of its
business that would constitute a trade payable to trade creditors (but
specifically excluding from such exception the deferred purchase price of real
property), (iv) evidenced by bankers’ acceptances, (v) consisting of
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person (in an amount equal to the lesser of
the obligation so secured and the fair market value of such property), (vi)
consisting of Capitalized Lease Obligations (including any Capitalized Leases
entered into as a part of a sale/leaseback transaction), (vii) consisting of
liabilities and obligations under any receivable sales transactions, (viii)
consisting of a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; or (ix) consisting of Net Hedging
Obligations; or (b) all Contingent Obligations and liabilities and obligations
of others of the kind described in the preceding clause

 

 

(a) that such Person has guaranteed or that is otherwise its legal
liability and all obligations to purchase, redeem or acquire for cash or
non-cash consideration any Capital Stock or other equity interests and (c)
obligations of such Person to purchase for cash or non-cash consideration
Securities or other property arising out of or in connection with the sale of
the same or substantially similar securities or property. For the avoidance of
doubt, Indebtedness of any water, sewer, or other improvement district that is
payable from assessments or taxes on property located within such district shall
not be deemed to be Indebtedness of any Person owning property located within
such district; provided that such Person has not otherwise obligated itself in
respect of the repayment of such Indebtedness. Notwithstanding the foregoing,
the Indebtedness of one Consolidated Entity to another Consolidated Entity
shall not be considered for the purposes of Section 8.12 of the Credit
Agreement and the calculation of the financial covenants set forth therein nor
shall such Indebtedness be considered a Financing.

 

“Indemnified
Liabilities” shall have the meaning given such term in Section 11.14
of the Credit Agreement.

 

“Indemnified
Person” shall have the meaning given such term in Section 11.14 of
the Credit Agreement.

 

“Indemnified
Taxes” means Taxes other than Excluded Taxes.

 

“Initial
Financial Statements” shall have the meaning given such term in Section
6.1 of the Credit Agreement.

 

“Initial
Maturity Date” shall have the meaning given such term in Section 1.3
of the Credit Agreement.

 

“Intangible
Assets” shall mean (i) all unamortized debt discount and expense,
unamortized deferred charges, goodwill and other intangible assets and (ii) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of assets of a going concern business made within twelve months
after the acquisition of such business) subsequent to December 31, 2003 in the
book value of any asset owned by the Consolidated Entities.

 

“Interest
Coverage Ratio” shall mean, at any time, the ratio of (i) EBITDA for the
twelve months then most recently ended, to (ii) Interest Expense for such
period..

 

“Interest
Expense” shall mean, for any period, solely with respect to the
Consolidated Entities, the sum (without duplication) for such period of: (i)
total interest expense, whether paid or accrued, of the Consolidated Entities,
including fees payable in connection with the Credit Agreement, charges in
respect of letters of credit and the portion of any Capitalized Lease
Obligations allocable to interest expense, including the interest expense of
consolidated joint ventures, but excluding amortization or write-off of debt
discount and expense (except as provided in clause (ii) below), (ii)
amortization of costs related to interest rate protection contracts and rate
buydowns, (iii) capitalized interest, (iv) for purposes of determining Interest
Expense as used in the Fixed Charge Coverage Ratio (both numerator and
denominator) only, amortization of Capitalized Loan Fees, and (v) interest
incurred on any liability or obligation that

 

 

constitutes a Contingent Obligation of any Consolidated Entity.

 

“Interest
Period” shall mean a period of one month commencing on the expiration of
the preceding Interest Period (or, in the case of the first Interest Period, on
the Closing Date). Such Interest Period shall end on (but exclude) the day
which corresponds numerically to such date one month thereafter, provided,
however, that if there is no such numerically corresponding day in such next
succeeding month, such Interest Period shall end on the last day of such next
succeeding month. If an Interest Period would otherwise end on a day which is
not a Eurodollar Business Day, such Interest Period shall end on the next
succeeding Eurodollar Business Day, provided, however, that if said next
succeeding Eurodollar Business Day falls in a new calendar month, such Interest
Period shall end on the immediately preceding Eurodollar Business Day.

 

“Investment”
shall mean, with respect to any Person, (i) any purchase or other acquisition
by that Person of Securities, or of a beneficial interest in Securities, issued
by any other Person, (ii) any purchase by that Person of a Property or the
assets of a business conducted by another Person, and (iii) any loan (other
than loans to employees), advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
Ordinary Course of Business) or capital contribution by that Person to any
other Person, including, without limitation, all Indebtedness to such Person
arising from a sale of property by such Person other than in the ordinary
course of its business. The amount of any Investment shall be the original cost
of such Investment, plus the cost of all additions thereto less the amount of
any return of capital or principal to the extent such return is in cash with
respect to such Investment without any adjustments for increases or decreases
in value or write-ups, write-downs or write-offs with respect to such
Investment. Notwithstanding the foregoing, Investments shall not include any
Disposition Promissory Notes.

 

“IRS” shall
mean the Internal Revenue Service or any entity succeeding to any of its
principal functions under the Code.

 

“Joint
Venture” shall mean, as to any Person: (i) any corporation fifty percent
(50%) or less of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or indirectly, by such
Person or by one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization fifty percent (50%)
or less of the ownership interests having ordinary voting power of which shall
at the time be so owned or controlled. Notwithstanding the foregoing, a Joint
Venture of CNL shall include each Person, other than a Subsidiary, in which CNL
owns a direct or indirect equity interest. Unless otherwise expressly provided,
all references in the Loan Documents to a “Joint Venture” shall mean a Joint
Venture of CNL.

 

“KSL
Acquisition” shall mean that certain acquisition by CNL Resort Acquisition
Corp. of certain Capital Stock of KSL Recreation Corporation pursuant to the
KSL Stock Purchase Agreement, and the subsequent merger of KSL Recreation
Group, Inc., through multiple iterative mergers, into KSL Recreation
Corporation, all of which is to be consummated on the Closing Date.

 

 

“KSL
Acquisition/Conversion Documents” shall have the meaning set forth in
Section 6.5(2).

 

“KSL
Conversion” shall mean each of the events contemplated in Schedule 0-6,
including the conversion of certain CNL Resort Entities from corporations to
limited partnerships and the execution of the CNL Resort Operating Leases.

 

“KSL Stock
Purchase Agreement” means that certain Stock Purchase Agreement, dated as
of February 12, 2004 between CNL Acquisition Corp. and certain shareholders of
KSL Recreation Corp.

 

“Lead
Arranger” shall mean Deutsche Bank Securities, Inc., in its capacity as
lead arranger for the credit facility evidenced by the Credit Agreement,
together with its permitted successors and assigns.

 

“Lenders”
shall mean each of the lenders from time to time party to the Credit Agreement,
including any Assignee permitted pursuant to Section 11.8 of the Credit
Agreement.

 

“LIBO Rate”
shall mean, with respect to any Interest Period, the per annum rate for such
Interest Period and for an amount equal to the amount of the Loan shown on Dow
Jones Telerate Page 3750 (or any equivalent successor page) at approximately
11:00 A.M. (London time) two Eurodollar Business Days prior to the first day of
such Interest Period or if such rate is not quoted, the arithmetic average as
determined by the Administrative Agent of the rates at which deposits in
immediately available U.S. dollars in an amount equal to the amount of the Loan
having a maturity approximately equal to such Interest Period are offered to
four (4) reference banks to be selected by the Administrative Agent in the
London interbank market, at approximately 11:00 a.m. (London time) two
Eurodollar Business Days prior to the first day of such Interest Period.

 

“LIBO
Reserve Percentage” shall mean with respect to an Interest Period, the maximum
aggregate reserve requirement (including all basic, supplemental, marginal and
other reserves and taking into account any transitional adjustments) which is
imposed under Regulation D on eurocurrency liabilities. As of the Closing Date,
the LIBO Reserve Percentage is zero, provided, however, there can be no
assurance as to what such amount may be in the future.

 

“Lien”
shall mean any security interest, mortgage, pledge, lien, claim on property,
charge or encumbrance securing an obligation to make a payment or transfer
property (including any conditional sale or other title retention agreement),
any lease in the nature thereof, and any agreement to give any security
interest.

 

“Loan”
shall have the meaning given such term in Section 1.1 of the Credit Agreement.

 

“Loan
Documents” shall mean the Credit Agreement, the Notes, the Fee Letter and
each of the following (but only to the extent evidencing, guaranteeing,
supporting or securing the obligations under the foregoing instruments and
agreements): the Guaranty, the Pledge Agreement, and each other instrument,
certificate or agreement executed by any Borrower Party in connection herewith,
as any of the same may be Modified from time to time.

 

 

“Margin
Stock” shall mean “margin stock” as defined in ‘Regulation U.

 

“Material
Adverse Effect” shall mean with respect to CNL and CNL Partners and their
Subsidiaries taken as a whole, any of the following (1) a material adverse
change in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of such Persons
from and after the Statement Date, (2) a material impairment of the ability of
any of such Persons to timely pay all amounts as they are to become due and
payable or to otherwise perform under any Loan Document; (3) a material
impairment of the overall value of the CNL Resort Properties, taken as a whole;
or (4) a material adverse effect upon the legality, validity, binding effect or
enforceability against any of such Persons of any Loan Document.

 

“Maturity
Date” shall initially mean the Initial Maturity Date; provided that the

 

“Maturity
Date” shall mean the Extended Maturity Date if the Borrowers extend the
Initial Maturity Date in accordance with the terms and conditions of Section
1.4 of the Credit Agreement. The Maturity Date shall be subject to
acceleration upon an Event of Default as otherwise provided in the Credit
Agreement.

 

“Measuring
Period” shall mean the period of four consecutive fiscal quarters ended on
the last day of the Fiscal Quarter most recently ended as to which operating
statements with respect to a Real Property have been delivered to the Lenders.

 

“Membership
Cash Flow” shall mean dues paid in respect of private memberships in hotel,
spa, and golf course facilities at a CNL Resort Property.

 

“Modifications”
shall mean any amendments, supplements, modifications, renewals, replacements,
consolidations, severances, substitutions and extensions of any document or
instrument from time to time; “Modify”, “Modified,” or related words shall have
meanings correlative thereto.

 

“Moody’s”
shall mean Moody’s Investors Service, Inc., or any successor thereto.

 

“Multiemployer
Plan” shall mean a “multiemployer plan” (within the meaning of Section
4001(a)(3) of ERISA) and to which any Consolidated Entity or any ERISA
Affiliate makes, is making, or is obligated to make contributions or, during
the preceding three calendar years, has made, or been obligated to make,
contributions.

 

“Net Cash
Proceeds” shall mean with respect to any Disposition of any Property, any
Financing with respect to any Property, or the issuance of any debt or equity
Securities: (a) all cash consideration, as well as the value of all non-cash
consideration (other than Disposition Promissory Notes, which shall be subject
to the mandatory prepayment provisions set forth in Section 3.3(2)(B) of
the Credit Agreement); less,  but without duplication, (b) any repayment of any
related Indebtedness permitted under Section 8.2 of the Credit
Agreement, currently existing or incurred in the future with respect to the
Property subject to a Disposition or Financing, to the extent required or
permitted under the terms of the loan documents governing such Indebtedness,
and any net payments made to a counterparty under Hedging Obligations incurred
with respect to such Indebtedness in connection with the termination of such
Hedging Obligations as a result of

 

 

a subject Disposition, less (c) all purchase money Financing proceeds
applied toward payment of the cash consideration for the purchase price or
other costs of acquisition of any Property acquired in accordance with Section
8.5(3) or acquired with Indebtedness permitted under Sections 8.2(4) and
8.2(5)  of the Credit
Agreement, less (d) any amounts which, pursuant to the terms of any Indebtedness
permitted under Section 8.2 of the Credit Agreement and incurred with
respect to the Property subject to a Disposition or Financing, is required to
be deposited in reserve accounts or paid to third parties, or subject to
restrictions which preclude distribution to Lenders as otherwise required
pursuant to Section 3.3 of the Credit Agreement, but only to the extent such
amounts are required to remain so reserved, restricted or paid under the terms
of the loan documents governing such Indebtedness; and less (e) transfer
taxes, customary brokerage costs, reasonable legal fees and other customary and
reasonable out of pocket costs actually paid to unaffihiated third parties in
connection with such Disposition, Financing, or issuance. Notwithstanding the
foregoing, (1) to the extent the Property subject to the Disposition or
Financing is not Wholly-Owned, Net Cash Proceeds shall equal the sum of (a),
(b), (c), (d) and (e) as the same is payable or allocable to the Borrower
Parties or their Wholly Owned Subsidiaries, and any sums not so allocable (i.e.
portions of the net proceeds allocable to Unaffihiated Partners) shall not be
included in Net Cash Proceeds, and (2) Net Cash Proceeds shall not include the
proceeds of any initial public offering of Securities of CNL to the extent
applied to purchase the Advisor in accordance with Section 8.6.

 

“Net
Hedging Obligations” shall mean, as of any date of determination, the
excess (if any) of all “unrealized losses” over all “unrealized profits” of
such Person arising from Hedging Obligations as substantiated in writing by the
Borrowers and approved by the Administrative Agent. “Unrealized losses” means
the fair market value of the cost to such Person of replacing such Hedging
Obligation as of the date of determination (assuming the Hedging Obligation
were to be terminated as of that date), and “unrealized profits” means the fair
market value of the gain to such Person of replacing such Hedging Obligation as
of the date of determination (assuming such Hedging Obligation were to be
terminated as of that date).

 

“Net Income”
shall mean, for any period, the net income (or loss), after provision for
taxes, of the Consolidated Entities determined on a consolidated basis for such
period taken as a single accounting period as determined in accordance with
GAAP, and including Membership Cash Flow, but excluding (i) any recorded
extraordinary losses and extraordinary gains; and (ii) other non-cash charges
and expenses (including non-cash charges resulting from accounting changes).

 

“Net Worth”
means, at any date, the consolidated stockholders’ equity of the Consolidated
Entities, excluding any: (i) Intangible Assets; and (ii) amounts attributable
to Disqualified Capital Stock.

 

“Note”
shall mean a promissory note in the form of that attached to the Credit
Agreement as Exhibit E issued by the Borrowers at the request of a
Lender pursuant to Section 3.1 of the Credit Agreement.

 

“Noticed
Event of Default” shall mean (i) an Event of Default has occurred and is
continuing; and (ii) Administrative Agent has notified the Borrower Parties in
writing of such

 

 

Event of Default.

 

“Obligations”
shall mean any and all debts, obligations and liabilities of the Borrowers or
the other Borrower Parties to the Administrative Agent, the other Agents and
the Lenders (whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from
time to time decreased or extinguished and later increased, created or
incurred), arising out of or related to the Loan Documents.

 

“Officers’
Certificate” shall mean as to any entity, a certificate executed on behalf
of such entity by a Responsible Officer.

 

“Ordinary
Course of  Business” shall mean, with respect to a specific Person,
the ordinary course of such Person’s business, substantially as conducted by
any such Person prior to and as of the Closing Date, and (A) undertaken by such
Person in good faith and not for purposes of evading any covenant or
restriction in any Loan Document, and (B) which shall not in any event
interfere with the ongoing operation of the Property of such Person in a manner
consistent with similar properties and shall not interfere with the day-to-day
operations of such Property as contemplated in the Loan Documents.

 

“Organizational
Documents” shall mean: (a) for any corporation, the certificate or articles
of incorporation, the bylaws, any certificate of determination or instrument
relating to the rights of preferred shareholders of such corporation, and all
applicable resolutions of the board of directors (or any committee thereof) of
such corporation, (b) for any partnership, the partnership agreement, any
certificate of formation, and any other instrument or agreement relating to the
rights between the partners or pursuant to which such partnership is formed,
(c) for any limited liability company, the operating agreement, any articles of
organization or formation, and any other instrument or agreement relating to
the rights between the members, pertaining to the manager, or pursuant to which
such limited liability company is formed, and (d) for any trust, the trust
agreement and any other instrument or agreement relating to the rights between
the trustors, trustees and beneficiaries, or pursuant to which such trust is
formed.

 

“Other
Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies of a Governmental
Authority with respect to any payment made under any Loan Document or from the
execution, delivery or enforcement of any Loan Document.

 

“Participant”
shall have the meaning given such term in Section 11.8 of the Credit
Agreement.

 

“PBGC”
shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to
any of its principal functions under ERISA.

 

“Pension
Plan” shall mean a pension plan (as defined in Section 3(2) of ERISA)
subject to Title LV of ERISA which the Consolidated Entities or any ERISA
Affiliate sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions, or in the case

 

 

of a multiple employer plan (as described in Section 4064(a) of ERISA)
has made contributions at any time during the immediately preceding five (5) plan years, but excluding any
Multiemployer Plan.

 

“Percentage
Share” shall mean for any Lender at any date the percentage set forth next
to such Lender’s name on Schedule G-l to the Credit Agreement, as the same may
be Modified from time to time, including, without limitation, to reflect the
addition or withdrawal of a Lender or the assignment of all or a portion of an
existing Lender’s Percentage Share as permitted pursuant to Section 11.8
of the Credit Agreement.

 

“Permitted
Encumbrances” shall mean any Liens with respect to the assets of the
Borrowers consisting of the following:

 

(a)           Liens (other than
environmental Liens and Liens in favor of the PBGC) with respect to the payment
of taxes, assessments or governmental charges in all cases which are not yet
due or which are being contested in good faith and with respect to which
adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP;

 

(b)           Statutory liens of
carriers, warehousemen, mechanics, materialmen, landlords, repairmen or other
like Liens arising by operation of law in the

 

Ordinary
Course of Business for amounts which, if not resolved in favor of the Borrower
Parties, could not result in a Material Adverse Effect;

 

(c)           Liens securing the
performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the Ordinary Course of Business;

 

(d)           Liens incidental to the
conduct of the business of the Borrower Parties, including Liens arising with
respect to zoning restrictions, easements, licenses, reservations, covenants,
rights-of-way, easements, encroachments, building restrictions, minor defects,
irregularities in title and other similar charges or encumbrances on the use of
the assets of the Borrower Parties which do not interfere with the ordinary
conduct of the business of the Borrower Parties and that are not incurred (i)
in violation of any terms and conditions of the Credit Agreement; (ii) in
connection with the borrowing of money or the obtaining of advances or credit,
or (iii) in a manner which could result in a Material Adverse Effect;

 

(e)           Liens incurred or
deposits made in the Ordinary Course of Business in connection with worker’s
compensation, unemployment insurance and other types of social security;

 

(f)            Any attachment
orjudgment Lien not constituting an Event of Default;

 

(g)           Licenses (with respect
to intellectual property and other property),

 

 

leases or subleases granted to third parties;

 

(h)           any (i) interest or
title of a lessor or sublessor under any lease not prohibited by the Credit
Agreement, (ii) Lien or restriction that the interest or title of such lessor
or sublessor may be subject to, or (iii) subordination of the interest of the
lessee or sublessee under such lease to any Lien or restriction referred to in
the preceding clause (ii), so long as the holder of such Lien or restriction
agrees to recognize the rights of such lessee or sublessee under such lease;

 

(i)            Liens arising from
filing UCC financing statements relating solely to leases not prohibited by the
Credit Agreement;

 

(j)            Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; and

 

(k)           Liens on personal
property (other than the Capital Stock of any CNL Entities).

 

“Person”
shall mean any corporation, natural person, firm, joint venture, partnership,
trust, unincorporated organization, government or any department or agency of
any government.

 

“Plan” shall
mean an employee benefit plan (as defined in Section 3(3) of ERISA) which the
Consolidated Entities or any ERISA Affiliate sponsors or maintains or to which
the Consolidated Entities or any ERISA Affiliate makes, is making, or is
obligated to make contributions and includes any Pension Plan, other than a
Multiemployer Plan.

 

“Pledge
Agreements” shall mean the Pledge Agreements dated as of even date herewith
from CNL, CNL Hospitality GP, CNL Hospitality LP and CNL Partners, in
substantially the form attached to the Credit Agreement as Exhibit F,
pursuant to which (i) CNL shall pledge to the Administrative Agent, for the
ratable benefit of the Lenders, all of its direct ownership interests in each
of its Pledged Subsidiaries; (ii) CNL Hospitality GP and CNL Hospitality LP
shall each pledge to the Administrative Agent, for the ratable benefit of the
Lenders, all of its respective direct ownership interests in CNL Partners, and
(iii) CNL Partners shall pledge to the Administrative Agent, for the ratable
benefit of the Lenders, all of its direct ownership interests in CNL Resort
Holdings.

 

“Pledged
Subsidiaries” shall mean each CNL Entity listed on Schedule 4.2 to
the Credit Agreement.

 

“Pledgor”
shall mean each pledgor under a Pledge Agreement.

 

“Potential
Default” shall mean an event which but for the lapse of time or the giving
of notice, or both, would constitute an Event of Default.

 

“Preferential
Payment” shall have the meaning given such term in Section 1.6(5)

 

 

of the Credit Agreement.

 

“Prime Rate”
shall mean the fluctuating per annum rate announced from time to time by
Deutsche Bank AG or any successor Administrative Agent at its principal office
in New York, New York as its “prime rate”. The Prime Rate is a rate set by
Deutsche Bank AG as one of its base rates and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto, and is evidenced by the recording thereof after its announcement in
such internal publication or publications as Deutsche Bank AG may designate.
The Prime Rate is not tied to any external index and does not necessarily
represent the lowest or best rate of interest actually charged to any class or
category of customers. Each change in the Prime Rate will be effective on the
day the change is announced within Deutsche Bank AG.

 

“Pro Forma
Statement” shall have the meaning given such term in Section 6.1 of
the Credit Agreement.

 

“Project”
shall mean any hotel property, resort property, office building, mixed use
property or other income producing project owned or controlled, directly or
indirectly by a CNL Entity.

 

“Property”
shall mean, collectively and severally, any and all Real Property and all
personal property owned or occupied by the subject Person. “Property” shall
include all Capital Stock owned by the subject Person in a Subsidiary Entity.

 

 

“Public
Company” shall mean that CNL has been the subject of an initial firmly
underwritten offering of common stock of the company made pursuant to the
Securities Act of 1933, as amended (the “Securities Act”), on Form S-I or Form
S-3 (as defined in the Securities Act) or any successor forms, by an investment
banking firm of recognized national standing, and following which the common stock
of the company is listed on the New York Stock Exchange or quoted on The Nasdaq
National Market.

 

“Qualified
Appraisal” means a real estate appraisal conducted in accordance with the
Uniform Standards of Professional Appraisal Practice (as promulgated by the
Appraisal Standards Board of the Appraisal Foundation) and all Requirements of
Law applicable to Lenders, including in conformity with FIRREA, undertaken by
an independent appraisal firm satisfactory to Administrative Agent, and
providing an assessment of fair market value of the subject Real Property.

 

“Qualified
Manager” shall mean each of the Persons listed on Schedule G-3 to the
Credit Agreement and any wholly owned Subsidiary thereof.

 

“Real
Property” means each of those parcels (or portions thereof) of real
property, improvements and fixtures thereon and appurtenances thereto now or
hereafter owned or leased by the CNL Entities (but shall not include leases of
office space only or similar space leases not involving an entire parcel of
real property).

 

“Reconstitution
of  the Board” shall mean that in conjunction with CNL becoming a
Public Company, the expansion of the existing Board of Directors to nine
members, five of whom shall be New York Stock Exchange qualified independent
directors, and four of whom shall be CNL Principals.

 

“Regulation
D” shall mean Regulation D of the Board of Governors of the Federal Reserve
System from time to time in effect and shall include any successor or other
regulation of said Board of Governors relating to reserve requirements
applicable to member banks of the Federal Reserve System.

 

“Regulation
U” shall mean Regulation U of the Board of Governors of the Federal Reserve
System (12 C.F.R. § 221), as the same may from time to time be amended,
supplemented or superseded.

 

“REIT” shall
mean a domestic trust or corporation that qualifies as a real estate investment
trust under the provisions of Sections 856, et
seq. of the Code.

 

“Reportable
Event” shall mean any of the events set forth in Section 4043(b) of ERISA
or the regulations thereunder, other than any such event for which the thirty
(30)-day notice requirement under ERISA has been waived in regulations issued
by the

 

PBGC.

 

“Required
Lenders” shall mean at any date, not less than two (2) Lenders holding not
less than 66 2/3% of the outstanding principal portion of the Loan.

 

 

“Requirements
of Law” shall mean, as to any Person, the Organizational Documents of such
Person, and any law, treaty, rule or regulation, or a final and binding
determination of an arbitrator or a determination of a court or other
Governmental Authority, 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.

 

“Reserve
Adjusted LIBO Ra” shall mean the rate per annum (rounded upward, if
necessary, to the next higher 1/16 of one percent) calculated as of the first
day of such Interest Period in accordance with the following formula:

 

	
   

  	
  Reserve
  Adjusted LIBO Rate =   LR   

  
	
   

  	
   

  	
  1-LRP

  
	
   

  	
   

  	
   

  
	
  where

  	
   

  
	
  LR = LIBO Rate

  	
   

  
	
  LRP = LIBO Reserve Percentage

  	
   

  

 

“Responsible
Financial Officer” shall mean, with respect to any Person, the chief
financial officer or treasurer of such Person or any other officer, partner or
member having substantially the same authority and responsibility.

 

“Responsible
Officer” shall mean, with respect to any Person, the president, chief
executive officer, vice president, Responsible Financial Officer, general
partner, managing member of such Person or any other officer, partner or member
having substantially the same authority and responsibility.

 

“Restricted
Cash” shall mean any cash or cash equivalents held by any Person with
respect to which such Person does not have unrestricted access and unrestricted
right to expend such cash or expend or liquidate such permitted Investments.

 

“S&P”
shall mean Standard & Poor’s Rating Services, a division of the McGraw-Hill
Companies, Inc., or any successor thereto.

 

“Secured
Indebtedness” shall mean that portion of the Total Liabilities that is
secured by a Lien (excluding, however, the Indebtedness under the Credit
Agreement).

 

“Securities”
means any stock, shares, partnership interests, voting trust certificates,
certificates of interest or participation in any profit sharing agreement or
arrangement, bonds, debentures, options, warrants, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as “securities” or any certificates
of interest, shares or participations in temporary or interim certificates for
the purchase or acquisition of, or any right to subscribe to, purchase or
acquire, any of the foregoing.

 

“Single
Purpose Entity” shall mean shall mean a Person, other than an individual,
which (A) is formed or organized solely for the purpose of holding, directly or
indirectly, an ownership interest in (i) with respect to CNL Resort, CNL Resort
Hospitality GP, LLC and CNL

 

 

Recreation, LP; and (ii) with respect to CNL Resort GP, CNL Resort, (B)
does not engage in any business unrelated to clause (A) above, (C) has not and
will not have any assets other than those related to its activities in
accordance with clauses (A) arid (B) above, (D) maintains its own separate
books and records and its own accounts, in each case which are separate and
apart from the books and records and accounts of any other Person, (E) holds
itself out as being a Person, separate and apart from any other Person, (F)
does not and will not commingle its funds or assets with those of any other
Person, (G) conducts its own business in its own name, (H) maintains separate
financial statements and files its own tax returns (or if its tax returns are
consolidated with those of CNL, such returns shall clearly identify such Person
as a separate legal entity), (I) pays its own debts and liabilities when they
become due out of its own funds, (J) observes all partnership, corporate,
limited liability company or trust formalities, as applicable, and does all
things necessary to preserve its existence, (K) except as expressly permitted
by the Loan Documents, maintains an arm’s-length relationship with its
Transactional Affiliates and shall not enter into any Contractual Obligations
with any Affiliates except as permitted under the Credit Agreement, (L) pays
the salaries of its own employees, if any, and maintains a sufficient number of
employees in light of its contemplated business operations, (M) does not
guarantee or otherwise obligate itself with respect to the debts of any other
Person, or hold out its credit as being available to satisfy the obligations of
any other Person, except with respect to the Loan (and the co-Borrower
provisions set forth in the Credit Agreement) and as otherwise permitted under
the Loan Documents, (N) does not acquire obligations of or securities issued by
its partners, members or shareholders, (0) allocates fairly and reasonably
shared expenses, including any overhead for shared office space, (P) uses
separate stationery, invoices, and checks, (Q) does not and will not pledge its
assets for the benefit of any other Person (except as permitted under the Loan
Documents) or make any loans or advances to any other Person (except with
respect to the Loan and the joint-Borrower provisions set forth in the Credit
Agreement), (R) does and will correct any known misunderstanding regarding its
separate identity, (S) maintains adequate capital in light of its contemplated
business operations, and (T) has and will have a partnership or operating
agreement, certificate of incorporation or other organizational document which
complies with the requirements set forth in this definition.

 

“Solvent”
shall mean, when used with respect to any Person, that at the time of
determination: (i) the fair saleable vaiue of its assets is in excess of the
total amount of its liabilities (including, without limitation, contingent
liabilities); (ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become absolute
and matured; (iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as they
mature; and (iv) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.

 

“Statement
Date” shall mean December 31, 2003.

 

“Subordinated
Creditor” shall have the meaning given such term in Section 7.15(1)
of the Credit Agreement.

 

“Subordinated
Debt” shall have the meaning given such term in Section 7.15(1) of
the Credit Agreement.

 

 

“Subsidiary”
shall mean, with respect to any Person: (a) any corporation more than fifty
percent (50%) of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or indirectly, by such
Person or by one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries, (b) any partnership, limited liability company,
association, joint venture or similar business organization more than fifty
percent (50%) of the ownership interests having ordinary voting power of which
shall at the time be so owned or controlled, (c) with respect to CNL, any other
Person in which CNL owns, directly or indirectly, any Capital Stock and which
would be combined with CNL in the consolidated financial statements of CNL in
accordance with GAAP; or (d) with respect to the CNL Resort Principal Entities,
any other Person in which they own, directly or indirectly, any Capital Stock
arid which would be combined with them in consolidated financial statements in
accordance with GAAP.

 

“Subsidiary
Entities” shall mean a Subsidiary or Joint Venture of a Person. Unless
otherwise expressly provided, all references in the Loan Documents to a
“Subsidiary Entity” shall mean a Subsidiary Entity of CNL.

 

“Taxes”
shall mean any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

“Tax
Expense” shall mean (without duplication), for any period, total tax
expense (if any) attributable to income and franchise taxes based on or
measured by income, whether paid or accrued, of the Consolidated Entities.

 

“Total
Liabilities” shall mean, at any time, without duplication, the aggregate
amount of (i) all Indebtedness of the Consolidated Entities reflected in the
financial statements of CNL or disclosed in the notes thereto (to the extent
the same would constitute a Contingent Obligation, but not including any
accounts payable and accruals incurred in the Ordinary Course of Business), plus (ii) all Indebtedness of all Joint Ventures
reflected in the financial statements of such Joint Ventures or disclosed in
the notes thereto (to the extent the same would constitute a Contingent
Obligation, but not including any accounts payable and accruals incurred in the
Ordinary Course of Business) which are otherwise recourse to any Consolidated
Entity or any of its assets or that otherwise constitutes Indebtedness of any
Consolidated Entity (including any recourse obligations arising as a result of
a Consolidated Entity serving as a general partner, directly or indirectly, in
such Joint Ventures, unless such general partner is a corporation whose sole
asset is its general partnership interest and who otherwise meets the criteria
set forth in clauses (D) through (T) in the definition of Single Purpose
Entity), plus (iii) all
liabilities of the Consolidated Entities with respect to purchase and
repurchase obligations, provided that any obligations to acquire
fully-constructed Real Property shall not be included in Total Liabilities
prior to the transfer of title of such Real Property.

 

“Transactional
Affiliates” shall have the meaning given such term in Section 8.6 of
the Credit Agreement.

 

“Unaffiliated
Partner Interests” shall mean the Capital Stock of Unaffiliated Partners in
a Subsidiary Entity of the Borrower Parties.

 

 

“Unaffiliated
Partners” shall mean Persons who own, directly or indirectly at any tier, a
beneficial interest in the Capital Stock of a Subsidiary Entity, but such
Persons shall exclude: (i) the CNL Entities; (ii) Affiliates of CNL Entities;
(iii) Persons whose Capital Stock or beneficial interest therein is owned,
directly or indirectly at any tier, by the CNL Entities or their Affiliates.

 

“Unfunded
Pension Liability” shall mean the excess of a Pension Plan’s benefit liabilities
under Section 400l(a)(16) of ERISA, over the current value of that Plan’s
assets, determined in accordance with the assumptions used for funding the
Pension Plan pursuant to Section 412 of the Code fbr the applicable plan year.

 

“Wholly-Owned”
shall mean, (A) with respect to Property “Wholly-Owned” by CNL or any CNL
Resort Principal Entity, property 100% owned by such Person; and (B) with
respect to any other Real Property, Capital Stock, or other Property owned or
leased, that (i) title to such Property is held directly by, or such Property
is leased by, CNL Partners, or (ii) in the case of Real Property or Capital
Stock, title to such property is held by, or (in the case of Real Property)
such Property is leased by, a Consolidated Entity at least 99% of the Capital
Stock of which is held of record and beneficially by CNL Partners (or a Person
whose Capital Stock is owned 100% by CNL Partners) and the balance of the
Capital Stock of which (if any) is held of record and beneficially by CNL (or a
Person whose Capital Stock is owned 100% by CNL).

 

 

Other Interpretive Provisions.

 

(1)           The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms. Terms (including uncapitalized terms) not otherwise defined herein and
that are defined in the UCC shall have the meanings therein described.

 

(2)           The words “hereof”,
“herein”, “hereunder” and similar words refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.

 

(3)           (i) The term
“documents” includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however evidenced;

 

(ii)           The term “including” is
not limiting and means “including without limitation;”

 

(iii)          In the computation of
periods of time from a specified date to a later specified date, the word
“from” means “from and including,” the words “to” and “until” each mean “to but
excluding,” and the word “through” means “to and including;”

 

(iv)          The term “property”
includes any kind of property or asset, real, personal or mixed, tangible or
intangible; and

 

(v)           The verb “exists” and
its correlative noun forms, with reference to a Potential Default or an Event
of Default, means that such Potential Default or Event of Default has occurred
and continues uncured and unwaived.

 

(4)           Unless otherwise
expressly provided herein, (i) references to agreements (including this
Agreement) and other contractual instruments shall be deemed to include all
subsequent Modifications thereto, but only to the extent such Modifications are
not prohibited by the terms of any Loan Document, (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation, and (iii) references to any Person
include its permitted successors and assigns.

 

(5)           This Agreement and
the other Loan Documents may use several different limitations, tests or
measurements to regulate the same or similar matters. All such limitations,
tests and measurements are cumulative and shall each be performed in accordance
with their terms.Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of this
26th day of May, 2004 (the “Commencement Date”) by and between Penn National
Gaming, Inc., a Pennsylvania corporation (the “Company”), and Peter M. Carlino,
an individual residing in Pennsylvania (“Executive”).

 

WHEREAS, Executive and the Company are party to a certain Employment
Agreement, dated as of April 12, 1994 (as amended from time to time, the
“Initial Agreement”) which, by its terms, has automatically renewed from year
to year; and

 

WHEREAS, the parties now desire to terminate the Initial Agreement and
to enter into a new agreement reflecting, among other things, certain
additional covenants and consideration exchanged by the parties, all as more
specifically set forth herein.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

 

1.                                       Employment.  The Company hereby agrees to employ
Executive and Executive hereby accepts such employment, in accordance with the
terms, conditions and provisions hereinafter set forth.

 

1.1.                              Duties
and Responsibilities.  Executive
shall serve as Chairman of the Board and Chief Executive Officer of the
Company.  Executive shall perform all
duties and accept all responsibilities incident to such position as may be
reasonably assigned to him by the Board of Directors of the Company (the
“Board”). Executive’s principal place of employment shall be in Wyomissing,
Pennsylvania.

 

1.2.                              Term.
The term of this Agreement shall begin on the date hereof and shall terminate
at the close of business on the fifth anniversary of the Commencement Date (the
“Initial Term”), unless earlier terminated in accordance with Section 3
hereof.  This Agreement shall
automatically renew for additional five-year periods (each, a “Renewal Term”
and, together with the Initial Term, the “Employment Term”) unless either party
has delivered written notice of non-renewal at least 60 days prior to the start
of a Renewal Term or unless earlier terminated in accordance with
Section 3 hereof.

 

1.3.                              Extent
of Service.  Executive agrees to use
Executive’s best efforts to carry out Executive’s duties and responsibilities
and, consistent with the other provisions of this Agreement, to devote
substantially all of Executive’s business time, attention and energy
thereto.  The foregoing shall not be
construed as preventing Executive from serving on the board of philanthropic
organizations, or providing oversight with respect to his personal investments
(including Carlino Development Group and its Affiliates) and the Carlino Family
Trust and its Affiliates, so long as such service does not materially interfere
with Executive’s duties hereunder.

 

2.                                       Compensation.  For all services rendered by Executive to
the Company, the Company shall compensate Executive as set forth below.

 

1

 

2.1.                              Base
Salary.  The Company shall pay
Executive a base salary (“Base Salary”), commencing on the Commencement Date,
at the annual rate of eight hundred thirty-two thousand ($832,000), payable in
installments at such times as the Company customarily pays its other senior
executives (“Peer Executives”). 
Executive’s performance and Base Salary shall be reviewed annually.  Any increase in Base Salary or other compensation
shall be made at the discretion of the compensation committee of the Board (the
“Compensation Committee”).

 

2.2.                              Cash
Bonuses.  Executive shall
participate in the Company’s incentive compensation plan for senior management
as such may be adopted, amended and approved, from time to time, by the
Compensation Committee.

 

2.3.                              Equity
Compensation.  The Company may grant
to Executive options or other equity compensation pursuant to, and subject to
the terms and conditions of, the then current equity compensation plan of Penn
National Gaming, Inc.  The Compensation
Committee shall set the amount and terms of such options or other equity
compensation.

 

2.4.                              Other
Benefits.  Executive shall be
entitled to participate in all other employee benefit plans and programs,
including, without limitation, health, vacation, retirement, deferred
compensation or SERP, made available to other Peer Executives, as such plans
and programs may be in effect from time to time and subject to the eligibility
requirements of the each plan.  Nothing
in this Agreement shall prevent the Company from amending or terminating any
retirement, welfare or other employee benefit plans or programs from time to
time, as the Company deems appropriate.

 

2.5.                              Vacation,
Sick Leave and Holidays.  Executive
shall be entitled in each calendar year to four (4) weeks of paid vacation
time.  Each vacation shall be taken by
Executive at such time or times as agreed upon by the Company and Executive,
and any portion of Executive’s allowable vacation time not used during the
calendar year shall be subject to the Company’s payroll policies regarding
carryover vacation.  Executive shall be
entitled to holiday and sick leave in accordance with the Company’s holiday and
other pay for time not worked policies.

 

2.6.                              Reimbursement
of Expenses.  Executive shall be
provided with reimbursement of reasonable expenses related to Executive’s
employment by the Company on a basis no less favorable than that authorized
from time to time for Peer Executives.

 

2.7.                              Automobile.  During the term of this Agreement, the
Company shall provide Executive with an automobile of such make and model
consistent with the Company’s policy for its provision of automobiles to Peer
Executives. The Company shall reimburse Executive for all expenses arising from
or related to the maintenance, repair and daily operation of such automobile in
carrying out Executive’s duties hereunder, including but not limited to, fuel,
service and insurance costs, provided that Executive presents vouchers evidencing
such expenses as required by the Company.

 

2.8.                              Perquisites.  The Company shall continue to reimburse
Executive for annual membership fees and assessments for a country club of
Executive’s choice.  The Company shall
also continue to pay the premiums for all split dollar life insurance policies
issued as of the date hereof and held by those certain irrevocable trusts
created by Executive.

 

2

 

3.                                       Termination.  Executive’s employment may be terminated prior
to the end of the Employment Term in accordance with, and subject to the terms
and conditions, set forth below.

 

3.1.                              Termination
by the Company.

 

(a)                                  Without
Cause.  The Company may terminate
Executive at any time without Cause (as such term is defined in
subsection (b) below) upon delivery of written notice to Executive, which
notice shall set forth the effective date of such termination.

 

(b)                                 With
Cause.  The Company may terminate
Executive at any time for Cause effective immediately upon delivery of written
notice to Executive.  As used herein,
the term “Cause” shall mean:

 

(i)                                     Executive
shall have been convicted of a felony or any misdemeanor involving allegations
of fraud, theft, perjury or conspiracy;

 

(ii)                                  Executive
is found disqualified or not suitable to hold a casino or other gaming license
by a governmental gaming authority in any jurisdiction where Executive is
required to be found qualified, suitable or licensed;

 

(iii)                               Executive
materially breaches any material Company policy or any material term hereof,
including, without limitation, Sections 4 through 7 and, in each case, fails to
cure such breach within 15 days after receipt of written notice thereof; or

 

(iv)                              Executive
misappropriates corporate funds as determined in good faith by the Board.

 

3.2.                              Termination
by the Executive.  Executive may
voluntarily terminate employment for any reason effective upon 60 days’ prior
written notice to the Company, unless the Company waives such notice
requirement (in which case the Company shall notify Executive in writing as to
the effective date of termination).  The
Company and Executive, however, recognize and agree that they mutually agreed
upon the term of this Agreement and that Executive is expected to complete
fully the Employment Term.

 

3.3.                              Termination
for Death or Disability.  In the
event of the death or total disability of Executive, this Agreement shall
terminate effective as of the date of Executive’s death or total
disability.  The term “total disability”
shall have the definition set forth in the Company’s Long Term Disability
Insurance Policy in effect at the time of such determination.

 

3.4.                              Payments
Due Upon Termination.

 

(a)                                  Generally.  Upon any termination described in Sections
3.1, 3.2 or 3.3 above, Executive shall be entitled to receive any amounts due
for Base Salary earned or expenses incurred through the effective date of
termination and any benefits accrued or earned on or prior to such date in
accordance with the terms of any applicable benefit plans and programs.

 

(b)                                 Certain
Circumstances.  In the event the
Company terminates Executive’s employment without Cause or due to a total
disability or in the event that the Company elects not

 

3

 

to renew this Agreement, and subject to Executive
executing the release attached hereto as Exhibit A, Executive shall be
entitled to receive the following in lieu of any other severance:

 

(i)                                     Executive
shall receive a payment equal to Executive’s monthly Base Salary at the highest
rate in effect for Executive during the 24-month period immediately preceding
the effective date of termination and Executive’s monthly bonus value
(determined by dividing the highest amount of annual cash bonus compensation
paid to Executive in respect of either the first or second full calendar year
immediately preceding the effective date of termination by twelve) for a period
equal to the greater of (1) the number of months remaining in the Employment
Term or (2) 36 months (the “Severance Period”).

 

(ii)                                  Executive
shall continue to receive the health benefits coverage in effect on the
effective date of termination (or as the same may be changed from time to time
for Peer Executives) for Executive and, if any, Executive’s spouse and
dependents for the Severance Period.  At
the option of the Company, the Company may elect to pay Executive cash in lieu
of such coverage in an amount equal to Executive’s after-tax cost of obtaining
generally comparable coverage for such period.

 

(iii)                               Executive
shall continue to serve as a non-officer employee of the Company during the
Severance Period and, as such, all options granted to Executive shall continue
vesting for such period.

 

(c)                                  Payments.  Cash Payments due under this
Section 3.4 shall be made as follows: 75% shall be made within 15 days of
the effective date of termination and the balance shall be made in accordance
with the payroll practices in effect on the date of termination, unless, at the
Company’s sole option, the Company elects to make all such payments in a single
lump sum.  Except as otherwise provided
in this Section 3.4, Section 8 or Section 9, no other payments
or benefits shall be due under this Agreement to Executive.

 

3.5.                              Notice
of Termination.  Any termination of
Executive’s employment shall be communicated by a written notice of termination
delivered within the time period specified in this Section 3.  The notice of termination shall (i) indicate
the specific termination provision in this Agreement relied upon, (ii) briefly
summarize the facts and circumstances deemed to provide a basis for a
termination of employment and the applicable provision hereof, and (iii)
specify the termination date in accordance with the requirements of this
Agreement.

 

4.                                       No
Conflicts of Interest.  Executive
agrees that throughout the period of Executive’s employment hereunder or
otherwise, Executive will not perform any activities or services, or accept
other employment that would materially interfere with or present a conflict of
interest concerning Executive’s employment with the Company.  Executive agrees and acknowledges that
Executive’s employment by the Company is conditioned upon Executive adhering to
and complying with the business practices and requirements of ethical conduct
set forth in writing from time to time by the Company in its employee manual or
similar publication.  Executive
represents and warrants that no other contract, agreement or understanding to
which Executive is a party or may be subject will be violated by the execution
of this Agreement by Executive.

 

4

 

5.                                       Confidentiality.  Executive recognizes and acknowledges that
Executive will have access to certain confidential information of the Company
and that such information constitutes valuable, special and unique property of
the Company (including, but not limited to, information such as business
strategies, identity of acquisition or growth targets, marketing plans,
customer lists, and other business related information for the Company’s
customers).  Executive agrees that
Executive will not, for any reason or purpose whatsoever, during or after the
term of employment, disclose any of such confidential information to any party,
and that Executive will keep inviolate and secret all confidential information
or knowledge which Executive has access to by virtue of Executive’s employment
with the Company, except as otherwise may be necessary in the ordinary course
of performing Executive’s duties with the Company.

 

6.                                       Non-Competition.

 

(a)                                  As
used herein, the term “Restriction Period” shall mean a period equal to the
greater of (i) the remainder of the Employment Term in effect on the effective
date of termination and (ii) the Severance Period, if applicable; provided,
however, that, if on or before the Trigger Date, Executive has been terminated
for one of the reasons contemplated by Section 3.4(b), Executive may elect
to terminate the Restriction Period at any time following the first anniversary
of the effective date of termination by delivering written notice to the Company
that Executive has made such election and that, in consideration therefore, is
waiving the right to receive any continued payments under Section 3.4(b).

 

(b)                                 During
Executive’s employment by the Company and for the duration of the Restriction
Period thereafter, Executive shall not, except with the prior written consent
of the Company, directly or indirectly, own, manage, operate, join, control,
finance or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise with, or use or
permit Executive’s name to be used in connection with, any business or
enterprise which owns or operates a gaming or pari-mutuel facility located
within 150 miles of any gaming or pari-mutuel facility owned or operated by the
Company or any of its affiliates.

 

(c)                                  The
foregoing restrictions shall not be construed to prohibit Executive’s ownership
of less than 5% of any class of securities of any corporation which is engaged
in any of the foregoing businesses and has a class of securities registered
pursuant to the Securities Exchange Act of 1934, provided that such ownership
represents a passive investment and that neither Executive nor any group of
persons including Executive in any way, either directly or indirectly, manages
or exercises control of any such corporation, guarantees any of its financial
obligations, otherwise takes any part in its business, other than exercising
Executive’s rights as a shareholder, or seeks to do any of the foregoing.

 

(d)                                 Executive
acknowledges that the covenants contained in Sections 5 through 7 hereof are
reasonable and necessary to protect the legitimate interests of the Company and
its affiliates and, in particular, that the duration and geographic scope of
such covenants are reasonable given the nature of this Agreement and the
position that Executive will hold within the Company.  Executive further agrees to disclose the existence and terms of
such covenants to any employer that Executive works for during the Restriction
Period.

 

5

 

7.                                       Non-Solicitation.  During Executive’s employment by the Company
and for a period equal to the greater of the Restriction Period or one year
after the effective date of termination, Executive will not, except with the
prior written consent of the Company, (i) directly or indirectly, solicit or
hire, or encourage the solicitation or hiring of, any person who is, or was
within a six month period prior to such solicitation or hiring, an executive or
management employee of the Company or any of its affiliates for any position as
an employee, independent contractor, consultant or otherwise or (ii) divert or
attempt to divert any existing business of the Company or any of its
affiliates.

 

8.                                       Change
of Control.

 

8.1.                              Consideration

 

(a)                                  Change
of Control.  In the event of a
Change of Control (as defined below), Executive shall be entitled to receive a
cash payment in an amount equal to the product of three times the sum of (i)
the highest annual rate of Base Salary in effect for Executive during the
24-month period immediately preceding the effective date of the Change in
Control (the “Trigger Date”) and (ii) the highest amount of annual cash bonus
compensation paid to Executive in respect of either the first or second full
calendar year immediately preceding the Trigger Date.

 

(b)                                 Restrictive
Provisions.  As consideration for
the foregoing payments, Executive agrees not to challenge the enforceability of
any of the restrictions contained in Sections 5, 6 or 7 of this Agreement upon
or after the occurrence of a Change of Control. Executive and Company
acknowledge that, as additional consideration for the change of control
payments, Executive has also agreed to limit Executive’s ability to opt out of
the Restriction Period in Section 6(a) to periods prior to the Trigger
Date.

 

8.2.                              Payment
Terms.  This change of control
payment shall be made in two lump sum payments as follows: (i) 75% to Executive
on the Trigger Date; and (ii) 25% into a mutually acceptable escrow account on
the Trigger Date, payable to Executive on the 90th day following the Trigger
Date.  Notwithstanding any of the
foregoing to the contrary, the payment contemplated by clause (ii) shall be
paid immediately upon the occurrence of any of the following: (a) Executive’s
employment is terminated by the Company; or (b) Executive terminates employment
for Good Reason (as defined below).

 

8.3.                              Certain
Other Terms.  In the event payments
are being made to Executive under this Section 8, no payments shall be due
under Section 3.4(b)(i) of this Agreement with respect to any termination
of Executive’s employment following a Change of Control.  At the option of the Company, the Company
may require Executive to execute the release attached hereto as Exhibit A;
provided, however, that this requirement shall not in any way alter the timing
of the payments to be made under Section 8.2.  The provisions of this Section 8 shall continue to apply to
Executive if, during the 24-month period immediately preceding the Trigger
Date, the Company terminates Executive’s employment without Cause or due to a
total disability or the Company elects not to renew this Agreement; provided,
however, that, in such event, any payments due under Section 8 shall be
reduced by any prior payments made under Section 3.4(b)(i).

 

6

 

8.4.                              Defined
Terms.

 

(a)                                  Change
of Control.  The occurrence of one
or more of the following events:  (i)
any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company;
(ii) the election of two (2) or more persons to the Board who do not constitute
Continuing Directors; or (iii) the ownership or acquisition by any Person or
Group of the power, directly or indirectly, to vote or direct the voting of
securities having more than forty percent (40%) of the ordinary voting power
for the election of directors of the Company.

 

(b)                                 Good
Reason.  The occurrence of any of
the following events that the Company fails to cure within 10 days after
receiving written notice thereof from Executive: (i) assignment to Executive of
any duties inconsistent in any material respect with Executive’s position
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities or inconsistent with Executive’s legal or fiduciary
obligations; (ii) any reduction in Executive’s compensation or substantial reduction
in Executive’s benefits taken as a whole; (iii) any travel requirements
materially greater than Executive’s travel requirements prior to the Change of
Control; or (iv) breach of any material term of this Agreement by the Company.

 

(c)                                  Continuing
Directors.  Any person who, as of
the date of determination, either (i) was a member of the Board as of the date
of this Agreement or (ii) was nominated for election or elected to the Board
with the affirmative vote of a majority of directors comprising the Board or,
if applicable, the Nominating Committee of the Board, who were Continuing
Directors immediately prior to such nomination or election.

 

(d)                                 Group.  Any group of related Persons for purposes of
Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

(e)                                  Person.  Any individual, partnership, joint venture,
trust, corporation, limited liability entity, unincorporated organization or
other entity (including a governmental entity).

 

9.                                       Certain
Tax Matters.

 

9.1.                              Generally.  In the event Executive becomes entitled to
receive the payments (the “Severance Payments”) provided under Section 3
or Section 8 hereof or under any other plan or arrangement providing for
payments under circumstances similar to those contemplated by such sections,
and if any of the Severance Payments will be subject to the tax (the “Excise
Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), the Company shall pay to Executive at the time specified
for such payments, an additional amount (the “Gross-Up Payment”) such that the
net amount retained by Executive shall be equal to the amount of the Severance
Payments after deducting normal and ordinary taxes but not deducting
(a) the Excise Tax and (b) any federal, state and local income tax and
Excise Tax payable on the payment provided for by this Section 9.

 

9.2.                              Illustration.  For example, if the Severance Payments are
$1,000,000 and if Executive is subject to the Excise Tax, then the Gross-Up
Payment will be such that Executive will retain an amount of $1,000,000 less
only any normal and ordinary taxes on such amount.

 

7

 

The Excise Tax and federal, state and local
taxes and any Excise Tax on the payment provided by this Section 9 will
not be deemed normal and ordinary taxes.

 

9.3.                              Certain
Terms.  For purposes of determining
whether any of the Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, the following will apply:

 

(a)                                  Any
other payments or benefits received or to be received by Executive in
connection with a Change in Control of the Company or Executive’s termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company shall be treated as “parachute
payments” within the meaning of Section 280G(b)(2) of the Code, and all
“excess parachute payments” within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected
by the Company’s Compensation Committee and acceptable to Executive, such other
payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to
the Excise Tax;

 

(b)                                 The
amount of the Severance Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (y) the total amount of the
Severance Payments or (z) the amount of excess parachute payments within
the meaning of Section 280G(b)(1) (after applying clause (a), above);
and

 

(c)                                  The
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in accordance with proposed,
temporary or final regulations under Sections 280G(d)(3) and (4) of the
Code or, in the absence of such regulations, in accordance with the principles
of Section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed to
pay Federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of Executive on the Trigger Date, net of the maximum
reduction in Federal income taxes which could be obtained from deduction of
such state and local taxes. In the event that the amount of Excise Tax
attributable to Severance Payments is subsequently determined to be less than
the amount taken into account hereunder at the time of determination then,
subject to applicable law, appropriate adjustments will be made with respect to
the payments hereunder.

 

9.4.                              Fees
and Expenses.  The Company shall
reimburse Executive for all reasonable legal fees and expenses incurred by
Executive in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code or any
regulations pertaining thereto to any payment or benefit provided hereunder.

 

10.                                 Document
Surrender.  Upon the termination of
Executive’s employment for any reason, Executive shall immediately surrender
and deliver to the Company all documents, correspondence and any other
information, of any type whatsoever, from the Company or any of

 

8

 

its agents, servants, employees, suppliers,
and existing or potential customers, that came into Executive’s possession by
any means whatsoever, during the course of employment.

 

11.                                 Governing
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws (and not the law
of conflicts) of the Commonwealth of Pennsylvania.

 

12.                                 Jurisdiction.  The parties hereby irrevocably consent to
the jurisdiction of the courts of the Commonwealth of Pennsylvania for all
purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the state or
federal courts having jurisdiction for matters arising in Wyomissing,
Pennsylvania, which shall be the exclusive and only proper forum for
adjudicating such a claim.

 

13.                                 Notices.  All notices and other communications
required or permitted under this Agreement or necessary or convenient in
connection herewith shall be in writing and shall be deemed to have been given
when hand delivered, delivered by guaranteed next-day delivery or sent by
facsimile (with confirmation of transmission) or shall be deemed given on the
third business day when mailed by registered or certified mail, as follows
(provided that notice of change of address shall be deemed given only when
received):

 

	
  If to the Company, to:

  
	
   

  
	
   

  	
  Penn National Gaming, Inc.

  
	
   

  	
  825 Berkshire Boulevard, Suite 200

  
	
   

  	
  Wyomissing, PA 19610

  
	
   

  	
  Fax: (610) 376-2842

  
	
   

  	
   

  
	
  Attention: President

  
	
   

  
	
  If to Executive, to:

  
	
   

  
	
   

  	
  Peter M. Carlino

  
	
   

  	
  c/o Penn National Gaming, Inc.

  
	
   

  	
  825 Berkshire Boulevard, Suite 200

  
	
   

  	
  Wyomissing, PA 19610

  
	
   

  	
  Fax: (610) 376-2842

  

 

or to such other names or addresses as the Company or Executive, as the
case may be, shall designate by notice to each other person entitled to receive
notices in the manner specified in this Section.

 

9

 

14.                                 Contents
of Agreement; Amendment and Assignment.

 

14.1.                        This Agreement
sets forth the entire understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior or contemporaneous
agreements or understandings with respect to thereto, including without
limitation, the Initial Agreement which is hereby terminated.  This Agreement cannot be changed, modified,
extended, waived or terminated except upon a written instrument signed by the
party against which it is to be enforced.

 

14.2.                        Executive
may not assign any of his rights or obligations under this Agreement.  The Company may assign its rights and
obligations under this Agreement to any successor to all or substantially all
of its assets or business by means of liquidation, dissolution, merger,
consolidation, transfer of assets or otherwise.

 

15.                                 Severability.  If any provision of this Agreement or
application thereof to anyone or under any circumstances is adjudicated to be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provision or application of this
Agreement which can be given effect without the invalid or unenforceable
provision or application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction.  If any provision is held void, invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances. 
In addition, if any court determines that any part of Sections 5, 6 or 7
hereof is unenforceable because of its duration, geographical scope or
otherwise, such court will have the power to modify such provision and, in its
modified form, such provision will then be enforceable.

 

16.                                 Remedies.

 

16.1.                        No remedy
conferred upon a party by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be
in addition to any other remedy given under this Agreement or now or hereafter
existing at law or in equity.

 

16.2.                        No delay
or omission by a party in exercising any right, remedy or power under this
Agreement or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by such party
from time to time and as often as may be deemed expedient or necessary by such
party in its sole discretion.

 

10

 

16.3.                        Executive
acknowledges that money damages would not be a sufficient remedy for any breach
of this Agreement by Executive and that the Company shall be entitled to
specific performance and injunctive relief as remedies for any such breach, in
addition to all other remedies available at law or equity to the Company.

 

17.           Construction. 
This Agreement is the result of thoughtful negotiations and reflects an
arms’ length bargain between two sophisticated parties, each represented by
counsel.  The parties agree that, if
this Agreement requires interpretation, neither party should be considered “the
drafter” nor be entitled to any presumption that ambiguities are to be resolved
in his or her favor.

 

18.                                 Beneficiaries/References.  Executive shall be entitled, to the extent
permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable under this
Agreement following Executive’s death by giving the Company written notice
thereof.  In the event of Executive’s
death or a judicial determination of Executive’s incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to
Executive’s beneficiary, estate or other legal representative.

 

19.                                 Withholding.  All payments under this Agreement shall be
made subject to applicable tax withholding, and the Company shall withhold from
any payments under this Agreement all federal, state and local taxes, as the
Company is required to withhold pursuant to any law or governmental rule or
regulation.  Except as specifically
provided otherwise in this Agreement, Executive shall bear all expense of, and
be solely responsible for, all federal, state and local taxes due with respect
to any payment received under this Agreement.

 

20.                                 Regulatory
Compliance.  The terms and
provisions hereof shall be conditioned on and subject to compliance with all
laws, rules, and regulations of all jurisdictions, or agencies, boards or
commissions thereof, having regulatory jurisdiction over the employment or
activities of Executive hereunder.

 

11

 

IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.

 

 

	
   

  	
  PENN NATIONAL GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert S. Ippolito

  	
   

  
	
   

  	
  Name:

  	
  Robert Ippolito

  
	
   

  	
  Title:

  	
  Vice President, Secretary &

  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Peter M. Carlino

  	
   

  
	
   

  	
   

  	
  Peter M. Carlino

  	
   

  
						

 

12

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