Document:

Exhibit 10.113

Exhibit
10.113

10-Q

MEZZANINE
LOAN AND SECURITY AGREEMENT

 

(Junior
Mezzanine)

 

Dated as
of April 7, 2005

 

Between

 

CNL
HOTEL DEL JUNIOR MEZZ PARTNERS, LP

 

as
Mezzanine Borrower

 

and

 

GERMAN
AMERICAN CAPITAL CORPORATION,

 

as
Mezzanine Lender

 

TABLE
OF CONTENTS

 

Page

 

	
      I.
	
      DEFINITIONS;
      PRINCIPLES OF CONSTRUCTION
	
      

	 	
      Section
      1.1
	
      Definitions
	
      

	 	
      Section
      1.2
	
      Principles
      of Construction
	
      

 

	
      II.
	
      GENERAL
      TERMS
	
      

	 	
      Section
      2.1
	
      Loan;
      Disbursement to Mezzanine Borrower
	
      

	 	
      Section
      2.2
	
      Interest;
      Loan Payments; Late Payment Charge
	
      

	 	
      Section
      2.3
	
      Prepayments
	
      

	 	
      Section
      2.4
	
      Regulatory
      Change; Taxes
	
      

	 	
      Section
      2.5
	
      Conditions
      Precedent to Closing
	
      

	 	
      Section
      2.6
	
      Filing
      of Financing Statements Authorized
	
      

 

	
      III.
	
      CASH
      MANAGEMENT
	
      

	 	
      Section
      3.1
	
      Cash
      Management
	
      

 

	
      IV.
	
      REPRESENTATIONS
      AND WARRANTIES
	
      

	 	
      Section
      4.1
	
      Mezzanine
      Borrower Representations
	
      

	 	
      Section
      4.2
	
      Survival
      of Representations
	
      

 

	
      V.
	
      MEZZANINE
      BORROWER COVENANTS
	
      

	 	
      Section
      5.1
	
      Affirmative
      Covenants
	
      

	 	
      Section
      5.2
	
      Negative
      Covenants
	
      

 

	
      VI.
	
      INSURANCE;
      CASUALTY; CONDEMNATION; RESTORATION
	
      

	 	
      Section
      6.1
	
      Insurance
      Coverage Requirements
	
      

	 	
      Section
      6.2
	
      Condemnation
      and Insurance Proceeds
	
      

	 	
      Section
      6.3
	
      Certificates
	
      

 

	
      VII.
	
      INTENTIONALLY
      OMITTED
	
      

 

	
      VIII.
	
      TRANSFERS,
      INDEBTEDNESS AND SUBORDINATE LIENS
	
      

	 	
      Section
      8.1
	
      Restrictions
      on Transfers and Indebtedness
	
      

	 	
      Section
      8.2
	
      Sale
      of Building Equipment and Immaterial Transfers and Easements by Mortgage
      Borrower
	
      

	 	
      Section
      8.3
	
      Intentionally
      Omitted
	
      

	 	
      Section
      8.4
	
      Transfers
      of Interests in Mezzanine Borrower
	
      

	 	
      Section
      8.5
	
      Loan
      Assumption
	
      

	 	
      Section
      8.6
	
      Notice
      Required; Legal Opinions
	
      

	 	
      Section
      8.7
	
      Leases
	
      

 

	
      IX.
	
      INTEREST
      RATE CAP AGREEMENT.
	
      

	 	
      Section
      9.1
	
      Interest
      Rate Cap Agreement
	
      

	 	
      Section
      9.2
	
      Pledge
      and Collateral Assignment
	
      

	 	
      Section
      9.3
	
      Covenants
	
      

	 	
      Section
      9.4
	
      Representations
      and Warranties
	
      

	 	
      Section
      9.5
	
      Payments
	
      

	 	
      Section
      9.6
	
      Remedies
	
      

	 	
      Section
      9.7
	
      Sales
      of Rate Cap Collateral (Junior Mezzanine)
	
      

	 	
      Section
      9.8
	
      Public
      Sales Not Possible
	
      

	 	
      Section
      9.9
	
      Receipt
      of Sale Proceeds
	
      

	 	
      Section
      9.10
	
      Extension
      Interest Rate Cap Agreement (Junior Mezzanine)
	
      

	 	
      Section
      9.11
	
      Filing
      of Financing Statements Authorized
	
      

 

	
      X.
	
      RESERVED
	
      

 

	
      XI.
	
      BOOKS
      AND RECORDS, FINANCIAL STATEMENTS, REPORTS AND OTHER
      INFORMATION
	
      

	 	
      Section
      11.1
	
      Books
      and Records
	
      

	 	
      Section
      11.2
	
      Financial
      Statements
	
      

 

	
      XII.
	
      ENVIRONMENTAL
      MATTERS
	
      

	 	
      Section
      12.1
	
      Representations
	
      

	 	
      Section
      12.2
	
      Covenants
	
      

	 	
      Section
      12.3
	
      Environmental
      Reports
	
      

	 	
      Section
      12.4
	
      Environmental
      Indemnification
	
      

	 	
      Section
      12.5
	
      Recourse
      Nature of Certain Indemnifications
	
      

 

	
      XIII.
	
      RESERVED
	
      

 

XIV. RESERVED 

 

	
      XV.
	
      ASSIGNMENTS
      AND PARTICIPATIONS.
	
      

	 	
      Section
      15.1
	
      Assignment
      and Acceptance
	
      

	 	
      Section
      15.2
	
      Effect
      of Assignment and Acceptance
	
      

	 	
      Section
      15.3
	
      Content
	
      

	 	
      Section
      15.4
	
      Register
	
      

	 	
      Section
      15.5
	
      Substitute
      Notes
	
      

	 	
      Section
      15.6
	
      Participations
	
      

	 	
      Section
      15.7
	
      Disclosure
      of Information
	
      

	 	
      Section
      15.8
	
      Security
      Interest in Favor of Federal Reserve Bank
	
      

 

XVI. RESERVED 

 

XVII. DEFAULTS 

	 	
      Section
      17.1
	
      Event
      of Default
	
      

	 	
      Section
      17.2
	
      Remedies
	
      

	 	
      Section
      17.3
	
      Remedies
      Cumulative; Waivers
	
      

	 	
      Section
      17.4
	
      Costs
      of Collection
	
      

	 	
      Section
      17.5
	
      Distribution
      of Collateral Proceeds
	
      

 

XVIII. SPECIAL
PROVISIONS 

	 	
      Section
      18.1
	
      Exculpation
	
      

 

XIX. MISCELLANEOUS 

	 	
      Section
      19.1
	
      Survival
	
      

	 	
      Section
      19.2
	
      Mezzanine
      Lender's Discretion
	
      

	 	
      Section
      19.3
	
      Governing
      Law
	
      

	 	
      Section
      19.4
	
      Modification,
      Waiver in Writing
	
      

	 	
      Section
      19.5
	
      Delay
      Not a Waiver
	
      

	 	
      Section
      19.6
	
      Notices
	
      

	 	
      Section
      19.7
	
      TRIAL
      BY JURY
	
      

	 	
      Section
      19.8
	
      Headings
	
      

	 	
      Section
      19.9
	
      Severability
	
      

	 	Section
      19.10 	Preferences 	 

	 	Section
      19.11	Waiver
      of Notice 	 

	 	Section
      19.12	Expenses;
      Indemnity 	 

	 	Section
      19.13 	Exhibits
      and Schedules Incorporated 	 

	 	Section
      19.14	Offsets,
      Counterclaims and Defenses 	 

	 	Section
      19.15	Liability
      of Assignees of Mezzanine Lender 	 

	 	Section
      19.16	No
      Joint Venture or Partnership; No Third Party Beneficiaries 	 

	 	Section
      19.17 	Publicity 	 

	 	Section
      19.18	Waiver
      of Marshalling of Assets 	 

	 	Section
      19.19	Waiver
      of Counterclaim and other Actions 	 

	 	Section
      19.20	Conflict;
      Construction of Documents; Reliance 	 

	 	Section
      19.21 	Prior
      Agreements 	 

	 	Section
      19.22	Counterparts 	 

	 	Section
      19.23	Disclosure 	 

 

 

 

EXHIBITS
AND SCHEDULES

 

	
      EXHIBIT
      A
	
      INTENTIONALLY
      OMITTED

	
      EXHIBIT
      B
	
      FORM
      OF PLEDGE ACKNOWLEDGEMENT

	
      EXHIBIT
      C
	
      SINGLE
      PURPOSE ENTITY PROVISIONS

	
      EXHIBIT
      D
	
      ENFORCEABILITY
      OPINION REQUIREMENTS

	
      EXHIBIT
      E
	
      NON-CONSOLIDATION
      OPINION REQUIREMENTS

	
      EXHIBIT
      F
	
      COUNTERPARTY
      OPINION REQUIREMENTS

	
      EXHIBIT
      G
	
      FORM
      OF TENANT ESTOPPEL LETTER

	
      EXHIBIT
      H
	
      BORROWER
      ORGANIZATIONAL STRUCTURE

	
      EXHIBIT
      I
	
      INTEREST
      RATE CAP AGREEMENT REQUIREMENTS

	
      EXHIBIT
      J
	
      FORM
      OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

	
      EXHIBIT
      K
	
      INTENTIONALLY
      OMITTED

	
      EXHIBIT
      L
	
      INTENTIONALLY
      OMITTED

	
      EXHIBIT
      M
	
      COUNTERPARTY
      ACKNOWLEDGMENT

	
      EXHIBIT
      N
	
      INTENTIONALLY
      OMITTED

	
      EXHIBIT
      O
	
      FORM
      OF INDEPENDENT DIRECTOR CERTIFICATE

	
      EXHIBIT
      P
	
      INTENTIONALLY
      OMITTED

	
      EXHIBIT
      Q
	
      INTENTIONALLY
      OMITTED

	
      EXHIBIT
      R
	
      ARTICLE
      8 OPT IN LANGUAGE

	 	 
	
      SCHEDULE
      I
	
      LITIGATION
      SCHEDULE

	
      SCHEDULE
      II
	
      INTENTIONALLY
      DELETED

	
      SCHEDULE
      III
	
      PRE-APPROVED
      TRANSFEREES

	
      SCHEDULE
      IV
	
      PRE-APPROVED
      MANAGERS

 

MEZZANINE
LOAN AND SECURITY AGREEMENT

 

(Junior
Mezzanine)

 

THIS
MEZZANINE LOAN AND SECURITY AGREEMENT (Junior Mezzanine), dated as of April 7,
2005 (as amended, restated, replaced, supplemented or otherwise modified from
time to time, this Agreement),
between CNL HOTEL DEL JUNIOR MEZZ PARTNERS, LP, a Delaware limited partnership
(Mezzanine
Borrower) having
an office c/o CNL Hotels & Resorts, Inc., Center at City Commons, 450 South
Orange Avenue, Orlando, Florida 32801 and GERMAN AMERICAN CAPITAL CORPORATION, a
Maryland corporation, having an address at 60 Wall Street, 10th Floor, New York,
New York 10005 (together with its successors and assigns, Mezzanine
Lender).

 

W
I T N E S S E T H:

 

WHEREAS,
Mezzanine Borrower desires to obtain the Loan (as hereinafter defined) from
Mezzanine Lender;

 

WHEREAS,
Mezzanine Lender is willing to make the Loan to Mezzanine Borrower, subject to
and in accordance with the terms of this Agreement and the other Loan Documents
(Junior Mezzanine) (as hereinafter defined).

 

NOW,
THEREFORE, in consideration of the making of the Loan by Mezzanine Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:

 

	I.  	
      DEFINITIONS;
      PRINCIPLES OF CONSTRUCTION

 

Section
1.1  Definitions

 

For all
purposes of this Agreement, except as otherwise expressly required or unless the
context clearly indicates a contrary intent:

 

Acceptable
Counterparty shall
mean a bank or other financial institution which has a long-term unsecured debt
or counterparty rating of "A+" or higher by S&P and its equivalent by
Moody's and, if the counterparty is rated by Fitch, by Fitch.

 

Acceptable
Management Agreement shall
mean, with respect to the Property, a new or amended management agreement with
the Manager which agreement shall be upon terms and conditions no less favorable
in all material respects to the Mezzanine Borrower, Operating Lessee, and
Mezzanine Lender than those contained in the Management Agreement or any new or
amended management agreement entered into by Mortgage Borrower, Operating
Lessee, and/or Manager with respect to the Property in accordance with the terms
of Section
5.2.14
hereof.

 

2

 

Acceptable
Manager shall
mean (i) the current Manager as of the Closing Date or any wholly owned
Affiliate (whether direct or indirect) of KSL DC Operating LLC or a member of
KSL DC Operating LLC, or KSL II Management Operations, LLC, (ii) at any time
after the Closing Date, any Pre-approved Manager listed on Schedule
IV hereto,
provided each such property manager continues to be Controlled by substantially
the same Persons Controlling such property manager as of the Closing Date (or if
such Manager is a publicly traded company, such Manager continues to be publicly
traded on an established securities market), (iii) any other hotel management
company that manages a system of at least six (6) hotels or resorts of a class
and quality at least as comparable to the Property (as reasonably determined by
Manager and Operating Lessee; provided, however Operating Lessee shall obtain
Mortgage Lender's prior approval of such determination, not to be unreasonably
withheld), and containing not fewer than 1,500 hotel rooms in the aggregate
(including condominium units under management) in the aggregate, (iv) any Close
Affiliate of any of the foregoing Persons or (v) any other reputable and
experienced professional hotel management company (A) whose competence,
qualifications, and experience in managing properties of a quality equal to or
exceeding the quality of the Property are comparable to, or greater than that of
the current Manager as of the Closing Date, or a Close Affiliate thereof and (B)
with respect to which Mezzanine Lender has consented to in writing.

 

Account
Agreement (Junior Mezzanine) shall
mean the Account and Control Agreement (Junior Mezzanine), dated the date
hereof, among Mezzanine Lender, Mezzanine Borrower and Cash Management Bank
(Junior Mezzanine).

 

Account
Agreement (Mortgage) shall
mean the Account and Control Agreement, dated as of February 9, 2005, among
Mortgage Lender, Mortgage Borrower and Cash Management Bank
(Mortgage).

 

Account
Collateral (Junior Mezzanine) shall
have the meaning set forth in Section
3.1.2.

 

Acknowledgment shall
mean the Acknowledgment, dated on or about the date hereof made by Counterparty,
or as applicable, Acceptable Counterparty in the form of Exhibit
M.

 

Additional
Non-Consolidation Opinion shall
have the meaning set forth in Section
4.1.20(b).

 

Affiliate shall
mean, with respect to any specified Person, any other Person directly or
indirectly Controlling or Controlled by or under direct or indirect common
Control with, or any general partner or managing member in, such specified
Person.

 

Agreement shall
mean this Agreement, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

3

Approved
Bank shall
have the meaning set forth in the Account Agreement (Junior
Mezzanine).

 

Assignment
and Acceptance shall
mean an assignment and acceptance entered into by Mezzanine Lender and an
assignee, and accepted by Mezzanine Lender in accordance with Article
XV and in
substantially the form of Exhibit
J or such
other form customarily used by Mezzanine Lender in connection with the
participation or syndication of mortgage or mezzanine loans at the time of such
assignment.

 

Assignment
of Management Agreement (Junior Mezzanine) shall
mean that certain Manager's Consent, Subordination of Management Agreement, and
Non-disturbance Agreement (Junior Mezzanine), dated the date hereof, among
Mezzanine Lender, Mezzanine Borrower, Operating Lessee, and Manager, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.

 

Assignment
of Management Agreement (Mortgage) shall
mean that certain Manager's Consent, Subordination of Management Agreement, and
Non-disturbance Agreement, dated as of February 9, 2005, among Mortgage Lender,
Mortgage Borrower and Manager, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

Bankruptcy
Code shall
mean Title 11, U.S.C.A., as amended from time to time and any successor statute
thereto.

 

Beneficial when
used in the context of beneficial ownership has the analogous meaning to that
specified in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.

 

Best
of Mezzanine Borrower's Knowledge, shall
mean the actual (as opposed to imputed or constructive) present knowledge of:
Eric Resnick, Peter McDermott, John Brady, and Barry Bloom, after due inquiry,
and without creating any personal liability on the part of any said individuals.
In the case where the term "Best of Mezzanine Borrower's Knowledge" is used in
the context of representations or warranties of Borrower to be made after the
date hereof, the term shall include the Person or Persons, as applicable, that
occupy the capacities of said individuals on the date such representation or
warranty is made to the extent that one or more of such individuals no longer
occupy their current capacities.

 

Budget shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Building
Equipment shall
have the meaning set forth in the Security Instrument.

 

4

Business
Day shall
mean any day other than a Saturday, Sunday or any other day on which national
banks in New York, California or in the state in which Servicer is located are
not open for business. When used with respect to an Interest Determination Date,
Business Day shall mean any day on which dealings in deposits in U.S. Dollars
are transacted in the London interbank market.

 

Capital
Expenditures shall
mean any amount incurred in respect of capital items which in accordance with
GAAP would not be included in Mortgage Borrower's annual financial statements
for an applicable period as an operating expense of the Property.

 

Cash
Management Bank (Junior Mezzanine) shall
mean LaSalle Bank National Association or any successor Approved Bank acting as
Cash Management Bank (Junior Mezzanine) under the Account Agreement (Junior
Mezzanine) or other financial institution approved by the Mezzanine Lender.
 

 

Cash
Management Bank (Mortgage) shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Close
Affiliate shall
mean with respect to any Person (the "First
Person") any
other Person (each, a "Second Person") which is an Affiliate of the First Person
and in respect of which any of the following are true: (a) the Second Person
owns, directly or indirectly, at least 75% of all of the legal, Beneficial
and/or equitable interest in such First Person, (b) the First Person owns,
directly or indirectly, at least 75% of all of the legal, Beneficial and/or
equitable interest in such Second Person, or (c) a third Person owns, directly
or indirectly, at least 75% of all of the legal, Beneficial and/or equitable
interest in both the First Person and the Second Person.

 

Closing
Date shall
mean the date of this Agreement set forth in the first paragraph
hereof.

 

Closing
Date NOI shall
mean $37,883,902.

 

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

 

Collateral shall
mean collectively (i) all of the Pledged Collateral and all proceeds thereof,
(ii) all Receipts, (iii) any stock certificates or other certificates,
membership interest certificates or instruments evidencing any of the foregoing
property described in clauses (i) and (ii) above, (iv) the Rate Cap Collateral
(Junior Mezzanine), (v) the Account Collateral (Junior Mezzanine) and (vi) all
other rights appurtenant to the property described in clauses (i) through (v)
above.

 

Collateral
Accounts shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

5

Collateral
Accounts (Junior Mezzanine) shall
have the meaning set forth in Section
3.1.1.

 

Control shall
mean (i) the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise and (ii) the ownership,
direct or indirect, of no less than 51% of the voting securities of such Person,
and the terms Controlled, Controlling and Common Control shall have correlative
meanings.

 

Counterparty shall
mean the counterparty to the Interest Rate Cap Agreement (Junior Mezzanine) and
any counterparty under a Replacement Interest Rate Cap Agreement (Junior
Mezzanine) or Extension Interest Rate Cap Agreement and, if applicable, any
credit support provider identified in the Interest Rate Cap Agreement,
Replacement Interest Rate Cap Agreement (Junior Mezzanine) or Extension Interest
Rate Cap Agreement.

 

Counterparty
Opinion shall
have the meaning set forth in Section
9.3(f).

 

Debt shall
mean, with respect to any Person at any time, (a) indebtedness or liability of
such Person for borrowed money whether or not evidenced by bonds, debentures,
notes or other instruments, or for the deferred purchase price of property or
services; (b) obligations of such Person as lessee under leases which should
have been or should be, in accordance with GAAP, recorded as capital leases; (c)
current liabilities of such Person in respect of unfunded vested benefits under
plans covered by Title IV of ERISA; (d) obligations issued for, or liabilities
incurred on the account of, such Person; (e) obligations or liabilities of such
Person arising under letters of credit, credit facilities or other acceptance
facilities; (f) obligations of such Person under any guarantees or other
agreement to become secondarily liable for any obligation of any other Person,
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person or otherwise to assure a
creditor against loss; (g) obligations of such Person secured by any Lien on any
property of such Person, whether or not the obligations have been assumed by
such Person; or (h) obligations of such Person under any interest rate or
currency exchange agreement.

 

Debt
Service (Junior Mezzanine) shall
mean, with respect to any particular period of time, scheduled interest payments
under the Mezzanine Note.

 

Default shall
mean the occurrence of any event hereunder or under any other Loan Document
(Junior Mezzanine) which, but for the giving of notice or passage of time, or
both, would be an Event of Default.

 

Default
Rate shall
have the meaning set forth in the Note.

 

Disqualified
Transferee shall
mean any Person or its Close Affiliate that, (i) has (within the past five (5)
years) defaulted, or is now in default, beyond any applicable cure period, of
its material obligations, under any material written agreement with Mezzanine
Lender, any Affiliate of Mezzanine Lender, or, unless approved by the

 

6

Mezzanine
Lender, any other financial institution or other person providing or arranging
financing; (ii) has been convicted in a criminal proceeding for a felony or a
crime involving moral turpitude or that is an organized crime figure or is
reputed (as determined by Mezzanine Lender in its sole discretion) to have
substantial business or other affiliations with an organized crime figure; (iii)
has at any time filed a voluntary petition under the Bankruptcy Code or any
other federal or state bankruptcy or insolvency law; (iv) as to which an
involuntary petition (which was not subsequently dismissed within one hundred
twenty (120) days) has at any time been filed under the Bankruptcy Code or any
other federal or state bankruptcy or insolvency law; (v) has at any time filed
an answer consenting to or acquiescing in any involuntary petition filed against
it by any other person under the Bankruptcy Code or any other federal or state
bankruptcy or insolvency law; (vi) has at any time consented to or acquiesced in
or joined in an application for the appointment of a custodian, receiver,
trustee or examiner for itself or any of its property; (vii) has at any time
made an assignment for the benefit of creditors, or has at any time admitted its
insolvency or inability to pay its debts as they become due; or (viii) has been
found by a court of competent jurisdiction or other governmental authority in a
comparable proceeding to have violated any federal or state securities laws or
regulations promulgated thereunder.

 

Downgrade shall
have the meaning as set forth in Section
9.3(c)
hereof.

 

Eligibility
Requirements means,
with respect to any Person, that such Person (i) has total assets (in name or
under management) in excess of $600,000,000 and (except with respect to a
pension advisory firm or similar fiduciary) capital/statutory surplus or
shareholder's equity of $250,000,000 and (ii) is regularly engaged in the
business of making or owning commercial real estate loans or operating
commercial properties.

 

Eligible
Account has the
meaning set forth in the Account Agreement (Junior Mezzanine).

 

Environmental
Certificate shall
have the meaning set forth in Section
12.2.1.

 

Environmental
Claim shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Environmental
Event shall
have the meaning set forth in Section
12.2.1.

 

Environmental
Indemnity (Junior Mezzanine) shall
mean the Environmental Indemnity, dated the date hereof, made by Guarantor in
favor of Mezzanine Lender.

 

Environmental
Law shall
have the meaning provided in the Environmental Indemnity (Junior
Mezzanine).

 

Environmental
Reports shall
have the meaning set forth in Section
12.1.

 

7

ERISA shall
mean the United States Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.

 

ERISA
Affiliate shall
have the meaning set forth in Section
4.1.9.

 

Event
of Default shall
have the meaning set forth in Section
17.1(a).

 

Excess
Cash Flow shall
mean "Excess Cash Flow" as defined in the Loan Agreement
(Mortgage).

 

Exculpated
Parties shall
have the meaning set forth in Section
18.1.1.

 

Excusable
Delay shall
mean a delay due to acts of god, governmental restrictions, stays, judgments,
orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work
stoppages, shortages of labor or materials or other causes beyond the reasonable
control of Mezzanine Borrower or Mortgage Borrower, but Mezzanine Borrower's or
Mortgage Borrower's lack of funds in and of itself shall not be deemed a cause
beyond the control of Mezzanine Borrower or Mortgage Borrower, as
applicable.

 

Extension
Interest Rate Cap Agreement shall
mean, following the Mezzanine Borrower's exercise of its option to extend the
Maturity Date pursuant to Section
5 of the
Mezzanine Note, an Interest Rate Cap Agreement or Agreements (together with the
confirmations and schedules relating thereto), each from an Acceptable
Counterparty and satisfying the requirements set forth on Exhibit
I hereto;
provided that, to the extent any such interest rate cap agreement does not meet
the foregoing requirements, an "Extension Interest Rate Cap Agreement" shall be
such interest rate cap agreement as may be approved by each of the Mezzanine
Lender in its sole discretion).

 

Fiscal
Year shall
mean the period commencing on the Closing Date and ending on and including
December 31 of the calendar year in which the Closing Date occurs and thereafter
each twelve month period commencing on January 1 and ending on December 31 until
the Debt is repaid in full, or such other common fiscal year of Borrower as
Borrower may select from time to time with the prior consent of Lender, such
consent not to be unreasonably withheld.

 

GAAP shall
mean the generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the accounting profession), or in such other
statements by such entity as may be in general use by significant segments of
the U.S. accounting profession, to the extent such principles are applicable to
the facts and circumstances on the date of determination, as appropriately
modified by the Uniform System, and as further modified for purposes of
calculating Net Membership Cash Flow.

 

General
Partner shall
mean CNL Hotel Del Junior Mezz Partners GP, LLC, a Delaware limited liability
company.

 

8

Governmental
Authority shall
mean any court, board, agency, commission, office or other authority of any
nature whatsoever for any governmental unit (federal, state, county, district,
municipal, city or otherwise) whether now or hereafter in
existence.

 

Guarantor shall
mean, collectively, CNL Hospitality Partners, LP, a Delaware limited
partnership, and KSL DC Operating, LLC, a Delaware limited liability
company.

 

Hazardous
Materials shall
have the meaning provided in the Environmental Indemnity (Junior
Mezzanine).

 

Holding
Account shall
mean the "Holding Account" and various sub-accounts to the Holding Account
established pursuant to the Loan Agreement (Mortgage) as in effect on the date
hereof.

 

Impositions shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Increased
Costs shall
have the meaning set forth in Section
2.4.1.

 

Indebtedness shall
mean, at any given time, the Principal Amount, together with all accrued and
unpaid interest thereon and all other obligations and liabilities due or to
become due to Mezzanine Lender pursuant hereto, under the Mezzanine Note or in
accordance with the other Loan Documents (Junior Mezzanine) and all other
amounts, sums and expenses paid by or payable to Mezzanine Lender hereunder or
pursuant to the Mezzanine Note or the other Loan Documents (Junior
Mezzanine).

 

Indemnified
Parties shall
have the meaning set forth in Section
19.12(b).

 

Independent shall
mean, when used with respect to any Person, a Person who: (i) does not have any
direct financial interest or any material indirect financial interest in
Mortgage Borrower or Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate
Mezzanine Borrower, or in any of their Affiliates, (ii) is not connected with
Mortgage Borrower, Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate
Mezzanine Borrower or any of their Affiliates, as an officer, employee,
promoter, underwriter, trustee, partner, member, manager, creditor, director,
supplier, customer or person performing similar functions and (iii) is not a
member of the immediate family of a Person defined in (i) or (ii)
above.

 

Independent
Architect shall
mean an architect, engineer or construction consultant selected by Mezzanine
Borrower or Mortgage Borrower, as applicable, which is Independent, licensed to
practice in the State and has at least five (5) years of architectural
experience and which is reasonably acceptable to Mezzanine Lender.

 

9

Independent
Director,
Independent
Manager, or
Independent
Member shall
mean a Person who is not and will not be while serving and has never been (i) a
member (other than an Independent Member), manager (other than an Independent
Manager), director, (other than an Independent Director), employee, attorney, or
counsel of Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine
Borrower, or their Affiliates (provided that Mortgage Borrower, Mezzanine
Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine Borrower, and each
of their respective general partners, may not have the same Independent
Directors, Independent Managers or Independent Members), (ii) in the seven (7)
years prior to the Closing Date, a customer, supplier or other Person who
derives more than 1% of its purchases or revenues from its activities with
Mezzanine Borrower, Mortgage Borrower, Intermediate or their Affiliates, (iii) a
direct or indirect legal or beneficial owner in such entity or any of its
Affiliates, (iv) a member of the immediate family of any member, manager,
employee, attorney, customer, supplier or other Person referred to above, or (v)
a person Controlling or under the common Control of anyone listed in (i) through
(iv) above. A Person that otherwise satisfies the foregoing shall not be
disqualified from serving as an Independent Director or Independent Manager or
Independent Member if such individual is at the time of initial appointment, or
at any time while serving as such, is an Independent Director or Independent
Manager or Independent Member, as applicable, of a Single Purpose Entity
affiliated with Mezzanine Borrower, other than the Mortgage Borrower, Mezzanine
Borrower, Intermediate Mezzanine Borrower, Senior Mezzanine Borrower, or each of
their respective general partners.

 

Initial
LIBOR Cap Strike Rate shall
mean 4%.

 

Insurance
Requirements shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Interest
Determination Date shall
have the meaning set forth in the Mezzanine Note.

 

Interest
Period shall
have the meaning set forth in the Mezzanine Note.

 

Interest
Rate Cap Agreement (Junior Mezzanine) shall
mean an Interest Rate Agreement or Agreements (together with the confirmation
and schedules relating thereto), or, with Mezzanine Lender's prior written
consent (which shall not be unreasonably withheld or delayed), a swap or other
interest rate hedging instrument, each between a Counterparty and Mezzanine
Borrower obtained by Mezzanine Borrower and collaterally assigned to Mezzanine
Lender pursuant to this Agreement, and each satisfying the requirements set
forth in Exhibit
I and, in
the case of a swap or other interest rate hedging agreement consented to by
Mezzanine Lender, any additional requirements of the Rating
Agencies).

 

Intermediate
Mezzanine Account shall
mean account number 722386.1 at LaSalle Bank National Association.

 

10

Intermediate
Mezzanine Borrower shall
mean CNL Hotel Del Intermediate Mezz Partners, LP, a Delaware limited
partnership.

 

Intermediate
Mezzanine Borrower's General Partner shall
mean CNL Hotel Del Intermediate Mezz Partners GP, LLC, a Delaware limited
liability company.

 

Intermediate
Mezzanine Lender shall
mean German American Capital Corporation, a Maryland corporation, its successors
and assigns.

 

Intermediate
Mezzanine Loan shall
mean the $40,000,000 mezzanine loan from Intermediate Mezzanine Lender to the
Intermediate Mezzanine Borrower that is evidenced and secured by the
Intermediate Mezzanine Loan Documents.

 

Intermediate
Mezzanine Loan Agreement shall
mean that certain Mezzanine Loan and Security Agreement (Intermediate
Mezzanine), dated as February 9, 2005, between Intermediate Mezzanine Borrower,
as borrower, and Intermediate Mezzanine Lender, as lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.

 

Intermediate
Mezzanine Loan Documents shall
mean, collectively, the Intermediate Mezzanine Loan Agreement, the Intermediate
Mezzanine Note, the Intermediate Mezzanine Pledge and any and all other
agreements, instruments or documents executed by Intermediate Mezzanine Borrower
evidencing, securing or delivered in connection with the Intermediate Mezzanine
Loan and the transactions contemplated thereby, including, without limitation,
officer's certificates.

 

Intermediate
Mezzanine Loan Default Notice shall
mean a notice from Intermediate Mezzanine Lender (upon which Mortgage Lender may
conclusively rely without any inquiry into the validity thereof) that an "Event
of Default" has occurred and is continuing under any of the Intermediate
Mezzanine Loan Documents.

 

Intermediate
Mezzanine Loan Default Revocation Notice shall
have the meaning set forth in Section
3.1.6(f).

 

Intermediate
Mezzanine Note shall
mean that certain Mezzanine Note (Intermediate Mezzanine), dated as of February
9, 2005, made by Intermediate Mezzanine Borrower, as maker, in favor of
Intermediate Mezzanine Lender, as payee, as amended pursuant to that certain
Amendment to Mezzanine Note (Intermediate Mezzanine), dated as of March 29,
2005, as the same may be further amended, restated, replaced, supplemented or
otherwise modified from time to time.

 

Intermediate
Mezzanine Pledge shall
mean that certain Pledge and Security Agreement (Intermediate Mezzanine), dated
as of February 9, 2005, from Mezzanine Borrower to Intermediate Mezzanine
Lender.

 

Junior
Mezzanine Account shall
have the meaning set forth in Section
3.1.1.

 

11

Late
Payment Charge shall
have the meaning set forth in Section
2.2.3.

 

Lease shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Legal
Requirements shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

LIBOR shall
have the meaning set forth in the Mezzanine Note.

 

LIBOR
Margin shall
have the meaning set forth in the Mezzanine Note.

 

LIBOR
Rate shall
have the meaning set forth in the Mezzanine Note.

 

Lien shall
mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment,
security interest, or any other encumbrance or charge on or affecting Mortgage
Borrower, Mezzanine Borrower, the Collateral, the Property, any portion thereof
or any interest therein, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing
statement, and the filing of mechanic's, materialmen's and other similar liens
and encumbrances.

 

Loan shall
mean the loan in the amount of $40,000,000 made by Mezzanine Lender to Mezzanine
Borrower pursuant to this Agreement.

 

Loan
(Mortgage) or Mortgage Loan shall
mean the loan in the amount of $230,000,000 made by Mortgage Lender to Mortgage
Borrower pursuant to the Loan Agreement (Mortgage).

 

Loan
Agreement (Mortgage) shall
mean the Loan and Security Agreement, dated as of February 9, 2005, between
Mortgage Borrower, as borrower and Mortgage Lender, as lender, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.

 

Loan
Documents (Junior Mezzanine) shall
mean, collectively, this Agreement, the Mezzanine Note, the Account Agreement
(Junior Mezzanine), the Recourse Guaranty (Junior Mezzanine), the Environmental
Indemnity (Junior Mezzanine) and the Pledge and any and all other agreements,
instruments or documents executed by Mezzanine Borrower (or another Person)
evidencing, securing or delivered in connection with the Loan and the
transactions contemplated thereby, including, without limitation, any
certificates or representations delivered by or on behalf of Mezzanine Borrower,
any Affiliate of Mezzanine Borrower, Manager, or any Affiliate of Manager
(including, without limitation, any certificates in connection with any legal
opinions delivered on the date hereof).

 

Loan
Documents (Mortgage) shall
mean, collectively, the Loan Agreement (Mortgage), the Mortgage Note, the
Security Instrument, the Assignment of Leases, the Trademark Security Agreement
(Mortgage), the Environmental Indemnity (Mortgage), the Assignment of Management
Agreement (Mortgage), the Account Agreement 

 

12

(Mortgage),
the Recourse Guaranty (Mortgage) and all other documents executed and/or
delivered by Mortgage Borrower in connection with the Loan (Mortgage) including
any certifications or representations delivered by or on behalf of Mortgage
Borrower, any Affiliate of Mortgage Borrower, Manager, or any Affiliate of the
Manager (including, without limitation, any certificates in connection with any
legal opinions delivered in connection therewith), together with all of the
Accommodation Security Documents executed by the Operating Lessee.

 

Low
DSCR Period shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Management
Agreement shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Management
Control shall
mean, with respect to any direct or indirect interest in the Mortgage Borrower
or the Property (not including Manager under an Approved Management Agreement),
the power and authority to make and implement or cause to be made and
implemented all material decisions with respect to the operation, management,
financing and disposition of the specified interest.

 

Management
Fee shall
mean an amount equal to the monthly property management fees payable to the
Manager pursuant to the terms of the Management Agreement for management
services, the Group Services Fee (including, but not limited to, the Sales and
Marketing Group Services Expense payable monthly to Manager equal to up to one
percent (1%) of Hotel Revenues), incentive management fees and any other fees
described in the Management Agreement, and any allocated franchise
fees.

 

Manager shall
mean KSL DC Management LLC, or any replacement "Manager" appointed in accordance
with Section
5.2.14
hereof.

 

Manager
Accounts shall
mean the "Bank Accounts" (as defined in the Management Agreement) maintained by
Manager in the name of Mortgage Borrower or Operating Lessee with respect to the
Property and in accordance with the terms of each Management
Agreement.

 

Material
Adverse Effect shall
mean any event or condition that has a material adverse effect on (i) the
Property taken as a whole, (ii) the use, operation, or value of the Property,
(iii) the business, profits, operations or financial condition of Mortgage
Borrower or Mezzanine Borrower, (iv) the ability of Mezzanine Borrower to repay
the principal and interest of the Loan as it becomes due or to satisfy any of
Mezzanine Borrower's obligations under the Loan Documents (Junior Mezzanine),
(v) the ability of Mortgage Borrower to repay the principal and interest of the
Loan (Mortgage) as it becomes due or to satisfy any of Mortgage Borrower's
obligations under the Loan 

 

13

Documents
(Mortgage), (vi) the ability of Senior Mezzanine Borrower to repay the principal
and interest of the Senior Mezzanine Loan as it becomes due or to satisfy any of
Senior Mezzanine Borrower's obligations under the Senior Mezzanine Loan
Documents, (vii) the Collateral taken as a whole or (viii) the priority of
the Liens in favor of Mezzanine Lender.

 

Material
Lease shall
mean any Lease (a) demising a premises within the Property that is more than
10,000 net rentable square feet or (b) that is for a term equal to or greater
than sixty (60) months.

 

Maturity
Date shall
have the meaning set forth in the Mezzanine Note.

 

Maturity
Date Payment shall
have the meaning set forth in the Mezzanine Note.

 

Maximum
Legal Rate shall
mean the maximum non-usurious interest rate, if any, that at any time or from
time to time may be contracted for, taken, reserved, charged or received on the
indebtedness evidenced by the Mezzanine Note and as provided for herein or the
other Loan Documents (Junior Mezzanine), under the laws of such state or states
whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.

 

Maximum
Pay Rate shall
mean, (A) the Initial LIBOR Cap Strike Rate through the Initial Maturity Date
and (B) during the term of each Extension Option (as defined in the Mezzanine
Note), the lesser of (i) the product of (x) 6% and (y) a fraction, the numerator
of which is trailing twelve month Net Operating Income as of the end of the
Initial Maturity Date (or First Extended Maturity Date) and the denominator of
which is Closing Date NOI and (ii) the rate, which when added to the average of
the LIBOR Margin (Mortgage) and the LIBOR Margin applicable to each of the
Mezzanine Loans (such average weighted to reflect the size of the associated
Loan or Mezzanine Loan, as applicable, as a percentage of the total combined
outstanding principal balance of the Loan and Mezzanine Loans), equals
10.50%.

 

Mezzanine
Borrower has the
meaning set forth in the first paragraph of this Agreement.

 

Mezzanine
Borrower's Account shall
mean following account, or such other account with any Person subsequently
identified in a written notice from Mezzanine Borrower to Mezzanine Lender,
which Mezzanine Borrower's Account shall be under the sole dominion and control
of Mezzanine Borrower:

 

Bank:
Bank of America, Los Angeles, CA

 

ABA#:
121000358

 

Attention:
Haik Melkonyan

 

Account
Name: Concentration Account

 

Account
Number: 12355-57180

 

14

Mezzanine
Debt Service Reserve Account shall
have the meaning set forth in Section
3.1.1.

 

Mezzanine
Lender shall
have the meaning set forth in the first paragraph of this
Agreement.

 

Mezzanine
Lender Monthly Debt Service Notice Letter shall
have the meaning set forth in Section
3.1.6(e).

 

Mezzanine
Note shall
mean that certain Mezzanine Note (Junior Mezzanine), dated as of the date hereof
in the principal amount of FORTY MILLION DOLLARS ($40,000,000), made by
Mezzanine Borrower in favor of Mezzanine Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to
time.

 

Mortgage
Borrower shall
mean CNL Hotel Del Partners, LP, a Delaware limited partnership.

 

Mortgage
Borrower General Partner shall
mean CNL Hotel Del Partners GP, LLC, a Delaware limited liability company, the
general partner of Mortgage Borrower.

 

Mortgage
Default shall
have the meaning ascribed to "Default" in the Loan Agreement
(Mortgage).

 

Mortgage
Event of Default shall
have the meaning ascribed to "Event of Default" in the Loan Agreement
(Mortgage).

 

Mortgage
Lender shall
mean German American Capital Corporation, its successors and
assigns.

 

Mortgage
Loan shall
mean the loan in the amount of $230,000,000 made by Mortgage Lender to Mortgage
Borrower pursuant to the Loan Agreement (Mortgage).

 

Mortgage
Note shall
have the meaning ascribed to "Note" in the Loan Agreement
(Mortgage).

 

Net
Excess Cash Flow shall
have the meaning set forth in Section
3.1.6(a).

 

Net
Excess Cash Flow Commencement Date shall
have the meaning set forth in Section
3.1.6(a).

 

Net
Membership Cash Flow shall
mean the net cash flow (whether positive or negative) consisting of the
following, to the extent not otherwise accounted for in Hotel Revenue or
Operating Expenses in accordance with GAAP: (a) cash received from sales of new
club memberships and conversions of existing club memberships to new club
memberships (including deposits and ongoing dues relating thereto), plus (b)
cash principal payments received on membership notes evidencing the financing of
the pur

 

15

chase of
new club memberships or the conversion of existing club memberships, less (c)
cash paid to cancel or recall existing club memberships and refunds of new club
membership sales.

 

Net
Operating Income shall
mean, for any specified period, the excess of Operating Income over Operating
Expenses for the trailing twelve (12) month period.

 

Non-Consolidation
Opinion shall
have the meaning provided in Section
2.5.5.

 

Notes shall
mean, collectively, the Mortgage Note and the Mezzanine Note.

 

Obligations shall
mean, collectively, the Obligations (Junior Mezzanine), Obligations
(Intermediate Mezzanine), Obligations (Senior Mezzanine), and the Obligations
(Mortgage).

 

Obligations
(Intermediate Mezzanine) shall
have the meaning set forth in the Intermediate Mezzanine Loan
Agreement.

 

Obligations
(Junior Mezzanine) shall
mean all indebtedness, obligations and liabilities of Mezzanine Borrower,
Guarantor and General Partner to Mezzanine Lender, under this Agreement or any
of the other Loan Documents (Junior Mezzanine) or in respect of the Loan or the
Mezzanine Note, or other instrument at any time evidencing any of the foregoing,
whether existing on the date of this Agreement or arising or incurred hereafter,
direct or indirect, joint or several, absolute or continent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise.

 

Obligations
(Mortgage) shall
have the meaning ascribed to "Obligations" in the Loan Agreement
(Mortgage).

 

Obligations
(Senior Mezzanine) shall
have the meaning set forth in the Senior Mezzanine Loan Agreement.

 

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

 

Officer's
Certificate shall
mean a certificate executed by an authorized signatory of Mezzanine Borrower
that is familiar with the financial condition of Mezzanine Borrower, the
Mortgage Borrower and the operation of the Property or the particular matter
which is the subject of such Officer's Certificate.

 

Operating
Expenses shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

 

16

Operating
Income shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Operating
Lessee shall
mean Hotel Del Coronado, LP, a Delaware limited partnership.

 

Opinion
of Counsel shall
mean opinions of counsel of law firm(s) licensed to practice in California, New
York, and Delaware selected by Mezzanine Borrower and reasonably acceptable to
Mezzanine Lender.

 

Other
Charges shall
mean maintenance charges, impositions other than Impositions, and any other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Property, now or hereafter
levied or assessed or imposed against the Property or any part thereof by any
Governmental Authority, other than those required to be paid by a Tenant
pursuant to its respective Lease.

 

Other
Taxes shall
have the meaning set forth in Section
2.4.3.

 

Payment
Date shall
have the meaning set forth in the Mezzanine Note.

 

Permitted
Borrower Transferee shall
mean any entity (i) that is experienced in owning and operating (including
acting as asset manager of) properties similar to the Property, (ii) that either
(a) has a net worth together with its Close Affiliates, as of a date no more
than six (6) months prior to the date of the transfer of at least $300 Million
(exclusive of the Property) and, immediately prior to such transfer, controls,
together with its Close Affiliates real estate equity assets of at least $1
Billion or (b) together with its Close Affiliates owns or has under management
or acts as the exclusive fund manager or investment advisor, at the time of the
transfer, not fewer than 6 luxury resort hotels (excluding the Property)
containing not fewer than 3,000 hotel rooms in the aggregate and (iii) that is
not a Disqualified Transferee.

 

Permitted
Debt shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Permitted
Debt (Junior Mezzanine) shall
mean the Mezzanine Note and other obligations, indebtedness and liabilities
specifically provided for in any Loan Document (Junior Mezzanine) and secured by
this Agreement and the Pledge and the other Loan Documents (Junior
Mezzanine).

 

Permitted
Encumbrances shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Permitted
Fund Manager means
any Person that on the date of determination is (i) a nationally-recognized
manager of investment funds investing in debt or equity interests relating to
commercial real estate, (ii) investing through a fund with committed capital of
at least $250,000,000 and (iii) not subject to a bankruptcy
proceeding.

 

17

Permitted
Investments shall
have the meaning set forth in the Account Agreement (Junior
Mezzanine).

 

Permitted
Loan Amendment shall
have the meaning set forth in Section
5.1.18(b).

 

Permitted
Revolving Credit Transfer shall
mean (a) a pledge of direct or indirect equity interests in Mezzanine Borrower
to secure the Revolving Credit Loan, and (b) any foreclosure (or transfer in
lieu thereof) in respect of the Revolving Credit Loan, provided that the
acquirer at foreclosure (or transfer in lieu thereof) (i) shall be a Qualified
Transferee or (ii) shall have received Mezzanine Lender's prior written consent
prior to such foreclosure (or such transfer in lieu of foreclosure), subject in
the case of each of clauses (i) and (ii) to the requirement that the Revolving
Credit Borrower deliver to Mezzanine Lender, the Mortgage Lender and the Rating
Agencies a nonconsolidation opinion satisfactory to the Rating Agencies with
respect to any Person having more than a 49% direct or indirect equity interest
(either individually or together with any interests held by an affiliate of such
Person) in Borrower.

 

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

 

Physical
Conditions Report shall
mean with respect to the Property, collectively, the (i) seismic report and (ii)
structural engineering report (prepared by an Independent Architect), both of
which have been (a) addressed to Mezzanine Lender, (b) prepared based on a scope
of work determined by Mortgage Lender in Mortgage Lender's reasonable
discretion, and (c) in form and content acceptable to Mortgage Lender in
Mortgage Lender's reasonable discretion, together with any amendments or
supplements thereto.

 

Plan shall
have the meaning set forth in Section
4.1.9(a).

 

Pledge shall
mean that certain Pledge and Security Agreement (Junior Mezzanine), dated as of
the date hereof, from Mezzanine Borrower to Mezzanine Lender pledging (i)
Mezzanine Borrower's 99.5% direct partnership interest in Intermediate Mezzanine
Borrower and (ii) Mezzanine Borrower's 100% direct membership interest in
Intermediate Mezzanine Borrower's General Partner.

 

Pledged
Collateral shall
have the meaning set forth in the Pledge.

 

Pre-approved
Manager shall
mean any entity set forth on Schedule
IV hereof
(which schedule is identical to the schedule of "Qualified Managers" contained
in the Management Agreement).

 

Pre-approved
Transferee shall
mean any of the entities set forth on Schedule
III hereof,
or any Close Affiliates thereof, provided any of the foregoing entities or their
Close Affiliates shall only be a "Pre-approved Transferee" if (i) such entity

 

18

continues
to be Controlled by substantially the same Persons Controlling such entity as of
the Closing Date or if such Pre-approved Transferee is a publicly traded
company, such Pre-approved Transferee continues to be publicly traded on an
established securities market, (ii) there has been no material adverse change in
the financial condition or results of operations of such entity since the
Closing Date, (iii) such entity is not a Disqualified Transferee and (iv) if
such entity as of the Closing Date is rated (a) "Investment Grade," there has
been no deterioration in such entity's long-term or short-term credit rating (if
any) since the Closing Date below "BBB-" or (b) below "Investment Grade," there
has been no deterioration in such entity's long-term or short-term credit rating
(if any) since the Closing Date.

 

Prepayment
Fee shall
have the meaning set forth in the Mezzanine Note.

 

Principal
Amount shall
have the meaning set forth in the Mezzanine Note.

 

Proceeds shall
have the meaning set forth in the Loan Agreement (Mortgage)

 

Prohibited
Loan Amendment shall
have the meaning specified in Section
5.1.18(b).

 

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

 

Property shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Qualified
Transferee shall
mean one or more of the following:

 

(i) a real
estate investment trust, bank, saving and loan association, investment bank,
insurance company, trust company, commercial credit corporation, pension plan,
pension fund or pension advisory firm, mutual fund, government entity or plan
that satisfies the Eligibility Requirements;

 

(ii) an
investment company, money management firm or "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933, as amended, or
an institutional "accredited investor" within the meaning of Regulation D under
the Securities Act of 1933, as amended, that satisfies the Eligibility
Requirements;

 

(iii) an
institution substantially similar to any of the foregoing entities described in
clauses (i) or (ii) that satisfies the Eligibility Requirements;

 

(iv) any
entity Controlled (and only so long as such entity continues at all times to be
Controlled) by any of the entities described in clauses (i) or (iii) above;
or

 

19

(v) an
investment fund, limited liability company, limited partnership or general
partnership where a Permitted Fund Manager or an entity that is otherwise a
Qualified Transferee under clauses (i), (ii), (iii) or (iv) of this definition
acts as the general partner, managing member or fund manager and at least 50% of
the equity interests in such investment vehicle are owned, directly or
indirectly, by one or more entities that are otherwise Qualified Transferees
under clauses (i), (ii), (iii) or (iv) of this definition.

 

Rate
Cap Collateral (Junior Mezzanine) shall
have the meaning set forth in Section
9.2.

 

Rating
Agencies shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Rating
Agency Confirmation shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Recourse
Guaranty (Mortgage) shall
mean that certain Guaranty of Recourse Obligations, dated as of February 9,
2005, by Guarantor in favor of Mortgage Lender, as the same may be amended,
supplemented, restated or otherwise modified from time to time.

 

Recourse
Guaranty (Junior Mezzanine) shall
mean that certain Guaranty of Recourse Obligations of Mezzanine Borrower, dated
as of the date hereof, by Guarantor in favor of Mezzanine Lender, as the same
may be amended, supplemented, restated or otherwise modified from time to
time.

 

Register shall
have the meaning set forth in Section
15.4.

 

Regulatory
Change shall
mean any change after the date of this Agreement in federal, state or foreign
laws or regulations or the adoption or the making, after such date, of any
interpretations, directives or requests applying to Mezzanine Lender, or any
Person Controlling Mezzanine Lender or to a class of banks or companies
Controlling banks of or under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or Governmental Authority
or monetary authority charged with the interpretation or administration
thereof.

 

Replacement
Interest Rate Cap Agreement (Junior Mezzanine) shall
mean, in connection with a replacement of an Interest Rate Cap Agreement
following a Downgrade of the Counterparty thereto, an interest rate cap
agreement (together with the confirmation and schedules relating thereto) from
an Acceptable Counterparty and satisfying the requirements set forth on
Exhibit
I hereto;
provided that to the extent any such interest rate cap agreement does not meet
the foregoing requirements a "Replacement Interest Cap Agreement (Junior
Mezzanine)" shall be such interest rate cap agreement approved in writing by
Mezzanine Lender.

 

Revolving
Credit Borrower shall
mean CNL KSL Partners, LP, a Delaware limited partnership.

 

20

Revolving
Credit Lender shall
mean Deutsche Bank Trust Company Americas, its successors and
assigns.

 

Revolving
Credit Loan shall
mean the $10,000,000 revolving credit loan from Revolving Credit Lender to the
Revolving Credit Borrower that is evidenced and secured by the Revolving Credit
Loan Documents.

 

Revolving
Credit Loan Documents shall
mean, collectively, the Revolving Credit Agreement, the Revolving Credit Note
and any and all other agreements, instruments or documents executed by Revolving
Credit Borrower evidencing, securing or delivered in connection with the
Revolving Credit Loan and the transactions contemplated thereby, including,
without limitation, officer's certificates.

 

Revolving
Credit Note shall
mean that certain Note, dated February 9, 2005, made by Revolving Credit
Borrower, as maker, in favor of Revolving Credit Lender, as payee, in the
principal amount of $10,000,000, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

S&P shall
mean Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc.

 

Securitization shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Senior
Mezzanine Account shall
mean account number 722385.1 at LaSalle Bank National Association.

 

Senior
Mezzanine Borrower shall
mean CNL Hotel Del Senior Mezz Partners, LP, a Delaware limited
partnership.

 

Senior
Mezzanine Lender shall
mean German American Capital Corporation, a Maryland corporation, together with
its successors and assigns.

 

Senior
Mezzanine Loan shall
mean the $90,000,000 mezzanine loan from Senior Mezzanine Lender to the Senior
Mezzanine Borrower that is evidenced and secured by the Senior Mezzanine Loan
Documents.

 

Senior
Mezzanine Loan Agreement shall
mean that certain Mezzanine Loan and Security Agreement (Senior Mezzanine),
dated as of February 9, 2005, between Senior Mezzanine Borrower, as borrower,
and Senior Mezzanine Lender, as lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

Senior
Mezzanine Loan Default Notice shall
mean a notice from Senior Mezzanine Lender (upon which Mortgage Lender may
conclusively rely without any inquiry into the validity thereof) that an "Event
of Default" has occurred and is continuing under any of the Senior Mezzanine
Loan Documents.

 

21

Senior
Mezzanine Loan Default Revocation Notice shall
have the meaning set forth in Section
3.1.6(f).

 

Senior
Mezzanine Loan Documents shall
mean, collectively, the Senior Mezzanine Loan Agreement, the Senior Mezzanine
Note, the Senior Mezzanine Pledge and any and all other agreements, instruments
or documents executed by Senior Mezzanine Borrower evidencing, securing or
delivered in connection with the Senior Mezzanine Loan and the transactions
contemplated thereby, including, without limitation, officer's
certificates.

 

Senior
Mezzanine Note shall
mean that certain Mezzanine Note (Senior Mezzanine), dated February 9, 2005,
made by Senior Mezzanine Borrower, as maker, in favor of Senior Mezzanine
Lender, as payee, as amended pursuant to that certain Amendment to Mezzanine
Note (Senior Mezzanine), dated as of March 29, 2005, as the same may be further
amended, restated, replaced, supplemented or otherwise modified from time to
time.

 

Senior
Mezzanine Pledge shall
mean that certain Pledge and Security Agreement (Senior Mezzanine), dated as of
February 9, 2005, from Senior Mezzanine Borrower to Senior Mezzanine Lender, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time. 

 

Servicer shall
mean such Person designated in writing with an address for such Person by
Mezzanine Lender, in its sole discretion, to act as Mezzanine Lender's agent
hereunder with such powers as are specifically delegated to the Servicer by
Mezzanine Lender, whether pursuant to the terms of this Agreement, the Account
Agreement (Junior Mezzanine) or otherwise, together with such other powers as
are reasonably incidental thereto.

 

Single
Purpose Entity shall
mean a Person, other than an individual, which (i) is formed or organized solely
for the purpose of owning, holding, developing, using, operating and financing
the Property, (ii) does not engage in any business unrelated to the Property and
the ownership, development, use, operation and financing thereof, (iii) does not
have any assets other than those related to its interest in the Property or the
operation, management and financing thereof or any indebtedness other than the
Permitted Debt, (iv) 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, (v) holds itself out as being a Person,
separate and apart from any other Person, (vi) does not and will not commingle
its funds or assets with those of any other Person, (vii) conducts its own
business in its own name; (viii) maintains separate financial statements, (ix)
pays its own liabilities out of its own funds, (x) observes all partnership,
corporate or limited liability company formalities, as applicable, (xi) pays the
salaries of its own employees, if any, and maintains a sufficient number of
employees, if any, in light of its contemplated business operations, (xii) 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, (xiii) does not acquire obligations or
securities of its partners, members or shareholders, (xiv) allocates fairly and

 

22

reasonably
shared expenses, including, without limitation, any overhead for shared office
space, if any, (xv) uses separate stationary, invoices, and checks, (xvi)
maintains an arms-length relationship with its Affiliates, (xvii) does not
pledge its assets for the benefit of any other Person (other than as permitted
under clauses (a) and (d) of the definition of Permitted Encumbrances) or make
any cash loans or advances to any other Person, (xviii) uses commercially
reasonable efforts to correct any known misunderstanding regarding its separate
identity, and (xix) maintains adequate capital in light of its contemplated
business operations. In addition, if such Person is a partnership, (1) all
general partners of such Person shall be Single Purpose Entities; and (2) if
such Person has more than one general partner, then the organizational documents
shall provide that such Person shall continue (and not dissolve) for so long as
a solvent general partner exists. In addition, if such Person is a corporation,
then, at all times: (a) such Person shall have at least two (2) Independent
Directors and (b) the board of directors of such Person may not take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
directors unless all of the directors, including the Independent Directors,
shall have participated in such vote. In addition, if such Person is a limited
liability company, (a) such Person shall have at least two (2) Independent
Managers or Independent Members, (b) if such Person is managed by a board of
managers, the board of managers of such Person may not take any action requiring
the unanimous affirmative vote of 100% of the members of the board of managers
unless all of the managers, including the Independent Managers, shall have
participated in such vote, (c) if such Person is not managed by a board of
managers, the members of such Person may not take any action requiring the
affirmative vote of 100% of the members of such Person unless all of the
members, including the Independent Members, shall have participated in such
vote, (d) each managing member shall be a Single Purpose Entity and (e) its
articles of organization, certificate of formation and/or operating agreement,
as applicable, shall provide that until all of the Indebtedness and Obligations
are paid in full such entity will not dissolve. In addition, the organizational
documents of such Person shall provide that such Person (1) without the
unanimous consent of all of the partners, directors or members, as applicable,
shall not with respect to itself or to any other Person in which it has a direct
or indirect legal or beneficial interest (a) seek or consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator, custodian or other
similar official for the benefit of the creditors of such Person or all or any
portion of such Person's properties, or (b) take any action that might cause
such Person to become insolvent, petition or otherwise institute insolvency
proceedings or otherwise seek any relief under any laws relating to the relief
from debts or the protection of debtors generally, (2) will maintain its books,
records, resolutions and agreements as official records, (3) will hold its
assets in its own name, (4) will maintain its financial statements, accounting
records and other organizational documents, books and records separate and apart
from any other Person, (5) will not identify its partners, members or
shareholders, or any Affiliates of any of them as a division or part of it, (6)
will maintain an arms-length relationship with its Affiliates, and (7) will not
enter into or be a party to any transaction with its partners, members,
shareholders, or its Affiliates except in the ordinary course of business and on
terms which are intrinsically fair and are no less favorable to it than would be
obtained in a comparable arms-length transaction with a third party.
Notwithstanding the foregoing, Mezzanine Lender hereby consents to each of
General Partner, CNL Hotel Del Senior Mezz Partners GP, LLC, and CNL Hotel

 

23

Del
Intermediate Mezz Partners GP, LLC, having only one (1) Independent Director on
its board of directors, and CNL KSL Partners GP, LLC having no Independent
Directors on its board of directors.

 

SPE
Entity shall
mean Mezzanine Borrower, General Partner, Mortgage Borrower, Senior Mezzanine
Borrower, Intermediate Mezzanine Borrower, Revolving Credit Borrower, Mortgage
Borrower General Partner, CNL Hotel Del Senior Mezz Partners GP, LLC, CNL Hotel
Del Intermediate Mezz Partners GP, LLC, CNL Hotel Del Tenant Corp., and
Operating Lessee which are each required to be a Single Purpose
Entity.

 

Special
Taxes shall
mean any and all present or future taxes, levies, imposts, deductions, charges
or withholdings, or any liabilities with respect thereto, including those
arising after the date hereof as result of the adoption of or any change in law,
treaty, rule, regulation, guideline or determination of a Governmental Authority
or any change in the interpretation or application thereof by a Governmental
Authority but excluding, in the case of Mezzanine Lender, such taxes (including
income taxes, franchise taxes and branch profit taxes) as are imposed on or
measured by Mezzanine Lender's net income by the United States of America or any
Governmental Authority of the jurisdiction under the laws under which Mezzanine
Lender is organized or maintains a lending office.

 

State shall
mean the State in which the Property or any part thereof is
located.

 

Sub-Account(s) shall
have the meaning set forth in Section
3.1.1.

 

Taking shall
have the meaning set forth in Loan Agreement (Mortgage).

 

Tenant shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Title
Company shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Title
Policy (Mortgage) shall
have the meaning ascribed to "Title Policy" in the Loan Agreement
(Mortgage).

 

Transfer shall
mean to, directly or indirectly, sell, assign, convey, mortgage, transfer,
pledge, hypothecate, encumber, grant a security interest in, exchange or
otherwise dispose of any beneficial interest or grant any option or warrant with
respect to, or where used as a noun, a direct or indirect sale, assignment,
conveyance, transfer, pledge or other disposition of any beneficial interest by
any means whatsoever whether voluntary, involuntary, by operation of law or
otherwise.

 

UCC or
Uniform
Commercial Code shall
mean the Uniform Commercial Code as in effect in the State.

 

24

Uniform
System shall
have the meaning set forth in the Loan Agreement (Mortgage).

 

Section
1.2  Principles
of Construction

 

All
references to sections and schedules are to sections and schedules in or to this
Agreement unless otherwise specified. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP as modified by the
Uniform System. When used herein, the term "financial statements" shall include
the notes and schedules thereto. Unless otherwise specified herein or therein,
all terms defined in this Agreement shall have the definitions given them in
this Agreement when used in any other Loan Document (Junior Mezzanine) or in any
certificate or other document made or delivered pursuant thereto. All uses of
the word "including" shall mean including, without limitation unless the context
shall indicate otherwise. Unless otherwise specified, the words hereof, herein
and hereunder and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined terms
herein shall be equally applicable to both the singular and plural forms of the
terms so defined.

 

	II.  	
      GENERAL
      TERMS

 

Section
2.1  Loan;
Disbursement to Mezzanine Borrower

 

2.1.1  The
Loan. Subject
to and upon the terms and conditions set forth herein, Mezzanine Lender hereby
agrees to make and Mezzanine Borrower hereby agrees to accept the Loan on the
Closing Date.

 

2.1.2  Disbursement
to Borrower.
Mezzanine Borrower may request and receive only one borrowing hereunder in
respect of the Loan and any amount borrowed and repaid hereunder in respect of
the Loan may not be reborrowed. Mezzanine Borrower acknowledges and agrees that
the full proceeds of the Loan have been disbursed by Mezzanine Lender to
Mezzanine Borrower on the Closing Date.

 

2.1.3  The
Mezzanine Note, Pledge and Loan Documents. The Loan
shall be evidenced by the Mezzanine Note and secured by the Pledge, this
Agreement and the other Loan Documents (Junior Mezzanine).

 

2.1.4  Use
of Proceeds.
Mezzanine Borrower shall use the proceeds of the Loan to make cash distributions
to its partners and as otherwise set forth on the Loan closing statement
executed by Mortgage Borrower, Mezzanine Borrower, Senior Mezzanine Borrower,
and Intermediate Mezzanine Borrower at closing.

 

25

 

Section
2.2  Interest;
Loan Payments; Late Payment Charge

 

2.2.1  Payment
of Principal and Interest.

 

(i)  Except as
set forth in Section
2.2.1(ii),
interest shall accrue on the Principal Amount as set forth in the Mezzanine
Note.

 

(ii)  Upon the
occurrence and during the continuance of an Event of Default and from and after
the Maturity Date if the entire Principal Amount is not repaid on the Maturity
Date, interest on the outstanding principal balance of the Loan and, to the
extent permitted by law, overdue interest and other amounts due in respect of
the Loan shall accrue at the Default Rate calculated from the date such payment
was due without regard to any grace or cure periods contained herein. Interest
at the Default Rate shall be computed from the occurrence of the Event of
Default until the actual receipt and collection of the Indebtedness (or that
portion thereof that is then due). To the extent permitted by applicable law,
interest at the Default Rate shall be added to the Indebtedness, shall itself
accrue interest at the same rate as the Loan and shall be secured by this
Agreement and the Pledge. This paragraph shall not be construed as an agreement
or privilege to extend the date of the payment of the Indebtedness, nor as a
waiver of any other right or remedy accruing to Mezzanine Lender by reason of
the occurrence of any Event of Default, and Mezzanine Lender retains its rights
under the Mezzanine Note to accelerate and to continue to demand payment of the
Indebtedness upon the happening of any Event of Default.

 

2.2.2  Method
and Place of Payment.

 

(a)  On each
Payment Date, Mezzanine Borrower shall pay or cause to be paid to Mezzanine
Lender interest accruing pursuant to the Mezzanine Note for the entire Interest
Period during which said Payment Date shall occur.

 

(b)  All
amounts advanced by Mezzanine Lender pursuant to the applicable
provisions of the Loan Documents (Junior Mezzanine), other than the Principal
Amount, together with any interest at the Default Rate or other charges as
provided therein, shall be due and payable hereunder as provided in the Loan
Documents (Junior Mezzanine). In the event any such advance or charge is not so
repaid by Mezzanine Borrower, Mezzanine Lender may, at its option and upon
notice to Mezzanine Borrower, first apply any payments received under the
Mezzanine Note to repay such advances, together with any interest thereon, or
other charges as provided in the Loan Documents (Junior Mezzanine), and the
balance, if any, shall be applied in payment of any installment of interest or
principal then due and payable.

 

(c)  The
Maturity Date Payment shall be due and payable in full on the Maturity
Date.

 

26

 

2.2.3  Late
Payment Charge. If any
interest payment due under the Loan Documents (Junior Mezzanine) is not paid by
Mezzanine Borrower within five (5) days after the date on which it is due (or,
if such fifth (5th) day is not a Business Day, then the Business Day immediately
preceding such day) on or prior to the date on which it is due, Mezzanine
Borrower shall pay to Mezzanine Lender upon demand an amount equal to the lesser
of three percent (3%) of such unpaid sum or the Maximum Legal Rate (the
Late
Payment Charge) in
order to defray the expense incurred by Mezzanine Lender in handling and
processing such delinquent payment and to compensate Mezzanine Lender for the
loss of the use of such delinquent payment. Any such amount shall be secured by
this Agreement, the Pledge and the other Loan Documents (Junior Mezzanine) to
the extent permitted by applicable law. Mezzanine Borrower acknowledges and
agrees that the five day grace period with respect to the applicability of the
Late Payment Charge (i) shall only apply to Mezzanine Borrower's first failure
to make a monthly interest payment in any calendar year and (ii) shall not
constitute a payment grace period and shall in no way limit Mezzanine Lender's
rights under Article
XVII.

 

2.2.4  Usury
Savings. This
Agreement and the Mezzanine Note are subject to the express condition that at no
time shall Mezzanine Borrower be obligated or required to pay interest on the
Principal Amount of the Loan at a rate which could subject Mezzanine Lender to
either civil or criminal liability as a result of being in excess of the Maximum
Legal Rate. If, by the terms of this Agreement or the other Loan Documents
(Junior Mezzanine), Mezzanine Borrower is at any time required or obligated to
pay interest on the Principal Amount due under the Mezzanine Note at a rate in
excess of the Maximum Legal Rate, then the LIBOR Rate or the Default Rate, as
the case may be, shall be deemed to be immediately reduced to the Maximum Legal
Rate and all previous payments in excess of the Maximum Legal Rate shall be
deemed to have been payments in reduction of principal and not on account of the
interest due under the Mezzanine Note. All sums paid or agreed to be paid to
Mezzanine Lender for the use, forbearance, or detention of the sums due under
the Loan, shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the Loan
until payment in full so that the rate or amount of interest on account of the
Loan does not exceed the Maximum Legal Rate of interest from time to time in
effect and applicable to the Loan for so long as the Loan is
outstanding.

 

Section
2.3  Prepayments

 

. No
prepayments of the Indebtedness shall be permitted except as set forth in
Section
2.3.1 hereof
and Section
4 of the
Mezzanine Note.

 

2.3.1  Mandatory
Prepayment.

 

(a)  Except as
described in Section
2.3.1(b) below
and subject to Article
VIII,
Mezzanine Borrower shall repay the Mezzanine Note, in full, together with the
Prepayment Fee (if applicable), in accordance with Section
4(b) and
Section
4(d) (if
applicable) of the Mezzanine Note upon the occurrence of any of the following
events:

 

27

 

(i)  if the
Property is Transferred;

 

(ii)  if all or
any portion of the Mortgage Borrower's interest in the Property is
Transferred;

 

(iii)  if all or
any portion of the Mezzanine Borrower's interest in the Mortgage Borrower is
Transferred;

 

(iv)  if a
Transfer or series of Transfers of any direct or indirect ownership interests in
the Mezzanine Borrower or any SPE Entity shall occur which either
individually or in the aggregate with all such Transfers violates the
requirements of Article
VIII;
or

 

(v)  if the
Loan (Mortgage) is repaid or refinanced.

 

(b)  If there
shall occur a casualty or Taking in respect of the Property and as a result
thereof the Loan (Mortgage) is prepaid in whole or in part, then, to the
extent
that there shall be excess proceeds or awards available following the
application of the proceeds or awards to reconstruct or repair the Property or
to the payment of all or any portion of (i) the Loan (Mortgage) pursuant to the
terms of the Loan Documents (Mortgage), (ii) Senior Mezzanine Loan pursuant to
the terms of the Senior Mezzanine Loan Documents and (iii) the Intermediate Loan
pursuant to the Intermediate Mezzanine Loan Documents (collectively,
Excess
Proceeds),
Mezzanine Borrower shall repay the Mezzanine Note, or a portion thereof, in the
amount of such available Excess Proceeds. All Excess Proceeds shall be deposited
directly into the Junior Mezzanine Account.

 

2.3.2  Prepayments
After Event of Default. If,
following an Event of Default, Mezzanine Lender shall accelerate the
Indebtedness and Mezzanine Borrower thereafter tenders payment of all or any
part of the Indebtedness, or if all or any portion of the Indebtedness is
recovered by Mezzanine Lender after such Event of Default, (a) such payment may
be made only on the next occurring Payment Date together with all unpaid
interest thereon as calculated through the end of the Interest Period during
which such Payment Date occurs (even if such period extends beyond such Payment
Date and calculated as if such payment had not been made on such Payment Date),
and all other fees and sums payable hereunder or under the Loan Documents
(Junior Mezzanine), including without limitation, interest that has accrued at
the Default Rate and any Late Payment Charges), (b) such payment shall be deemed
a voluntary prepayment by Mezzanine Borrower, and (c) Mezzanine Borrower shall
pay, in addition to the Indebtedness, an amount equal to the Prepayment Fee, if
applicable.

 

2.3.3  Release
of Collateral.
Mezzanine Lender shall, upon the written request and at the reasonable expense
of Mezzanine Borrower, upon payment in full of the Principal Amount and interest
on the Loan and all other amounts due and payable under the Loan Documents
(Junior Mezzanine) in accordance with the terms and provisions of the Mezzanine
Note and this Agreement, release the Lien of (i) this Agreement upon the Account
Collateral (Junior Mezzanine) and the Rate Cap Collateral (Junior 

 

28

Mezzanine)
and (ii) the Pledge on the Collateral or assign it, in whole or in part, to a
new lender. In such event, Mezzanine Borrower shall submit to Mezzanine Lender,
on a date prior to the date of such release or assignment sufficient to provide
a reasonable period for review thereof, a release of lien or assignment of lien,
as applicable, for such Collateral for execution by Lender. Such release or
assignment, as applicable, shall be in a form satisfactory to Mezzanine Lender
in its reasonable discretion. In addition, Mezzanine Borrower shall provide all
other documentation Mezzanine Lender reasonably requires to be delivered by
Mezzanine Borrower in connection with such release or assignment, as
applicable.

 

Section
2.4  Regulatory
Change; Taxes

 

2.4.1  Increased
Costs. If, as a
result of any Regulatory Change or compliance of Mezzanine Lender therewith, the
basis of taxation of payments to Mezzanine Lender or any company Controlling
Mezzanine Lender of the principal of or interest on the Loan is changed or
Mezzanine Lender or the company Controlling Mezzanine Lender shall be subject to
(i) any tax, duty, charge or withholding of any kind with respect to this
Agreement (excluding federal taxation of the overall net income of Mezzanine
Lender or the company Controlling Mezzanine Lender); or (ii) any reserve,
special deposit or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities, of Mezzanine Lender
or any company Controlling Mezzanine Lender is imposed, modified or deemed
applicable; or (iii) any other condition affecting loans to borrowers subject to
LIBOR-based interest rates is imposed on Mezzanine Lender or any company
Controlling Mezzanine Lender and Mezzanine Lender determines that, by reason
thereof, the cost to Mezzanine Lender or any company Controlling Mezzanine
Lender of making, maintaining or extending the Loan to Mezzanine Borrower is
increased, or any amount receivable by Mezzanine Lender or any company
Controlling Mezzanine Lender hereunder in respect of any portion of the Loan to
Mezzanine Borrower is reduced, in each case by an amount deemed by Mezzanine
Lender in good faith to be material (such increases in cost and reductions in
amounts receivable being herein called Increased
Costs), then
Mezzanine Lender shall provide notice thereof to Mezzanine Borrower and
Mezzanine Borrower agrees that it will pay to Mezzanine Lender upon Mezzanine
Lender's written request such additional amount or amounts as will compensate
Mezzanine Lender or any company Controlling Mezzanine Lender for such Increased
Costs to the extent Mezzanine Lender determines that such Increased Costs are
allocable to the Loan and provided that Mezzanine Lender is generally exercising
rights similar to those set forth in this Section
2.4.1 against
other borrowers similarly situated to Mezzanine Borrower. Mezzanine Lender will
notify Mezzanine Borrower of any event occurring after the date hereof which
will entitle Mezzanine Lender to compensation pursuant to this Section
2.4.1 as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation; provided,
however, that,
if Mezzanine Lender fails to deliver a notice within 90 days after the date on
which an officer of Mezzanine Lender responsible for overseeing this Agreement
knows or has reason to know of its right to additional compensation under this
Section
2.4.1,
Mezzanine Lender shall only be entitled to additional compensation for any such
Increased Costs incurred from and after the date that is 90 days prior to the
date Mezzanine Borrower received such notice. If Mezzanine Lender requests
compensation under this 

 

29

Section
2.4.1,
Mezzanine Borrower may, by notice to Mezzanine Lender, require that Mezzanine
Lender furnish to Mezzanine Borrower a statement setting forth the basis for
requesting such compensation and the method for determining the amount thereof,
and a description as to why Section
2.4.1 is not
applicable.

 

2.4.2  Special
Taxes.
Mezzanine Borrower shall make all payments hereunder free and clear of and
without deduction for Special Taxes. If Mezzanine Borrower shall be required by
law to deduct any Special Taxes from or in respect of any sum payable hereunder
or under any other Loan Document (Junior Mezzanine) to Mezzanine Lender, (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section
2.4.2)
Mezzanine Lender receives an amount equal to the sum it would have received had
no such deductions been made, (ii) Mezzanine Borrower shall make such
deductions, and (iii) Mezzanine Borrower shall pay the full amount deducted to
the relevant Governmental Authority in accordance with applicable
law.

 

2.4.3  Other
Taxes. In
addition, Mezzanine Borrower agrees to pay any present or future stamp or
documentary taxes or other excise or property taxes, charges, or similar levies
which arise from any payment made hereunder, or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the other Loan
Documents (Junior Mezzanine), or the Loan (hereinafter referred to as
Other
Taxes).

 

2.4.4  Indemnity.
Mezzanine Borrower shall indemnify Mezzanine Lender for the full amount of
Special Taxes and Other Taxes (including any Special Taxes or Other Taxes
imposed by any Governmental Authority on amounts payable under this Section
2.4.4) paid by
Mezzanine Lender and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto, whether or not such Special Taxes or
Other Taxes were correctly or legally asserted. This indemnification shall be
made within thirty (30) days after the date Mezzanine Lender makes written
demand therefor.

 

2.4.5  Change
of Office. To the
extent that changing the jurisdiction of Mezzanine Lender's applicable office
would have the effect of minimizing Special Taxes, Other Taxes or Increased
Costs, Mezzanine Lender shall use reasonable efforts to make such a change,
provided that same would not otherwise be disadvantageous to Mezzanine
Lender.

 

2.4.6  Survival. Without
prejudice to the survival of any other agreement of Mezzanine Borrower
hereunder, the agreements and obligations of Mezzanine Borrower contained in
this Section
2.4 shall
survive the payment in full of principal and interest hereunder, and the
termination of this Agreement.

 

30

 

Section
2.5  Conditions
Precedent to Closing

 

The
obligation of Mezzanine Lender to make the Loan hereunder is subject to the
fulfillment by, or on behalf of, Mezzanine Borrower or waiver by Mezzanine
Lender of the following conditions precedent no later than the Closing Date;
provided,
however, that
unless a condition precedent shall expressly survive the Closing Date pursuant
to a separate agreement, by funding the Loan, Mezzanine Lender shall be deemed
to have waived any such conditions not theretofore fulfilled or
satisfied:

 

2.5.1  Representations
and Warranties; Compliance with Conditions.

 

(a)  The
representations and warranties of Mezzanine Borrower contained
in this Agreement and the other Loan Documents (Junior Mezzanine) shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of such date, and no Default or Event of Default
shall have occurred and be continuing; and Mezzanine Borrower shall be in
compliance in all material respects with all terms and conditions set forth in
this Agreement and in each other Loan Document (Junior Mezzanine) on its part to
be observed or performed; and

 

(b)  The
representations and warranties of (i) Mortgage Borrower contained in the Loan
Agreement (Mortgage) and the other Loan Documents (Mortgage), (ii) Senior
Mezzanine Borrower contained in the Senior Mezzanine Loan Agreement and the
other Senior Mezzanine Loan Documents, and (iii) Intermediate Mezzanine Borrower
contained in the Intermediate Mezzanine Loan Agreement and the other
Intermediate Mezzanine Loan Documents shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on and as
of such date, and no Default or Event of Default shall have occurred and be
continuing under the Mortgage Loan, Senior Mezzanine Loan, or Intermediate
Mezzanine Loan, as applicable; and Mortgage Borrower, Senior Mezzanine Borrower,
Intermediate Mezzanine Borrower, and Guarantor shall be in compliance in all
material respects with all terms and conditions set forth in the Loan Documents
(Mortgage), the Senior Mezzanine Loan Documents, and the Intermediate Mezzanine
Loan Documents on its part to be observed or performed, as
applicable.

 

2.5.2  Delivery
of Loan Documents (Junior Mezzanine); Title Policy; Reports;
Leases.

 

(a)  Loan
Documents (Junior Mezzanine).
Mezzanine Lender shall have received an original copy of this Agreement, the
Mezzanine Note and all of the other Loan Documents (Junior Mezzanine), in each
case, duly executed (and to the extent required, acknowledged) and delivered on
behalf of Mezzanine Borrower and any other parties thereto.

 

31

 

(b)  Certificates.
Mezzanine Lender shall have received originals of the Certificates together with
a partnership and membership power (as applicable) endorsed in
blank.

 

(c)  UCC
Financing Statements.
Mezzanine Lender shall have received evidence that the UCC financing statements
relating to the Pledge and this Agreement have been delivered for filing in the
applicable jurisdictions.

 

(d)  Interest
Rate Cap Agreement (Junior Mezzanine).
Mezzanine Lender shall have received the original Interest Rate Cap Agreement
(Junior Mezzanine) which shall be in form and substance satisfactory to
Mezzanine Lender and a counterpart of the Acknowledgment executed and delivered
by the Counterparty.

 

(e)  Account
Agreement (Junior Mezzanine).
Mezzanine Lender shall have received the original of the Account Agreement
(Junior Mezzanine) executed by each of Cash Management Bank (Junior Mezzanine)
and Mezzanine Borrower and Mezzanine Borrower.

 

(f)  Title
Insurance.

 

(i)  Mezzanine
Lender shall have received a copy of the Title Policy (Mortgage) or a marked-up
and signed commitment having the force and effect of a title policy, marked
"paid" by an authorized representatives of the Title Company) issued by
the Title Company with respect to the Loan (Mortgage) and dated as of the
Closing Date, together with a copy of the mezzanine loan endorsement to the
owner's title insurance policy obtained by Mortgage Borrower, in favor of
Mezzanine Lender, its successors and assigns, dated as of the Closing Date and
reinsurance and direct access agreements in form and substance acceptable to
Mezzanine Lender. Mezzanine Lender shall also have received evidence that all
premiums in respect of the Title Policy (Mortgage) have been paid;
and

 

(ii)  Mezzanine
Lender shall have received an "Eagle 9" title policy in favor of Mezzanine
Lender, its successors and assigns, dated as of the Closing Date. Mezzanine
Lender also shall have received evidence that all premiums in respect of the
"Eagle 9" title policy have been paid.

 

(g)  Survey.
Mezzanine Lender shall have received a current Survey for the Property,
containing the survey certification required by the Loan Agreement
(Mortgage).

 

(h)  Insurance.
Mezzanine Lender shall have received valid certificates of insurance for the
policies of insurance required by the Loan Agreement (Mortgage) naming Mezzanine
Lender as an additional insured and containing a cross liability/severability
endorsement, satisfactory to Mezzanine Lender in its reasonable discretion, and
evidence of the payment of all insurance premiums currently due and payable for
the existing policy period.

 

32

 

(i)  Environmental
Reports.
Mezzanine Lender shall have received an Environmental Report in respect of the
Property satisfactory to Mezzanine Lender.

 

(j)  Zoning.
Mezzanine Lender shall have received an ALTA 3.1 zoning endorsement for the
Title Policy (Mortgage).

 

(k)  Certificate
of Occupancy.
Mezzanine Lender shall have received a copy of the valid certificates of
occupancy for the Property or evidence acceptable to Mezzanine Lender that a
certificate of occupancy is not required by applicable law.

 

(l)  Encumbrances.
Mezzanine Borrower shall have taken or caused to be taken such actions in such a
manner so that Mezzanine Lender has a valid and perfected first Lien as of the
Closing Date on the Collateral and Mezzanine Lender shall have received
satisfactory evidence thereof.

 

(m)  Intentionally
Omitted.

 

(n)  Assignment
of Management Agreement.
Mezzanine Lender shall have received the original of the Assignment of
Management Agreement (Junior Mezzanine) executed by each of Mezzanine Borrower
and Manager;

 

(o)  Pledgor
Acknowledgments.
Mezzanine Lender shall have received an original of the Acknowledgment in the
form of Exhibit
B executed
by each of Mezzanine Borrower, Intermediate Mezzanine Borrower, CNL Hotel Del
Intermediate Mezz Partners GP, LLC, and dated as of the Closing
Date.

 

2.5.3  Related
Documents. Each
additional document not specifically referenced herein, but relating to the
transactions contemplated herein, shall have been duly authorized, executed and
delivered by all parties thereto and Mezzanine Lender shall have received and
approved certified copies thereof.

 

2.5.4  Delivery
of Organizational Documents. On or
before the Closing Date, Mezzanine Borrower shall deliver, or cause to be
delivered, to Mezzanine Lender copies certified by an Officer's Certificate, of
all organizational documentation related to Mortgage Borrower, Operating Lessee,
Mezzanine Borrower, Guarantor, General Partner, each SPE Entity, Manager and
certain of its Affiliates as have been requested by Mezzanine Lender and/or the
formation, structure, existence, good standing and/or qualification to do
business of Mortgage Borrower, Operating Lessee, Mezzanine Borrower, Guarantor,
General Partner, each SPE Entity and such Affiliates, as Mezzanine Lender may
request in its sole discretion, including, without limitation, good standing
certificates, qualifications to do business in the appropriate jurisdictions,
resolutions authorizing the entering into of the Loan and incumbency
certificates as may be requested by Mezzanine Lender. Each of the organizational
documents of any SPE Entity shall contain provisions having a substantive effect
materially similar to that of the language set forth in Exhibit
C or such
other language as approved by Lender. Mezzanine Lender 

 

33

hereby
approves the organizational documents delivered to Mezzanine Borrower pursuant
to this Section
2.5.4.

 

2.5.5  Opinions
of Mezzanine Borrower's Counsel.

 

(a)  Mezzanine
Lender shall have received a Non-Consolidation Opinion
substantially in compliance with the requirements set forth in Exhibit
E or in
such other form approved by the Mezzanine Lender (the Non-Consolidation
Opinion).

 

(b)  Mezzanine
Lender shall have received the Opinion of Counsel substantially in compliance
with the requirements set forth in Exhibit
D or in
such other form approved by the Mezzanine Lender.

 

(c)  Mezzanine
Lender shall have received from Counterparty the Counterparty Opinion
substantially in compliance with the requirements set forth in Exhibit
F or in
such other form approved by the Mezzanine Lender.

 

2.5.6  Budgets.
Mezzanine Borrower shall have delivered the Budget for the current Fiscal Year,
which Budget shall be certified by an Officer's Certificate.

 

2.5.7  Completion
of Proceedings. All
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated by this Agreement and other Loan Documents (Junior
Mezzanine) and all documents incidental thereto shall be satisfactory in form
and substance to Mezzanine Lender, and Mezzanine Lender shall have received all
such counterpart originals or certified copies of such documents as Mezzanine
Lender may reasonably request.

 

2.5.8  Independent
Director Certificate.
Mezzanine Lender shall have received an executed Independent Director
certificate substantially in the form attached as Exhibit
O.

 

2.5.9  Material
Adverse Effect. No event
or condition shall have occurred since the date of Mortgage Borrower's and
Mezzanine Borrower's most recent financial statements previously delivered to
Mezzanine Lender which has or could reasonably be expected to have a Material
Adverse Effect. The Operating Income and Operating Expenses of the Property, and
all other features of the transaction shall be as represented to Mezzanine
Lender without material adverse change. None of Mezzanine Borrower, Senior
Mezzanine Borrower, Intermediate Mezzanine Borrower, Mortgage Borrower,
Guarantor nor any of their constituent Persons shall be the subject of any
bankruptcy, reorganization, or insolvency proceeding.

 

2.5.10  Leases
and Rent Roll.
Mezzanine Lender shall have received copies of all Leases, certified as
requested by Mezzanine Lender. Mezzanine Lender shall have received a certified
rent roll of the Property dated within thirty (30) days prior to the Closing
Date.

 

2.5.11  Reserved.

 

34

 

2.5.12  Tax
Lot.
Mezzanine Lender shall have received evidence that the Property constitutes one
(1) or more separate tax lots, which evidence shall be reasonably satisfactory
in form and substance to Mezzanine Lender.

 

2.5.13  Physical
Conditions Report.
Mezzanine Lender shall have received a Physical Conditions Report (or
re-certified Physical Conditions Report) with respect to the Property, which
report shall be satisfactory in form and substance to Mezzanine
Lender.

 

2.5.14  Management
Agreement.
Mezzanine Lender shall have received a certified copy of the Management
Agreement which shall be satisfactory in form and substance to Mezzanine
Lender.

 

2.5.15  Appraisal.
Mezzanine Lender shall have received an appraisal of the Property, which shall
be satisfactory in form and substance to Mezzanine Lender.

 

2.5.16  Financial
Statements.
Mezzanine Lender shall have received certified copies of financial statements
with respect to the Property for the three most recent Fiscal Years, each in
form and substance satisfactory to Mezzanine Lender.

 

2.5.17  Transaction
Costs.
Mezzanine Borrower shall have paid or reimbursed Mezzanine Lender for all title
insurance (or "Eagle 9") premiums, filing fees, costs of reports, appraisals,
reasonable fees and costs of Mezzanine Lender's counsel, and all other third
party out-of-pocket expenses incurred in connection with the origination of the
Loan.

 

2.5.18  Further
Documents.
Mezzanine Lender or its counsel shall have received such other and further
approvals, opinions, documents and information as Mezzanine Lender or its
counsel may have reasonably requested including the Loan Documents (Junior
Mezzanine) in form and substance satisfactory to Mezzanine Lender and its
counsel.

 

Section
2.6  Filing
of Financing Statements Authorized

 

.
Mezzanine Borrower hereby authorizes the filing of a form UCC-1 financing
statement naming the Mezzanine Borrower as debtor and the Mezzanine Lender as
secured party in any office (including the office of the Secretary of State of
the State of Delaware) covering all property of the Mezzanine Borrower
(including, but not limited to, the Account Collateral (Junior Mezzanine) and
the Rate Cap Collateral (Junior Mezzanine)).

 

35

 

	III.  	
      CASH
      MANAGEMENT

 

Section
3.1  Cash
Management

 

3.1.1  Establishment
of Account.
Mezzanine Borrower hereby confirms that, simultaneously with the execution of
this Agreement, pursuant to the Account Agreement (Junior Mezzanine), it has
established with Cash Management Bank (Junior Mezzanine), in the name of
Mezzanine Borrower for the benefit of Mezzanine Lender, as secured party, one
(1) segregated account (the Junior
Mezzanine Account), which
has been established as a securities account. The Junior Mezzanine Account and
the funds deposited therein and securities and other assets credited thereto
shall serve as additional security for the Loan. Pursuant to the Account
Agreement (Junior Mezzanine), Mezzanine Borrower shall irrevocably instruct and
authorize Cash Management Bank (Junior Mezzanine) to disregard any and all
orders for withdrawal from the Junior Mezzanine Account made by, or at the
direction of, Mezzanine Borrower. Mezzanine Borrower agrees that, prior to the
payment in full of the Indebtedness, the terms and conditions of the Account
Agreement (Junior Mezzanine) shall not be amended or modified without the prior
written consent of Mezzanine Lender (which consent Mezzanine Lender may grant or
withhold in its sole discretion). In recognition of Mezzanine Lender's security
interest in the funds deposited into the Junior Mezzanine Account, Mezzanine
Borrower shall identify the Junior Mezzanine Account with the name of Mezzanine
Lender, as secured party. The Junior Mezzanine Account shall be named as
follows: "CNL Hotel Del Junior Mezz Partners, LP f/b/o German American Capital
Corporation, as secured party, Junior Mezzanine Account" (Account Number
722528.1). Mezzanine Borrower confirms that it has established with Cash
Management Bank (Junior Mezzanine) a sub-account for the retention of Account
Collateral (Junior Mezzanine) in respect of Debt Service (Junior Mezzanine) on
the Loan with the account number 722529.1 (the Junior
Mezzanine Debt Service Reserve Account) (the
Sub-Account and,
together with the Junior Mezzanine Account, the Collateral
Accounts
(Junior
Mezzanine)), which
(i) may be ledger or book entry sub-account and need not be actual sub-account,
(ii) shall be linked to the Junior Mezzanine Account, (iii) shall be a
"Securities Account" pursuant to Article 8 of the UCC, and (iv) shall be an
Eligible Account to which certain funds shall be allocated and from which
disbursements shall be made pursuant to the terms of this
Agreement.

 

3.1.2  Pledge
of Account Collateral (Junior Mezzanine). To
secure the full and punctual payment and performance of the Obligations (Junior
Mezzanine), Mezzanine Borrower hereby collaterally assigns, grants a security
interest in and pledges to Mezzanine Lender, to the extent not prohibited by
applicable law, a first priority continuing security interest in and to the
following property of Mezzanine Borrower, whether now owned or existing or
hereafter acquired or arising and regardless of where located (all of the same,
collectively, the Account
Collateral
(Junior
Mezzanine)):

 

36

 

(a)  any and
all Excess Cash Flow from time to time available in the Intermediate Mezzanine
Account and required, by the terms of the Intermediate Mezzanine
Loan Agreement as now in effect or amended with the consent of Mezzanine Lender,
to be deposited by the Intermediate Mezzanine Lender or the Cash Management Bank
(Intermediate Mezzanine) into the Junior Mezzanine Account;

 

(b)  the
Collateral Accounts (Junior Mezzanine) and all cash, checks, drafts, securities
entitlements, certificates, instruments and other property, including, without
limitation, all deposits and/or wire transfers from time to time deposited or
held in, credited to or made to Collateral Accounts (Junior Mezzanine)
;

 

(c)  any and
all amounts invested in Permitted Investments;

 

(d)  all
interest, dividends, cash, instruments, securities entitlements and other
property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any or all of the foregoing or purchased with funds from
the Collateral Accounts (Junior Mezzanine); and

 

(e)  to the
extent not covered by clauses (a), (b), (c) or (d) above, all proceeds (as
defined under the UCC) of any or all of the foregoing.

 

In
addition to the rights and remedies herein set forth, Mezzanine Lender shall
have all of the rights and remedies with respect to the Account Collateral
(Junior Mezzanine) available to a secured party at law or in equity, including,
without limitation, the rights of a secured party under the UCC, as if such
rights and remedies were fully set forth herein.

 

This
Agreement shall constitute a security agreement for purposes of the Uniform
Commercial Code and other applicable law.

 

3.1.3  Maintenance
of Collateral Accounts.
Mezzanine
Borrower agrees that the Junior Mezzanine Account and the Sub-Accounts are and
shall each be maintained (i) as a "securities account" (as such term is defined
in Section
8-501(a) of the
UCC), (ii) in such a manner that Mezzanine Lender shall have control (within the
meaning of Section
8-106(d)(2) of the
UCC) over the Junior Mezzanine Account and any Sub-Account thereof, (iii) such
that Mezzanine Borrower, and Manager shall have no right of withdrawal from the
Junior Mezzanine Account or the Sub-Accounts and, except as provided herein, no
Account Collateral (Junior Mezzanine) shall be released to Mezzanine Borrower or
Manager from the Junior Mezzanine Account or the Sub-Accounts. Without limiting
the Mezzanine Borrower's obligations under the immediately preceding sentence,
Mezzanine Borrower shall only establish and maintain the Junior Mezzanine
Account with a financial institution that has executed an agreement
substantially in the form of the Account Agreement (Junior Mezzanine) or in such
other form acceptable to Mezzanine Lender in its sole discretion.

 

37

 

3.1.4  Eligible
Accounts. The
Collateral Accounts shall be Eligible Accounts. The Collateral Accounts (Junior
Mezzanine) shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other banking or governmental authority, as may now or hereafter be in effect.
Income and interest accruing on the Collateral Accounts (Junior Mezzanine) or
any investments held in such accounts shall be periodically added to the
principal amount of such account and shall be held, disbursed and applied in
accordance with the provisions of this Agreement and the Account Agreement
(Junior Mezzanine). Mezzanine Borrower shall be the beneficial owner of the
Collateral Accounts (Junior Mezzanine) for federal income tax purposes and shall
report all income on the Collateral Accounts (Junior Mezzanine).

 

3.1.5  Deposits
into Sub-Accounts. On the
date hereof, Mezzanine Borrower has deposited the following amounts into the
Sub-Accounts:

 

(i)  $0.00
into the Mezzanine Debt Service Reserve Account.

 

3.1.6  Monthly
Funding.

 

(a)  Mezzanine
Borrower hereby instructs Mezzanine Lender to transfer (and
pursuant to the Account Agreement (Junior Mezzanine) shall irrevocably authorize
Cash Management Bank (Junior Mezzanine) to execute any corresponding
instructions of Mezzanine Lender), and Mezzanine Lender shall transfer (or cause
Cash Management Bank to transfer pursuant to disbursement instructions from
Mezzanine Lender) to the Mezzanine Debt Service Reserve Account, from the Junior
Mezzanine Account by 11:00 am New York time on the first (1st) calendar day of
each calendar month (and if such day is not a Business Day then on the
immediately preceding Business Day) or as soon thereafter as there shall be
sufficient collected funds on deposit in the Junior Mezzanine Account, and from
time to time (but no less frequently than weekly thereafter) funds in an amount
equal to the sum of any Protective Advances which may have been advanced by (and
not previously reimbursed to) the Mezzanine Lender pursuant to the terms of the
Loan Documents (Junior Mezzanine) to cure any Default or Event of Default, any
Mortgage Default or Mortgage Event of Default, or to protect the Collateral
together with any interest payable on such amounts pursuant to the Loan
Documents (Junior Mezzanine), plus (x) the unpaid Debt Service (Junior
Mezzanine) for the next occurring Payment Date, plus (y) an amount equal to such
payments for any prior month(s), to the extent not previously paid, plus (z) an
amount equal to the amount, if any, deducted from the Junior Mezzanine Account
in any preceding month to pay any other amounts then due under the Loan
Documents (Junior Mezzanine) (other than any Debt Service (Junior Mezzanine)).
Mezzanine Borrower acknowledges that Mezzanine Lender shall not be required to
make such withdrawal and deposit until such time as Mezzanine Lender is able to
calculate the amount of the Debt Service (Junior Mezzanine) for the next
occurring Payment Date. As used herein, the term Net
Excess Cash Flow means
the amount available in the Junior Mezzanine Account after the transfers to the
Mezzanine Debt Service Reserve Account required under this Section
3.1.6 have
been made and the term Net

 

38

Excess
Cash Flow Commencement Date shall
mean the date such amounts have been fully funded or reserved within the Junior
Mezzanine Account in any given calendar month.

 

(b)  If for
any reason there will be insufficient amounts in the Mezzanine Debt Service
Reserve Account on any Payment Date to pay the Debt Service (Junior Mezzanine)
due on such Payment Date, Mezzanine Borrower shall immediately deposit into the
Junior Mezzanine Account an amount equal to the shortfall of available funds in
the Mezzanine Debt Service Reserve Account. Any failure by Mezzanine Borrower to
deposit the full amount required by the preceding sentence shall constitute an
Event of Default hereunder. If Mezzanine Lender shall reasonably determine that
there will be insufficient amounts in the Junior Mezzanine Account to pay any
Protective Advances as and when the same are due and payable, Mezzanine Lender
shall provide written notice of same to Mezzanine Borrower setting forth the
basis for such determination. Within five (5) Business Days of receipt of said
notice, Mezzanine Borrower shall deposit into the Junior Mezzanine Account an
amount equal to the shortfall of available funds in the Junior Mezzanine
Account. Any failure by Mezzanine Borrower to deposit the full amount required
by the preceding sentence within said five (5) Business Day period shall
constitute an Event of Default hereunder.

 

(c)  Provided
that (i) no Event of Default shall have occurred and be continuing hereunder or
under any of the other Loan Documents (Junior Mezzanine), (ii) no Mortgage Event
of Default shall have occurred and be continuing, (iii) no Event of Default
shall have occurred and be continuing under the Senior Mezzanine Loan, (iv) no
Event of Default shall have occurred and be continuing under the Intermediate
Mezzanine Loan, (v) Mezzanine Borrower shall have delivered to Mezzanine Lender
an Officer's Certificate (which Mezzanine Borrower shall not be obligated to
deliver more frequently than once per calendar month) certifying that the
signatories thereto do not know of the occurrence of any uncured Events of
Default under the Loan, Mortgage Loan, Senior Mezzanine Loan, or Intermediate
Mezzanine Loan outstanding, and (vi) Mezzanine Borrower shall have deposited
into the Junior Mezzanine Account all funds then required to have been so
deposited, then Mezzanine Lender shall transfer the Net Excess Cash Flow from
the Junior Mezzanine Account to the Mezzanine Borrower's Account.

 

(d)  In the
event that an Event of Default shall have occurred and is then continuing, then,
without notice from Mezzanine Lender, all Net Excess Cash Flow shall be applied
to reduce the outstanding Principal Amount of the Mezzanine Note. At such time
that the Event of Default shall no longer be continuing and provided none of the
events set forth in subsection (c)(i) through (iv) above shall have occurred and
is then continuing, then all Net Excess Cash Flow shall be distributed in
accordance with the provision of subsection (c) above.

 

39

 

(e)  Mezzanine
Lender (so long as Mezzanine Lender is not the same entity as Mortgage Lender)
agrees to deliver to Mortgage Lender a monthly notice letter (the Mezzanine
Lender Monthly Debt Service Notice Letter) at
least five (5) Business Days prior to each Payment Date setting forth (i) the
Debt Service (Junior Mezzanine) payable by Mezzanine Borrower on the immediately
succeeding Payment Date, and (ii) whether or not an Event of Default has then
occurred and is continuing under the Mezzanine Loan Documents.

 

(f)  Mezzanine
Borrower hereby acknowledges that, pursuant to Section
3.1.6 of the
Loan Agreement (Mortgage), (i) to the extent the Mortgage Lender has received
notice from Mezzanine Lender that an Event of Default has occurred and is
continuing under the Loan Documents (Junior Mezzanine) (a Mezzanine
Loan Default Notice) and
until such time as Mortgage Lender receives a notice from Mezzanine Lender that
such Event of Default is no longer continuing (a Mezzanine
Loan Default Revocation Notice), the
Mortgage Borrower has irrevocably directed that Excess Cash Flow is to be
deposited directly into the Junior Mezzanine Account for application as provided
in this Agreement (in lieu of transferring such funds to such accounts of the
Mortgage Borrower as the Mortgage Borrower may have so directed if the Mortgage
Lender had not received such notice from Mezzanine Lender), (ii) to the extent
Mortgage Lender has not received a Mezzanine Loan Default Notice but has
received an Intermediate Mezzanine Loan Default Notice or a Senior Mezzanine
Loan Default Notice and until such time as Mortgage Lender receives an
Intermediate Mezzanine Loan Default Revocation Notice or a Senior Mezzanine Loan
Default Revocation Notice, as applicable, Mortgage Borrower irrevocably directed
that all Excess Cash Flow be deposited directly into the Intermediate Mezzanine
Account or Senior Mezzanine Account for application as provided in the
Intermediate Mezzanine Loan Agreement or Senior Mezzanine Loan Agreement in lieu
of transferring such funds to such accounts of Mortgage Borrower as Mortgage
Borrower may have so directed if Mortgage Lender had not received such notice
from Intermediate Mezzanine Lender or Senior Mezzanine Lender) and (iii) the
directions described in the preceding clauses (i) or (ii) shall not be changed
or terminated without the written consent of the Mezzanine Lender.
Notwithstanding any provision herein to the contrary, provided no Event of
Default has occurred or is continuing, there shall be disbursed to Mezzanine
Borrower the Proceeds of a Condemnation or Casualty remaining after payment of
all amounts to which Mortgage Lender, Senior Mezzanine Lender and Intermediate
Mezzanine Lender are entitled. Mezzanine Borrower agrees that Mezzanine Lender
shall not be required to deliver to Mortgage Lender a Mezzanine Loan Default
Notice prior to the deposit of Proceeds into the Junior Mezzanine
Account.

 

3.1.7  Cash
Management Bank.

 

(a)  For the
purposes of this Agreement, the Cash Management Bank (Junior Mezzanine) named
herein shall be deemed to be an Approved Bank; provided, however, that the term
"Approved Bank" shall be applicable for all other purposes and shall be
applicable to any successor or assign of Cash Management Bank (Junior
Mezzanine).
Mezzanine Lender shall have the right at Mezzanine Borrower's sole cost and

 

40

expense
to replace the Cash Management Bank (Junior Mezzanine) with a financial
institution reasonably satisfactory to Mezzanine Borrower in the event that (i)
the Cash Management Bank (Junior Mezzanine) fails, in any material respect, to
comply with the Account Agreement (Junior Mezzanine), (ii) the Cash Management
Bank (Junior Mezzanine) named herein is no longer the Cash Management Bank
(Junior Mezzanine) or (iii) the Cash Management Bank (Junior Mezzanine) is no
longer an Approved Bank.

 

(b)  During
the term of the Loan, so long as no Event of Default shall have occurred and is
continuing, at its sole cost and expense, Mezzanine Borrower shall have the
right to replace the Cash Management Bank (Junior Mezzanine) with a financial
institution that is an Approved Bank provided such institution shall execute and
deliver to Mezzanine Lender (with a copy to Mortgage Lender) the Account
Agreement (Junior Mezzanine) (and Mezzanine Lender shall reasonably cooperate
with Mezzanine Borrower in connection with such transfer). Upon the occurrence
and during the continuance of an Event of Default, Mezzanine Lender shall have
the right at Mezzanine Borrower's sole cost and expense to replace Cash
Management Bank at any time, without notice to Mezzanine Borrower. Mezzanine
Borrower shall cooperate with Mezzanine Lender in connection with the
appointment of any replacement Cash Management Bank and the execution by the
Cash Management Bank and the Mezzanine Borrower of an Account Agreement and
delivery of same to Mezzanine Lender.

 

(c)  So long
as no Event of Default shall have occurred and be continuing, Mezzanine Borrower
shall have the right at its sole cost and expense to replace the Cash Management
Bank (Junior Mezzanine) with a financial institution that is an Approved Bank
provided that such financial institution and Mezzanine Borrower shall execute
and deliver to Mezzanine Lender an Account Agreement substantially similar to
the Account Agreement (Junior Mezzanine) executed as of the Closing
Date.

 

3.1.8  Mezzanine
Borrower's Account Representations, Warranties and
Covenants.
Mezzanine Borrower represents, warrants and covenants that:

 

(a)  Pursuant
to the Loan Agreement (Mortgage), Mortgage Borrower has directed that, after
Mortgage Lender receives notice of a Default hereunder (and provided no
Mortgage Event of Default exists or an Event of Default under the Senior
Mezzanine Loan or Intermediate Mezzanine Loan), all Excess Cash Flow is to be
deposited into the Junior Mezzanine Account;

 

(b)  None of
Senior Mezzanine Borrower, Intermediate Mezzanine Borrower, Mortgage Borrower
nor any other Person will have any right, title or interest in or to any Excess
Cash Flow from and after the time at which the Intermediate Mezzanine Lender
becomes obligated under the Loan Agreement (Intermediate) to transfer such
Excess Cash Flow to the Junior Mezzanine Account, except any rights Mezzanine
Borrower shall have to allocations of such funds following the disbursement to
Mezzanine Borrower of any Net Excess Cash Flow as provided in Section
3.1.6(a);

 

41

 

(c)   There
are no accounts other than the Collateral Accounts, Collateral Accounts (Senior
Mezzanine), Collateral Accounts (Intermediate Mezzanine), and Collateral
Accounts (Junior Mezzanine) maintained by Mortgage Borrower, Mezzanine Borrower
or any other Person with respect to the collection of rents, revenues, proceeds
or other income from the Property or for the collection of Receipts, except for
the Collection Account (as defined in the Loan Agreement (Mortgage)), the
Holding Account (as defined in the Loan Agreement (Mortgage)), the Manager
Accounts, and the Senior Mezzanine Account, Intermediate Mezzanine Account,
Junior Mezzanine Account, and any accounts held by Mezzanine Borrower in which
it is permitted to receive transfers of Net Excess Cash Flow as provided in
Section
3.1.6(c);

 

(d)  Mezzanine
Borrower shall cause Mortgage Borrower to deposit or cause to be deposited all
Distributions into the Junior Mezzanine Account as required by the Pledge and
this Agreement or any other Loan Document (Junior Mezzanine); and

 

(e)  so long
as the Loan shall be outstanding, neither Mortgage Borrower, Operating Lessee,
Manager, Mezzanine Borrower, nor any of their Affiliates shall open any other
operating accounts with respect to the collection of rents, revenues, proceeds
or other income from the Property or for the collection of
Receipts.

 

3.1.9  Account
Collateral (Junior Mezzanine) and Remedies.

 

(a)  Upon the
occurrence and during the continuance of an Event of Default, without additional
notice from Mezzanine Lender to Mezzanine Borrower, (i) Mezzanine Lender may, in
addition to and not in limitation of Mezzanine Lender's other rights, make any
and all withdrawals from, and transfers between and among, the Collateral
Accounts (Junior Mezzanine) as Mezzanine Lender shall determine in its sole and
absolute discretion to pay any Obligations (Junior Mezzanine), Operating
Expenses and/or Capital Expenditures for the Property; (ii) all Excess Cash Flow
shall be retained in the Junior Mezzanine Account or applicable Sub-Accounts,
(iii) all payments to the Mezzanine Borrower's Account pursuant to Section
3.1.6 shall
immediately cease and (iv) Mezzanine Lender may liquidate and transfer any
amounts then invested in Permitted Investments to the Collateral Accounts
(Junior Mezzanine) to which they relate or reinvest such amounts in other
Permitted Investments as Mezzanine Lender may reasonably determine is necessary
to perfect or protect any security interest granted or purported to be granted
hereby or to enable Mezzanine Lender to exercise and enforce Mezzanine Lender's
rights and remedies hereunder with respect to any Account Collateral (Junior
Mezzanine) or to preserve the value of the Account Collateral (Junior
Mezzanine).

 

(b)  Upon the
occurrence and during the continuance of an Event of Default, Mezzanine Borrower
hereby irrevocably constitutes and appoints Mezzanine Lender as Mezzanine
Borrower's true and lawful attorney-in-fact, with full power of substitution, to
execute, acknowledge and deliver any instruments and to exercise and enforce
every right, power, remedy, option and privilege of Mezzanine Borrower with
respect to the Account Collateral (Junior Mezzanine), and do in the name, place
and stead 

 

42

of
Mezzanine Borrower, all such acts, things and deeds for and on behalf of and in
the name of Mezzanine Borrower, which Mezzanine Borrower could or might do or
which Mezzanine Lender may deem necessary or desirable to more fully vest in
Mezzanine Lender the rights and remedies provided for herein and to accomplish
the purposes of this Agreement. The foregoing powers of attorney are irrevocable
and coupled with an interest. Upon the occurrence and during the continuance of
an Event of Default, Mezzanine Lender may perform or cause performance of any
such agreement, and any reasonable expenses of Mezzanine Lender incurred in
connection therewith shall be paid by Mezzanine Borrower as provided in
Section
5.1.12.

 

(c)  Mezzanine
Borrower hereby expressly waives, to the fullest extent permitted by law,
presentment, demand, protest or any notice of any kind (except as expressly
required under the Loan Documents (Junior Mezzanine)) in connection with this
Agreement or the Account Collateral (Junior Mezzanine). Mezzanine Borrower
acknowledges and agrees that ten (10) Business Days' prior written notice of the
time and place of any public sale of the Account Collateral (Junior Mezzanine)
or any other intended disposition thereof shall be reasonable and sufficient
notice to Mezzanine Borrower within the meaning of the UCC.

 

3.1.10  Transfers
and Other Liens.
Mezzanine Borrower agrees that it will not (i) sell or otherwise dispose of any
of the Account Collateral (Junior Mezzanine) except as may be expressly
permitted under the Loan Documents (Junior Mezzanine), or (ii) create or permit
to exist any Lien upon or with respect to all or any of the Account Collateral
(Junior Mezzanine), except for the Lien granted to Mezzanine Lender under this
Agreement.

 

3.1.11  Reasonable
Care. Beyond
the exercise of reasonable care in the custody thereof, Mezzanine Lender shall
have no duty as to any Account Collateral (Junior Mezzanine) in its possession
or control as agent therefor or bailee thereof or any income thereon or the
preservation of rights against any person or otherwise with respect thereto.
Mezzanine Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Account Collateral (Junior Mezzanine) in its
possession if the Account Collateral (Junior Mezzanine) is accorded treatment
substantially equal to that which Mezzanine Lender accords its own property, it
being understood that Mezzanine Lender shall not be liable or responsible for
any loss or damage to any of the Account Collateral (Junior Mezzanine), or for
any diminution in value thereof, by reason of the act or omission of Mezzanine
Lender, its Affiliates, agents, employees or bailees, except to the extent that
such loss or damage results from Mezzanine Lender's gross negligence or willful
misconduct. In no event shall Mezzanine Lender be liable either directly or
indirectly for losses or delays resulting from any event which may be the basis
of an Excusable Delay, computer malfunctions, interruption of communication
facilities, labor difficulties or other causes beyond Mezzanine Lender's
reasonable control or for indirect, special or consequential damages except to
the extent of Mezzanine Lender's gross negligence or willful misconduct.
Notwithstanding the foregoing, Mezzanine Borrower acknowledges and agrees that
(i) Mezzanine Lender does not have custody of the Account Collateral (Junior
Mezzanine), (ii) Cash Management Bank (Junior Mezzanine) custody of the Account
Collateral (Junior Mezzanine), (iii) the initial Cash Management Bank

 

43

(Junior
Mezzanine) was chosen by Mezzanine Borrower and (iv) Mezzanine Lender has no
obligation or duty to supervise Cash Management Bank (Junior Mezzanine) or to
see to the safe custody of the Account Collateral (Junior
Mezzanine).

 

3.1.12  Mezzanine
Lender's Liability.

 

(a)  Mezzanine
Lender shall be responsible for the performance only of such duties with respect
to the Account Collateral (Junior Mezzanine) as are specifically set forth in
this Section
3.1 or
elsewhere in the Loan Documents (Junior Mezzanine), and no other duty shall be
implied from any provision hereof. Mezzanine Lender shall not be under any
obligation or duty to perform any act with respect to the Account Collateral
(Junior Mezzanine) which would cause it to incur any expense or liability or to
institute or defend any suit in respect hereof, or to advance any of its own
monies. Mezzanine Borrower shall indemnify and hold Mezzanine Lender, its
employees and officers harmless from and against any loss, cost or damage
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred by Mezzanine Lender in connection with the transactions contemplated
hereby with respect to the Account Collateral (Junior Mezzanine) (excluding
losses on Permitted Investments) except as such may be caused by the gross
negligence or willful misconduct of Mezzanine Lender, its employees, officers or
agents.

 

(b)  Mezzanine
Lender shall be protected in acting upon any notice, resolution, request,
consent, order, certificate, report, opinion, bond or other paper, document or
signature believed by it in good faith to be genuine, and, in so acting, it may
be assumed that any person purporting to give any of the foregoing in connection
with the provisions hereof has been duly authorized to do so. Mezzanine Lender
may consult with counsel, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or suffered
by it hereunder and in good faith in accordance therewith.

 

3.1.13  Continuing
Security Interest. This
Agreement shall create a continuing security interest in the Account Collateral
(Junior Mezzanine) and shall remain in full force and effect until payment in
full of the Indebtedness; provided, however, such security interest shall
automatically terminate with respect to funds which were duly deposited into
Mezzanine Borrower's Account in accordance with the terms hereof. Upon payment
in full of the Indebtedness, this security interest shall automatically
terminate without further notice from any party and Mezzanine Borrower shall be
entitled to the return, upon its request, of such of the Account Collateral
(Junior Mezzanine) as shall not have been sold or otherwise applied pursuant to
the terms hereof and Mezzanine Lender shall execute such instruments and
documents as may be reasonably requested by Mezzanine Borrower to evidence such
termination and the release of the Account Collateral (Junior
Mezzanine).

 

44

 

	IV.  	
      REPRESENTATIONS
      AND WARRANTIES

 

Section
4.1  Mezzanine
Borrower Representations

 

Mezzanine
Borrower represents and warrants as of the Closing Date that:

 

4.1.1  Organization. Each of
Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine Borrower
and CNL Hospitality Partners, LP is a limited partnership that has been duly
organized and is validly existing and in good standing pursuant to the laws of
the State of Delaware with requisite power and authority to own its properties
and to transact the businesses in which it is now engaged. Each of KSL DC
Operating LLC, Operating Lessee, and Manager is a limited liability company that
has been duly organized and is validly existing and in good standing pursuant to
the laws of the State of Delaware with requisite power and authority to own its
properties and to transact the businesses in which it is now engaged. Each of
Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine Borrower,
Mortgage Borrower, Guarantor, Operating Lessee, and Manager has duly qualified
to do business and is in good standing in each jurisdiction where it is required
to be so qualified in connection with its properties, businesses and operations.
Each of Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine
Borrower, Mortgage Borrower, Guarantor, Operating Lessee, and Manager possesses
all rights, licenses, permits and authorizations, governmental or otherwise,
necessary to entitle it to own its properties and to transact the businesses in
which it is now engaged, (provided, however, with respect to Guarantor only,
those rights, licenses, permits and authorizations that would cause a Material
Adverse Effect), and the sole business of Mezzanine Borrower is the ownership of
the Property. The organizational structure of Mortgage Borrower, Mezzanine
Borrower, and their Affiliates is accurately depicted by the schematic diagram
attached hereto as Exhibit
H.
Mezzanine Borrower shall not itself, and shall not permit Mortgage Borrower or
SPE Entity or Manager to, change its name, identity, corporate structure or
jurisdiction of organization unless it shall have given Mezzanine Lender thirty
(30) days prior written notice of any such change and shall have taken all steps
reasonably requested by Mezzanine Lender to grant, perfect, protect and/or
preserve the security interest granted hereunder to Mezzanine
Lender.

 

4.1.2  Proceedings. Each of
Mezzanine Borrower, Guarantor, Operating Lessee, and Manager has full power to
and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the other Loan Documents (Junior Mezzanine).
This Agreement and the other Loan Documents (Junior Mezzanine) have been duly
executed and delivered by, or on behalf of, Mezzanine Borrower, Guarantor,
Operating Lessee, and Manager, as applicable, and constitute legal, valid and
binding obligations of Mezzanine Borrower, Guarantor, Operating Lessee, and
Manager, as applicable, enforceable against Mezzanine Borrower, Guarantor,
Operating Lessee, and Manager, as applicable, in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency and similar
laws affecting rights of creditors 

 

45

generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at
law).

 

4.1.3  No
Conflicts. The
execution, delivery and performance of this Agreement and the other Loan
Documents (Junior Mezzanine) by Mezzanine Borrower, Guarantor, Operating Lessee,
and Manager, as applicable, will not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance (other than pursuant
to the Loan Documents (Junior Mezzanine)) upon any of the property or assets of
Mezzanine Borrower, Guarantor, Operating Lessee, and Manager pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement, partnership
agreement or other agreement or instrument to which Mezzanine Borrower,
Guarantor, Operating Lessee, and Manager is a party or by which any of Mezzanine
Borrower's, Guarantor's, Operating Lessee's, and Manager's property or assets is
subject (unless consents from all applicable parties thereto have been
obtained), nor will such action result in any violation of the provisions of any
statute or any order, rule or regulation of any Governmental Authority, and any
consent, approval, authorization, order, registration or qualification of or
with any Governmental Authority required for the execution, delivery and
performance by Mezzanine Borrower, Guarantor, Operating Lessee, and Manager of
this Agreement or any other Loan Documents (Junior Mezzanine) has been obtained
and is in full force and effect.

 

4.1.4  Litigation. There
are no lawsuits, administrative proceedings, arbitration proceedings, or other
such legal proceedings that have been filed and served upon Mezzanine Borrower
(or with respect to which Mezzanine Borrower has otherwise received proper
notice) or, to the Best of Mezzanine Borrower's Knowledge, otherwise pending or
threatened against or affecting Mortgage Borrower, Mezzanine Borrower, Operating
Lessee, Manager, or the Property whose outcome, if determined against Mortgage
Borrower, Mezzanine Borrower, Manager, Operating Lessee, or the Property, would
have a Material Adverse Effect. To the Best of Mezzanine Borrower's Knowledge,
Schedule
I includes
each pending action against Mortgage Borrower, Mezzanine Borrower, Operating
Lessee, Manager or otherwise affecting the Property that involves a claim or
claims for either (a) monetary damages exceeding $25,000, or (b) injunctive
relief or other equitable remedy that could have a Material Adverse Effect,
excluding: (i) actions for monetary damages only that have been tendered to, and
accepted without reservation of rights by, the liability insurance carrier for
the Property, (ii) worker's compensation claims, and (iii) any proceedings by
employees working at the Property where the amount claimed in such proceeding is
less than $25,000; to the Best of Mezzanine Borrower's Knowledge, the aggregate
amount of such claims described in subclause (iii) of this sentence is less than
$200,000. There are no arbitration proceedings, governmental investigations,
actions, suits or proceedings at law or in equity by or before any Governmental
Authority now pending or, to the Best of Mezzanine Borrower's Knowledge,
threatened against or affecting Guarantor which, if determined against Guarantor
would have a Material Adverse Effect.

 

46

 

4.1.5  Agreements.
Mezzanine Borrower is not a party to any agreement or instrument or subject to
any restriction which is reasonably likely to have a Material Adverse Effect.
Mezzanine Borrower is not in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party or by which
Mezzanine Borrower or the Property is bound, which default is reasonably likely
to have a Material Adverse Effect. Mezzanine Borrower has no material financial
obligation (contingent or otherwise) under any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which Mezzanine
Borrower is a party or by which Mezzanine Borrower or the Property is otherwise
bound, other than (a) obligations incurred in the ordinary course of the
operation of the Property, including membership programs disclosed in writing to
Mezzanine Lender on or prior to the date hereof, and (b) obligations under the
Loan Documents (Junior Mezzanine).

 

4.1.6  Title.
Mezzanine Borrower owns all of the assets reflected in the proforma balance
sheet of Mezzanine Borrower as of the date of such proforma balance sheet,
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances,
except for the Permitted Encumbrances.

 

4.1.7  No
Bankruptcy Filing. None of
Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine Borrower,
Guarantor, Mortgage Borrower, General Partner, any SPE Entity, Operating Lessee,
or Manager is contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
major portion of such entity's assets or property, and Mezzanine Borrower has no
knowledge of any Person contemplating the filing of any such petition against it
or against Mezzanine Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine
Borrower, Guarantor, Mortgage Borrower, General Partner, any SPE Entity,
Operating Lessee, or Manager.

 

4.1.8  Full
and Accurate Disclosure. To the
Best of Mezzanine Borrower's Knowledge, no statement of fact made by Mezzanine
Borrower in this Agreement or in any of the other Loan Documents (Junior
Mezzanine) contains any untrue statement of a material fact or omits to state
any material fact necessary to make statements contained herein or therein not
misleading. There is no fact presently known to Mezzanine Borrower which has not
been disclosed which has a Material Adverse Effect, or to the Best of Mezzanine
Borrower's Knowledge could reasonably be expected to have a Material Adverse
Effect.

 

4.1.9  ERISA.

 

(a)  Mezzanine
Borrower does not maintain or contribute to and is not required to contribute
to, an "employee benefit plan" as defined by Section
3(3) of
ERISA, which is subject to Title IV of ERISA (other than a "multiemployer plan"
as defined 

 

47

by
Section
3(37) of
ERISA), and Mezzanine Borrower (i) has no knowledge of any material liability
which has been incurred or is expected to be incurred by Mezzanine Borrower
which is reasonably likely to result in a Material Adverse Effect and is or
remains unsatisfied for any taxes or penalties or unfunded contributions with
respect to any "employee benefit plan" or any "plan," within the meaning of
Section
4975(e)(1) of the
Internal Revenue Code or any other benefit plan (other than a "multiemployer
plan") maintained, contributed to, or required to be contributed to by Mezzanine
Borrower or by any entity that is under common control with Mezzanine Borrower
within the meaning Section
4001(a)(14) of ERISA
(each, an ERISA
Affiliate) (each,
a Plan) or any
plan that would be a Plan but for the fact that it is a multiemployer plan
within the meaning of ERISA Section
3(37); and
(ii) has made and shall continue to make when due all required contributions to
all such Plans (other than Plans relating to ERISA Affiliates), if any, where
the failure to so contribute is reasonably likely to result in a Material
Adverse Effect. Each such Plan (other than Plans relating to ERISA Affiliates),
if any, has been and will be administered in material compliance with its terms
and the applicable provisions of ERISA, the Internal Revenue Code, and any other
applicable federal or state law; and no action shall be taken or fail to be
taken that would result in the disqualification or loss of tax-exempt status of
any such Plan intended to be qualified and/or tax exempt; and

 

(b)  With
respect to any "multiemployer plan," (i) Mezzanine Borrower has not, since
September 26, 1980, made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203 and 4205 of
ERISA, (ii) Mezzanine Borrower has made and shall continue to make when due all
required contributions to all such "multiemployer plans" and (iii) no ERISA
Affiliate has, since September 26, 1980, made or suffered a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively defined in
Sections 4203 and 4205 of ERISA which withdrawal is reasonably expected to have
a Material Adverse Effect.

 

(c)  Mezzanine
Borrower is not an employee benefit plan, as defined in Section
3(3) of
ERISA, whether or not subject to Title I of ERISA, none of the assets of
Mezzanine Borrower, Guarantor or Mortgage Borrower constitutes or will
constitute plan assets of one or more such plans within the meaning of 29 C.F.R.
Section
2510.3-101 and
transactions by or with any of Mezzanine Borrower, Guarantor or Mortgage
Borrower are not subject to similar laws regulating investment of, and fiduciary
obligations with respect to, plans similar to the provisions of Section
406 of ERISA
or Section
4975 of the
Code currently in effect which prohibit or otherwise restrict the transactions
contemplated by this Agreement.

 

4.1.10  Compliance.
Mezzanine Borrower, Guarantor, Mortgage Borrower, General Partner and the
Property and the use thereof comply in all material respects with all applicable
Legal Requirements, including, without limitation, building and zoning
ordinances and codes except where the failure to so comply is not reasonably
expected to result in a Material Adverse Effect. To the Best of Mezzanine
Borrower's Knowledge, none of Mezzanine Borrower, Guarantor, Mortgage Borrower,
or General Partner is in default or in violation of any order, writ, injunction,
decree or demand of any Governmental Authority. To the Best of Mezzanine
Borrower's Knowledge, there has not been committed by Mezzanine Borrower,
Guarantor, Mortgage Borrower or General 

 

48

Partner
any act or omission affording the federal government or any other Governmental
Authority the right of forfeiture as against the Property, the Collateral or any
part thereof or any monies paid in performance of Mezzanine Borrower's
obligations under any of the Loan Documents (Junior Mezzanine).

 

4.1.11  Financial
Information. To the
Best of Mezzanine Borrower's Knowledge, all financial data of Mezzanine
Borrower, Guarantor and Mortgage Borrower, including, without limitation, the
statements of cash flow and income and operating expense, that have been
delivered by or on behalf of Mezzanine Borrower or Mortgage Borrower to
Mezzanine Lender in respect of the Property (i) are true, complete and correct
in all material respects, (ii) fairly represent the financial condition of the
Property, the Mezzanine Borrower, Guarantor and Mortgage Borrower as of the date
of such reports, and (iii) to the extent prepared or audited by an independent
certified public accounting firm, have been prepared in accordance with GAAP
throughout the periods covered, except as disclosed therein. None of Mezzanine
Borrower, Guarantor, Mortgage Borrower, or General Partner has any material
contingent liabilities, liabilities for delinquent taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Mezzanine Borrower and could reasonably be
expected to have a Material Adverse Effect, except as referred to or reflected
in said financial statements and operating statements. Since the date of such
financial statements, there has been no material adverse change in the financial
condition, operations or business of Mezzanine Borrower, Guarantor, Mortgage
Borrower, or General Partner from that set forth in said financial
statements.

 

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

 

4.1.13  Federal
Reserve Regulations. None of
the proceeds of the Loan will be used for the purpose of purchasing or carrying
any "margin stock" as defined in Regulation U, Regulation X or Regulation T or
for the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry "margin stock" or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of
Regulation U or Regulation X. As of the Closing Date, Mezzanine Borrower does
not own any "margin stock."

 

4.1.14  Setoff,
Etc. The
Collateral and the rights of Mezzanine Lender with respect to the Collateral are
not subject to any setoff, claims, withholdings or other defenses.

 

49

 

4.1.15  Not
a Foreign Person. None of
Mezzanine Borrower, Guarantor or Mortgage Borrower is a foreign person within
the meaning of § 1445(f)(3) of the Code.

 

4.1.16  Enforceability. The Loan
Documents (Junior Mezzanine) are not subject to any existing right of
rescission, set-off, counterclaim or defense by Mezzanine Borrower or Guarantor,
as applicable, including the defense of usury, nor would the operation of any of
the terms of the Loan Documents (Junior Mezzanine), or the exercise of any right
thereunder, render the Loan Documents (Junior Mezzanine) unenforceable (subject
to applicable bankruptcy, insolvency and similar laws affecting rights of
creditors generally, and subject as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law)), and neither Mezzanine Borrower nor Mortgage Borrower has asserted any
right of rescission, set-off, counterclaim or defense with respect
thereto.

 

4.1.17  Insurance.
Mezzanine Borrower has obtained and has delivered to Mezzanine Lender certified
copies or original certificates of all insurance policies required under this
Agreement, reflecting the insurance coverages, amounts and other requirements
set forth in this Agreement. Mezzanine Borrower has not, and to the Best of
Mezzanine Borrower's Knowledge no Person has, done by act or omission anything
which would impair the coverage of any such policy.

 

4.1.18  Physical
Condition. To the
Best of Mezzanine Borrower's Knowledge and except as expressly disclosed in the
Physical Conditions Report, the Property, including, without limitation, all
buildings, Improvements, parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection systems, electrical
systems, equipment, elevators, exterior sidings and doors, landscaping,
irrigation systems and all structural components, are in good condition, order
and repair in all material respects; to the Best of Mezzanine Borrower's
Knowledge and except as disclosed in the Physical Conditions Report, there
exists no structural or other material defects or damages in or to the Property,
whether latent or otherwise, and Mezzanine Borrower has not received any written
notice from any insurance company or bonding company of any defects or
inadequacies in the Property, or any part thereof, which would adversely affect
the insurability of the same or cause the imposition of extraordinary premiums
or charges thereon or of any termination or threatened termination of any policy
of insurance or bond.

 

4.1.19  Leases. The
Property is not subject to any Leases other than the Leases described in the
certified rent roll delivered in connection with the origination of the Loan.
Such certified rent roll is true, complete and correct in all material respects
as of the date set forth therein. No Person has any possessory interest in the
Property or right to occupy the same (other than typical short-term occupancy
rights of hotel guests which are not the subject of a written agreement) except
under and pursuant to the provisions of the Leases. The current Leases are in
full force and effect and to the Best of Mezzanine Borrower's Knowledge, there
are no material defaults thereunder by 

 

50

either
party (other than as expressly disclosed on the certified rent roll delivered to
Mezzanine Lender or the Tenant estoppel certificates delivered to Mezzanine
Lender in connection with the closing of the Loan) and there are no conditions
that, with the passage of time or the giving of notice, or both, would
constitute material defaults thereunder. No Rent has been paid more than one (1)
month in advance of its due date, except as disclosed in the Tenant estoppel
certificates delivered to Mezzanine Lender in connection with the closing of the
Loan. There has been no prior sale, transfer or assignment, hypothecation or
pledge by Mortgage Borrower of Mortgage Borrower's interest in any Lease or of
the Rents received therein, which will be outstanding following the funding of
the Loan, other than those being assigned to Mortgage Lender concurrently
herewith. No Tenant under any Lease has a right or option pursuant to such Lease
or otherwise to purchase all or any part of the property of which the leased
premises are a part.

 

4.1.20  Single
Purpose Entity/Separateness.

 

(a)  Mezzanine
Borrower hereby represents, warrants and covenants that each of Mezzanine
Borrower, Mortgage Borrower and each SPE Entity is, and has been since the date
of its respective formation, a Single Purpose Entity, except that other than the
general partners of Mortgage Borrower and Operating Lessee (which have two
Independent Directors) and (ii) other than CNL KSL Partners GP, LLC (which does
not have an Independent Director), each of Mezzanine Borrower GP, CNL Hotel Del
Senior Mezz Partners GP, LLC, Mezzanine Borrower's General Partner, and
Revolving
Credit Borrower has a single Independent Director.

 

(b)  All of
the assumptions made in the Non-Consolidation Opinion, including, but not
limited to, any exhibits attached thereto and any certificates delivered by
Mezzanine Borrower in connection with the issuance of the Non-Consolidation
Opinion, are true and correct in all respects and any assumptions made in any
subsequent non-consolidation opinion delivered in connection with the Loan
Documents (Junior Mezzanine) (an Additional
Non-Consolidation Opinion),
including, but not limited to, any exhibits attached thereto, are true and
correct in all material respects. Mezzanine Borrower, Mortgage Borrower and each
SPE Entity have complied with all of the assumptions made with respect to it in
the Non-Consolidation Opinion. To the Best of Mezzanine Borrower's Knowledge,
each entity other than Mezzanine Borrower with respect to which an assumption
shall be made in any Additional Non-Consolidation Opinion will have complied and
will comply with all of the assumptions made with respect to it in any
Additional Non-Consolidation Opinion.

 

4.1.21  Management
Agreement. The
Management Agreement is in full force and effect and there is no default
thereunder by any party thereto and no event has occurred that, with the passage
of time and/or the giving of notice would con-stitute a default thereunder. The
Manager is not an Affiliate of Mezzanine Borrower.

 

4.1.22  Compliance
with Anti-Terrorism, Embargo and Anti-Money Laundering
Laws.
(i) None of Mezzanine Borrower, Guarantor or any Person who owns any equity
interest in or Controls Mezzanine Borrower or, to the Best of Borrower's
Knowledge, Guarantor, currently is identified on the OFAC List or otherwise

 

51

qualifies
as a Prohibited Person, and Mezzanine Borrower has implemented procedures to
ensure that no Person who now or hereafter owns any equity interest in Mezzanine
Borrower or Guarantor is a Prohibited Person or Controlled by a Prohibited
Person, and (ii) none of Mezzanine Borrower or Guarantor is in violation of
any Legal Requirements relating to anti-money laundering or anti-terrorism,
including, without limitation, Legal Requirements related to transacting
business with Prohibited Persons or the requirements of the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related
regulations issued thereunder, including temporary regulations, all as amended
from time to time. 

 

4.1.23  Tax
Filings.
Mezzanine Borrower has filed (or has obtained effective extensions for filing)
all federal, state and local tax returns required to be filed and has paid or
made adequate provision for the payment of all federal, state and local taxes,
charges and assessments payable by Mezzanine Borrower.

 

4.1.24  Solvency/Fraudulent
Conveyance.
Mezzanine Borrower (a) has not entered into the transaction contemplated by this
Agreement or any Loan Document (Junior Mezzanine) with the actual intent to
hinder, delay, or defraud any creditor and (b) has received reasonably
equivalent value in exchange for its obligations under the Loan Documents
(Junior Mezzanine). After giving effect to the Loan, the fair saleable value of
Mezzanine Borrower's assets exceeds and will, immediately following the making
of the Loan, exceed Mezzanine Borrower's total liabilities, including, without
limitation, subordinated, unliquidated, disputed and contingent liabilities. The
fair saleable value of Mezzanine Borrower's assets is and will, immediately
following the making of the Loan, be greater than Mezzanine Borrower's probable
liabilities, including the maximum amount of its contingent liabilities on its
Debts as such Debts become absolute and matured. Mezzanine Borrower's assets do
not and, immediately following the making of the Loan will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Mezzanine Borrower does not intend to, and does not believe
that it will, incur Debt and liabilities (including contingent liabilities and
other commitments) beyond its ability to pay such Debt and liabilities as they
mature (taking into account the timing and amounts of cash to be received by
Mezzanine Borrower and the amounts to be payable on or in respect of obligations
of Mezzanine Borrower).

 

4.1.25  Investment
Company Act.
Mezzanine Borrower is not (a) an investment company or a company Controlled by
an investment company, within the meaning of the Investment Company Act of 1940,
as amended, (b) a holding company or a subsidiary company of a holding company
or an affiliate of either a holding company or a subsidiary company within the
mean of the Public Utility Holding Company Act of 1935, as amended or (c)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.

 

52

 

4.1.26  Interest
Rate Cap Agreement. The
Interest Rate Cap Agreement (Junior Mezzanine) is in full force and effect and
enforceable against Mezzanine Borrower in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditors' rights and subject as to enforceability to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).

 

4.1.27  Brokers. Neither
Mezzanine Borrower nor, to the Best of Mezzanine Borrower's Knowledge, Mezzanine
Lender has dealt with any broker or finder with respect to the transactions
contemplated by the Loan Documents (Junior Mezzanine) and neither party has done
any acts, had any negotiations or conversations, or made any agreements or
promises which will in any way create or give rise to any obligation or
liability for the payment by either party of any brokerage fee, charge,
commission or other compensation to any Person with respect to the transactions
contemplated by the Loan Documents (Junior Mezzanine). Mezzanine Borrower
covenants and agrees that it shall pay as and when due any and all brokerage
fees, charges, commissions or other compensation or reimbursement due to any
broker of Mezzanine Borrower with respect to the transactions contemplated by
the Loan Documents (Junior Mezzanine). Mezzanine Borrower and Mezzanine Lender
shall each indemnify and hold harmless the other from and against any loss,
liability, cost or expense, including any judgments, attorneys' fees, or costs
of appeal, incurred by the other party and arising out of or relating to any
claim for brokerage commissions or finder's fees alleged to be due as a result
of the indemnifying party's agreements or actions. The provisions of this
Section
4.1.27 shall
survive the expiration and termination of this Agreement and the payment of the
Indebtedness.

 

4.1.28  No
Other Debt. Neither
Mezzanine Borrower nor General Partner has borrowed or received debt financing
that has not been heretofore repaid in full, other than the Permitted
Debt.

 

4.1.29  Taxpayer
Identification Number.
Mezzanine Borrower's Federal taxpayer identification number is
20-0494009.

 

4.1.30  Knowledge
Qualifications.
Mezzanine Borrower represents that Eric Resnick, Peter McDermott, John Brady
and/or Barry Bloom are in a position to have meaningful knowledge with respect
to the matters set forth in the Loan Documents (Junior Mezzanine) which have
been qualified to the knowledge of such Persons.

 

4.1.31  Representations
and Warranties.
Mezzanine Borrower represents and warrants that each of the representations and
warranties contained in the Loan Documents (Mortgage), Senior Mezzanine Loan
Documents, and Intermediate Mezzanine Loan Documents (which are hereby
incorporated by reference as if fully set forth herein) is true and correct in
all material respects, as of the Closing Date and to the best of its knowledge,
after reasonable inquiry, there is no Event of Default under the Mortgage Loan,
Senior Mezzanine Loan, or Intermediate Mezzanine Loan.

 

53

 

Section
4.2  Survival
of Representations

 

.
Mezzanine Borrower agrees that all of the representations and warranties of
Mezzanine Borrower set forth in Section
4.1 and
elsewhere in this Agreement and in the other Loan Documents (Junior Mezzanine)
shall be deemed given and made as of the date of the funding of the Loan and
survive for so long as any amount remains owing to Mezzanine Lender under this
Agreement or any of the other Loan Documents (Junior Mezzanine) by Mezzanine
Borrower or Guarantor unless a longer survival period is expressly stated in a
Loan Document (Junior Mezzanine) with respect to a specific representation or
warranty, in which case, for such longer period. All representations,
warranties, covenants and agreements made in this Agreement or in the other Loan
Documents (Junior Mezzanine) by Mezzanine Borrower shall be deemed to have been
relied upon by Mezzanine Lender notwithstanding any investigation heretofore or
hereafter made by Mezzanine Lender or on its behalf.

 

	V.  	
      MEZZANINE
      BORROWER COVENANTS

 

Section
5.1  Affirmative
Covenants

 

From the
Closing Date and until payment and performance in full of all obligations of
Mezzanine Borrower under the Loan Documents (Junior Mezzanine), Mezzanine
Borrower hereby covenants and agrees with Mezzanine Lender that:

 

5.1.1  Performance
by Mezzanine Borrower.

 

(a)  Mezzanine
Borrower shall in a timely manner observe, perform and fulfill each and every
covenant, term and provision of each Loan Document (Junior Mezzanine) executed
and delivered by, or applicable to, Mezzanine Borrower and shall not enter into
or otherwise suffer or permit any amendment, waiver, supplement,
termination or
other modification of any Loan Document (Junior Mezzanine) executed and
delivered by, or applicable to, Mezzanine Borrower without the prior written
consent of Mezzanine Lender.

 

(b)  Mezzanine
Borrower shall cause Intermediate Mezzanine Borrower, Senior Mezzanine Borrower,
and Mortgage Borrower in a timely manner to observe, perform and fulfill each
and every covenant, term and provision of the Intermediate Mezzanine Loan
Documents, Senior Mezzanine Loan Documents, and Loan Documents (Mortgage), as
applicable, executed and delivered by, or applicable to, Intermediate Mezzanine
Borrower, Senior Mezzanine Borrower, or Mortgage Borrower.

 

5.1.2  Existence;
Compliance with Legal Requirements; Insurance. Subject
to Mortgage Borrower's right of contest pursuant to Section
7.3, of the
Loan Agreement (Mortgage), Mezzanine Borrower shall comply and cause the
Mortgage Borrower, any SPE Entity and the Property to be in compliance with all
Legal Requirements applicable to the Mezzanine Borrower, Mortgage Borrower, any
SPE Entity and Manager and the Property and the uses permitted upon the
Property. Mezzanine 

 

54

Borrower
shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its existence, rights, licenses, permits and franchises
necessary to comply with all Legal Requirements applicable to it and the
Property. There shall never be committed by Mezzanine Borrower, and Mezzanine
Borrower shall not knowingly permit Mortgage Borrower or any other Person in
occupancy of or involved with the operation or use of the Property to commit,
any act or omission affording the federal government or any state or local
government the right of forfeiture as against the Property or any part thereof
or any monies paid in performance of Mezzanine Borrower's obligations under any
of the Loan Documents (Junior Mezzanine). Mezzanine Borrower hereby covenants
and agrees not to commit, knowingly permit or suffer to exist any act or
omission affording such right of forfeiture. Mezzanine Borrower shall at all
times maintain, preserve and protect (and shall cause Mortgage Borrower to at
all times maintain, preserve and protect) all franchises and trade names and
preserve all the remainder of its property used in the conduct of its business
and shall keep the Property in good working order and repair, and from time to
time make, or cause to be made, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto, as required by the Loan
Agreement (Mortgage). Mezzanine Borrower shall keep or shall cause Mortgage
Borrower to keep the Property insured at all times to such extent and against
such risks, and maintain liability and such other insurance, as is more fully
set forth in this Agreement and the Loan Agreement (Mortgage).

 

5.1.3  Litigation.
Mezzanine Borrower shall give prompt written notice to Mezzanine Lender of any
litigation or governmental proceedings pending or threatened in writing against
Mezzanine Borrower, Mortgage Borrower, the Collateral or the Property which, if
determined adversely to Mezzanine Borrower, Mortgage Borrower, the Collateral or
the Property would have a Material Adverse Effect.

 

5.1.4  Single
Purpose Entity.

 

(a)  Each of
Mezzanine Borrower, General Partner, Mortgage Borrower,
and each SPE Entity has been since the date of its respective formation and
shall remain a Single Purpose Entity.

 

(b)  Each of
Mezzanine Borrower, Mortgage Borrower and each SPE Entity shall continue to
maintain its own account or accounts, separate from those of any Affiliate, with
commercial banking institutions. None of the funds of Mezzanine Borrower, will
be commingled with the funds of any other Affiliate.

 

(c)  To the
extent that Mezzanine Borrower, Mortgage Borrower or any SPE Entity shares the
same officers or other employees as any of their Affiliates, the salaries of and
the expenses related to providing benefits to such officers and other employees
shall be fairly allocated among such entities, and each such entity shall bear
its fair share of the salary and benefit costs associated with all such common
officers and employees.

 

55

 

(d)  To the
extent that Mezzanine Borrower, Mortgage Borrower or any SPE Entity jointly
contracts with any of Mezzanine Borrower, Mortgage Borrower, any SPE Entity or
any of their Affiliates, as applicable, to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so doing shall be
allocated fairly among such entities, and each such entity shall bear its fair
share of such costs. To the extent that Mezzanine Borrower, Mortgage Borrower or
any SPE Entity contracts or does business with vendors or service providers
where the goods and services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly allocated to or among
such entities for whose benefit the goods and services are provided, and each
such entity shall bear its fair share of such costs. All material transactions
between (or among) Mezzanine Borrower, Mortgage Borrower or each SPE Entity and
any of their respective Affiliates shall be conducted on substantially the same
terms (or on more favorable terms for Mezzanine Borrower, Mortgage Borrower or
any SPE Entity, as applicable) as would be conducted with third
parties.

 

(e)  To the
extent that Mezzanine Borrower, Mortgage Borrower, any SPE Entity or any of
their Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses.

 

(f)  Mezzanine
Borrower, Mortgage Borrower and each SPE Entity shall conduct its affairs
strictly in accordance with its organizational documents, and observe all
necessary, appropriate and customary corporate, limited liability company or
partnership formalities, as applicable, including, but not limited to, obtaining
any and all members' consents necessary to authorize actions taken or to be
taken, and maintaining accurate and separate books, records and accounts,
including, without limitation, payroll and intercompany transaction
accounts.

 

(g)  In
addition, Mezzanine Borrower, Mortgage Borrower and each SPE Entity shall each:
(i) maintain books and records separate from those of any other Person; (ii)
maintain its assets in such a manner that it is not more costly or difficult to
segregate, identify or ascertain such assets; (iii) hold regular meetings of its
board of directors, shareholders, partners or members, as the case may be, and
observe all other corporate, partnership or limited liability company, as the
case may be, formalities; (iv) hold itself out to creditors and the public as a
legal entity separate and distinct from any other entity; (v) prepare separate
tax returns and financial statements, or if part of a consolidated group, then
it will be shown as a separate member of such group; (vi) transact all business
with its Affiliates on an arm's-length basis and pursuant to enforceable
agreements; (vii) conduct business in its name and use separate stationery,
invoices and checks; (viii) not commingle its assets or funds with those of any
other Person; and (ix) not assume, guarantee or pay the debts or obligations of
any other Person.

 

5.1.5  Consents. If
Mezzanine Borrower, Mortgage Borrower or any SPE Entity is a corporation, the
board of directors of such Person may not take any action requiring the
unanimous affirmative vote of 100% of the members of the board of 

 

56

directors
unless all of the directors, including the Independent Directors, shall have
participated in such vote. If Mezzanine Borrower, Mortgage Borrower or any SPE
Entity is a limited liability company, (a) if such Person is managed by a board
of managers, the board of managers of such Person may not take any action
requiring the unanimous affirmative vote of 100% of the members of the board of
managers unless all of the managers, including the Independent Managers, shall
have participated in such vote, (b) if such Person is not managed by a board of
managers, the members of such Person may not take any action requiring the
affirmative vote of 100% of the members of such Person unless all of the
members, including the Independent Members, shall have participated in such
vote. An affirmative vote of 100% of the directors, board of managers or
members, as applicable, of Mezzanine Borrower, Mortgage Borrower and any SPE
Entity shall be required to (i) file a bankruptcy or insolvency petition or
otherwise institute insolvency proceedings or to authorize Mezzanine Borrower,
Mortgage Borrower or any SPE Entity to do so or (ii) file an involuntary
bankruptcy petition against any Close Affiliate, Manager, or any Close Affiliate
of Manager. Furthermore, Mezzanine Borrower's, Mortgage Borrower's or each SPE
Entity's formation documents shall expressly state that for so long as the Loan
is outstanding, none of Mezzanine Borrower, Mortgage Borrower nor any SPE Entity
shall be permitted to (i) dissolve, liquidate, consolidate, merge or sell all or
substantially all of Mezzanine Borrower's, Mortgage Borrower's or any SPE
Entity's assets other than in connection with the repayment of the Loan or (ii)
engage in any other business activity and such restrictions shall not be
modified or violated for so long as the Loan is outstanding.

 

5.1.6  Notice
of Default.
Mezzanine Borrower shall promptly advise Mezzanine Lender (a) of any event or
condition that has or is likely to have a Material Adverse Effect and (b) of the
occurrence of any Default or Event of Default arising under the Loan Documents
(Junior Mezzanine), or Default or Event of Default arising under the Mortgage
Loan, Senior Mezzanine Loan, or Intermediate Mezzanine Loan to which Mezzanine
Borrower has knowledge.

 

5.1.7  Cooperate
in Legal Proceedings.
Mezzanine Borrower shall cooperate (and shall cause Mortgage Borrower to
cooperate) fully with Mezzanine Lender with respect to any proceedings before
any court, board or other Governmental Authority which would reasonably be
expected to affect in any material adverse way the rights of Mezzanine Lender
hereunder or under any of the other Loan Documents (Junior Mezzanine) and, in
connection therewith, permit Mezzanine Lender, at its election, to participate
in any such proceedings which may have a Material Adverse Effect.

 

5.1.8  Perform
Loan Documents (Junior Mezzanine).
Mezzanine Borrower shall observe, perform and satisfy all the terms, provisions,
covenants and conditions of, and shall pay when due all costs, fees and expenses
to the extent required, under the Loan Documents (Junior Mezzanine) executed and
delivered by, or applicable to, Mezzanine Borrower.

 

57

 

5.1.9  Further
Assurances; Separate Notes.

 

(a)  Mezzanine
Borrower shall execute and acknowledge (or cause to be executed and
acknowledged) and deliver to Mezzanine Lender all documents, and take all
actions, reasonably required by Mezzanine Lender from time to time to confirm
the rights created or now or hereafter intended to be created under this
Agreement and the other Loan Documents (Junior Mezzanine) and any security
interest created or purported to be created thereunder, to protect and further
the validity, priority and enforceability of this Agreement and the other Loan
Documents (Junior Mezzanine), to subject to the Loan Documents (Junior
Mezzanine) any property of Mezzanine Borrower intended by the terms of any one
or more of the Loan Documents (Junior Mezzanine) to be encumbered by the Loan
Documents (Junior Mezzanine), or otherwise carry out the purposes of the Loan
Documents (Junior Mezzanine) and the transactions contemplated thereunder.
Mezzanine Borrower agrees that it shall, upon request, reasonably cooperate with
Mezzanine
Lender in connection with any request by Mezzanine Lender to sever the Mezzanine
Note into two (2) or more separate substitute or component notes in an aggregate
principal amount equal to the Principal Amount and to reapportion the Loan among
such separate substitute notes, including, without limitation, by executing and
delivering to Mezzanine Lender new substitute or component notes to replace the
Mezzanine Note, amendments to or replacements of existing Loan Documents (Junior
Mezzanine) to reflect such severance and/or Opinions of Counsel with respect to
such substitute or component notes, amendments and/or replacements, provided
that Mezzanine Borrower shall bear no costs or expenses in connection therewith
(other than administrative costs and expenses of Mezzanine Borrower), and the
holders of such substitute or component notes shall designate a lead lender or
agent for such holders to whom Mezzanine Borrower may direct all communications
with respect to the Loan. Any such substitute or component notes may have
varying principal amounts and economic terms, provided, however, that (i) the
maturity date of any such substitute or component note shall be the same as the
scheduled Maturity Date of the Mezzanine Note immediately prior to the issuance
of such substitute notes, (ii) the substitute notes shall provide for
amortization of the Principal Amount on a weighted average basis over a period
not less than the amortization period provided under the Mezzanine Note, if any,
immediately prior to the issuance of the substitute notes, (iii) the weighted
average LIBOR Margin for the term of the substitute notes shall not exceed the
LIBOR Margin under the Mezzanine Note immediately prior to the issuance of such
substitute notes; and (iv) the economics of the Loan, taken as a whole, shall
not change in a manner which is adverse to Mezzanine Borrower. Upon the
occurrence and during the continuance of an Event of Default, Mezzanine Lender
may apply payment of all sums due under such substitute notes in such order and
priority as Mezzanine Lender shall elect in its sole and absolute
discretion.

 

(b)  Mezzanine
Borrower further agrees that if, in connection with the Securitization, it is
determined by the Rating Agencies that a portion of the Securitization would not
receive an "investment grade" rating unless the principal amount of the Mortgage
Loan were to be decreased and, as a result, the principal amount of the Mortgage
Loan is decreased, then (i) the Mezzanine Borrower shall take all actions as are
necessary 

 

58

to effect
the "resizing" of the Loan and the Mortgage Loan, (ii) the Mezzanine Borrower
shall cause the Mortgage Borrower to comply with its agreements to effect a
"resizing", and (iii) Mezzanine Lender shall on the date of the "resizing" of
the Loan lend to the Mezzanine Borrower (by way of a reallocation of the
principal amount of the Mortgage Loan and the Loan) such additional amount equal
to the amount of the principal reduction of the Loan provided that Mortgage
Borrower and Mezzanine Borrower execute and deliver any and all necessary
amendments or modifications to the Loan Documents (Mortgage) and the Loan
Documents (Junior Mezzanine). In addition, Mezzanine Borrower and Mezzanine
Lender agree that if, in connection with the Securitization, it is determined by
the Rating Agencies that, if the principal amount of the Loan were to be
decreased and, as a result the principal amount of the Mortgage Loan were
increased, more "investment grade" rated securities could be issued, then (i) if
"resizing" to increase the size of the Mortgage Loan and decrease the size of
the Loan is provided for in the Loan Documents (Mortgage), each of them shall
take all actions provided for in the documentation for the Loan as are necessary
to effect the "resizing" of the Loan and the Mortgage Loan, (ii) Mezzanine
Borrower shall cause the Mortgage Borrower to comply with its agreements to
effect a "resizing" and (iii) Mortgage Lender shall on the date of the
"resizing" of the Loan lend to the Mortgage Borrower (by way of a reallocation
of the principal amount of the Mortgage Loan and the Loan) an additional amount
equal to the amount of principal reduction of the Loan, provided that Mortgage
Borrower and Mezzanine Borrower execute and deliver any and all necessary
modifications to the Loan Documents (Mortgage) and Loan Documents (Junior
Mezzanine). In connection with the foregoing, Mezzanine Borrower agrees, at
Mezzanine Borrower's sole cost and expense, to execute and deliver such
documents and other agreements reasonably required by Mortgage Lender and/or
Mezzanine Lender to "re-size" the Loan and the Mortgage Loan, including, without
limitation, an amendment to this Agreement, the Mezzanine Note, the Pledge and
the other Loan Documents (Mortgage) and, if the principal amount of the Mortgage
Loan is increased, an endorse-ment to the Title Policy reflecting an increase in
the insured amount thereunder. Mezzanine Borrower agrees to reimburse Mezzanine
Lender for all costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by Mezzanine Lender in connection with
any "resizing" of the Loan and to pay for any additional "Eagle 9" or other
UCC insurance coverage reasonably required by Mezzanine Lender in connection
with any increase in the principal amount of any Mezzanine Loan, and shall
deliver opinions of counsel similar to those delivered on the date hereof with
respect to Mezzanine Borrower and the Mezzanine Loans. Notwithstanding the
fore-going, Mezzanine Lender agrees that any "resizing" of the Mortgage Loan and
the Loan shall not change the economics of the Mortgage Loan, Senior Mezzanine
Loan, Intermediate Mezzanine Loan, and the Mezzanine Loan taken as a whole in a
manner which is adverse to Mezzanine Borrower.

 

(c)  In
addition, Mezzanine Borrower shall, at Mezzanine Borrower's sole cost and
expense:

 

(i)  furnish
to Mezzanine Lender, to the extent not otherwise already
furnished to Mezzanine Lender and reasonably acceptable to Mezzanine Lender, all
instruments, documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other insurance
reports and agreements, and 

 

59

each and
every other document, certificate, agreement and instrument required to be
furnished by Mortgage Borrower pursuant to the terms of the Loan Documents
(Mortgage);

 

(ii)  execute
and deliver, from time to time, such further instruments (including, without
limitation, delivery of any financing statements under the UCC) as may be
reasonably requested by Mezzanine Lender to confirm the lien of the Pledge and
this Agreement or any Collateral;

 

(iii)  execute
and deliver to Mezzanine Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary to evidence,
preserve and/or protect the collateral at any time securing or intended to
secure the obligations of Mezzanine Borrower under the Loan Documents (Junior
Mezzanine), as Mezzanine Lender may reasonably require;

 

(iv)  do and
execute all and such further lawful and reasonable acts, conveyances and
assurances for the carrying out of the terms and conditions of this Agreement
and the other Loan Documents (Junior Mezzanine), as Mezzanine Lender shall
reasonably require from time to time; and

 

(v)  cause its
New York counsel to re-issue the New York opinion delivered on the date hereof
(in identical form and without updating) in favor of any purchaser of the Loan
or an interest therein.

 

5.1.10  Business
and Operations. Mortgage
Borrower, Mezzanine Borrower, and Operating Lessee shall continue to engage in
the businesses presently conducted by it as and to the extent the same are
necessary for the ownership, main-tenance, management and operation of the
Property and the Collateral, as applicable. Mezzanine Borrower shall and shall
cause Mortgage Borrower to, qualify to do business and shall remain in good
standing under the laws of all applicable jurisdictions and as and to the extent
required for the ownership, maintenance, management and operation of the
Property and, as applicable, the ownership of the Collateral.

 

5.1.11  Title
to the Collateral.
Mezzanine Borrower shall warrant and defend (a) its title to the Collateral and
every part thereof, subject only to Liens per-mitted hereunder (including
Permitted Encumbrances) and (b) the validity and priority of the Lien of the
Pledge and this Agreement on the Collateral, subject only to Liens per-mitted
hereunder (including Permitted Encumbrances), in each case against the claims of
all Persons whomsoever. Mezzanine Borrower shall reimburse Mezzanine Lender for
any losses, costs, damages or expenses (including reasonable attorneys' fees and
court costs) incurred by Mezzanine Lender if an interest in the Collateral,
other than as per-mitted hereunder, is claimed by another Person.

 

5.1.12  Costs
of Enforcement. In the
event (a) that this Agreement or the Pledge is foreclosed upon in whole or in
part or that this Agreement or the Pledge is put into the hands of an attorney
for collection, suit, action or foreclosure, (b) of the foreclosure of any
security agreement prior to or subsequent to this Agreement or the Pledge in
which proceeding Mezzanine Lender is made a party, or a Pledge prior to or

 

60

subsequent
to the Pledge in which proceeding Mezzanine Lender is made a party, or (c) of
the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of Mezzanine Borrower or any of its constituent Persons or an assignment
by Mezzanine Borrower or any of its constituent Persons for the benefit of its
creditors, Mezzanine Borrower, its successors or assigns, shall be chargeable
with and agrees to pay all costs of collection and defense, including reasonable
attorneys' fees and costs, incurred by Mezzanine Lender or Mezzanine Borrower in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, together with all required service or use
taxes.

 

5.1.13  Estoppel
Statement.

 

(a)  
Mezzanine Borrower shall, from time to time, upon thirty (30) days' prior
written request from Mezzanine Lender, execute, acknowledge and deliver to the
Mezzanine Lender (and shall cause Mortgage Borrower, Senior Mezzanine Borrower,
and Intermediate Mezzanine Borrower, to execute, acknowledge and deliver to
Mezzanine
Lender), an Officer's Certificate, stating that this Agreement and the other
Loan Documents (Junior Mezzanine) (or as applicable, the Loan Documents
(Mortgage), Senior Mezzanine Loan Documents, or Intermediate Mezzanine Loan
Documents) are unmodified and in full force and effect (or, if there have been
modifications, that this Agreement and the other Loan Documents (Junior
Mezzanine) or, as applicable, Loan Documents (Mortgage), Senior Mezzanine Loan
Documents, or Intermediate Mezzanine Loan Documents are in full force and effect
as modified and setting forth such modifications), stating the amount of accrued
and unpaid interest and the outstanding principal amount of the Mezzanine Note
(or, as applicable, the Mortgage Note, Senior Mezzanine Note, or Intermediate
Mezzanine Note) and containing such other information, qualified to the Best of
Mezzanine Borrower's Knowledge, with respect to the Mezzanine Borrower,
Guarantor, Mortgage Borrower, Senior Mezzanine Borrower, Intermediate Mezzanine
Borrower, the Property, the Loan, the Mortgage Loan, Senior Mezzanine Loan, and
Intermediate Mezzanine Loan as Mezzanine Lender shall reasonably request. The
estoppel certificate shall also state either that no Event of Default or
Mortgage Event of Default exists hereunder or thereunder or, if any Event of
Default or Mortgage Event of Default shall exist hereunder or thereunder,
specify such Event of Default or Mortgage Event of Default and the steps being
taken to cure such Event of Default of Mortgage Event of Default.

 

(b)  Mezzanine
Borrower shall use commercially reasonable efforts to deliver to Mezzanine
Lender, within thirty (30) days of Mezzanine Lender's request, tenant estoppel
certificates from each Tenant under Leases entered into after the Closing Date
in substantially the form and substance of the estoppel certificate set forth in
Exhibit
G provided
that Mezzanine Borrower shall not be required to deliver such certificates more
frequently than one time in any calendar year; provided, however, that there
shall be no limit on the number of times Mezzanine Borrower may be required to
obtain such certificates if a Default hereunder or under any of the Loan
Documents (Junior Mezzanine) has occurred and is continuing.

 

61

 

5.1.14  Loan
Proceeds.
Mezzanine Borrower shall use the proceeds of the Loan received by it on the
Closing Date only for the purposes set forth in Section
2.1.4.

 

5.1.15  No
Joint Assessment.
Mezzanine Borrower shall not suffer, permit or initiate the joint assessment of
the Property (a) with any other real property constituting a tax lot separate
from the Property and (b) which constitutes real property with any portion of
the Property which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to such real property
portion of the Property.

 

5.1.16  No
Further Encumbrances.
Mezzanine Borrower shall do, or cause to be done, all things necessary to keep
and protect the Property and the Collateral and all portions thereof
unencumbered from any Liens, easements or agreements granting rights in or
restricting the use or development of the Property, except for (a) with respect
to the Property, Permitted Encumbrances, (b) Liens permitted pursuant to the
Loan Documents (Junior Mezzanine), or the Loan Documents (Mortgage), (c) Liens
for Impositions prior to the imposition of any interest, charges or expenses for
the non-payment thereof and (d) any Liens permitted pursuant to
Leases.

 

5.1.17  Leases
and REAs.
Mezzanine Borrower shall cause Mortgage Borrower, promptly after receipt
thereof, to deliver to Mezzanine Lender a copy of any notice received with
respect to the REAs and the Leases claiming that Mortgage Borrower is in default
in the performance or observance of any of the material terms, covenants or
conditions of any of the REAs or the Leases.

 

5.1.18  Loan
(Mortgage) Covenants.

 

(a)  Mezzanine
Borrower hereby covenants that it shall cause Mortgage Borrower to fully keep,
perform and comply with (or cause to be kept, performed and complied with) each
of the covenants set forth in the Loan Agreement (Mortgage) and the Security
Instrument, which are hereby incorporated by reference as if fully set forth
herein, notwithstanding any waiver or future amendment of such covenants by
Mortgage Lender (other than a Permitted Loan Amendment). Mezzanine Borrower
acknowledges that the obligation to comply with such covenants is separate from,
and may be enforced independently from, the obligations of the Mortgage Borrower
under the Loan Documents
(Mortgage).

 

(b)  Mezzanine
Borrower shall not, and shall cause Mortgage Borrower, Senior Mezzanine
Borrower, and Intermediate Mezzanine Borrower not to, (i) amend or modify (by
agreement on the part of the Mortgage Borrower, Senior Mezzanine Borrower,
Intermediate Mezzanine Borrower, or Mezzanine Borrower) or (ii) affirmatively
permit the modification or amendment of (by operation of law or otherwise) the
Loan Documents (Mortgage), Senior Mezzanine Loan Documents, or Intermediate
Mezzanine 

 

62

Loan
Documents in effect as of the Closing Date that would be a Prohibited Loan
Amendment (as hereinafter defined) except for those amendments or modifications
(Permitted
Loan Amendment) that
are (i) required under the Loan Documents (Mortgage), or Senior Mezzanine Loan
Documents, or Intermediate Mezzanine Loan Documents, as applicable, or that
Mortgage Borrower, Senior Mezzanine Borrower, or Intermediate Mezzanine Borrower
is required to consent to thereunder pursuant to the express terms of the Loan
Documents (Mortgage), Senior Mezzanine Loan Documents, or Intermediate Mezzanine
Loan Documents, as applicable, (ii) which do not constitute a Prohibited Loan
Amendment, or (iii) are otherwise consented to by Mezzanine Lender. As used
herein, a Prohibited
Loan Amendment shall
mean an amendment or modification to the Loan Documents (Mortgage), Senior
Mezzanine Loan Documents, or Intermediate Mezzanine Loan Documents that (A) is
reasonably likely to have a Material Adverse Effect, or (B) which (1) increases
the principal amount of the Loan (Mortgage), Senior Mezzanine Loan, or
Intermediate Mezzanine Loan (exclusive of protective advances), (2) increases
the interest rate payable under the Loan (Mortgage), Senior Mezzanine Loan, or
Intermediate Mezzanine Loan (3) provides for the payment of any additional
interest, additional fees, increases the amount of or adds additional reserve
payments or increases the amount of or adds additional escrows, or otherwise
increases the amount payable under the Loan (Mortgage), Senior Mezzanine Loan,
or Intermediate Mezzanine Loan, (4) increases the frequency or payment amount of
the periodic principal installments under the Loan (Mortgage), Senior Mezzanine
Loan, or Intermediate Mezzanine Loan, (5) modifies the recourse carveout
obligations under the Loan Documents (Mortgage), Senior Mezzanine Loan, or
Intermediate Mezzanine Loan in a manner which increases or expands recourse
liability, (6) modifies the due-on-sale, due-on-encumbrance, or collateral
release provisions of the Loan Documents (Mortgage), Senior Mezzanine Loan
Documents, or Intermediate Mezzanine Loan Documents, (7) modifies the provisions
governing requirements with respect to the Independent Managers under the Loan
Documents (Mortgage), Senior Mezzanine Loan Documents, or Intermediate Mezzanine
Loan Documents in a manner materially adverse to Mortgage Lender, (8) adds
material additional obligations, liabilities or indemnities on the part of
Mortgage Borrower, Guarantor, General Partner, Senior Mezzanine Borrower,
Intermediate Mezzanine Borrower, or Mezzanine Borrower, (9) shortens any default
cure periods or adds any additional defaults under the Loan Documents
(Mortgage), Senior Mezzanine Loan Documents, or Intermediate Mezzanine Loan
Documents, (10) extends the maturity date of the Loan (Mortgage), Senior
Mezzanine Loan, or Intermediate Mezzanine Loan beyond the initially scheduled
maturity date (except in connection with any work-out or other surrender,
compromise, release, renewal, or indulgence relating to the Loan (Mortgage),
Senior Mezzanine Loan, or Intermediate Mezzanine Loan, (11) modifies any
provisions related to the Management Agreement, (12) waives or modifies any
provisions related to the use of proceeds under the Loan Documents (Mortgage),
Senior Mezzanine Loan Documents, or Intermediate Mezzanine Loan Documents, (13)
modifies any provisions of the Loan Documents (Mortgage), Senior Mezzanine Loan
Documents, or Intermediate Mezzanine Loan Documents related to the funding of
escrows or cash management or any provision of the Account Agreement (Mortgage),
Account Agreement (Senior Mezzanine), or Account Agreement (Intermediate
Mezzanine), or (14) decreases or materially modifies any insurance requirements
under the Loan Documents (Mortgage). Any amendment or 

 

63

modification
to the Loan Documents (Mortgage), Senior Mezzanine Loan Documents, or
Intermediate Mezzanine Loan Documents in violation of this Section shall be
ineffective as between Mezzanine Borrower and Mezzanine Lender, and, if not
cured by Mezzanine Borrower within thirty (30) days after written notice from
Mezzanine Lender shall constitute an Event of Default hereunder, unless
Mezzanine Lender consents thereto in writing in its sole
discretion.

 

(c)  In the
event the Loan (Mortgage) shall at any time be repaid, or the Liens securing the
Loan (Mortgage) at any time be released in full, then unless and until the
Mezzanine Note shall have been repaid in full and all obligations of Mezzanine
Borrower to Mezzanine Lender hereunder and under the other Loan Documents
(Junior Mezzanine) shall have been satisfied, then Mezzanine Borrower and
Manager shall nevertheless comply or cause the Mortgage Borrower to comply with
each of the terms and provisions of the Loan Documents (Mortgage) (other than
payment of principal, interest and premium (if any)) and the Loan Documents
(Mortgage) shall nevertheless be deemed to remain in full force and effect as
between Mezzanine Borrower and Mezzanine Lender with Mezzanine Lender being
deemed in such context to possess exclusively all of the rights and remedies of
the Mortgage Lender thereunder including without limitation, all rights of
consent and approval, rights to receive and control the disposition of casualty
insurance proceeds and condemnation awards, and the right to collect rents
through a lockbox and make waterfall distributions (but expressly excluding any
rights and remedies relating to payment of the indebtedness under the Loan
Documents (Mortgage) and evidenced by the Mortgage Note and Mezzanine Borrower
shall nevertheless comply or cause the Mortgage Borrower to comply with each of
the terms and provisions of the Loan Documents (Mortgage) (and any Permitted
Loan Amendments or amendment or modification consented to in writing by
Mezzanine Lender) (other than the payment of principal, interest and premium, if
any). Mezzanine Borrower shall, and shall cause Mortgage Borrower to, execute
any and all documents reasonably requested by Mezzanine Lender for the
implementation or furtherance of the foregoing provided that the same shall be
at Mezzanine Lender's sole cost and expense. Mezzanine Borrower shall deliver to
Mezzanine Lender copies of any and all modifications to the Loan Documents
(Mortgage) within five (5) Business Days after execution thereof.

 

(d)  Mezzanine
Borrower covenants and agrees to cause Mortgage Borrower to deliver any and all
financial information delivered or required to be delivered to Mortgage Lender
pursuant to the terms of the Loan Documents (Mortgage) to be delivered
simultaneously to Mezzanine Lender.

 

5.1.19  Impositions.
Mezzanine Borrower shall cause Mortgage Borrower to pay all Impositions, to
timely pay all claims for labor, material or supplies that if unpaid or unbonded
might by law become a lien or charge upon any of its property (including the
Property), and to keep the Property free from any Lien (other than the lien of
the Loan Documents (Mortgage) and the Permitted Encumbrances), and shall in any
event cause the prompt, full and unconditional discharge of all Liens imposed
upon the Property or any portion thereof within thirty (30) days after receiving
written notice (whether from Mezzanine Lender, the lienholder or any other
Person) of the filing thereof; subject in each case to Mortgage Borrower's right
to contest the same as permitted in but 

 

64

subject
to the conditions set forth in the Loan Agreement (Mortgage) so long as no Event
of Default has occurred. In the event that Mortgage Borrower elects to commence
any contest or similar proceeding with respect to any such Imposition, Lien or
other claim described herein, Mezzanine Borrower shall provide prompt written
notice thereof to Mezzanine Lender together with such evidence as Mezzanine
Lender may reasonably require showing Mortgage Borrower's satisfaction of the
requirements set forth in Section
7.3 of the
Loan Agreement (Mortgage) to Mortgage Borrower conducting such contest.
Notwithstanding the foregoing, Mezzanine Borrower shall cause Mortgage Borrower
promptly to pay any contested Imposition, Lien or claim and the payment thereof
shall not be deferred, if Mezzanine Lender or Mortgage Borrower may be subject
to civil or criminal damages as a result thereof. If such action or proceeding
is terminated or discontinued adversely to Mortgage Borrower, then Mezzanine
Borrower shall cause Mortgage Borrower to deliver to Mezzanine Lender reasonable
evidence of payment of such contested Imposition or Lien.

 

5.1.20  Leases.
Mezzanine Borrower shall promptly after receipt thereof (or receipt by Mortgage
Borrower) deliver to Mezzanine Lender a copy of any notice received with respect
to the Leases claiming that Mortgage Borrower is in default in the performance
or observance of any of the material terms, covenants or conditions of any of
the Leases, if such default is reasonably likely to have a Material Adverse
Effect.

 

5.1.21  Membership
Programs.
Mezzanine Borrower shall receive Mezzanine Lender's prior written consent to
make any material modifications to (or permit Mortgage Borrower to make any
material modifications to) any existing membership program or similar program at
the Property or enter into any new membership or similar program at the Property
to the extent such modification or new program (i) would allow any member to
redeem a membership deposit prior to Mortgage Borrower obtaining at least one
new membership deposit in an amount at least equal to the existing deposit to be
redeemed (i.e., a 1:1 redemption program), or (ii) could adversely affect the
value of Mezzanine Lender's security for the Loan. Mezzanine Borrower shall
cause Mortgage Borrower to cause any membership deposits which are not subject
to a minimum of 1:1 redemption program to be held in a separate interest-bearing
account and if requested by Lender, shall, at its sole cost and expense promptly
cause any such deposits to be held in an account under the control of Lender. If
Lender consents to any membership or similar program that does not have a
minimum 1:1 redemption method, Borrower agrees at its sole cost and expense to
promptly establish any reserves with Lender and make any corresponding
modifications to the Loan Documents as are requested by the Rating
Agencies.

 

5.1.22  Article
8 "Opt In" Language. Each
organizational document of Mezzanine Borrower, General Partner, each SPE Entity
and Mortgage Borrower shall be modified to include the language set forth on
Exhibit
R and such
language shall remain in each such organizational document for so long as the
Obligations are outstanding.

 

65

 

Section
5.2  Negative
Covenants

 

From the
Closing Date until payment and performance in full of all Obligations of
Mezzanine Borrower under the Loan Documents (Junior Mezzanine) or the earlier
release of the Lien of this Agreement or the Pledge in accordance with the terms
of this Agreement and the other Loan Documents (Junior Mezzanine), Mezzanine
Borrower covenants and agrees with Mezzanine Lender that it will not do (and
will not permit Operating Lessee to do), or permit to be done, directly or
indirectly, any of the following (and in such connection, references in this
Article V to Mortgage Borrower shall alternatively mean Operating Lessee, as the
context may require):

 

5.2.1  Incur
Debt. Incur,
create or assume any Debt other than Permitted Debt (Junior Mezzanine) or
Transfer all or any part of the Collateral or any interest therein, except as
permitted in the Loan Documents (Junior Mezzanine);

 

5.2.2  Encumbrances. Other
than in connection with the Senior Mezzanine Loan Documents, the Loan Documents
(Mortgage), the Intermediate Mezzanine Loan Documents, and the Revolving Credit
Loan Documents, incur, create or assume or permit the incurrence, creation or
assumption of any Debt secured by an interest in Mortgage Borrower, Mezzanine
Borrower, Operating Lessee, CNL Hotel Del Tenant Corp., or Manager, and shall
not Transfer or permit the Transfer of any interest in Mortgage Borrower,
Mezzanine Borrower, Operating Lessee, or Manager, except as permitted pursuant
to Article
VIII;

 

5.2.3  Engage
in Different Business. Engage,
directly or indirectly, in any business other than that of entering into this
Agreement and the other Loan Documents (Junior Mezzanine) to which Mezzanine
Borrower is a party and ownership of interests in the Mortgage Borrower and
activities related thereto;

 

5.2.4  Make
Advances. Make
advances or make loans to any Person, or hold any investments, except as
expressly permitted pursuant to the terms of this Agreement or any other Loan
Document (Junior Mezzanine);

 

5.2.5  Partition. Permit
Mortgage Borrower to partition the Property;

 

5.2.6  Commingle.
Commingle its assets with the assets of any of its Affiliates;

 

5.2.7  Guarantee
Obligations.
Guarantee any obligations of any Person;

 

5.2.8  Transfer
Assets. Transfer
any asset other than in the ordinary course of business or Transfer any interest
in the Property except as may be permitted hereby or in the other Loan Documents
(Junior Mezzanine);

 

66

 

5.2.9  Amend
Organizational Documents. Amend or
modify any of its organizational documents without Mezzanine Lender's consent,
other than in connection with any Transfer permitted pursuant to Article
VIII or to
reflect any change in capital accounts, contributions, distributions,
allocations or other provisions that do not and could not reasonably be expected
to have a Material Adverse Effect and provided that Mezzanine Borrower and each
SPE Entity each remain a Single Purpose Entity;

 

5.2.10  Dissolve.
Dissolve, wind-up, terminate, liquidate, merge with or consolidate into another
Person, except following or simultaneously with a repayment of the Loan in full
or as expressly permitted pursuant to this Agreement;

 

5.2.11  Bankruptcy. (i) File
a bankruptcy or insolvency petition or otherwise institute insolvency
proceedings, (ii) dissolve, liquidate, consolidate, merge or sell all or
substantially all of Mezzanine Borrower's assets other than in connection with
the repayment of the Loan, (iii) engage in any other business activity or (iv)
file or solicit the filing of an involuntary bankruptcy petition against
Mezzanine Borrower, Mortgage Borrower, Manager or any Close Affiliate of
Mezzanine Borrower or Manager, without obtaining the prior consent of all of the
directors of Mezzanine Borrower, including, without limitation, the Independent
Directors;

 

5.2.12  ERISA. Engage
in any activity that would subject it to regulation under ERISA or qualify it as
an "employee benefit plan" (within the meaning of Section
3(3) of
ERISA) to which ERISA applies and Mezzanine Borrower's assets do not and will
not constitute plan assets within the meaning of 29 C.F.R. Section
2510.3-101;

 

5.2.13  Distributions. From and
after the occurrence and during the continuance of an Event of Default, make any
distributions to or for the benefit of any of its shareholders, partners or
members, as the case may be, or its or their Affiliates;

 

5.2.14  Manager.

 

(a)  Except as
provided in this Section
5.2.14,
Mezzanine Borrower shall not, without the prior written consent of Mezzanine
Lender, which consent shall not be unreasonably withheld or delayed, permit
Mortgage Borrower to: amend, modify, supplement, alter or waive any right under
the Management Agreement without Mezzanine Lender's prior written consent, not
to unreasonably withheld. Without the receipt of Mezzanine Lender's prior
written consent, Mezzanine Borrower may permit Mortgage Borrower to make any
nonmaterial modification, change, supplement, alteration or amendment to the
Management Agreement and to waive any nonmaterial rights thereunder, provided
that no such modification, change, supplement, alteration, amendment or waiver
shall affect the cash management procedures set forth in the Management
Agreement or the Loan Documents (Mortgage) or Loan Documents (Junior Mezzanine),
decrease the cash flow of the Property, adversely affect the marketability of
the Property or the Collateral, change the definitions of "default" or "event of
default," change the 

 

67

definitions
of "operating expense" or words of similar meaning to add additional items to
such definitions, change any definitions or provisions so as to reduce the
payments due the Mortgage Borrower thereunder, change the timing of remittances
to the Mortgage Borrower thereunder, increase or decrease reserve requirements,
change the term of the Management Agreement or increase any Management Fees
payable under the Management Agreement; provided, however, the Group Services
Fee may include amounts in addition to the existing Sales and Marketing Group
Services Expense if and to the extent such amounts are attributable to services
that would otherwise constitute an Operating Expense or fee and such services
qualify under the provisions of the Management Agreement;

 

(b)  Mezzanine
Borrower may permit Mortgage Borrower to enter into a new Management Agreement
with an Acceptable Manager upon receipt of a Rating Agency Confirmation (or, if
such manager is a Pre-approved Manager, upon receipt of Mezzanine Lender's prior
written consent) with respect to the Property Management Agreement and delivery
of an acceptable Non-Consolidation Opinion covering such replacement Manager if
such Person (i) is not covered by the Non-Consolidation Opinion or an Additional
Non-Consolidation Opinion, and (ii) is an Affiliate of Mortgage
Borrower;

 

(c)  Mezzanine
Borrower hereby agrees that, subject to the provisions of the Assignment of
Management Agreement (Junior Mezzanine), Mezzanine Lender shall have the right
to terminate the Manager subsequent to (i) an Event of Default under this
Agreement and (ii) an acceleration of the Loan.

 

5.2.15  Franchise
Fee and Management Fee.
Mezzanine Borrower may not, without the prior written consent of Mezzanine
Lender (which may be withheld in its sole and absolute discretion) take or
permit Mortgage Borrower to take any action that would increase the percentage
amount of the Management Fee, or add a new type of fee (other than a "Group
Services Expense" as permitted by Section
5.2.14 above)
payable to Manager relating to the Property, including, without limitation, the
Franchise Fee and Management Fee;

 

5.2.16  Reserved.

 

5.2.17  REAs. Without
the prior consent of Mezzanine Lender, which shall not be unreasonably withheld,
delayed or conditioned, Mezzanine Borrower shall not permit Mortgage Borrower to
execute modifications to the REAs;

 

5.2.18  Modify
Account Agreement (Junior Mezzanine). Without
the prior consent of Mezzanine Lender, which shall not be unreasonably withheld,
delayed or conditioned, Mezzanine Borrower shall not execute any modification to
the Account Agreement (Junior Mezzanine);

 

68

 

5.2.19  Zoning
Reclassification. Except
as contemplated by Section
2.3.4 of the
Loan Agreement (Mortgage), without the prior written consent of Mezzanine
Lender, which consent shall not be unreasonably withheld, permit Mortgage
Borrower to (a) initiate or consent to any zoning reclassification of any
portion of the Property, (b) seek any variance under any existing zoning
ordinance that could result in the use of the Property becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, or (c) allow any portion of the Property to be used in any manner
that could result in the use of the Property becoming a non-conforming use under
any zoning ordinance or any other applicable land use law, rule or
regulation;

 

5.2.20  Change
of Principal Place of Business. Change
its principal place of business and chief executive office set forth on the
first page of this Agreement without first giving Mezzanine Lender thirty (30)
days' prior written notice (but in any event, within the period required
pursuant to the UCC) and there shall have been taken such action, reasonably
satisfactory to Mezzanine Lender, as may be necessary to maintain fully the
effect, perfection and priority of the security interest of Mezzanine Lender
hereunder in the Account Collateral (Junior Mezzanine) and the Rate Cap
Collateral (Junior Mezzanine) at all times;

 

5.2.21  Reserved.

 

5.2.22  Debt
Cancellation. Cancel
or otherwise forgive or release any material claim or debt owed to it by any
Person, except for adequate consideration or in the ordinary course of its
business;

 

5.2.23  Misapplication
of Funds.
Distribute any revenue from the Property or any Proceeds in violation of the
provisions of this Agreement, fail to remit amounts to the Junior Mezzanine
Account, as required by Section
3.1, or the
Pledge, misappropriate any security deposit or portion thereof or apply the
proceeds of the Loan in violation of Section
2.1.4;
or

 

5.2.24  Single-Purpose
Entity. Fail to
be a Single-Purpose Entity or take or suffer any action or inaction the result
of which would be to cause it or any SPE Entity to cease to be a Single-Purpose
Entity.

 

	VI.  	
      INSURANCE;
      CASUALTY; CONDEMNATION; RESTORATION

 

Section
6.1  Insurance
Coverage Requirements

 

(a)  Mezzanine
Borrower will cause Mortgage Borrower, at its expense, to procure and maintain
the insurance policies
required by the Loan Documents (Mortgage). Each commercial general liability or
umbrella liability policy with respect to the Property shall name Mezzanine
Lender as an additional insured and shall contain a cross liability/severability
endorsement in form and substance acceptable to Mezzanine Lender.

 

69

 

(b)  In the
event of any loss or damage to the Property, Mezzanine Borrower shall give
prompt written notice to the insurance carrier and Mezzanine Lender. Mezzanine
Lender acknowledges that Mortgage Borrower's rights to any insurance proceeds
are subject to the terms of the Loan Agreement (Mortgage). Mezzanine Borrower
may not and shall not permit Mortgage Borrower to settle, adjust or compro-mise
any claim under such insurance policies without the prior written consent of
Mezzanine Lender which shall not be unreasonably withheld, delayed or denied;
pro-vided, further, that Mortgage Borrower may make proof of loss and adjust and
compro-mise any claim under casualty insurance policies which is of an amount
less than $500,000 so long as no Event of Default has occurred. Any proceeds of
such claim which are not used to reconstruct or repair the Property, or applied
to the balance of the loan evidenced by the Loan Documents (Mortgage), shall be
deposited into the accounts established pursuant to the Loan Agreement
(Mortgage) to the extent required thereby, or if such deposit is not required
thereunder, then such proceeds shall be paid to Mezzanine Lender and applied to
the payment of the Obligations (Junior Mezzanine) whether or not then
due.

 

(c)  In the
event that Mortgage Borrower is permitted pursuant to the terms of the Loan
Agreement (Mortgage) to reconstruct, restore or repair the Property following a
casualty to any portion of the Property, Mezzanine Borrower shall cause Mortgage
Borrower to promptly and diligently repair and restore the Property in the
manner and within the time periods required by the Loan Agreement (Mortgage),
the Leases and any other agreements affecting the Property. In the event that
Mortgage Borrower is permitted pursuant to terms of the Loan Agreement
(Mortgage) to elect to not reconstruct, restore or repair the Property following
a casualty to any portion of the Property, Mezzanine Borrower shall not permit
Mortgage Borrower to elect not to re-construct, restore or repair the Property
without the prior written consent of Mezzanine Lender.

 

(d)  Mezzanine
Borrower shall comply with all Insurance Requirements and shall not bring or
keep or permit to be brought or kept any article upon any of the Property or
cause or permit any condition to exist thereon which would be prohibited by any
Insurance Requirement, or would invalidate insurance coverage required to be
maintained by Mortgage Borrower on or with respect to any part of the Property
pursuant to Section
6.1 of the
Loan Agreement (Mortgage).

 

Section
6.2  Condemnation
and Insurance Proceeds

 

. In the
event that all or any portion of the Property shall be damaged or taken through
condemnation (which term shall include any damage or taking by any governmental
authority, quasi-governmental authority, any party having the power of
condemnation, or any transfer by private sale in lieu thereof), or any such
condemnation shall be threatened, Mezzanine Borrower shall give prompt written
notice to Mezzanine Lender. Mezzanine Lender acknowledges that Mortgage
Borrower's rights to any condemnation award is subject to the terms of the Loan
Agreement (Mortgage). Mezzanine Borrower may not and shall not permit Mortgage
Borrower to settle or compromise any claim, action or proceeding relating to
such damage or condemnation without the prior 

 

70

written
consent of Mezzanine Lender, which shall not be unreasonably withheld, delayed
or denied; provided, further, that Mortgage Borrower may settle, adjust and
compromise any such claim, action or proceeding which is of an amount less than
$5,000,000 so long as no Default or Event of Default has occurred. Any Excess
Proceeds shall be paid to Mezzanine Lender and applied to the payment of the
Obligations (Junior Mezzanine) whether or not then due pursuant to Section
2.3.1(b). In the
event that Mortgage Borrower is permitted pursuant to the terms of the Loan
Agreement (Mortgage) to reconstruct, restore or repair the Property following a
condemnation of any portion of the Property, Mezzanine Borrower shall cause
Mortgage Borrower to promptly and diligently repair and restore the Property in
the manner and within the time periods required by the Loan Agreement
(Mortgage), the Leases and any other agreements affecting the Property. In the
event that Mortgage Borrower is permitted pursuant to the terms of the Loan
Agreement (Mortgage) to elect not to reconstruct, restore or repair the Property
following a condemnation of any portion of the Property, Mezzanine Borrower
shall not permit Mortgage Borrower to elect not to reconstruct, restore or
repair the Property without the prior written consent of Mezzanine
Lender.

 

Section
6.3  Certificates

 

.
Mezzanine Borrower shall deliver (or cause Mortgage Borrower to deliver) to
Mezzanine Lender annually, concurrently with the renewal of the insurance
policies required hereunder, a certificate from Mezzanine Borrower's and
Mortgage Borrower's insurance agent stating that the insurance policies required
to be delivered to Mezzanine Lender pursuant to Section
6.1 and
Section
2.5.2(h) are
maintained with insurers who comply with the terms of Section
6.1.9 of the
Loan Agreement (Mortgage), setting forth a schedule describing all premiums
required to be paid by Mezzanine Borrower or Mortgage Borrower, as applicable,
to maintain the policies of insurance required under Section
6.1 and
Section
2.5.2(h), and
stating that either Mezzanine Borrower or Mortgage Borrower, as applicable, has
paid such premiums. Certificates of insurance with respect to all replacement
policies shall be delivered to Mezzanine Lender not less than fifteen (15)
Business Days prior to the expiration date of any of the insurance policies
required to be maintained hereunder which certificates shall bear notations
evidencing payment of applicable premiums. Originals (or certified copies) of
such replacement insurance policies shall be delivered to Mezzanine Lender
promptly after Mezzanine Borrower's receipt thereof but in any case within
thirty (30) days after the effective date thereof (including the insurance
certificates delivered pursuant to Section
2.5.2(h)). If
Mezzanine Borrower fails to (i) maintain or to deliver to Mezzanine Lender the
certificates of insurance required by this Agreement or (ii) maintain and
deliver originals (or certificated copies) of such insurance policies within
thirty (30) days after the effective date thereof, upon five (5) Business Days'
prior notice to Mezzanine Borrower, Mezzanine Lender may procure such insurance,
and all costs thereof (and interest thereon at the Default Rate) shall be added
to the Indebtedness. Mezzanine Lender shall not, by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment or defense of lawsuits, and Mezzanine Borrower
hereby expressly assumes full responsibility therefor and all liability, if any,
with respect thereto. Mezzanine Borrower 

 

71

agrees
that any replacement insurance policy required hereunder shall not include any
so called "terrorist exclusion" or similar exclusion or exception to insurance
coverage relating to the acts of terrorist groups or individuals.

 

	VII.  	
      INTENTIONALLY
      OMITTED

 

	VIII.  	
      TRANSFERS,
      INDEBTEDNESS AND SUBORDINATE
LIENS

 

Section
8.1  Restrictions
on Transfers and Indebtedness

 

(a)  Unless
such action is a Permitted Revolving Credit Transfer, or is otherwise permitted
by the subsequent
provisions of this Article
VIII,
Mezzanine Borrower shall not, and shall not permit Mortgage Borrower or any
other Person to, without Mezzanine Lender's prior written consent, (a) Transfer
legal, Beneficial or direct or indirect equitable interests in all or any part
of the Property, the Mezzanine Borrower, Mortgage Borrower, Operating Lessee,
Intermediate Mezzanine Borrower, Senior Mezzanine Borrower, General Partner, or
Mortgage Borrower General Partner, (B) permit or suffer any owner, directly or
indirectly, of a legal, Beneficial, or equitable interest in the Property,
Mezzanine Borrower, Mortgage Borrower, Operating Lessee, Intermediate Mezzanine
Borrower, Senior Mezzanine Borrower, General Partner, or Mortgage Borrower
General Partner, to Transfer such interest, whether by Transfer of stock or
other legal, Beneficial or equitable interest in any entity or otherwise, (C)
mortgage, hypothecate or otherwise encumber or grant a security interest in all
or any part of the legal, Beneficial or equitable interests in all or any part
of the Collateral, Property, Mezzanine Borrower, Mortgage Borrower, the
Operating Lessee, Intermediate Mezzanine Borrower, Senior Mezzanine Borrower,
General Partner, or Mortgage Borrower General Partner, or (D) file a declaration
of condominium with respect to the Property.

 

Notwithstanding
any provision herein to the contrary, nothing contained herein shall be deemed
to restrict or otherwise interfere with the ability of the holders of direct or
indirect legal, Beneficial or equitable interests in CNL Hospitality Partners,
LP and/or KSL DC Operating, LLC to Transfer such interests, whether in
connection with an initial public offering of shares in CNL Hospitality
Partners, LP and/or KSL DC Operating, LLC or otherwise.

 

(b)  Mezzanine
Borrower shall not incur, create or assume any Debt or incur any liabilities
without the consent of Mezzanine Lender; provided,
however,
Mezzanine Borrower may, without the consent of Mezzanine Lender, incur, create
or assume Permitted Debt (Junior Mezzanine).

 

Section
8.2  Sale
of Building Equipment and Immaterial Transfers and Easements by Mortgage
Borrower

 

.
Mezzanine Borrower may permit Mortgage Borrower to effect any Transfer permitted
pursuant to Section
8.2 and 8.3 of the
Loan Agreement (Mortgage) without Mezzanine Lender's prior written
consent.

 

72

 

Section
8.3  Intentionally
Omitted

 

Section
8.4  Transfers
of Interests in Mezzanine Borrower

 

. Each
holder of any direct or indirect interest in Mezzanine Borrower shall have the
right to transfer (but not pledge, hypothecate or encumber) its equity interest
in the Mezzanine Borrower to any Person who is not a Disqualified Transferee
without Mezzanine Lender's consent or a Rating Agency Confirmation if
Section
8.6 is
complied with and, after giving effect to such transfer:

 

(A)
 Mezzanine
Borrower and the Property will be directly owned by a Single Purpose Entity in
compliance with the representations, warranties and covenants in Section
4.1.20 hereof
(as if the Mezzanine Borrower shall have remade all of such representations,
warranties and covenants as of, and after giving effect to, the transfer), and
which shall have executed and delivered to Mezzanine Lender an assumption
agreement in form and substance acceptable to Mezzanine Lender, evidencing the
continuing agreement of the Mezzanine Borrower to abide and be bound by all the
terms, covenants and conditions set forth in this Agreement, the Mezzanine Note,
the Pledge and the other Senior Mezzanine Loan Documents and all other
outstanding obligations under the Loan, together with such legal opinions and
title insurance endorsements as may be reasonably requested by Mortgage Lender
and Mezzanine Lender;

 

(B)
 an
Acceptable Manager shall continue to act as Manager for the Property pursuant to
the existing Management Agreement or an Acceptable Management
Agreement;

 

(C)
 KSL DC
Operating, LLC, CNL Hospitality Partners, LP or a Close Affiliate of either such
entity owns directly or indirectly at least fifty-one percent (51%) of the
equity interests in the Mezzanine Borrower and Mortgage Borrower and the Person
that is the proposed transferee is not a Disqualified Transferee; provided that,
after giving effect to any such transfer, in no event shall any Person other
than CNL Hospitality Partners, LP, KSL DC Operating, LLC or a Close Affiliate of
CNL Hospitality Partners, LP or KSL DC Operating, LLC exercise Management
Control over the Mezzanine Borrower and/or Mortgage Borrower. In the event that
Management Control shall be exercisable jointly by CNL Hospitality Partners, LP,
KSL DC Operating, LLC or a Close Affiliate of CNL Hospitality Partners, LP or
KSL DC Operating, LLC with any other Person or Persons, then CNL Hospitality
Partners, LP, KSL DC Operating, LLC or such Close Affiliate shall be deemed to
have Management Control only if CNL Hospitality Partners, LP, KSL DC Operating,
LLC or such Close Affiliate retains the ultimate right as between the CNL
Hospitality Partners, LP, KSL DC Operating, LLC or such Close Affiliate and the
transferee to unilaterally make all material decisions with respect to the
operation, management, financing and disposition of the Property;

 

73

 

(D) if there
has been a Transfer of forty-nine percent (49%) or more of the direct membership
interests, stock or other direct equity ownership interests in Mezzanine
Borrower, Mortgage Borrower, General Partner, Mortgage Borrower General Partner,
Mezzanine Borrower shall have first delivered to Mezzanine Lender an Officer's
Certificate and legal opinion of the types described in Section
8.6 below;
and

 

(E) Mezzanine
Borrower shall cause the transferee, if Mezzanine Lender so requests and if such
transferee is required to be a Single Purpose Entity pursuant to this Agreement,
to deliver to Mezzanine Lender its organizational documents solely for the
purpose of Mezzanine Lender confirming that such organizational documents comply
with the single purpose bankruptcy remote entity requirements set forth
herein.

 

Section
8.5  Loan
Assumption

 

. Without
limiting the foregoing, Mezzanine Borrower and Operating Lessee shall have the
right to sell, assign, convey or transfer (but not mortgage, hypothecate or
otherwise encumber or grant a security interest in) legal or equitable title to
all (but not less than all) of the Collateral only if Mortgage Borrower, Senior
Mezzanine Borrower, Intermediate Mezzanine Borrower, and Operating Lessee
simultaneously exercise their right to transfer the Property pursuant to
Section
8.5 of the
Loan Agreement (Mortgage), the Senior Mezzanine Loan Agreement, and the
Intermediate Mezzanine Loan Agreement, as applicable, and:

 

(A) after
giving effect to the proposed transaction:

 

(1) Mezzanine
Borrower will be owned by a Single Purpose Entity wholly owned (directly or
indirectly) by a Permitted Borrower Transferee, Pre-approved Transferee or such
other entity (specifically approved in writing by Mezzanine Lender) which will
be in compliance with the representations, warranties and covenants contained in
Section
4.1.20 hereof
(as if such transferee shall have remade all of such representations, warranties
and covenants as of, and after giving effect to, the proposed transaction), and
which shall have executed and delivered to Mezzanine Lender an assumption
agreement and such other agreements as Mezzanine Lender may reasonably request
(collectively, the Assumption
Agreement) in form
and substance acceptable to Mezzanine Lender, evidencing the proposed
transferee's agreement to abide and be bound by all the terms, covenants and
conditions set forth in this Agreement, the Mezzanine Note and the other Loan
Documents (Senior Mezzanine) and all other outstanding obligations under the
Loan; the Permitted Borrower Transferee, Pre-Approved Transferee or such other
approved entity shall assume the obligations of Guarantor under the Loan
Documents (Mezzanine) (and such Single Purpose Entity and the applicable
Permitted Borrower Transferee, Pre-approved Transferee or other approved entity
shall thereafter be subject to the provisions of this Article VIII), and the
transferee shall cause to be delivered to Mezzanine Lender such legal opinions
and title insurance endorsements as may be reasonably requested by Mezzanine
Lender;

 

74

 

(2) an
Acceptable Manager shall continue to act as Manager for the Property pursuant to
the existing Management Agreement or an Acceptable Management
Agreement;

 

(3) no Event
of Default shall have occurred and be continuing; and

 

(4) Mezzanine
Borrower shall have caused (i) the transferee to execute and deliver to
Mezzanine Lender a fully executed counterpart to the Pledge, pledging all of
such transferee's equity interests in Intermediate Mezzanine Borrower to
Mezzanine Lender as additional collateral for the Loan and (ii) the ultimate
parent(s) of such transferee to execute and deliver to Mezzanine Lender a fully
executed counterpart to the Recourse Guaranty (Junior Mezzanine) and
Environmental Indemnity (Junior Mezzanine), together with a legal opinion from
such transferee's counsel reasonably satisfactory to Mezzanine Lender with
respect to the due execution, delivery, authority, enforceability and perfection
(solely with respect to the Pledge) of the Pledge, Recourse Guaranty (Junior
Mezzanine) and Environmental Indemnity (Junior Mezzanine).

 

(B) the
Assumption Agreement shall state the applicable transferee's agreement to abide
by and be bound by the terms in the Mezzanine Note (or such other promissory
notes to be executed by the transferee, such other promissory note or notes to
be on the same terms as the Mezzanine Note), this Agreement (or such other loan
agreement to be executed by such transferee, which shall contain terms
substantially identical to the terms hereof) and such other Loan Documents
(Junior Mezzanine) (or other loan documents to be delivered by such transferee,
which shall contain terms substantially identical to the terms of the applicable
Loan Documents (Junior Mezzanine)) whenever arising, and Mezzanine Borrower,
and/or such transferee shall deliver such legal opinions and title insurance
endorsements as may reasonably be requested by Mezzanine Lender;

 

(C) following
execution of a contract for the sale of the Property and not less than thirty
(30) days prior to the expected date of such proposed sale, Mezzanine Borrower
shall submit notice of such sale to Mezzanine Lender. Mezzanine Borrower shall
submit to Mezzanine Lender, not less than ten (10) days prior to the expected
date of such sale, the Assumption Agreement for execution by Mezzanine Lender.
Such documents shall be in a form appropriate for the jurisdiction in which the
Collateral is located and shall be reasonably satisfactory to Mezzanine Lender.
In addition, Mezzanine Borrower shall provide all other documentation Mezzanine
Lender reasonably requires to be delivered by Mezzanine Borrower in connection
with such assumption, together with an Officer's Certificate certifying that (i)
the assumption to be effected will be effected in compliance with the terms of
this Agreement and (ii) will not impair or otherwise adversely affect the
validity or priority of the Lien of the Pledge (or replacement pledge
agreements, as applicable);

 

75

 

(D) prior to
any such transaction, the proposed transferee shall deliver to Mezzanine Lender
an Officer's Certificate stating that (x) such transferee is not an "employee
benefit plan" within the meaning of Section
3(3) of ERISA
that is subject Title I of ERISA or any other Similar Law and (y) the underlying
assets of the proposed transferee do not constitute assets of any such employee
benefit plan for purposes of ERISA or any Similar Law;

 

(E) if the
transfer is to (i) an entity other than a Pre-approved Transferee, such transfer
shall be subject to Mezzanine Lender's consent in its sole discretion, and (ii)
a Permitted Borrower Transferee, such transfer shall be subject to Mezzanine
Lender's prior written consent in its reasonable discretion;

 

(F) the terms
of Section
8.6 shall be
complied with and Mezzanine Borrower shall cause the transferee to deliver to
Mezzanine Lender its organizational documents solely for the purpose of
Mezzanine Lender confirming that such organizational documents comply with the
single purpose bankruptcy remote entity requirements set forth herein;
and

 

(G) Mezzanine
Lender shall have received the payment of, or reimbursement for, all reasonable
costs and expenses incurred by Mezzanine Lender (and any Servicer) in connection
therewith (including, without limitation, reasonable attorneys' fees and
disbursements).

 

(h) Each of
the Intermediate Mezzanine Borrower and Senior Mezzanine Borrower shall
simultaneously exercise its right to transfer the "Collateral" (as defined in
such Mezzanine Loan) pursuant to and in accordance with Section 8.5 of each
such Mezzanine the Loan Agreement.

 

Section
8.6  Notice
Required; Legal Opinions

 

. Not less
than five (5) Business Days prior to the closing of any trans-action permitted
under the provisions of Sections
8.2 through
8.5,
Mezzanine Borrower shall deliver or cause to be delivered to Mezzanine Lender
(A) an Officer's Certificate describing the proposed transaction and stating
that such transaction is permitted hereunder and under the other Loan Documents
(Senior Mezzanine), together with any documents upon which such Officer's
Certificate is based, and (B) a legal opinion of counsel to Mezzanine Borrower
or the transferee selected by either of them (to the extent approved by
Mezzanine Lender), in form and substance consistent with similar opinions then
being required by the Mezzanine Lender and acceptable to the Mezzanine Lender,
confirming, among other things, that the assets of the Mezzanine Borrower, and
of its managing general partner or managing member, as applicable, will not be
substantively consolidated with the assets of such owners or Controlling Persons
of the Mezzanine Borrower as Mezzanine Lender may specify, in the event of a
bankruptcy or similar proceeding involving such owners or Controlling
Persons.

 

76

 

Section
8.7  Leases

 

8.7.1  New
Leases and Lease Modifications. Except
as otherwise provided in this Section
8.7,
Mezzanine Borrower shall not permit Operating Lessee to (x) enter into any Lease
on terms other than "market" and rental rates (in Mezzanine Borrower's or
Operating Lessee's good faith judgment), or enter into any Material Lease (a
New
Lease) or (y)
consent to the assignment of any Material Lease (unless required to do so by the
terms of such Material Lease) that releases the original Tenant from its
obligations under the Material Lease, or (z) modify any Material Lease
(including, without limitation, accept a surrender of any portion of the
Property subject to a Material Lease (unless otherwise permitted or required by
law), allow a reduction in the term of any Material Lease or a reduction in the
Rent payable under any Material Lease, change any renewal provisions of any
Material Lease, materially increase the obligations of the landlord or
materially decrease the obligations of any Tenant) or terminate any Material
Lease (any such action referred to in clauses (y) and (z) being referred to
herein as a Lease
Modification) without
the prior written consent of Mezzanine Lender which consent shall not be
unreasonably withheld or delayed. Any New Lease or Lease Modification that
requires Mezzanine Lender's consent shall be delivered to Mezzanine Lender for
approval not less than ten (10) Business Days prior to the effective date of
such New Lease or Lease Modification. Lender agrees that non-material changes to
the Operating Lease (as determined by Mezzanine Lender in its sole but
reasonable discretion) may be permitted without requiring Mezzanine Lender's
consent.

 

8.7.2  Leasing
Conditions. Subject
to terms of this Section
8.7,
provided no Event of Default shall have occurred and be continuing, Mortgage
Borrower may enter into a New Lease or Lease Modification, without Mezzanine
Lender's prior written consent, that satisfies each of the following conditions
(as evidenced by an Officer's Certificate delivered to Mezzanine Lender prior to
Mortgage Borrower's entry into such New Lease or Lease
Modification):

 

(a)  with
respect to a New Lease or Lease Modification, the premises demised thereunder is
not more than 10,000 net rentable square feet of the Property;

 

(b)  the term
of such New Lease or Lease Modification, as applicable, does not exceed 120
months, plus up to two (2) 60-month option terms (or equivalent combination of
renewals);

 

(c)  the New
Lease or Lease Modification provides for "market" rental rates other terms and
does not contain any terms which would adversely affect Mezzanine
Lender's rights under the Loan Documents (Junior Mezzanine) or that would have a
Material Adverse Effect;

 

(d)  the New
Lease or Lease Modification, as applicable, provides that the premises demised
thereby cannot be used for any of the following uses; any pornographic or
obscene purposes, any commercial sex establishment, any pornographic,
ob

 

77

scene,
nude or semi-nude performances, modeling, materials, activities or sexual
conduct or any other use that has or could reasonably be expected to have a
Material Adverse Effect;

 

(e)  the
Tenant under such New Lease or Lease Modification, as applicable, is not an
Affiliate of Mortgage Borrower;

 

(f)  the New
Lease or Lease Modification, as applicable, does not prevent Proceeds from being
held and disbursed by Mezzanine Lender in accordance with the terms of the Loan
Documents (Mortgage) and does not entitle any Tenant to receive and retain
Proceeds except those that may be specifically awarded to it in condemnation
proceedings because of the Condemnation of its trade fixtures and its leasehold
improvements which have not become part of the Property and such business loss
as Tenant may specifically and separately establish; and

 

(g)  the New
Lease or Lease Modification, as applicable satisfies the requirements of
Section
8.7.7 and
Section
8.7.8.

 

8.7.3  Delivery
of New Lease or Lease Modification. Upon the
execution of any New Lease or Lease Modification, as applicable, Mezzanine
Borrower shall cause Mortgage Borrower to deliver to Mezzanine Lender an
executed copy of the Lease.

 

8.7.4  Lease
Amendments.
Mezzanine Borrower shall cause Mortgage Borrower to agree that it shall not have
the right or power, as against Mezzanine Lender without its consent, to cancel,
abridge, amend or otherwise modify any Lease unless such modification complies
with this Section
8.7.

 

8.7.5  Security
Deposits. All
security or other deposits of Tenants of the Property shall be treated as trust
funds and shall, if required by law or the applicable Lease, not be commingled
with any other funds of Mortgage Borrower, and such deposits shall be deposited,
upon receipt of the same by Mortgage Borrower in a separate trust account
maintained by Mortgage Borrower expressly for such purpose. Within ten (10)
Business Days after written request by Mezzanine Lender, Mezzanine Borrower
shall cause Mortgage Borrower to furnish to Mezzanine Lender reasonably
satisfactory evidence of compliance with this Section
8.7.5,
together with a statement of all lease securities deposited with Mortgage
Borrower by the Tenants and the location and account number of the account in
which such security deposits are held.

 

8.7.6  No
Default Under Leases.
Mezzanine Borrower shall cause Mortgage Borrower to (i) promptly perform and
observe all of the material terms, covenants and conditions required to be
performed and observed by Mortgage Borrower under the Leases and the REAs, if
the failure to perform or observe the same would have a Material Adverse Effect;
(ii) exercise, within ten (10) Business Days after a written request by
Mezzanine Lender, any right to request from the Tenant under any Lease, or the
party to any REAs, a certificate with respect to the status thereof and (iii)
not collect any of the Rents, more than one (1) month in advance (except that
Mortgage Borrower may 

 

78

collect
such security deposits and last month's Rents as are permitted by Legal
Requirements and are commercially reasonable in the prevailing market and
collect other charges in accordance with the terms of each Lease).

 

	IX.  	
      INTEREST
      RATE CAP AGREEMENT.

 

Section
9.1  Interest
Rate Cap Agreement

 

.
Mezzanine Borrower shall maintain the Interest Rate Cap Agreement with an
Acceptable Counterparty in effect and having a term extending through the last
day of the accrual period in which the applicable Maturity Date occurs, and an
initial notional amount equal to the Loan Amount. The Interest Rate Cap
Agreement shall have a strike rate equal to the Maximum Pay Rate. The notional
amount of the Interest Rate Cap Agreement may be reduced from time to time in
amounts equal to any prepayment of the principal of the Loan made in accordance
with the Loan Documents (Junior Mezzanine), provided that the strike rate shall
be equal to the Maximum Pay Rate.

 

Section
9.2  Pledge
and Collateral Assignment

 

.
Mezzanine Borrower hereby pledges, assigns, transfers, delivers and grants a
continuing first priority lien to Mezzanine Lender, as security for payment of
all sums due in respect of the Loan and the performance of all other terms,
conditions and covenants of this Agreement and any other Loan Documents (Junior
Mezzanine) on Mezzanine Borrower's part to be paid and performed, in, to and
under all of Mezzanine Borrower's right, title and interest whether now owned or
hereafter acquired and whether now existing or hereafter arising (collectively,
the Rate
Cap Collateral (Junior Mezzanine)): (i) in
the Interest Rate Cap Agreement (as soon as such agreement is effective or when
and if any replacement agreement becomes effective, any Replacement Interest
Rate Cap Agreement (Junior Mezzanine) or Extension Interest Rate Cap Agreement);
(ii) to receive any and all payments under the Interest Rate Cap Agreement (or,
when and if any such agreement becomes effective, any Replacement Interest Rate
Cap Agreement (Junior Mezzanine) or Extension Interest Rate Cap Agreement),
whether as contractual obligations, damages or otherwise; and (iii) to all
claims, rights, powers, privileges, authority, options, security interests,
liens and remedies, if any, under or arising out of the Interest Rate Cap
Agreement (as soon as such agreement is effective or when and if any such
agreement becomes effective, any Replacement Interest Rate Cap Agreement (Junior
Mezzanine) or Extension Interest Rate Cap Agreement), in each case including all
accessions and additions to, substitutions for and replacements, products and
proceeds of any of the foregoing. Mezzanine Borrower shall deliver to Mezzanine
Lender an executed counterpart of such Interest Rate Cap Agreement, Replacement
Interest Rate Cap Agreement (Junior Mezzanine) or Extension Interest Rate Cap
Agreement (Junior Mezzanine) (which shall, by its terms, authorize the
assignment to Mezzanine Lender and require that payments be made directly to
Mezzanine Lender) and notify the Counterparty of such assignment (either in such
Interest Rate Cap Agreement (Junior Mezzanine), Replacement Interest Rate Cap
Agreement (Junior Mezzanine) or Extension Interest Rate Cap Agreement or by
separate instrument). Mezzanine Borrower shall not, without obtaining the prior
written consent of Mezzanine Lender, further pledge, transfer, deliver,

 

79

assign or
grant any security interest in the Interest Rate Cap Agreement (Junior
Mezzanine)(or, when and if any such agreement becomes effective, any Replacement
Interest Rate Cap Agreement (Junior Mezzanine) or Extension Interest Rate Cap
Agreement), or permit any Lien or encumbrance to attach thereto, or any levy to
be made thereon, or any UCC-1 Financing Statements or any other notice or
instrument as may be required under the UCC, as appropriate, except those naming
Mezzanine Lender as the secured party, to be filed with respect
thereto.

 

Section
9.3  Covenants

 

(a)  Mezzanine
Borrower shall comply with all of its obligations under the terms and provisions
of the Interest Rate Cap Agreement (Junior Mezzanine). All amounts paid by the
Counterparty under the Interest Rate Cap Agreement to
Mezzanine Borrower or Mezzanine Lender shall be deposited immediately into the
Junior Mezzanine Account pursuant to Section
3.1.
Mezzanine Borrower shall take all actions reasonably requested by Mezzanine
Lender to enforce Mezzanine Borrower's rights under the Interest Rate Cap
Agreement (Junior Mezzanine) in the event of a default by the Counterparty
thereunder and shall not waive, amend or otherwise modify any of its rights
thereunder.

 

(b)  Mezzanine
Borrower shall defend Mezzanine Lender's right, title and interest in and to the
Rate Cap Collateral (Junior Mezzanine) pledged by Mezzanine Borrower pursuant
hereto or in which it has granted a security interest pursuant hereto against
the claims and demands of all other Persons.

 

(c)  In the
event of (x) any downgrade, withdrawal or qualification (each, a Downgrade) of the
rating of the Counterparty such that, thereafter, the Counterparty shall cease
to be an Acceptable Counterparty and (y) the Counterparty shall fail to comply
with the requirements contained in the Interest Rate Cap Agreement (Junior
Mezzanine) which are described in Exhibit
I upon
such occurrence, the Mezzanine Borrower shall either (i) obtain Lender's prior
written consent to retain such Counterparty or (ii) replace the Interest Rate
Cap Agreement (Junior Mezzanine) with a Replacement Interest Cap Agreement, (x)
having a term extending through the end of the Interest Period in which the
Maturity Date occurs, (y) in a notional amount at least equal to the Principal
Amount of the Loan then outstanding, and (z) having a strike rate equal to the
Maximum Pay Rate.

 

(d)  In the
event that Mezzanine Borrower fails to purchase and deliver to Mezzanine Lender
the Interest Rate Cap Agreement (Junior Mezzanine) as and when required
hereunder, Mezzanine Lender may purchase the Interest Rate Cap Agreement (Junior
Mezzanine) and the cost incurred by Mezzanine Lender in purchasing the Interest
Rate Cap Agreement (Junior Mezzanine) shall be paid by Mezzanine Borrower to
Mezzanine Lender with interest thereon at the Default Rate from the date such
cost was incurred by Mezzanine Lender until such cost is paid by Mezzanine
Borrower to Mezzanine Lender.

 

80

 

(e)  Mezzanine
Borrower shall not (i) without the prior written consent of Mezzanine Lender,
modify, amend or supplement the terms of the Interest Rate Cap Agreement (Junior
Mezzanine), (ii) without the prior written consent of Mezzanine Lender, except
in accordance with the terms of the Interest Rate Cap Agreement (Junior
Mezzanine), cause the termination of the Interest Rate Cap Agreement (Junior
Mezzanine) prior to its stated maturity date, (iii) without the prior written
consent of Mezzanine Lender, except as aforesaid, waive or release any
obligation of the Counterparty (or any successor or substitute party to the
Interest Rate Cap Agreement (Junior Mezzanine)) under the Interest Rate Cap
Agreement (Junior Mezzanine), (iv) without the prior written consent of
Mezzanine Lender, consent or agree to any act or omission to act on the part of
the Counterparty (or any successor or substitute party to the Interest Rate Cap
Agreement (Junior Mezzanine)) which, without such consent or agreement, would
constitute a default under the Interest Rate Cap Agreement (Junior Mezzanine),
(v) fail to exercise promptly and diligently each and every material right which
it may have under the Interest Rate Cap Agreement (Junior Mezzanine), (vi) take
or intentionally omit to take any action or intentionally suffer or permit any
action to be omitted or taken, the taking or omission of which would result in
any right of offset against sums payable under the Interest Rate Cap Agreement
(Junior Mezzanine) or any defense by the Counterparty (or any successor or
substitute party to the Interest Rate Cap Agreement (Junior Mezzanine)) to
payment or (vii) fail to give prompt notice to Mezzanine Lender of any notice of
default given by or to Mezzanine Borrower under or with respect to the Interest
Rate Cap Agreement (Junior Mezzanine), together with a complete copy of such
notice.

 

(f)  In
connection with an Interest Rate Cap Agreement (Junior Mezzanine), Mezzanine
Borrower shall obtain and deliver to Mezzanine Lender an Opinion of Counsel from
counsel (which counsel may be in-house counsel for the Counterparty) for the
Counterparty upon which Mezzanine Lender and its successors and assigns may rely
(the Counterparty
Opinion), under
New York law and, if the Counterparty is a non-U.S. entity, the applicable
foreign law, substantially in compliance with the requirements set forth in
Exhibit
F or in
such other form approved by the Mezzanine Lender.

 

Section
9.4  Representations
and Warranties

 

.
Mezzanine Borrower hereby covenants with, and represents and warrants to,
Mezzanine Lender as follows:

 

(a)  The
Interest Rate Cap Agreement (Junior Mezzanine) constitutes the legal, valid and
binding obligation of Mezzanine Borrower, enforceable against Mezzanine
Borrower in accordance with its terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).

 

81

 

(b)  The Rate
Cap Collateral (Junior Mezzanine) is free and clear of all claims or security
interests of every nature whatsoever, except such as are created pursuant to
this Agreement and the other Loan Documents (Junior Mezzanine), and Mezzanine
Borrower has the right to pledge and grant a security interest in the same as
herein provided without the consent of any other Person other than any such
consent that has been obtained and is in full force and effect.

 

(c)  The Rate
Cap Collateral (Junior Mezzanine) has been duly and validly pledged hereunder.
All consents and approvals required to be obtained by Mezzanine Borrower for the
consummation of the transactions contemplated by this Agreement have been
obtained.

 

(d)  Giving
effect to the aforesaid grant and assignment to Mezzanine Lender, Mezzanine
Lender has, as of the date of this Agreement, and as to Rate Cap Collateral
(Junior Mezzanine) acquired from time to time after such date, shall have, a
valid, and upon proper filing, perfected and continuing first priority lien upon
and security interest in the Rate Cap Collateral (Junior Mezzanine); provided
that no representation or warranty is made with respect to the perfected status
of the security interest of Mezzanine Lender in the proceeds of Rate Cap
Collateral (Junior Mezzanine) consisting of "cash proceeds" or "non-cash
proceeds" as defined in the UCC except if, and to the extent, the provisions of
Section
9-306 of the
UCC shall be complied with.

 

(e)  Except
for financing statements filed or to be filed in favor of Mezzanine Lender as
secured party, there are no financing statements under the UCC covering any or
all of the Rate Cap Collateral (Junior Mezzanine) and Mezzanine Borrower shall
not, without the prior written consent of Mezzanine Lender, until payment in
full of all of the Obligations (Junior Mezzanine), execute and file in any
public office, any enforceable financing statement or statements covering any or
all of the Rate Cap Collateral (Junior Mezzanine), except financing statements
filed or to be filed in favor of Mezzanine Lender as secured party.

 

Section
9.5  Payments

 

. If
Mezzanine Borrower at any time shall be entitled to receive any payments with
respect to the Interest Rate Cap Agreement (Junior Mezzanine), such amounts
shall, immediately upon becoming payable to Mezzanine Borrower, be deposited by
Counterparty into the Junior Mezzanine Account.

 

Section
9.6  Remedies

 

. Subject
to the provisions of the Interest Rate Cap Agreement (Junior Mezzanine), if an
Event of Default shall occur and then be continuing:

 

82

 

(a)  Mezzanine
Lender, without obligation to resort to any other security,
right or remedy granted under any other agreement or instrument, shall have the
right to, in addition to all rights, powers and remedies of a secured party
pursuant to the UCC, at any time and from time to time, sell, resell, assign and
deliver, in its sole discretion, any or all of the Rate Cap Collateral (Junior
Mezzanine) (in one or more parcels and at the same or different times) and all
right, title and interest, claim and demand therein and right of redemption
thereof, at public or private sale, for cash, upon credit or for future
delivery, and in connection therewith Mezzanine Lender may grant options and may
impose reasonable conditions such as requiring any purchaser to represent that
any "securities" constituting any part of the Rate Cap Collateral (Junior
Mezzanine) are being purchased for investment only, Mezzanine Borrower hereby
waiving and releasing any and all equity or right of redemption to the fullest
extent permitted by the UCC or applicable law. If all or any of the Rate Cap
Collateral (Junior Mezzanine) is sold by Mezzanine Lender upon credit or for
future delivery, Mezzanine Lender shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
Mezzanine Lender may resell such Rate Cap Collateral (Junior Mezzanine). It is
expressly agreed that Mezzanine Lender may exercise its rights with respect to
less than all of the Rate Cap Collateral (Junior Mezzanine), leaving unexercised
its rights with respect to the remainder of the Rate Cap Collateral (Junior
Mezzanine), provided,
however, that
such partial exercise shall in no way restrict or jeopardize Mezzanine Lender's
right to exercise its rights with respect to all or any other portion of the
Rate Cap Collateral (Junior Mezzanine) at a later time or times.

 

(b)  Mezzanine
Lender may exercise, either by itself or by its nominee or designee, in the name
of Mezzanine Borrower, all of Mezzanine Lender's rights, powers and remedies in
respect of the Rate Cap Collateral (Junior Mezzanine), hereunder and under
law.

 

(c)  Mezzanine
Borrower hereby irrevocably, in the name of Mezzanine Borrower or otherwise,
authorizes and empowers Mezzanine Lender and assigns and transfers unto
Mezzanine Lender, and constitutes and appoints Mezzanine Lender its true and
lawful attorney-in-fact, and as its agent, irrevocably, with full power of
substitution for Mezzanine Borrower and in the name of Mezzanine Borrower, upon
the occurrence and during the continuance of an Event of Default, (i) to
exercise and enforce every right, power, remedy, authority, option and privilege
of Mezzanine Borrower under the Interest Rate Cap Agreement (Junior Mezzanine),
including any power to subordinate or modify the Interest Rate Cap Agreement
(Junior Mezzanine) (but not, unless an Event of Default exists and is
continuing, the right to terminate or cancel the Interest Rate Cap Agreement
(Junior Mezzanine)), or to give any notices, or to take any action resulting in
such subordination, termination, cancellation or modification and (ii) in order
to more fully vest in Mezzanine Lender the rights and remedies provided for
herein, to exercise all of the rights, remedies and powers granted to Mezzanine
Lender in this Agreement, and Mezzanine Borrower further authorizes and empowers
Mezzanine Lender, as Mezzanine Borrower's attorney-in-fact, and as its agent,
irrevocably, with full power of substitution for Mezzanine Borrower and in the
name of Mezzanine Borrower, upon the occurrence and 

 

83

during
the continuance of an Event of Default, to give any authorization, to furnish
any information, to make any demands, to execute any instruments and to take any
and all other action on behalf of and in the name of Mezzanine Borrower which in
the opinion of Mezzanine Lender may be necessary or appropriate to be given,
furnished, made, exercised or taken under the Interest Rate Cap Agreement
(Junior Mezzanine), in order to comply therewith, to perform the conditions
thereof or to prevent or remedy any default by Mezzanine Borrower thereunder or
to enforce any of the rights of Mezzanine Borrower thereunder. These
powers-of-attorney are irrevocable and coupled with an interest, and any similar
or dissimilar powers heretofore given by Mezzanine Borrower in respect of the
Rate Cap Collateral (Junior Mezzanine) to any other Person are hereby
revoked.

 

(d)  Upon the
occurrence and during the continuance of an Event of Default, Mezzanine Lender
may, without notice to, or assent by, Mezzanine Borrower or any other Person (to
the extent permitted by law), but without affecting any of the Obligations
(Junior Mezzanine), in the name of Mezzanine Borrower or in the name of
Mezzanine Lender, notify the Counterparty, or if applicable, any other
counterparty to the Interest Rate Cap Agreement (Junior Mezzanine), to make
payment and performance directly to Mezzanine Lender; extend the time of payment
and performance of, compromise or settle for cash, credit or otherwise, and upon
any terms and conditions, any obligations owing to Mezzanine Borrower, or claims
of Mezzanine Borrower, under the Interest Rate Cap Agreement (Junior Mezzanine);
file any claims, commence, maintain or discontinue any actions, suits or other
proceedings deemed by Mezzanine Lender necessary or advisable for the purpose of
collecting upon or enforcing the Interest Rate Cap Agreement (Junior Mezzanine);
and execute any instrument and do all other things deemed necessary and proper
by Mezzanine Lender to protect and preserve and realize upon the Rate Cap
Collateral (Junior Mezzanine) and the other rights contemplated
hereby.

 

(e)  Pursuant
to the powers-of-attorney provided for above, Mezzanine Lender may take any
action and exercise and execute any instrument which it may deem necessary or
advisable to accomplish the purposes hereof; provided, however, that Mezzanine
Lender shall not be permitted to take any action pursuant to said
power-of-attorney that would conflict with any limitation on Mezzanine Lender's
rights with respect to the Rate Cap Collateral (Junior Mezzanine). Without
limiting the generality of the foregoing, Mezzanine Lender, after the occurrence
of an Event of Default, shall have the right and power to receive, endorse and
collect all checks and other orders for the payment of money made payable to
Mezzanine Borrower representing: (i) any payment of obligations owed pursuant to
the Interest Rate Cap Agreement (Junior Mezzanine), (ii) interest accruing on
any of the Rate Cap Collateral (Junior Mezzanine) or (iii) any other payment or
distribution payable in respect of the Rate Cap Collateral (Junior Mezzanine) or
any part thereof, and for and in the name, place and stead of Mezzanine
Borrower, to execute endorsements, assignments or other instruments of
conveyance or transfer in respect of any property which is or may become a part
of the Rate Cap Collateral (Junior Mezzanine) hereunder.

 

(f)  Mezzanine
Lender may exercise all of the rights and remedies of a secured party under the
UCC.

 

84

 

(g)  Without
limiting any other provision of this Agreement or any of Mezzanine Borrower's
rights hereunder, and without waiving or releasing Mezzanine Borrower from any
obligation or default hereunder, Mezzanine Lender shall have the right, but not
the obligation, to perform any act or take any appropriate action, as it, in its
reasonable judgment, may deem necessary to protect the security of this
Agreement, to cure such Event of Default or to cause any term, covenant,
condition or obligation required under this Agreement or the Interest Rate Cap
Agreement (Junior Mezzanine) to be performed or observed by Mezzanine Borrower
to be promptly performed or observed on behalf of Mezzanine Borrower. All
amounts advanced by, or on behalf of, Mezzanine Lender in exercising its rights
under this Section
9.7(g)
(including, but not limited to, reasonable legal expenses and disbursements
incurred in connection therewith), together with interest thereon at the Default
Rate from the date of each such advance, shall be payable by Mezzanine Borrower
to Mezzanine Lender upon demand and shall be secured by this
Agreement.

 

Section
9.7  Sales
of Rate Cap Collateral (Junior Mezzanine)

 

. No
demand, advertisement or notice, all of which are, to the fullest extent
permitted by law, hereby expressly waived by Mezzanine Borrower, shall be
required in connection with any sale or other disposition of all or any part of
the Rate Cap Collateral (Junior Mezzanine), except that Mezzanine Lender shall
give Mezzanine Borrower at least thirty (30) Business Days' prior written notice
of the time and place of any public sale or of the time when and the place where
any private sale or other disposition is to be made, which notice Mezzanine
Borrower hereby agrees is reasonable, all other demands, advertisements and
notices being hereby waived. To the extent permitted by law, Mezzanine Lender
shall not be obligated to make any sale of the Rate Cap Collateral (Junior
Mezzanine) if it shall determine not to do so, regardless of the fact that
notice of sale may have been given, and Mezzanine Lender may without notice or
publication adjourn any public or private sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. Upon each private sale of the Rate Cap Collateral (Junior Mezzanine)
of a type customarily sold in a recognized market and upon each public sale,
unless prohibited by any applicable statute which cannot be waived, Mezzanine
Lender (or its nominee or designee) may purchase any or all of the Rate Cap
Collateral (Junior Mezzanine) being sold, free and discharged from any trusts,
claims, equity or right of redemption of Mezzanine Borrower, all of which are
hereby waived and released to the extent permitted by law, and may make payment
therefor by credit against any of the Obligations (Junior Mezzanine) in lieu of
cash or any other obligations. In the case of all sales of the Rate Cap
Collateral (Junior Mezzanine), public or private, Mezzanine Borrower shall pay
all reasonable costs and expenses of every kind for sale or delivery, including
brokers' and attorneys' fees and disbursements and any tax imposed thereon.
However, the proceeds of sale of Rate Cap Collateral (Junior Mezzanine) shall be
available to cover such costs and expenses, and, after deducting such costs and
expenses from the proceeds of sale, Mezzanine Lender shall apply any residue to
the payment of the Obligations (Junior Mezzanine) in the order of priority as
set forth in Section
17.5.

 

85

 

Section
9.8  Public
Sales Not Possible

 

.
Mezzanine Borrower acknowledges that the terms of the Interest Rate Cap
Agreement (Junior Mezzanine) may prohibit public sales, that the Rate Cap
Collateral (Junior Mezzanine) may not be of the type appropriately sold at
public sales, and that such sales may be prohibited by law. In light of these
considerations, Mezzanine Borrower agrees that private sales of the Rate Cap
Collateral (Junior Mezzanine) shall not be deemed to have been made in a
commercially unreasonably manner by mere virtue of having been made
privately.

 

Section
9.9  Receipt
of Sale Proceeds

 

. Upon any
sale of the Rate Cap Collateral (Junior Mezzanine) by Mezzanine Lender hereunder
(whether by virtue of the power of sale herein granted, pursuant to judicial
process or otherwise), the receipt by Mezzanine Lender or the officer making the
sale or the proceeds of such sale shall be a sufficient discharge to the
purchaser or purchasers of the Rate Cap Collateral (Junior Mezzanine) so sold,
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to Mezzanine Lender or
such officer or be answerable in any way for the misapplication or
non-application thereof.

 

Section
9.10  Extension
Interest Rate Cap Agreement (Junior Mezzanine)

 

. If
Mezzanine Borrower exercises any of its options to extend the Maturity Date
pursuant to Section
5 of the
Note, then, on or prior to the Maturity Date being extended, the Mezzanine
Borrower shall obtain or have in place an Extension Interest Rate Cap Agreement
(i) having a term through the end of the Interest Period in which the extended
Maturity Date occurs, (ii) in a notional amount at least equal to the Principal
Amount of the Loan as of the Maturity Date being extended, and (iii) having a
strike rate equal to an amount such that the maximum interest rate paid by the
Mezzanine Borrower after giving effect to payments made under such Extension
Interest Rate Cap Agreement shall equal no more than the Maximum LIBOR Pay Rate.

 

Section
9.11  Filing
of Financing Statements Authorized

 

.
Mezzanine Borrower hereby authorizes the filing of a form UCC-1 financing
statement naming Mezzanine Borrower as debtor and Mezzanine Lender as secured
party in any office (including the office of the Secretary of State of the State
of Delaware) covering all property of Mezzanine Borrower (including, but not
limited to, the Account Collateral (Junior Mezzanine) and the Rate Cap
Collateral (Junior Mezzanine), but excluding Net Excess Cash Flow).

 

86

 

	X.  	
      RESERVED

 

	XI.  	
      BOOKS
      AND RECORDS, FINANCIAL STATEMENTS, REPORTS
      AND OTHER INFORMATION

 

Section
11.1  Books
and Records

 

.
Mezzanine Borrower shall cause Mortgage Borrower to keep and maintain on a
fiscal year basis proper books and records separate from any other Person, in
which accurate and complete entries shall be made of all dealings or
transactions of or in relation to the Mortgage Note, the Mezzanine Note, the
Property and the business and affairs of Mortgage Borrower and Mezzanine
Borrower relating to the Property which shall reflect all items of income and
expense in connection with the operation on an individual basis of the Property
and in connection with any services, equipment or furnishings provided in
connection with the operation of the Property, in accordance with GAAP.
Mezzanine Lender and its authorized representatives shall have the right at
reasonable times and upon reasonable notice to examine the books and records of
Mortgage Borrower and Mezzanine Borrower relating to the operation of the
Property and to make such copies or extracts thereof as Mezzanine Lender may
reasonably require. Mezzanine Borrower shall simultaneously furnish (or cause
Mortgage Borrower to furnish) to Mezzanine Lender copies of all financial
statements, reports and information required to be submitted by Mortgage
Borrower to Mortgage Lender pursuant to the Loan Agreement
(Mortgage).

 

Section
11.2  Financial
Statements

 

11.2.1  Budget.

 

(a)  Not later
than March 1st of each Fiscal Year hereafter, Mezzanine Borrower shall
prepare or cause to be prepared and deliver to Mezzanine Lender, for
informational
purposes only, a Budget in respect of the Property for the Fiscal Year in which
such delivery date falls. If Mezzanine Borrower or Mortgage Borrower
subsequently amends the Budget, Mezzanine Borrower shall promptly deliver the
amended Budget to Mezzanine Lender.

 

(b)  Notwithstanding
the foregoing clause any Budgets submitted during a Low DSCR Period, and in each
case any material amendment therefrom, shall be subject to Mezzanine Lender's
prior written approval, which approval shall not be unreasonably withheld or
delayed.

 

(c)  Within
thirty (30) days after its receipt of notice of the commence-ment of any Low
DSCR Period, Mezzanine Borrower shall (unless the then current Budget has been
approved in writing by Mezzanine Lender) prepare or cause to be prepared and
deliver to Mezzanine Lender for Mezzanine Lender's approval (which shall not be
unreasonably withheld or delayed), a proposed Budget for the Fiscal Year in
which such Low DSCR Period commences. Mezzanine Borrower shall consult with
Mezzanine 

 

87

Lender
and shall afford Mezzanine Lender a reasonable opportunity to meet and confer
with Mezzanine Borrower to discuss in reasonable detail such proposed revised
Budget and general hotel operations, and Borrower (as distinguished from its
constituent partners) shall use its best efforts to obtain Manager's approval of
the resulting budget revisions as requested by Lender in its reasonable
discretion.

 

11.2.2  Other
Information.
Mezzanine Borrower shall, promptly after written request by Mezzanine Lender,
furnish or cause to be furnished to Mezzanine Lender, in such manner and in such
detail as may be reasonably requested by Mezzanine Lender, such reasonable
additional information as may be reasonably requested with re-spect to the
Property and/or the Collateral. The information required to be furnished by
Mezzanine Borrower to Mezzanine Lender under this Section
11.2 shall be
provided in both hard copy format and electronic format; provided that
Mezzanine Borrower shall only be required to provide the information required
under this Section
11.2.7 in
elec-tronic format if such information is so available in the ordinary course of
the operations of the Mezzanine Borrower, and Manager, and without significant
expense.

 

	XII.  	
      ENVIRONMENTAL
      MATTERS

 

Section
12.1  Representations

 

.
Mezzanine Borrower hereby represents and warrants that except as set forth in
the environmental reports and studies delivered to Mezzanine Lender (the
Environmental
Reports), (i)
neither Mezzanine Borrower nor Mortgage Borrower has engaged in or knowingly
permitted any operations or activities upon, or any use or occupancy of the
Property, or any portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation, release, discharge,
refining, dumping or disposal of any Hazardous Materials on, under, in or about
the Property, or transported any Hazardous Materials to, from or across the
Property, except in all cases in material compliance with Environmental Laws and
only in the course of legitimate business operations at the Property; (ii) to
the Best of Mezzanine Borrower's Knowledge, no tenant, occupant or user of the
Property, or any other Person, has engaged in or permitted any operations or
activities upon, or any use or occupancy of the Property, or any portion
thereof, for the purpose of or in any material way involving the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
dumping or disposal of any Hazardous Materials on, in or about the Property, or
transported any Hazardous Materials to, from or across the Property, except in
all cases in material compliance with Environmental Laws and only in the course
of legitimate business operations at the Property; (iii) to the Best of
Mezzanine Borrower's Knowledge, no Hazardous Materials are presently
constructed, deposited, stored, or otherwise located on, under, in or about the
Property except in material compliance with Environmental Laws; (iv) to the Best
of Mezzanine Borrower's Knowledge, no Hazardous Materials have migrated from the
Property upon or beneath other properties which would reasonably be expected to
result in material liability for Mezzanine Borrower or Mortgage Borrower; and
(v) to the Best of Mezzanine Borrower's Knowledge, no Hazardous Materials have
migrated or threaten to migrate from other properties upon, about or beneath the
Property which would reasonably be expected to result in material liability for
Mezzanine Borrower or Mortgage Borrower.

 

88

 

Section
12.2  Covenants

 

12.2.1  Compliance
with Environmental Laws. Subject
to Mortgage Borrower's right to contest under Section
7.3 of the
Loan Agreement (Mortgage), Mezzanine Borrower covenants and agrees with
Mezzanine Lender that it shall comply and shall cause Mortgage Borrower to
comply in all material respects with all Environmental Laws. If at any time
during the continuance of the Lien of the Security Instrument and/or Pledge, a
Governmental Authority having jurisdiction over the Property requires remedial
action to correct the presence of Hazardous Materials in, around, or under the
Property (an Environmental
Event),
Mezzanine Borrower shall deliver prompt notice of the occurrence of such
Environmental Event to Mezzanine Lender. Within thirty (30) days after Mezzanine
Borrower has knowledge of the occurrence of an Environmental Event, Mezzanine
Borrower shall deliver to Mezzanine Lender an Officer's Certificate (an
Environmental
Certificate)
explaining the Environmental Event in reasonable detail and setting forth the
proposed remedial action, if any. Mezzanine Borrower shall promptly provide
Mezzanine Lender with copies of all notices which allege or identify any actual
or potential violation or noncompliance received by or prepared by or for
Mezzanine Borrower in connection with any Environmental Law. For purposes of
this paragraph, the term "notice" shall mean any summons, citation, directive,
order, claim, pleading, letter, application, filing, report, findings,
declarations or other materials pertinent to compliance of the Property and
Mezzanine Borrower with such Environmental Laws.

 

12.2.2  Reserved.

 

Section
12.3  Environmental
Reports

 

. Upon the
occurrence and during the continuance of an Environmental Event with respect to
the Property or an Event of Default, Mezzanine Lender shall have the right to
have its consultants perform a comprehensive environmental audit of the
Property. Such audit shall be conducted by an environmental consultant chosen by
Mezzanine Lender and may include a visual survey, a record review, an area
reconnaissance assessing the presence of hazardous or toxic waste or substances,
PCBs or storage tanks at the Property, an asbestos survey of the Property, which
may include random sampling of the Improvements and air quality testing, and
such further site assessments as Mezzanine Lender may reasonably require due to
the results obtained from the foregoing. Mezzanine Borrower grants (and shall
cause Mortgage Borrower to grant) to Mezzanine Lender, its agents, consultants
and contractors the right to enter the Property as reasonable or appropriate for
the circumstances for the purposes of performing such studies and the reasonable
cost of such studies shall be due and payable by Mezzanine Borrower to Mezzanine
Lender upon demand and shall be secured by the Lien of this Agreement and the
Pledge. Mezzanine Lender shall not unreasonably interfere with (and shall cause
Mortgage Borrower not to unreasonably interfere with), and Mezzanine Lender
shall direct the environmental consultant to use its commercially reasonable
efforts not to hinder, Mortgage Borrower's or any Tenant's, other occupant's or
Manager's operations upon the 

 

89

Property
when conducting such audit, sampling or inspections. By undertaking any of the
measures identified in and pursuant to this Section
12.3,
Mezzanine Lender shall not be deemed to be exercising any control over the
operations of Mezzanine Borrower or Mortgage Borrower or the handling of any
environmental matter or hazardous wastes or substances of Mezzanine Borrower or
Mortgage Borrower for purposes of incurring or being subject to liability
therefor.

 

Section
12.4  Environmental
Indemnification

 

.
Mezzanine Borrower shall protect, indemnify, save, defend, and hold harmless the
Indemnified Parties from and against any and all liability, loss, damage,
actions, causes of action, costs or expenses whatsoever (including reasonable
attorneys' fees and expenses) and any and all claims, suits and judgments which
any Indemnified Party may suffer, as a result of or with respect to: (a) any
Environmental Claim relating to or arising from the Property; (b) the violation
of any Environmental Law in connection with the Property; (c) any release,
spill, or the presence of any Hazardous Materials affecting the Property; and
(d) the presence at, in, on or under, or the release, escape, seepage, leakage,
discharge or migration at or from, the Property of any Hazardous Materials,
whether or not such condition was known or unknown to Mezzanine Borrower;
provided that, in each case, Mezzanine Borrower shall be relieved of its
obligation under this subsection if any of the matters referred to in clauses
(a) through (d) above did not occur (but need not have been discovered) prior to
the foreclosure of the Pledge. If any such action or other proceeding shall be
brought against Mezzanine Lender, upon written notice from Mezzanine Borrower to
Mezzanine Lender (given reasonably promptly following Mezzanine Lender's notice
to Mezzanine Borrower of such action or proceeding), Mezzanine Borrower shall be
entitled to assume the defense thereof, at Mezzanine Borrower's expense, with
counsel reasonably acceptable to Mezzanine Lender; provided,
however,
Mezzanine Lender may, at its own expense, retain separate counsel to participate
in such defense, but such participation shall not be deemed to give Mezzanine
Lender a right to control such defense, which right Mezzanine Borrower expressly
retains. Notwithstanding the foregoing, each Indemnified Party shall have the
right to employ separate counsel at Mezzanine Borrower's expense if, in the
reasonable opinion of legal counsel, a conflict or potential conflict exists
between the Indemnified Party and Mezzanine Borrower that would make such
separate representation advisable. Mezzanine Borrower shall have no obligation
to indemnify an Indemnified Party for damage or loss resulting from such
Indemnified Party's gross negligence or willful misconduct.

 

Section
12.5  Recourse
Nature of Certain Indemnifications

 

.
Notwithstanding anything to the contrary provided in this Agreement or in any
other Loan Document (Junior Mezzanine), the indemnification provided in
Section
12.4 shall be
fully recourse to Mezzanine Borrower and shall be independent of, and shall
survive, the discharge of the Indebtedness, the release of the Lien created by
the Pledge, and/or the conveyance of title to the Collateral to Mezzanine Lender
or any purchaser or designee in connection with a foreclosure of the Pledge or
conveyance in lieu of foreclosure.

 

90

 

	XIII.  	
      RESERVED

 

	XIV.  	
      RESERVED

 

	XV.  	
      ASSIGNMENTS
      AND PARTICIPATIONS.

 

Section
15.1  Assignment
and Acceptance

 

. At no
incremental cost or liability to Mezzanine Borrower, Mezzanine Lender may assign
to one or more Persons all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (Junior Mezzanine) (including, without
limitation, all or a portion of the Mezzanine Note); provided that the parties
to each such assignment shall execute and deliver to Mezzanine Lender, for its
acceptance and recording in the Register (as hereinafter defined), an Assignment
and Acceptance. In addition, at no incremental cost to Mezzanine Borrower,
Mezzanine Lender may participate to one or more Persons all or any portion of
its rights and obligations under this Agreement and the other Loan Documents
(Junior Mezzanine) (including without limitation, all or a portion of the
Mezzanine Note) utilizing such documentation to evidence such participation and
the parties' respective rights thereunder as Mezzanine Lender, in its sole
discretion, shall elect.

 

Section
15.2  Effect
of Assignment and Acceptance

 

. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in such Assignment and Acceptance, (i) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of Mezzanine Lender, as the case may be, hereunder and
such assignee shall be deemed to have assumed such rights and obligations, and
(ii) Mezzanine Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement and the
other Loan Documents (Junior Mezzanine) (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of Mezzanine Lender's rights
and obligations under this Agreement and the other Loan Documents (Junior
Mezzanine), Mezzanine Lender shall cease to be a party hereto) accruing from and
after the effective date of the Assignment and Acceptance, except with respect
to (A) any payments made by Mezzanine Borrower to Mezzanine Lender pursuant to
the terms of the Loan Documents (Junior Mezzanine) after the effective date of
the Assignment and Acceptance and (B) any letter of credit, cash deposit or
other deposits or security (other than the Liens of this Agreement and the
Pledge and the other Loan Documents (Junior 

 

91

Mezzanine))
delivered to or for the benefit of or deposited with German American Capital
Corporation, as Mezzanine Lender, for which German American Capital Corporation
shall remain responsible for the proper disposition thereof until such items are
delivered to a party who is qualified as an Approved Bank and agrees to hold the
same in accordance with the terms and provisions of the agreement pursuant to
which such items were deposited.

 

Section
15.3  Content

 

. By
executing and delivering an Assignment and Acceptance, Mezzanine Lender and the
assignee thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and Acceptance,
Mezzanine Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Documents (Junior
Mezzanine) or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, this
Agreement or any other Loan Documents (Junior Mezzanine) or any other instrument
or document furnished pursuant hereto or thereto; (ii) Mezzanine Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Mezzanine Borrower or the performance or observance by
Mezzanine Borrower of any of its obligations under any Loan Documents (Junior
Mezzanine) or any other instrument or document furnished pursuant thereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon
Mezzanine Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents (Junior
Mezzanine); (v) such assignee appoints and authorizes Mezzanine Lender to take
such action as agent on its behalf and to exercise such powers and discretion
under the Loan Documents (Junior Mezzanine) as are delegated to Mezzanine Lender
by the terms hereof together with such powers and discretion as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform, in
accordance with their terms, all of the obligations which by the terms of this
Agreement and the other Loan Documents (Junior Mezzanine) are required to be
performed by Mezzanine Lender.

 

Section
15.4  Register

 

.
Mezzanine Lender shall maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of Mezzanine Lender and each assignee pursuant to this
Article
XV and the
Principal Amount of the Loan owing to each such assignee from time to time (the
Register). The
entries in the Register shall, with respect to such assignees, be conclusive and
binding for all purposes, absent manifest error. The Register shall be available
for inspection by Mezzanine Borrower or any assignee pursuant to this
Article
XV at any
reasonable time and from time to time upon reasonable prior written
notice.

 

92

 

Section
15.5  Substitute
Notes

 

. Upon its
receipt of an Assignment and Acceptance executed by an assignee, together with
any Mezzanine Note or Mezzanine Notes subject to such assignment, Mezzanine
Lender shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit
J hereto,
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt written notice thereof to
Mezzanine Borrower. Within five (5) Business Days after its receipt of such
notice, Mezzanine Borrower, at Mezzanine Lender's own expense, shall execute and
deliver to Mezzanine Lender in exchange and substitution for the surrendered
Mezzanine Note or Mezzanine Notes a new Mezzanine Note to the order of such
assignee in an amount equal to the portion of the Loan assigned to it and a new
Mezzanine Note to the order of Mezzanine Lender in an amount equal to the
portion of the Loan retained by it hereunder. Such new Mezzanine Note or
Mezzanine Notes shall be in an aggregate Principal Amount equal to the aggregate
then outstanding principal amount of such surrendered Mezzanine Note or
Mezzanine Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the Mezzanine
Note (modified, however, to the extent necessary so as not to impose duplicative
or increased obligations on Mezzanine Borrower and to delete obligations
previously satisfied by Mezzanine Borrower). Notwithstanding the provisions of
this Article
XV,
Mezzanine Borrower shall not be responsible or liable for any additional taxes,
reserves, adjustments or other costs and expenses that are related to, or arise
as a result of, any transfer of the Loan or any interest or participation
therein that arise solely and exclusively from the transfer of the Loan or any
interest or participation therein or from the execution of the new Mezzanine
Note contemplated by this Section
15.5,
including, without limitation, any mortgage tax. Mezzanine Lender and/or the
assignees, as the case may be, shall from time to time designate one agent
through which Mezzanine Borrower shall request all approvals and consents
required or contemplated by this Agreement and on whose statements Mezzanine
Borrower may rely.

 

Section
15.6  Participations

 

. Each
assignee pursuant to this Article
XV may sell
participations to one or more Persons (other than Mezzanine Borrower or any of
its Affiliates) in or to all or a portion of its rights and obligations under
this Agreement and the other Loan Documents (Junior Mezzanine) (including,
without limitation, all or a portion of the Mezzanine Note held by it);
provided,
however, that
(i) such assignee's obligations under this Agreement and the other Loan
Documents (Junior Mezzanine) shall remain unchanged, (ii) such assignee shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) such assignee shall remain the holder of any such
Mezzanine Note for all purposes of this Agreement and the other Loan Documents
(Junior Mezzanine), and (iv) Mezzanine Borrower, Mezzanine Lender and the
assignees pursuant to this Article
XV shall
continue to deal solely and directly with such assignee in connection with such
assignee's rights and obligations under this Agreement and the other Loan
Documents (Junior Mezzanine). In the event that more than one (1) party
comprises Mezza

 

93

nine
Lender, Mezzanine Lender shall designate one party to act on the behalf of all
parties comprising Mezzanine Lender in providing approvals and all other
necessary consents under the Loan Documents (Junior Mezzanine) and on whose
statements Mezzanine Borrower may rely.

 

Section
15.7  Disclosure
of Information

 

. Any
assignee pursuant to this Article
XV may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Article
XV,
disclose to the assignee or participant or proposed assignee or participant, any
information relating to Mezzanine Borrower furnished to such assignee by or on
behalf of Mezzanine Borrower; provided,
however, that,
prior to any such disclosure, the assignee or participant or proposed assignee
or participant shall agree in writing for the benefit of Mezzanine Borrower to
preserve the confidentiality of any confidential information received by
it.

 

Section
15.8  Security
Interest in Favor of Federal Reserve Bank

 

.
Notwithstanding
any other provision set forth in this Agreement or any other Loan Document
(Junior Mezzanine), any assignee pursuant to this Article XV may at any time
create a security interest in all or any portion of its rights under this
Agreement or the other Loan Documents (Junior Mezzanine) (including, without
limitation, the amounts owing to it and the Mezzanine Note or Mezzanine Notes
held by it) in favor of any Federal Reserve Bank in accordance with Regulation A
of the Board of Governors of the Federal Reserve System.

 

	XVI.  	
      RESERVED

 

	XVII.  	
      DEFAULTS

 

Section
17.1  Event
of Default

 

(a)  Each of
the following events shall constitute an
event of default hereunder (an Event
of Default):

 

(i)  if (A)
the Indebtedness is not paid in full on the Maturity Date, (B) any Debt Service
is not paid in full on the applicable Payment Date, (C) any prepayment of
principal due under this Agreement or the Mezzanine Note is not paid when due,
(D) the Prepayment Fee is not paid when due, (E)  any deposit to the Junior
Mezzanine Account or any of the other Collateral Accounts is not made on the
required deposit date therefor; or (F) except as to any amount included in (A),
(B), (C), (D) and/or (E) of this clause (i), any other amount payable pursuant
to this Agreement, the Mezzanine
Note or any other Loan Document (Junior Mezzanine) is not paid in full when due
and payable in accordance with the provisions of the applicable Loan Document
(Junior Mezzanine), with such failure as described in subclauses (A), (B), (C),
(D), and (E) continuing for ten (10) Business Days after Mezzanine Lender
delivers written notice thereof to Mezzanine Borrower;

 

94

 

(ii)  subject
to Mortgage Borrower's right to contest as set forth in Section
7.3 of the
Loan Agreement (Mortgage), if any of the Impositions or Other Charges are not
paid prior to the imposition of any interest, penalty, charge or expense for the
non-payment thereof;

 

(iii)  if the
insurance policies required by Section
6.1 are not
kept in full force and effect, or if certificates of any of such insurance
policies are not delivered to Mezzanine Lender within ten (10) Business Days
following Mezzanine Lender's request therefor;

 

(iv)  if,
except as permitted pursuant to Article
VIII, (a) any
Transfer of any direct or indirect legal, beneficial or equitable interest in
all or any portion of the Collateral, (b) any Transfer of any direct or indirect
interest in Mortgage Borrower, Mezzanine Borrower, Guarantor, General Partner,
or other Person restricted by the terms of Article VIII, (c) any Lien or
encumbrance on all or any portion of the Collateral, (d) any pledge,
hypothecation, creation of a security interest in or other en-cumbrance of any
direct or indirect interests in Mezzanine Borrower, Mortgage Borrower, General
Partner or other Person restricted by the terms of Article VIII or (e) the
filing of a declaration of condominium with respect to the
Property;

 

(v)  if (i)
any representation or warranty made by Mezzanine Borrower in Section
4.1.23 shall
have been false or misleading in any material respect as of the date the
representation or warranty was made which incorrect, false or misleading
statement is not cured within thirty (30) days after receipt by Mezzanine
Borrower of notice from Mezzanine Lender in writing of such breach or (ii) if
any other representation or warranty made by Mezzanine Borrower herein by
Mezzanine Borrower, Guarantor, General Partner or any Affiliate of Mezzanine
Borrower in any other Loan Document (Junior Mezzanine), or in any report,
certificate (including, but not limited to, any certificate by Mezzanine
Borrower delivered in connection with the issuance of the Non-Consolidation
Opinion), financial statement or other instrument, agreement or document
furnished to Mezzanine Lender shall have been false or misleading in any
material respect as of the date the representation or warranty was made;
provided,
however, that if
such representation or warranty which was false or misleading in any material
respect is, by its nature, curable and is not reasonably likely to have a
Material Adverse Effect, and such representation or warranty was not, to the
Best of Mezzanine Borrower's Knowledge, false or misleading in any material
respect which made, then same shall not constitute an Event of Default unless
Mezzanine Borrower has not cured same within five (5) Business Days after
receipt by Mezzanine Borrower of notice from Mezzanine Lender in writing of such
breach;

 

(vi)  if
Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE Entity, or any
Guarantor shall make an assignment for the benefit of creditors;

 

95

 

(vii)  if a
receiver, liquidator or trustee shall be appointed for Mezzanine Borrower,
Mortgage Borrower, General Partner, any SPE Entity, or any Guarantor or if
Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE Entity, or any
Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or
any similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Mezzanine Borrower, Mortgage Borrower, General Partner, any
SPE Entity, or any Guarantor, or if any proceeding for the dissolution or
liquidation of Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE
Entity, or any Guarantor shall be instituted; provided,
however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Mezzanine Borrower, Mortgage Borrower, General Partner, any SPE
Entity, or any Guarantor upon the same not being discharged, stayed or dismissed
within ninety (90) days;

 

(viii)  if
Mezzanine Borrower, General Partner, any SPE Entity, or any Guarantor, as
applicable, Transfers its rights under this Agreement or any of the other Loan
Documents (Junior Mezzanine) or any interest herein or therein in contravention
of the Loan Documents (Junior Mezzanine);

 

(ix)  the
occurrence of (i) a Mortgage Default or Mortgage Event of Default, or (ii) a
Default or Event of Default under the Senior Mezzanine Loan or Intermediate
Mezzanine Loan.

 

(x)  with
respect to any term, covenant or provision set forth herein (other than the
other subsections of this Section
17.l) which
specifically contains a notice requirement or grace period, if Mezzanine
Borrower, General Partner, any SPE Entity, or any Guarantor shall be in default
under such term, covenant or condition after the giving of such notice or the
expiration of such grace period;

 

(xi)  if
Mezzanine Borrower, having notified Mezzanine Lender of its election to extend
the Maturity Date as set forth in Section
5 of the
Mezzanine Note, fails to deliver the Replacement Interest Rate Cap Agreement
(Junior Mezzanine) to Mezzanine Lender prior to the first day of the extended
term of the Loan and Mezzanine Borrower has not prepaid the Loan pursuant to the
terms of the Mezzanine Note prior to such first day of the extended
term;

 

(xii)  if
Mezzanine Borrower shall fail to comply with any covenants set forth in
Article
V or
Section
XI with
such failure continuing for ten (10) Business Days after Mezzanine Lender
delivers written notice thereof to Mezzanine Borrower;

 

(xiii)  if
Mortgage Borrower shall fail to comply with any covenants set forth in
Section
4 or
Section
3(d) or
Section
8 of the
Security Instrument (Mortgage) with such failure continuing for ten (10)
Business Days after Mortgage Lender delivers written notice thereof to Mortgage
Borrower;

 

96

 

(xiv)  Mezzanine
Borrower shall fail to deposit any sums required to be deposited in the Junior
Mezzanine Account or any Sub-Account thereof pursuant to Article
III when
due;

 

(xv)  if this
Agreement or any other Loan Document (Junior Mezzanine) or any Lien granted
hereunder or thereunder, in whole or in part, shall terminate or shall cease to
be effective or shall cease to be a legally valid, binding and enforceable
obligation of Mezzanine Borrower or any Guarantor, or any Lien securing the
Indebtedness shall, in whole or in part, cease to be a perfected first priority
Lien, subject to the Permitted Encumbrances (except in any of the foregoing
cases in accordance with the terms hereof or under any other Loan Document
(Junior Mezzanine) or by reason of any affirmative act of Mezzanine
Lender);

 

(xvi)  Intentionally
Omitted;

 

(xvii)  Intentionally
Omitted;

 

(xviii)  Intentionally
Omitted;

 

(xix)  if
Mezzanine Borrower, General Partner, any SPE Entity or Guarantor shall continue
to be in Default under any of the other terms, covenants or conditions of this
Agreement or of any Loan Document (Junior Mezzanine) not specified in
subsections
(i) to
(xvii) above,
for thirty (30) days after notice from Mezzanine Lender; provided,
however, that if
such Default is susceptible of cure but cannot reasonably be cured within such
thirty (30) day period and provided further that Mezzanine Borrower, General
Partner, any SPE Entity or Guarantor shall have commenced to cure such Default
within such thirty (30) day period and thereafter diligently proceeds to cure
the same, such thirty (30) day period shall be extended for such time as is
reasonably necessary for Mezzanine Borrower in the exercise of due diligence to
cure such Default, such additional period not to exceed ninety (90)
days.

 

(b)  Unless
waived in writing by Mezzanine Lender, upon the occurrence
and during the continuance of an Event of Default (other than an Event of
Default described in clauses (a)(vi), (vii) or (viii) above) Mezzanine Lender
may, without notice or demand, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan Documents (Junior
Mezzanine) or at law or in equity, take such action that Mezzanine Lender deems
advisable to protect and enforce its rights against Mezzanine Borrower and in
the Collateral, including, without limitation, (i) declaring immediately due and
payable the entire Principal Amount together with interest thereon and all other
sums due by Mezzanine Borrower under the Loan Documents (Junior Mezzanine), (ii)
collecting interest on the Principal Amount at the Default Rate whether or not
Mezzanine Lender elects to accelerate the Mezzanine Note and (iii) enforcing or
availing itself of any or all rights or remedies set forth in the Loan Documents
(Junior Mezzanine) against Mezzanine Borrower and the Collateral, including,
without limitation, all rights or remedies available at law or in equity; and
upon any Event of 

 

97

Default
described in subsections
(a)(vi) or
(a)(vii) above,
the Indebtedness and all other obligations of Mezzanine Borrower hereunder and
under the other Loan Documents (Junior Mezzanine) shall immediately and
automatically become due and payable, without notice or demand, and Mezzanine
Borrower hereby expressly waives any such notice or demand, anything contained
herein or in any other Loan Document (Junior Mezzanine) to the contrary
notwithstanding. The foregoing provisions shall not be construed as a waiver by
Mezzanine Lender of its right to pursue any other remedies available to it under
this Agreement, the Pledge or any other Loan Document (Junior Mezzanine). Any
payment hereunder may be enforced and recovered in whole or in part at such time
by one or more of the remedies provided to Mezzanine Lender in the Loan
Documents (Junior Mezzanine).

 

(c)  Upon the
occurrence of a Default or an Event of Default pursuant to Section
17.1(a)(ix),
Mezzanine Borrower shall cause Mortgage Borrower, Senior Mezzanine Borrower, or
Intermediate Mezzanine Borrower, as applicable, to deliver to Mezzanine Lender
within five (5) Business Days after the first to occur of (a) receipt by
Mortgage Borrower, Senior Mezzanine Borrower, or Intermediate Mezzanine Borrower
of notice of such Default or Event of Default from Mortgage Lender, Senior
Mezzanine Lender, or Intermediate Mezzanine Lender, or (b) the date Mortgage
Borrower obtains actual knowledge of the occurrence of such Default or Event of
Default, a detailed description of the actions to be taken by Mortgage Borrower,
Senior Mezzanine Borrower, or Junior Mezzanine Borrower, to cure such Default or
Event of Default and the dates by which each such action shall occur. Such
schedule shall be subject to the approval of Mezzanine Lender. Mezzanine
Borrower shall cause Mortgage Borrower, Senior Mezzanine Borrower, or
Intermediate Mezzanine Borrower, as applicable, to take all such actions as are
necessary to cure such Default or Event of Default by the date approved by
Mezzanine Lender and shall deliver to Mezzanine Lender not less frequently than
weekly thereafter written updates concerning the status of Mortgage Borrower's,
Senior Mezzanine Borrower's, or Intermediate Mezzanine Borrower's efforts to
cure such Default or Event of Default. Mezzanine Lender shall have the right,
but not the obligation, to pay any sums or to take any action which Mezzanine
Lender deems necessary or advisable to cure any default or alleged default under
the Loan Documents (Mortgage), Senior Mezzanine Loan Documents, or Intermediate
Mezzanine Loan Documents (whether or not Mortgage Borrower, Senior Mezzanine
Borrower, or Intermediate Mezzanine Borrower, as applicable, is undertaking
efforts to cure such default), and such payment or such action is hereby
authorized by Mezzanine Borrower, and any sum so paid and any expense incurred
by Mezzanine Lender in taking any such action shall be evidenced by this
Agreement and secured by this Agreement and the Pledge and shall be immediately
due and payable by Mezzanine Borrower to Mezzanine Lender with interest at the
Default Rate until paid. Mezzanine Borrower shall cause Mortgage Borrower,
Senior Mezzanine Borrower, or Intermediate Mezzanine Borrower to permit
Mezzanine Lender to enter upon the Collateral for the purpose of curing any
default or alleged default under the Loan Documents (Mortgage), Senior Mezzanine
Loan Documents, or Intermediate Mezzanine Loan Documents. Mezzanine Borrower
hereby transfers and assigns any excess proceeds arising from any foreclosure or
sale under power pursuant to the Loan Documents (Mortgage), Senior Mezzanine
Loan Documents, or Intermediate Mezzanine Loan Documents, or any instrument
evidencing the indebtedness secured thereby, and 

 

98

Mezzanine
Borrower hereby authorizes and directs the holder or holders of the Loan
Documents (Mortgage), Senior Mezzanine Loan Documents, or Intermediate Mezzanine
Loan Documents to pay such excess proceeds directly to Mezzanine Lender up to
the amount of the Obligations (Junior Mezzanine).

 

Section
17.2  Remedies

 

(a)  Unless
waived in writing by Mezzanine Lender, upon the occurrence
and during the continuance of an Event of Default, all or any one or more of the
rights, powers, privileges and other remedies available to Mezzanine Lender
against Mezzanine Borrower and Guarantor under this Agreement or any of the
other Loan Documents (Junior Mezzanine) executed and delivered by, or applicable
to, Mezzanine Borrower or at law or in equity may be exercised by Mezzanine
Lender at any time and from time to time, whether or not all or any of the
Indebtedness shall be declared due and payable, and whether or not Mezzanine
Lender shall have commenced any foreclosure proceeding or other action for the
enforcement of its rights and remedies under any of the Loan Documents (Junior
Mezzanine) with respect to the Collateral. Any such actions taken by Mezzanine
Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Mezzanine Lender may determine in its sole discretion, to the fullest extent
permitted by law, without impairing or otherwise affecting the other rights and
remedies of Mezzanine Lender permitted by law, equity or contract or as set
forth herein or in the other Loan Documents (Junior Mezzanine). Without limiting
the generality of the foregoing, Mezzanine Borrower agrees that if an Event of
Default is continuing (i) Mezzanine Lender shall not be subject to any one
action or election of remedies law or rule and (ii) all liens and other rights,
remedies or privileges provided to Mezzanine Lender shall remain in full force
and effect until Mezzanine Lender has exhausted all of its remedies against the
Collateral and this Agreement and the Pledge have been foreclosed, sold and/or
otherwise realized upon in satisfaction of the Indebtedness or the Indebtedness
has been paid in full.

 

(b)  Upon the
occurrence of any Event of Default, Mezzanine Lender may, but without any
obligation to do so and without notice to or demand on Mezzanine Borrower and
without releasing Mezzanine Borrower from any obligation hereunder, take any
action to cure such Event of Default. Mezzanine Lender may appear in, defend, or
bring any action or proceeding to protect its interests in the Collateral or to
foreclose its security interest under this Agreement and the Pledge or under any
of the other Loan Documents (Junior Mezzanine) or collect the
Indebtedness.

 

(c)  Upon the
occurrence and during the continuance of an Event of Default, with respect to
the Account Collateral (Junior Mezzanine), the Mezzanine Lender
may:

 

(i)  without
notice to Mezzanine Borrower, except as required by law, and at any time or from
time to time, charge, set-off and otherwise apply all or any part of the Account
Collateral (Junior Mezzanine) against the Obligations (Junior Mezzanine) or any
part thereof;

 

99

 

(ii)  in
Mezzanine Lender's sole discretion, at any time and from time to time, exercise
any and all rights and remedies available to it under this Agreement, and/or as
a secured party under the UCC;

 

(iii)  demand,
collect, take possession of or receipt for, settle, compromise, adjust, sue for,
foreclose or realize upon the Account Collateral (Junior Mezzanine) (or any
portion thereof) as Mezzanine Lender may determine in its sole discretion;
and

 

(iv)  take all
other actions provided in, or contemplated by, this Agreement.

 

(d)  With
respect to Mezzanine Borrower, the Account Collateral (Junior
Mezzanine), the Rate Cap Collateral (Junior Mezzanine) and the Collateral,
nothing contained herein or in any other Loan Document (Junior Mezzanine) shall
be construed as requiring Mezzanine Lender to resort to the Collateral for the
satisfaction of any of the Indebtedness, and Mezzanine Lender may seek
satisfaction out of the Collateral or any part thereof, in its absolute
discretion in respect of the Indebtedness. In addition, Mezzanine Lender shall
have the right from time to time to partially foreclose this Agreement and the
Pledge in any manner and for any amounts secured by this Agreement or the Pledge
then due and payable as determined by Mezzanine Lender in its sole discretion
including, without limitation, the following circumstances: (i) in the event
Mezzanine Borrower defaults beyond any applicable grace period in the payment of
one or more scheduled payments of principal or interest, Mezzanine Lender may
foreclose this Agreement and the Pledge to recover such delinquent payments, or
(ii) in the event Mezzanine Lender elects to accelerate less than the entire
outstanding principal balance of the Loan, Mezzanine Lender may foreclose this
Agreement and the Pledge to recover so much of the principal balance of the Loan
as Mezzanine Lender may accelerate and such other sums secured by this Agreement
or the Pledge as Mezzanine Lender may elect. Notwithstanding one or more partial
foreclosures, the Collateral shall remain subject to this Agreement and the
Pledge to secure payment of sums secured by this Agreement and the Pledge and
not previously recovered.

 

Section
17.3  Remedies
Cumulative; Waivers

 

.
The
rights, powers and remedies of Mezzanine Lender under this Agreement and the
Loan Documents (Junior Mezzanine) shall be cumulative and not exclusive of any
other right, power or remedy which Mezzanine Lender may have against Mezzanine
Borrower pursuant to this Agreement or the other Loan Documents (Junior
Mezzanine), or existing at law or in equity or otherwise. Mezzanine Lender's
rights, powers and remedies may be pursued singly, concurrently or otherwise, at
such time and in such order as Mezzanine Lender may determine in Mezzanine
Lender's sole discretion. No delay or omission to exercise any remedy, right or
power accruing upon an Event of Default shall impair any such remedy, right or
power or shall be construed as a waiver thereof, but any such remedy, right or
power may be exercised from time to time and as 

 

100

often as
may be deemed expedient. A waiver of one Default or Event of Default with
respect to Mezzanine Borrower or any Guarantor shall not be construed to be a
waiver of any subsequent Default or Event of Default by Mezzanine Borrower or
any Guarantor or to impair any remedy, right or power consequent
thereon.

 

Section
17.4  Costs
of Collection

 

. In the
event that after an Event of Default: (i) the Mezzanine Note or any of the Loan
Documents (Junior Mezzanine) is placed in the hands of an attorney for
collection or enforcement or is collected or enforced through any legal
proceeding; (ii) an attorney is retained to represent Mezzanine Lender in any
bankruptcy, reorganization, receivership, or other proceedings affecting
creditors' rights and involving a claim under this Agreement, the Mezzanine Note
or any of the Loan Documents (Junior Mezzanine); or (iii) an attorney is
retained to protect or enforce the lien or any of the terms of this Agreement,
the Pledge or any of the Loan Documents (Junior Mezzanine); then Mezzanine
Borrower shall pay to Mezzanine Lender all reasonable attorney's fees, costs and
expenses actually incurred in connection therewith, including costs of appeal,
together with interest on any judgment obtained by Mezzanine Lender at the
Default Rate.

 

Section
17.5  Distribution
of Collateral Proceeds

 

. In the
event that, following the occurrence and during the continuance of any Event of
Default, any monies are received in connection with the enforcement of any of
the Loan Documents (Junior Mezzanine), or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:

 

(a)  First, to
the payment of, or (as the case may be) the reimbursement of, Mezzanine Lender
for or in respect of all reasonable costs, expenses, disbursements and losses
which shall have been incurred or sustained by Mezzanine Lender to protect or
preserve the Collateral or in connection with the collection of such monies by
Mezzanine Lender (including without limitation, enforcement costs), for the
exercise, protection or enforcement by Mezzanine Lender of all or any of the
rights, remedies, powers and privileges of
Mezzanine Lender under this Agreement or any of the other Loan Documents (Junior
Mezzanine) or in respect of the Collateral or in support of any provision of
adequate indemnity to Mezzanine Lender against any taxes or liens which by law
shall have, or may have, priority over the rights of Mezzanine Lender to such
monies;

 

(b)  Second,
to all other Obligations (Junior Mezzanine) in such order or preference as
Mezzanine Lender shall determine in its sole and absolute
discretion;

 

(c)  Third,
the excess, if any, shall be returned to Mezzanine Borrower or to such other
Persons as are entitled thereto.

 

101

 

	XVIII.  	
      SPECIAL
      PROVISIONS

 

Section
18.1  Exculpation

 

18.1.1  Exculpated
Parties. Except
as set forth in this Section
18.1, the
Recourse Guaranty and the Environmental Indemnity, no personal liability shall
be asserted, sought or obtained by Mezzanine Lender or enforceable against (i)
Mezzanine Borrower, (ii) any Affiliate of Mezzanine Borrower, (iii) any Person
owning, directly or indirectly, any legal or beneficial interest in Mezzanine
Borrower or any Affiliate of Mezzanine Borrower or (iv) any direct or indirect
partner, member, principal, officer, Controlling Person, beneficiary, trustee,
advisor, shareholder, employee, agent, Affiliate or director of any Persons
described in clauses (i) through (iii) above (collectively, the Exculpated
Parties) and
none of the Exculpated Parties shall have any personal liability (whether by
suit, deficiency, judgment or otherwise) in respect of the Obligations (Junior
Mezzanine), this Agreement, the Pledge, the Mezzanine Note, the Collateral or
any other Loan Document (Junior Mezzanine), or the making, issuance or transfer
thereof, all such liability, if any, being expressly waived by Mezzanine Lender.
The foregoing limitation shall not in any way limit or affect Mezzanine Lender's
right to any of the following and Mezzanine Lender shall not be deemed to have
waived any of the following:

 

(a)  Foreclosure
of the lien of this Agreement and the Pledge in accordance
with the terms and provisions set forth herein and in the Pledge;

 

(b)  Action
against any other security at any time given to secure the payment of the
Mezzanine Note and the other Obligations (Junior Mezzanine);

 

(c)  Exercise
of any other remedy set forth in this Agreement or in any other Loan Document
(Junior Mezzanine) which is not inconsistent with the terms of this Section
18.1;

 

(d)  Any right
which Mezzanine Lender may have under Sections 506(a), 506(b), 1111(b) or any
other provisions of the Bankruptcy Code to file a claim for the full amount of
the Indebtedness secured by this Agreement and the Pledge or to require that all
collateral shall continue to secure all of the Indebtedness owing to Mezzanine
Lender in accordance with the Loan Documents (Junior Mezzanine); or

 

(e)  The
liability of any given Exculpated Party with respect to any separate written
guaranty or agreement given by any such Exculpated Party in connection with the
Loan (including, without limitation, the Recourse Guaranty and the Environmental
Indemnity).

 

18.1.2  Carveouts
From Non-Recourse Limitations.
Notwithstanding the foregoing or anything in this Agreement or any of the Loan
Documents (Junior Mezzanine) to the contrary, there shall at no time be any
limitation on Mezzanine Borrower's or any Guarantor's liability (except each
Guarantor's liability may be several in accordance with the terms of the
Recourse Guaranty) for the payment, in accordance 

 

102

with the
terms of this Agreement, the Mezzanine Note, the Pledge and the other Loan
Documents (Junior Mezzanine), to Mezzanine Lender of:

 

(a)  any loss,
damage, cost or expense incurred by or on behalf of Mezzanine
Lender by reason of (i) the fraudulent acts of Mezzanine Borrower or
intentional misrepresentations by Mezzanine Borrower or any Affiliate of
Mezzanine Borrower and/or (ii) the failure of Mortgage Borrower and/or
Operating Lessee (as applicable) to have a valid and subsisting certificate of
occupancy(s) for all or any portion of the Property if and to the extent such
certificate of occupancy(s) is required to comply with all Legal
Requirements;

 

(b)  Proceeds
which Mortgage Borrower, any Affiliate of Mortgage Borrower, Mezzanine Borrower
or any Affiliate of Mezzanine Borrower has received and to which Mezzanine
Lender is entitled pursuant to the terms of this Agreement or any of the Loan
Documents (Junior Mezzanine) to the extent the same have not been applied toward
payment of the Indebtedness, or used for the repair or replacement of the
Property in accordance with the Loan Agreement (Mortgage);

 

(c)  any
membership deposits and any security deposits and advance deposits which are not
delivered to Mortgage Lender upon a foreclosure of the Property or action in
lieu thereof, except to the extent any such deposits were applied or refunded in
accordance with the terms and conditions of any of the Leases or membership
agreement, as applicable, prior to the occurrence of the Event of Default that
gave rise to such foreclosure or action in lieu thereof;

 

(d)  any loss,
damage, cost or expense incurred by or on behalf of Mezzanine Lender by reason
of all or any part of the Collateral, the Account Collateral (Junior Mezzanine)
or the Rate Cap Collateral (Junior Mezzanine) being encumbered by a Lien (other
than this Agreement and the Pledge) in violation of the Loan Documents (Junior
Mezzanine);

 

(e)  after the
occurrence and during the continuance of an Event of Default, any Rents, issues,
profits and/or income collected by Mortgage Borrower, Mezzanine Borrower,
Operating Lessee, or any Affiliate of Mortgage Borrower, Mezzanine Borrower, or
Operating Lessee (other than Rents and credit card receivables sent to the
Collection Account pursuant to the Loan Agreement (Mortgage) or paid directly to
Mortgage Lender pursuant to any notice of direction delivered to tenants of the
Property or credit card companies) and not applied to payment of the Obligations
or used to pay normal and verifiable Operating Expenses of the Property or
otherwise applied in a manner permitted under the Loan Documents (Mortgage) and
Loan Documents (Junior Mezzanine);

 

(f)  any loss,
damage, cost or expense incurred by or on behalf of Mezzanine Lender by reason
of physical damage to the Property from intentional waste committed by Mortgage
Borrower, any Affiliate of Mortgage Borrower, Mezzanine Borrower or any
Affiliate of Mezzanine Borrower;

 

103

 

(g)  any loss,
damage, cost or expense incurred by or on behalf of Mezzanine Lender by reason
of the breach of any representation, warranty, covenant or indemnification
provision in the Environmental Indemnity (Junior Mezzanine) concerning
environmental laws, hazardous substances and asbestos and any indemnification of
Mezzanine Lender with respect thereto;

 

(h)  Intentionally
Omitted;

 

(i)  if
Mezzanine Borrower fails to obtain Mezzanine Lender's prior written consent to
any Transfer, as required by this Agreement or the Pledge;

 

(j)  any and
all liabilities, obligations, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees, causes of action, suits, claims,
demands and adjustments of any nature or description whatsoever) which may at
any time be imposed upon, incurred by or awarded against Mezzanine Lender, in
the event (and arising out of such circumstances) that (x) Mezzanine Borrower
should raise any defense, counterclaim and/or allegation in any foreclosure
action by Mezzanine Lender relative to the Property, the Account Collateral
(Junior Mezzanine) or the Rate Cap Collateral (Junior Mezzanine) or any part
thereof which is found by a court to have been raised by Mezzanine Borrower in
bad faith or to be without basis in fact or law, or (y) an involuntary case is
commenced against Mezzanine Borrower under the Bankruptcy Code with the
collusion of Mezzanine Borrower or any of its Affiliates or (z) an order for
relief is entered with respect to the Mezzanine Borrower under the Bankruptcy
Code through the actions of the Mezzanine Borrower or any of its Affiliates at a
time when the Mezzanine Borrower is able to pay its debts as they become due
unless Mezzanine Borrower and Guarantor shall have received an opinion of
independent counsel that the General Partner of Mezzanine Borrower has a
fiduciary duty to seek such an order for relief;

 

(k)  any loss,
damage, cost, or expense incurred by or on behalf of Lender by reason of
Mezzanine Borrower or General Partner failing to be since the date of its
formation, a Single Purpose Entity; and

 

(l)  reasonable
attorney's fees and expenses incurred by Mezzanine Lender in connection with any
successful suit filed on account of any of the foregoing clauses (a) through
(l).

 

	XIX.  	
      MISCELLANEOUS

 

Section
19.1  Survival

 

. This
Agreement and all covenants, indemnifications, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall
survive the making by Mezzanine Lender of the Loan and the execution and
delivery to Mezzanine Lender of the Mezzanine Note, and shall continue in full
force and effect so long as all or any of the Indebtedness is outstanding and
unpaid unless a longer period is expressly set forth herein or in the other Loan
Documents (Junior Mezzanine). 

 

104

Whenever
in this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party. All covenants,
promises and agreements in this Agreement, by or on behalf of Mezzanine
Borrower, shall inure to the benefit of the successors and assigns of Mezzanine
Lender. If Mezzanine Borrower consists of more than one person, the obligations
and liabilities of each such person hereunder and under the other Loan Documents
(Junior Mezzanine) shall be joint and several.

 

Section
19.2  Mezzanine
Lender's Discretion

 

. Whenever
pursuant to this Agreement, Mezzanine Lender exercises any right given to it to
approve or disapprove, or any arrangement or term is to be satisfactory to
Mezzanine Lender, the decision of Mezzanine Lender to approve or disapprove or
to decide whether arrangements or terms are satisfactory or not satisfactory
shall (except as is otherwise specifically herein provided) be in the sole
discretion of Mezzanine Lender and shall be final and conclusive.

 

Section
19.3  Governing
Law

 

(A) THIS
AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY
MEZZANINE LENDER AND ACCEPTED BY MEZZANINE BORROWER IN THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS (JUNIOR MEZZANINE)
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST
EXTENT PERMITTED BY LAW, MEZZANINE BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS AGREEMENT AND THE MEZZANINE NOTE AND THE OTHER LOAN DOCUMENTS
(JUNIOR MEZZANINE), AND THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
SECTION
5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(B) ANY
LEGAL SUIT, ACTION OR PROCEEDING AGAINST MEZZANINE LENDER OR MEZZANINE BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT MEZZANINE LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK, PURSUANT TO SECTION
5-1402
OF THE NEW YORK GENERAL OBLIGATIONS LAW AND MEZZANINE BORROWER WAIVES ANY
OBJECTIONS WHICH IT MAY NOW OR 

 

105

HEREAFTER
HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND MEZZANINE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. MEZZANINE
BORROWER DOES HEREBY DESIGNATE AND APPOINT:

 

CORPORATION
SERVICE COMPANY

 

80
STATE STREET

 

ALBANY,
NEW YORK 12207-2543

 

AS
ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND
ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS
UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO MEZZANINE BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON MEZZANINE BORROWER IN ANY SUCH
SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. MEZZANINE BORROWER (I)
SHALL GIVE PROMPT NOTICE TO MEZZANINE LENDER OF ANY CHANGED ADDRESS OF ITS
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE
A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH
SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR
SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.

 

Section
19.4  Modification,
Waiver in Writing

 

. No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, or of the Mezzanine Note, or of any other Loan
Document (Junior Mezzanine), or consent to any departure therefrom, shall in any
event be effective unless the same shall be in a writing signed by the party
against whom enforcement is sought and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which given.
Except as otherwise expressly provided herein, no notice to or demand on
Mezzanine Borrower shall entitle Mezzanine Borrower to any other or future
notice or demand in the same, similar or other circumstances.

 

Section
19.5  Delay
Not a Waiver

 

. Neither
any failure nor any delay on the part of Mezzanine Lender in insisting upon
strict performance of any term, condition, covenant or agreement, or exercising
any right, power, remedy or privilege hereunder, or under the Mezzanine Note or

 

106

under any
other Loan Document (Junior Mezzanine), or any other instrument given as
security therefor, shall operate as or constitute a waiver thereof, nor shall a
single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege. In particular, and not
by way of limitation, by accepting payment after the due date of any amount
payable under this Agreement, the Mezzanine Note or any other Loan Document
(Junior Mezzanine), Mezzanine Lender shall not be deemed to have waived any
right either to require prompt payment when due of all other amounts due under
this Agreement, the Mezzanine Note or the other Loan Documents (Junior
Mezzanine), or to declare a default for failure to effect prompt payment of any
such other amount.

 

Section
19.6  Notices

 

. All
notices, consents, approvals and requests required or permitted hereunder or
under any other Loan Document (Junior Mezzanine) shall be given in writing and
shall be effective for all purposes if hand delivered or sent by (a) certified
or registered United States mail, postage prepaid, return receipt requested, (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery or (c) telecopier (with answer back
acknowledged), addressed as follows (or at such other address and Person as
shall be designated from time to time by any party hereto, as the case may be,
in a written notice to the other parties hereto in the manner provided for in
this Section):

 

If to
Mezzanine Lender:

 

German
American Capital Corporation

 

60 Wall
Street, 10th Floor

 

New York
New York 10005

 

Attention:
Todd Sammann and General Counsel

 

Telecopy
No.: (212) 797-4489

 

Confirmation
No.: (212) 250-2748

 

With a
copy to:

 

Midland
Loan Services, Inc.

 

10851
Mastin Suite 700

 

Overland
Park, Kansas 66210

 

Attention:
Jan Sternin

 

Telecopy
No.: (913) 253-9001

 

Confirmation
No.: (913) 253-9216

 

107

 

With a
copy to:

 

Skadden,
Arps, Slate, Meagher & Flom LLP

 

Four
Times Square

 

New York,
New York 10036

 

Attention:
Harvey R. Uris, Esq.

 

Telecopy
No.: (917) 777-2212

 

Confirmation
No.: (212) 735-3000

 

If to
Mezzanine Borrower:

 

c/o CNL
Hotels Resorts, Inc.

 

Center at
City Commons

 

450 South
Orange Avenue

 

Orlando,
Florida 32801

 

Attention:
Senior Vice President

 

Telefax
No.: (407) 650-1085

 

and

 

c/o KSL
Resorts

 

50-905
Avenida Bermudas

 

La
Quinta, California 92253

 

Attention:
Mr. Eric Resnick, Chief Financial Officer

 

Telefax
No.: (760) 564-8005

 

With a
copy to:

 

Gibson
Dunn & Crutcher LLP

 

333 South
Grand Avenue

 

Los
Angeles, CA 90071-3197

 

Attention:
Michael F. Sfregola, Esq.

 

Telefax
No.: (213) 229-6558

 

and

 

Lowndes
Drosdick Doster Kantor & Reed, P.A.

 

215 North
Eola Avenue

 

Orlando,
Florida 32801

 

Attention:
Richard J. Fildes, Esq.

 

Telefax
No.: (407) 843-4444

 

All
notices, elections, requests and demands under this Agreement shall be effective
and deemed received upon the earliest of (i) the actual receipt of the same by
personal delivery or otherwise, (ii) one (1) Business Day after being deposited
with a nationally recognized overnight courier service as required above, (iii)
three (3) Business Days after 

 

108

being
deposited in the United States mail as required above or (iv) on the day sent if
sent by facsimile with confirmation on or before 5:00 p.m. New York time on any
Business Day or on the next Business Day if so delivered after 5:00 p.m. New
York time or on any day other than a Business Day. Rejection or other refusal to
accept or the inability to deliver because of changed address of which no notice
was given as herein required shall be deemed to be receipt of the notice,
election, request, or demand sent.

 

Section
19.7  TRIAL
BY JURY

 

.
MEZZANINE BORROWER AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER IT, HEREBY
EXPRESSLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS
AGREEMENT, THE PLEDGE, THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT (JUNIOR
MEZZANINE), INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION
THEREOF OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT,
THE PLEDGE, THE MEZZANINE NOTE OR ANY OTHER LOAN DOCUMENT (JUNIOR MEZZANINE) (AS
NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE; AND MEZZANINE BORROWER HEREBY AGREES AND CONSENTS THAT AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT HERETO TO THE WAIVER OF ANY RIGHT TO TRIAL BY JURY.
MEZZANINE BORROWER ACKNOWLEDGES THAT IT HAS CONSULTED WITH LEGAL COUNSEL
REGARDING THE MEANING OF THIS WAIVER AND ACKNOWLEDGES THAT THIS WAIVER IS AN
ESSENTIAL INDUCEMENT FOR THE MAKING OF THE LOAN. THIS WAIVER SHALL SURVIVE THE
REPAYMENT OF THE LOAN.

 

Section
19.8  Headings

 

. The
Article and/or Section headings and the Table of Contents in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

 

Section
19.9  Severability

 

. Wherever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

 

109

 

Section
19.10  Preferences

 

. To the
extent Mezzanine Borrower makes a payment or payments to Mezzanine Lender, which
payment or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
proceeds received, the obligations hereunder or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such
payment or proceeds had not been received by Mezzanine Lender.

 

Section
19.11  Waiver
of Notice

 

.
Mezzanine Borrower shall not be entitled to any notices of any nature whatsoever
from Mezzanine Lender except with respect to matters for which this Agreement or
the other Loan Documents (Junior Mezzanine) specifically and expressly provide
for the giving of notice by Mezzanine Lender to Mezzanine Borrower and except
with respect to matters for which Mezzanine Borrower is not, pursuant to
applicable Legal Requirements, permitted to waive the giving of notice.
Mezzanine Borrower hereby expressly waives the right to receive any notice from
Mezzanine Lender with respect to any matter for which this Agreement or the
other Loan Documents (Junior Mezzanine) do not specifically and expressly
provide for the giving of notice by Mezzanine Lender to Mezzanine
Borrower.

 

Section
19.12  Expenses;
Indemnity

 

(a)  Except as
may be otherwise expressly
set forth in the Loan Documents (Junior Mezzanine), Mezzanine Borrower covenants
and agrees to pay or, if Mezzanine Borrower fails to pay, to reimburse,
Mezzanine Lender upon receipt of written notice from Mezzanine Lender for all
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Mezzanine Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Loan Documents (Junior Mezzanine) and the consummation of the transactions
contemplated hereby and thereby and all the costs of furnishing all opinions by
counsel for Mezzanine Borrower (including without limitation any opinions
requested by Mezzanine Lender pursuant to this Agreement); (ii) Mezzanine
Lender's ongoing performance of and compliance with all agreements and
conditions contained in this Agreement and the other Loan Documents (Junior
Mezzanine) on its part to be performed or complied with after the Closing Date;
(iii) the negotiation, preparation, execution, delivery and administration of
any consents, amendments, waivers or other modifications to this Agreement and
the other Loan Documents (Junior Mezzanine) and any other documents or matters
as required herein or under the other Loan Documents (Junior Mezzanine); (iv)
securing Mezzanine Borrower's compliance with any requests made pursuant to the
provisions of this Agreement; (v) the filing and recording fees and expenses,
mortgage recording taxes, title insurance and reasonable fees and expenses of
counsel for providing to Mezzanine 

 

110

Lender
all required legal opinions, and other similar expenses incurred in creating and
perfecting the Lien in favor of Mezzanine Lender pursuant to this Agreement and
the other Loan Documents (Junior Mezzanine); (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or
affecting Mezzanine Borrower, this Agreement, the other Loan Documents (Junior
Mezzanine), the Property, or any other security given for the Loan; (vii)
enforcing any obligations of or collecting any payments due from Mezzanine
Borrower under this Agreement, the other Loan Documents (Junior Mezzanine) or
with respect to the Collateral or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a work-out or of any insolvency or bankruptcy proceedings and (viii)
procuring insurance policies pursuant to Section
6.1.11;
provided,
however, that
Mezzanine Borrower shall not be liable for the payment of any such costs and
expenses to the extent the same arise (A) by reason of the gross negligence,
illegal acts, fraud or willful misconduct of Mezzanine Lender or (B) in
connection with any action taken under Article IV, other than the Mezzanine
Borrower's internal administrative costs. Any cost and expenses due and payable
to Mezzanine Lender may be paid from any amounts in the Junior Mezzanine Account
if same are not paid by Mezzanine Borrower within ten (10) Business Days after
receipt of written notice from Mezzanine Lender.

 

(b)  Subject
to the non-recourse provisions of Section
18.1,
Mezzanine Borrower shall protect, indemnify and save harmless Mezzanine Lender,
and all officers, directors, stockholders, members, partners, employees, agents,
successors and assigns thereof (collectively, the Indemnified
Parties) from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including all reasonable attorneys' fees and
expenses actually incurred) imposed upon or incurred by or asserted against the
Indemnified Parties, the Collateral or the Property or any part of its interest
therein, by reason of the occurrence or existence of any of the following (to
the extent Proceeds payable on account of the following shall be inadequate; it
being understood that in no event will the Indemnified Parties be required to
actually pay or incur any costs or expenses as a condition to the effectiveness
of the foregoing indemnity) prior to (i) the acceptance by Mezzanine Lender or
its designee of a deed-in-lieu of foreclosure with respect to the Collateral, or
(ii) an Indemnified Party or its designee taking possession or control of the
Collateral or (iii) the foreclosure of the Pledge, except to the extent caused
by the willful misconduct or gross negligence of the Indemnified Parties (other
than such willful misconduct or gross negligence imputed to the Indemnified
Parties because of their interest in the Property): (1) ownership of Mezzanine
Borrower's interest in the Property, or any interest therein, or receipt of any
Rents or other sum therefrom, (2) any accident, injury to or death of any
persons or loss of or damage to Property occurring on or about the Property or
any Appurtenances thereto, (3) any design, construction, operation, repair,
maintenance, use, non-use or condition of the Property or Appurtenances thereto,
including claims or penalties arising from violation of any Legal Requirement or
Insurance Requirement, as well as any claim based on any patent or latent
defect, whether or not discoverable by Mezzanine Lender, any claim the insurance
as to which is inadequate, and any Environmental Claim, (4) any Default under
this Agreement or any of the other Loan Documents (Junior Mezzanine) or any
failure on the part of Mezzanine Borrower to perform or comply or to cause
Mortgage Borrower to perform or comply with 

 

111

any of
the terms of any Lease within the applicable notice or grace periods, (5) any
performance of any labor or services or the furnishing of any materials or other
Property in respect of the Property or any part thereof, (6) any negligence or
tortious act or omission on the part of Mezzanine Borrower or any of its agents,
contractors, servants, employees, sublessees, licensees or invitees, (7) any
contest referred to in Section
7.3 of the
Loan Agreement (Mortgage), (8) any obligation or undertaking relating to the
performance or discharge of any of the terms, covenants and conditions of the
landlord contained in the Leases, or (9) except as may be expressly limited
herein, the presence at, in or under the Property or the Improvements of any
Hazardous Materials in violation of any Environmental Law. Any amounts the
Indemnified Parties are legally entitled to receive under this Section which are
not paid within fifteen (15) Business Days after written demand therefor by the
Indemnified Parties or Mezzanine Lender, setting forth in reasonable detail the
amount of such demand and the basis therefor, shall bear interest from the date
of demand at the Default Rate, and shall, together with such interest, be part
of the Indebtedness and secured by this Agreement and the Pledge. In case any
action, suit or proceeding is brought against the Indemnified Parties by reason
of any such occurrence, Mezzanine Borrower shall at Mezzanine Borrower's expense
resist and defend such action, suit or proceeding or will cause the same to be
resisted and defended by counsel at Mezzanine Borrower's reasonable expense for
the insurer of the liability or by counsel designated by Mezzanine Borrower
(unless reasonably disapproved by Mezzanine Lender promptly after Mezzanine
Lender has been notified of such counsel); provided,
however, that
nothing herein shall compromise the right of Mezzanine Lender (or any
Indemnified Party) to appoint its own counsel at Mezzanine Borrower's expense
for its defense with respect to any action which in its reasonable opinion
presents a conflict or potential conflict between Mezzanine Lender and Mezzanine
Borrower that would make such separate representation advisable; provided
further that if Mezzanine Lender shall have appointed separate counsel pursuant
to the foregoing, Mezzanine Borrower shall not be responsible for the expense of
additional separate counsel of any Indemnified Party unless in the reasonable
opinion of Mezzanine Lender a conflict or potential conflict exists between such
Indemnified Party and Mezzanine Lender. So long as Mezzanine Borrower is
resisting and defending such action, suit or proceeding as provided above in a
prudent and commercially reasonable manner, Mezzanine Lender and the Indemnified
Parties shall not be entitled to settle such action, suit or proceeding without
Mezzanine Borrower's consent which shall not be unreasonably withheld or
delayed, and claim the benefit of this Section with respect to such action, suit
or proceeding and Mezzanine Lender agrees that it will not settle any such
action, suit or proceeding without the consent of Mezzanine Borrower;
provided,
however, that if
Mezzanine Borrower is not diligently defending such action, suit or proceeding
in a prudent and commercially reasonable manner as provided above, and Mezzanine
Lender has provided Mezzanine Borrower with thirty (30) days' prior written
notice, or shorter period if mandated by the requirements of applicable law, and
opportunity to correct such determination, Mezzanine Lender may settle such
action, suit or proceeding and claim the benefit of this Section
19.12 with
respect to settlement of such action, suit or proceeding. Any Indemnified

 

112

Party
will give Mezzanine Borrower prompt notice after such Indemnified Party obtains
actual knowledge of any potential claim by such Indemnified Party for
indemnification hereunder. The Indemnified Parties shall not settle or
compromise any action, proceeding or claim as to which it is indemnified
hereunder without notice to Mezzanine Borrower.

 

Section
19.13  Exhibits
and Schedules Incorporated

 

. The
Exhibits and Schedules annexed hereto are hereby incorporated herein as a part
of this Agreement with the same effect as if set forth in the body
hereof.

 

Section
19.14  Offsets,
Counterclaims and Defenses

 

. Any
assignee of Mezzanine Lender's interest in and to this Agreement, the Mezzanine
Note and the other Loan Documents (Junior Mezzanine) shall take the same free
and clear of all offsets, counterclaims or defenses which are unrelated to such
documents which Mezzanine Borrower may otherwise have against any assignor of
such documents, and no such unrelated counterclaim or defense shall be
interposed or asserted by Mezzanine Borrower in any action or proceeding brought
by any such assignee upon such documents and any such right to interpose or
assert any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Mezzanine Borrower.

 

Section
19.15  Liability
of Assignees of Mezzanine Lender

 

. No
assignee of Mezzanine Lender shall have any personal liability, directly or
indirectly, under or in connection with this Agreement or any other Loan
Document (Junior Mezzanine) or any amendment or amendments hereto made at any
time or times, heretofore or hereafter, any different than the liability of
Mezzanine Lender hereunder. In addition, no assignee shall have at any time or
times hereafter any personal liability, directly or indirectly, under or in
connection with or secured by any agreement, lease, instrument, encumbrance,
claim or right affecting or relating to the Property or to which the Property is
now or hereafter subject any different than the liability of Mezzanine Lender
hereunder. The limitation of liability provided in this Section
19.15 is (i)
in addition to, and not in limitation of, any limitation of liability applicable
to the assignee provided by law or by any other contract, agreement or
instrument, and (ii) shall not apply to any assignee's gross negligence or
willful misconduct.

 

Section
19.16  No
Joint Venture or Partnership; No Third Party Beneficiaries

 

(a)  Mezzanine
Borrower and Mezzanine Lender intend that the relationships
created hereunder and under the other Loan Documents (Junior Mezzanine) be
solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Mezzanine Borrower and Mezzanine Lender nor to grant
Mezzanine Lender any interest in the Collateral other than that of Mezzanine
Lender.

 

113

 

(b)  This
Agreement and the other Loan Documents (Junior Mezzanine) are solely for the
benefit of Mezzanine Lender and Mezzanine Borrower and nothing contained in this
Agreement or the other Loan Documents (Junior Mezzanine) shall be deemed to
confer upon anyone other than Mezzanine Lender and Mezzanine Borrower any right
to insist upon or to enforce the performance or observance of any of the
obligations contained herein or therein. All conditions to the obligations of
Mezzanine Lender to make the Loan hereunder are imposed solely and exclusively
for the benefit of Mezzanine Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Mezzanine Lender will refuse to make the Loan in the
absence of strict compliance with any or all thereof and no other Person shall
under any circumstances be deemed to be a beneficiary of such conditions, any or
all of which may be freely waived in whole or in part by Mezzanine Lender if, in
Mezzanine Lender's sole discretion, Mezzanine Lender deems it advisable or
desirable to do so.

 

Section
19.17  Publicity

 

. All news
releases, publicity or advertising by Mezzanine Borrower or its Affiliates
through any media intended to reach the general public which refers to the Loan
Documents (Junior Mezzanine) or the financing evidenced by the Loan Documents
(Junior Mezzanine), to Mezzanine Lender, or any of its Affiliates shall be
subject to the prior written approval of Mezzanine Lender.

 

Section
19.18  Waiver
of Marshalling of Assets

 

. To the
fullest extent permitted by law, Mezzanine Borrower, for itself and its
successors and assigns, waives all rights to a marshalling of the assets of
Mezzanine Borrower, Mezzanine Borrower's shareholders and others with interests
in Mezzanine Borrower and of the Collateral, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the right
of Mezzanine Lender under the Loan Documents (Junior Mezzanine) to a sale of the
Collateral for the collection of the Indebtedness without any prior or different
resort for collection or of the right of Mezzanine Lender to the payment of the
Indebtedness out of the net proceeds of the Collateral in preference to every
other claimant whatsoever.

 

Section
19.19  Waiver
of Counterclaim and other Actions

 

.
Mezzanine Borrower hereby expressly and unconditionally waives, in connection
with any suit, action or proceeding brought by Mezzanine Lender on this
Agreement, the Mezzanine Note, the Pledge or any Loan Document (Junior
Mezzanine), any and every right it may have to (i) interpose any counterclaim
therein (other than a counterclaim which can only be asserted in the suit,
action or proceeding brought by Mezzanine Lender on this Agreement, the
Mezzanine Note, the Pledge or any Loan 

 

114

Document
(Junior Mezzanine) and cannot be maintained in a separate action) and (ii) have
any such suit, action or proceeding consolidated with any other or separate
suit, action or proceeding.

 

Section
19.20  Conflict;
Construction of Documents; Reliance

 

. In the
event of any conflict between the provisions of this Agreement and any of the
other Loan Documents (Junior Mezzanine), the provisions of this Agreement shall
control. The parties hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and execution of the Loan
Documents (Junior Mezzanine) and that such Loan Documents (Junior Mezzanine)
shall not be subject to the principle of construing their meaning against the
party which drafted same. Mezzanine Borrower acknowledges that, with respect to
the Loan, Mezzanine Borrower shall rely solely on its own judgment and advisors
in entering into the Loan without relying in any manner on any statements,
representations or recommendations of Mezzanine Lender or any parent, subsidiary
or Affiliate of Mezzanine Lender. Mezzanine Lender shall not be subject to any
limitation whatsoever in the exercise of any rights or remedies available to it
under any of the Loan Documents (Junior Mezzanine) or any other agreements or
instruments which govern the Loan by virtue of the ownership by it or any
parent, subsidiary or Affiliate of Mezzanine Lender of any equity interest any
of them may acquire in Mezzanine Borrower, and Mezzanine Borrower hereby
irrevocably waives the right to raise any defense or take any action on the
basis of the foregoing with respect to Mezzanine Lender's exercise of any such
rights or remedies. Mezzanine Borrower acknowledges that Mezzanine Lender
engages in the business of real estate financings and other real estate
transactions and investments which may be viewed as adverse to or competitive
with the business of Mezzanine Borrower or its Affiliates.

 

Section
19.21  Prior
Agreements

 

. This
Agreement and the other Loan Documents (Junior Mezzanine) contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between such
parties, whether oral or written, are superseded by the terms of this Agreement
and the other Loan Documents (Junior Mezzanine) and unless specifically set
forth in a writing contemporaneous herewith the terms, conditions and provisions
of any and all such prior agreements do not survive execution of this
Agreement.

 

Section
19.22  Counterparts

 

. This
Agreement may be executed in multiple counterparts, each of which shall
constitute an original, but all of which shall constitute one
document.

 

Section
19.23  Disclosure

 

.
Notwithstanding anything to the contrary contained in Sections
15.1 and
15.6, in
connection with the transactions contemplated by such Sections, in no event
shall Mezzanine Lender deliver financial information with respect to the
Collateral, the Property or the Guarantor to the Persons listed in Schedule
III, without
first obtaining 

 

115

Mezzanine
Borrower's prior written consent; provided however,
Mezzanine Borrower's consent shall not be required with respect to Morgan
Stanley, Lehman Brothers, The Equitable Life Assurance Society of the United
States, Teachers Insurance and Annuity Association and the state of Ohio Pension
Fund if Mezzanine Lender delivers a confidentiality agreement from any of such
Persons reasonably acceptable to Mezzanine Borrower.

 

116

 

IN
WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed by their duly
authorized representatives, all as of the day and year first above
written.

 

MEZZANINE
BORROWER:

CNL HOTEL
DEL JUNIOR MEZZ PARTNERS, LP, a Delaware limited partnership

By: CNL Hotel
Del Junior Mezz Partners GP, 

LLC, a
Delaware limited liability company,

its
General Partner

By: /s/
John X. Brady    

Name: John X.
Brady

Title:  Vice
President

By
signing below, General Partner agrees that in consideration of the substantial
benefit that it will receive from Lender making the Loan to Borrower, General
Partner agrees to comply (or permit Mezzanine Borrower to take such action
necessary to comply) with all of the terms, conditions, obligations and
restrictions affecting General Partner set forth herein:

 

GENERAL
PARTNER:

CNL HOTEL
DEL JUNIOR MEZZ PARTNERS GP, LLC, a Delaware limited liability
company

By: /s/
John X. Brady   

Name: John X.
Brady

Title:  Vice
President

[Mezzanine
Lender's signature appears on following page]

MEZZANINE
LENDER:

GERMAN
AMERICAN CAPITAL 

CORPORATION,
a Maryland corporation

By: /s/
Todd O. Sammann  

Name: Todd O.
Sammann

Title:
 Vice
President

By: /s/
Eric M. Schwartz  

Name: Eric M.
Schwartz 

Title:  Vice
President

10-QExhibit 10.114

10-Q

Exhibit
10.114

 

 

INDEMNIFICATION
AGREEMENT

 

THIS
INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into as of the 13th
day of May, 2005, by and among CNL Hotels & Resorts, Inc., a Maryland
corporation (the “Company”) and _______________, an officer of the Company (the
“Indemnitee”).

 

WITNESSETH:

 

WHEREAS,
the interpretation of ambiguous statutes, regulations, articles of incorporation
and bylaws regarding indemnification of directors and officers may be too
uncertain to provide such directors and officers with adequate notice of the
legal, financial and other risks to which they may be exposed by virtue of their
service as such; and

 

 

WHEREAS,
damages sought against directors and officers in shareholder or similar
litigation by class action plaintiffs may be substantial, and the costs of
defending such actions and of judgments in favor of’ plaintiffs or of settlement
therewith may be prohibitive for individual directors and officers, without
regard to the merits of a particular action and without regard to the
culpability of, or the receipt of improper personal benefit by, any named
director or officer to the detriment of the corporation; and

 

 

WHEREAS,
the issues in controversy in such litigation usually relate to the knowledge,
motives and intent of the director or officer, who may be the only person with
firsthand knowledge of essential facts or exculpating circumstances who is
qualified to testify in his defense regarding matters of such a subjective
nature, and the long period of time which may elapse before final disposition of
such litigation may impose undue hardship and burden on a director or officer or
his estate in launching and maintaining a proper and adequate defense of himself
or his estate against claims for damages; and

 

 

WHEREAS,
the Company is organized under the Maryland General Corporation Law (the “MGCL”)
and Section 2-418 of the MGCL empowers corporations to indemnify and advance
expenses of litigation to a person serving as a director, officer, employee or
agent of a corporation and to persons serving at the request of the corporation,
while a director of a corporation, as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan, and further provides
that the indemnification and advancement of expenses set forth in said section,
subject to certain limitations are not “exclusive of any other rights, by
indemnification or otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of stockholders or directors, an agreement or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office”; and

 

 

 

 

WHEREAS,
the Articles of Incorporation of the Company, as they may be amended or amended
and restated from time to time (the “Articles of Incorporation”), provide that
the Company shall indemnify and hold harmless directors, advisors, or
affiliates, as such terms are defined in the Articles of Incorporation;
and

 

 

WHEREAS,
the Board of Directors of the Company (the “Board”) has concluded that it is
reasonable and prudent for the Company contractually to obligate itself to
indemnify in a reasonable and adequate manner the Indemnitee and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against Indemnitee for Indemnitee’s decisions and actions as a director
and/or officer of the Company and any of its subsidiaries or affiliates, and as
an officer of CNL Hospitality Corp., advisor to the Company (“CHC”)
(collectively, “Affiliates”) to the extent that such decisions and actions are
performed on behalf of the Company.

 

 

NOW,
THEREFORE, in consideration of the foregoing, and of other good and valuable
consideration, the receipt and sufficiency of which is acknowledged by each of
the parties hereto, the parties agree as follows:

 

 

I.
  

DEFINITIONS

 

For
purposes of this Agreement, the following terms shall have the meanings set
forth below:

 

 

A.  “Board” shall
mean the Board of Directors of the Company.

 

B.  “Change
in Control” shall
mean a change in the ownership or power to direct the Voting Securities of the
Company or the acquisition by a person not affiliated with the Company of the
ability to direct the management of the Company.

 

C.  “Corporate
Status” shall
mean the status of a person who is or was a director or officer of the Company
or any of the Affiliates, or a member of any committee of the Board, and the
status of a person who, while a director or officer of the Company, is or was
serving at the request of the Company as a director, officer, partner (including
service as a general partner of any limited partnership), trustee, employee, or
agent of another foreign or domestic corporation, partnership, joint venture,
trust, other incorporated or unincorporated entity or enterprise or employee
benefit plan.

 

D.  “Disinterested
Director” shall
mean a director of the Company who neither is nor was a party to the Proceeding
in respect of which indemnification is being sought by the
Indemnitee.

2

 

 

E.  “Expenses” shall
mean without limitation expenses of Proceedings including all attorneys’ fees,
retainers, court costs, transcript costs, fees of experts, investigation fees
and expenses, accounting and witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees
and all other disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating or being or preparing to be a witness in a
Proceeding.

 

F.  “Good
Faith Act or Omission” shall
mean an act or omission of the Indemnitee reasonably believed by the Indemnitee
to be in or not opposed to the best interests of the Company or the Affiliates
and other than (i) one involving negligence or misconduct, or, if the Indemnitee
is an independent director, one involving gross negligence or willful
misconduct; (ii) one that was material to the loss or liability and that was
committed in bad faith or that was the result of active or deliberate
dishonesty; (iii) one from which the Indemnitee actually received an improper
personal benefit in money, property or services; or (iv) in the case of a
criminal Proceeding, one as to which the Indemnitee had cause to believe his
conduct was unlawful.

 

G.  “Liabilities” shall
mean liabilities of any type whatsoever, including, without limitation, any
judgments, fines, excise taxes and penalties under the Employee Retirement
Income Security Act of 1974, as amended, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties or
amounts paid in settlement) in connection with the investigation, defense,
settlement or appeal of any Proceeding or any claim, issue or matter
therein.

 

H.  “Proceeding” shall
mean any threatened, pending or completed action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
actual, threatened or completed proceeding whether civil, criminal,
administrative or investigative, or any appeal therefrom.

 

I.  “Voting
Securities” shall
mean any securities of the Company that are entitled to vote generally in the
election of directors.

 

II.
  

TERMINATION
OF AGREEMENT

 

This
Agreement shall be retroactive to Indemnitee’s first date of service as a
director and/or officer of the Company and any of its Affiliates, to the extent
that Indemnitee’s decisions and/or actions are performed on behalf of the
Company, and shall continue until, and terminate upon the later to occur of (i)
the death of the Indemnitee; (ii) the final termination of all Proceedings
(including possible Proceedings) in respect of which the Indemnitee is granted
rights of indemnification or advancement of Expenses hereunder and of any
proceeding commenced by the Indemnitee regarding the interpretation or
enforcement of this Agreement; or (iii) the amendment of the Articles of
Incorporation of the Company to expressly include an indemnity of its officers
to the extent herein provided.

3

 

III.
  

SERVICE
BY INDEMNITEE, NOTICE OF 

PROCEEDINGS,
DEFENSE OF CLAIMS

 

A.  Notice
of Proceedings. The
Indemnitee agrees to notify the Company promptly in writing upon being served
with any summons, citation, subpoena, complaint, indictment, information or
other document relating to any Proceeding or matter which may be subject to
indemnification or advancement of Expenses covered hereunder, but the
Indemnitee’s omission to so notify the Company shall not relieve the Company
from any liability which it may have to the Indemnitee under this
Agreement.

 

B.  Defense
of Claims. The
Company will be entitled to participate, at its own expense, in any Proceeding
of which it has notice. The Company jointly with any other indemnifying party
similarly notified of any Proceeding will be entitled to assume the defense of
the Indemnitee therein, with counsel reasonably satisfactory to the Indemnitee;
provided, however, that the Company shall not be entitled to assume the defense
of the Indemnitee in any Proceeding if there has been a Change in Control or if
the Indemnitee has reasonably concluded that there may be a conflict of interest
between the Company and the Indemnitee with respect to such Proceeding. The
Company will not be liable to the Indemnitee under this Agreement for any
Expenses incurred by the Indemnitee in connection with the defense of any
Proceeding, other than reasonable costs of investigation or as otherwise
provided below, after notice from the Company to the Indemnitee of its election
to assume the defense of the Indemnitee therein. The Indemnitee shall have the
right to employ his own counsel in any such Proceeding, but the fees and
expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Company; (ii) the Indemnitee shall have reasonably concluded that counsel
employed by the Company may not adequately represent the Indemnitee and shall
have so informed the Company; or (iii) the Company shall not in fact have
employed counsel to assume the defense of the Indemnitee in such Proceeding or
such counsel shall not, in fact, have assumed such defense or such counsel shall
not be acting, in connection therewith, with reasonable diligence; and in each
such case the fees and expenses of the Indemnitee’s counsel shall be advanced by
the Company in accordance with this Agreement.

 

C.  Settlement
of Claims. The
Company shall not settle any Proceeding in any manner which would impose any
liability, penalty or limitation on the Indemnitee without the written consent
of the Indemnitee; provided, however, that the Indemnitee will not unreasonably
withhold or delay consent to any proposed settlement. The Company shall not be
liable to indemnify the Indemnitee under this Agreement or otherwise for any
amounts paid in settlement of any Proceeding effected by the Indemnitee without
the Company’s written consent, which consent shall not be unreasonably withheld
or delayed.

4

IV.
  

INDEMNIFICATION

 

A.  In
General. Upon
the terms and subject to the conditions set forth in this Agreement, the Company
shall hold harmless and indemnify the Indemnitee against any and all Liabilities
actually incurred by or for him in connection with any Proceeding (whether the
Indemnitee is or becomes a party, a witness or otherwise is a participant in any
role) to the fullest extent required or permitted by the Articles of
Incorporation and by applicable law in effect on the date hereof and to such
greater extent as applicable law may hereafter from time to time permit. For all
matters for which the Indemnitee is entitled to indemnification under this
Article IV, the Indemnitee shall be entitled to advancement of Expenses in
accordance with Article V hereof.

 

B.  Proceeding
Other Than a Proceeding by or in the Right of the Company. If the
Indemnitee was or is a party or is threatened to be made a party to any
Proceeding (whether the Indemnitee is or becomes a party, a witness or otherwise
is a participant in any role) (other than a Proceeding by or in the right of the
Company or any Affiliate) by reason of Indemnitee’s Corporate Status, or by
reason of alleged action or inaction by Indemnitee in any such capacity, the
Company shall, subject to the limitations set forth in Section IV.F. below, hold
harmless and indemnify Indemnitee against any and all Expenses and Liabilities
actually and reasonably incurred by or for the Indemnitee in connection with the
Proceeding if the act(s) or omission(s) of the Indemnitee giving rise thereto
were Good Faith Act(s) or Omission(s).

 

C.  Proceedings
by or in the Right of the Company. If the
Indemnitee was or is a party or is threatened to be made a party to any
Proceeding (whether the Indemnitee is or becomes a party, a witness or otherwise
is a participant in any role) by or in the right of the Company or any Affiliate
to procure a judgment in its favor by reason of Indemnitee’s Corporate Status,
or by reason of any action or inaction by Indemnitee in any such capacity, the
Company shall, subject to the limitations set forth in Section IV.F. below, hold
harmless and indemnify Indemnitee against any and all Expenses actually incurred
by or for Indemnitee in connection with the investigation, defense, settlement
or appeal of such Proceeding if the act(s) or omission(s) of the Indemnitee
giving rise to the Proceeding were Good Faith Act(s) or Omission(s); except that
no indemnification under this Section IV.C. shall be made in respect of any
claim, issue or matter as to which the Indemnitee shall have been finally
adjudged to be liable to the Company or any Affiliate, unless a court of
appropriate jurisdiction (including, but not limited to, the court in which such
Proceeding was brought) shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
regardless of whether the Indemnitee’s act(s) or omission(s) were found to be a
Good Faith Act(s) or Omission(s), the Indemnitee is fairly and reasonably
entitled to indemnification for such Expenses which such court shall deem
proper.

 

D.  Indemnification
of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee is, by reason of the Indemnitee’s Corporate Status, a party to and is
successful, on the merits or 

5

 

otherwise,
in any Proceeding, the Indemnitee shall be indemnified by the Company to the
maximum extent consistent with applicable law, against all Expenses and
Liabilities actually incurred by or for him in connection therewith. If the
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall hold harmless and indemnify the
Indemnitee to the maximum extent consistent with applicable law, against all
Expenses and Liabilities actually and reasonably incurred by or for Indemnitee
in connection with each successfully resolved claim, issue or matter in such
Proceeding. Resolution of a claim, issue or matter by dismissal, with or without
prejudice, except as provided in subsection F hereof, shall be deemed a
successful result as to such claim, issue or matter, so long as there has been
no finding (either adjudicated or pursuant to Article VI hereof) that the act(s)
or omission(s) of the Indemnitee giving rise thereto were not a Good Faith
Act(s) or Omission(s).

 

E.  Indemnification
for Expenses of Witness.
Notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee, by reason of the Indemnitee’s Corporate Status, has prepared to
serve or has served as a witness in any Proceeding, or has participated in
discovery proceedings or other trial preparation, the Indemnitee shall be held
harmless and indemnified against all Expenses actually and reasonably incurred
by or for him in connection therewith.

 

F.  Specific
Limitations on Indemnification. In
addition to the other limitations set forth in this Article IV, and
notwithstanding anything in this Agreement to the contrary, the Company shall
not be obligated under this Agreement to make any payment to the Indemnitee for
indemnification with respect to any Proceeding:

 

1.  To the
extent that payment is actually made to the Indemnitee under any insurance
policy or is made on behalf of the Indemnitee by or on behalf of the Company
otherwise than pursuant to this Agreement.

 

2.  If a
court in such Proceeding has entered a judgment or other adjudication which is
final and has become nonappealable and establishes that a claim of the
Indemnitee for such indemnification arose from: (i) a breach by the Indemnitee
of the Indemnitee’s duty of loyalty to the Company or its shareholders; (ii)
acts or omissions of the Indemnitee that are not Good Faith Acts or Omissions or
which are the result of active and deliberate dishonesty; (iii) acts or
omissions of the Indemnitee which the Indemnitee had reasonable cause to believe
were unlawful; or (iv) a transaction in which the Indemnitee actually received
an improper personal benefit in money, property or services.

 

3.  If there
has been no Change in Control, for Liabilities in connection with Proceedings
settled without the consent of the Company which consent, however, shall not be
unreasonably withheld.

 

4.  For any
loss or liability arising from an alleged violation of federal or state
securities laws unless one or more of the following conditions are met: (i)
there has been a successful adjudication on the merits of each count involving
alleged securities law violations as to the Indemnitee, (ii) such claims have
been dismissed with prejudice on 

6

 

the
merits by a court of competent jurisdiction as to the Indemnitee; or (iii) a
court of competent jurisdiction approves a settlement of the claims against the
Indemnitee and finds that indemnification of the settlement and the related
costs should be made, and the court considering the request for indemnification
has been advised of the position of the Securities and Exchange Commission and
of the published position of any state securities regulatory authority in which
securities of the Company were offered or sold as to indemnification for
violations of securities laws.

 

V.
  

ADVANCEMENT
OF EXPENSES

 

Notwithstanding
any provision to the contrary in Article VI hereof, the Company shall advance to
the Indemnitee all Expenses which, by reason of the Indemnitee’s Corporate
Status, were incurred by or for Indemnitee in connection with any Proceeding for
which the Indemnitee is entitled to indemnification pursuant to Article IV
hereof, in advance of the final disposition of such Proceeding, provided that
all of the following are satisfied: (i) the Indemnitee was made a party to the
proceeding by reason of Indemnitee’s service as a director or officer of the
Company, (ii) the Indemnitee provides the Company with written affirmation of
Indemnitee’s good faith belief that Indemnitee has met the standard of conduct
necessary for indemnification by the Company pursuant to Article IV hereof,
(iii) the Indemnitee provides the Company with a written agreement (the
“Undertaking”) to repay the amount paid or reimbursed by the Company, together
with the applicable legal rate of interest thereon, if it is ultimately
determined that the Indemnitee did not comply with the requisite standard of
conduct, and (iv) the legal proceeding was initiated by a third party who is not
a stockholder of the Company or, if by a stockholder of the Company acting in
his or her capacity as such, a court of competent jurisdiction approves such
advancement. The Indemnitee shall be required to execute and submit the
Undertaking to repay Expenses advanced in the form of Exhibit A attached hereto
or in such form as may be required under applicable law as in effect at the time
of execution thereof. The Undertaking shall reasonably evidence the Expenses
incurred by or for the Indemnitee and shall contain the written affirmation by
the Indemnitee, described above, of Indemnitee’s good faith belief that the
standard of conduct necessary for indemnification has been met. The Company
shall advance such expenses within five (5) business days after the receipt by
the Company of the Undertaking. The Indemnitee hereby agrees to repay any
Expenses advanced hereunder if it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified against such Expenses. Any advances
and the undertaking to repay pursuant to this Article V shall be
unsecured.

 

 

VI.
  

PROCEDURE
FOR PAYMENT OF LIABILITIES;

DETERMINATION
OF RIGHT TO INDEMNIFICATION

 

A.  Procedure
for Payment. To
obtain indemnification for Liabilities under this Agreement, the Indemnitee
shall submit to the Company a written request for payment, including with such
request such documentation as is reasonably available to the Indemnitee and
reasonably necessary to determine whether, and to what extent, the Indemnitee is
entitled to indemnification and payment hereunder. The Secretary of the Company,
or such other person as shall be designated by the Board of Directors, promptly
upon receipt of a request for 

7

 

indemnification
shall advise the Board of Directors, in writing, of such request. Any
indemnification payment due hereunder shall be paid by the Company no later than
five (5) business days following the determination, pursuant to this Article VI,
that such indemnification payment is proper hereunder.

 

B.  No
Determination Necessary when the Indemnitee was Successful. To the
extent the Indemnitee has been successful, on the merits or otherwise, in
defense of any Proceeding referred to in Sections IV.B. or IV.C. above or in the
defense of any claim, issue or matter described therein, the Company shall
indemnify the Indemnitee against Expenses actually and reasonably incurred by or
for Indemnitee in connection with the investigation, defense or appeal of such
Proceeding.

 

C.  Determination
of Good Faith Act or Omission. In the
event that Section VI.B. is inapplicable, the Company also shall hold harmless
and indemnify the Indemnitee unless the Company shall prove by clear and
convincing evidence to a forum listed in Section VI.D. below that the act(s) or
omission(s) of the Indemnitee giving rise to the Proceeding were not Good Faith
Act(s) or Omission(s).

 

D.  Forum
for Determination. The
Indemnitee shall be entitled to select from among the following the forums, in
which the validity of the Company’s claim under Section VI.C., above, that the
Indemnitee is not entitled to indemnification will be heard:

 

1.  A quorum
of the Board consisting of Disinterested Directors;

 

2.  The
shareholders of the Company;

 

3.  Legal
counsel selected by the Indemnitee, subject to the approval of the Board, which
approval shall not be unreasonably delayed or denied, which counsel shall make
such determination in a written opinion; or

 

4.  A panel
of three arbitrators, one of whom is selected by the Company, another of whom is
selected by the Indemnitee and the last of whom is selected jointly by the first
two arbitrators so selected.

 

As soon
as practicable, and in no event later than thirty (30) days after written notice
of the Indemnitee’s choice of forum pursuant to this Section VI.D., the Company
shall, at its own expense, submit to the selected forum in such manner as the
Indemnitee or the Indemnitee’s counsel may reasonably request, its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim. The fees and expenses of the selected forum in connection
with making the determination contemplated hereunder shall be paid by the
Company. If the Company shall fail to submit the matter to the selected forum
within thirty (30) days after the Indemnitee’s written notice or if the forum so
empowered to make the determination shall have failed to make the requested
determination within thirty (30) days after the matter has been submitted to it
by the Company, the requisite determination that the Indemnitee has the right to
indemnification shall be deemed to have been made.

 

8

 

 

 

E.  Right
to Appeal.
Notwithstanding a determination by any forum listed in Section VI.D. above that
the Indemnitee is not entitled to indemnification with respect to a specific
Proceeding, the Indemnitee shall have the right to apply to the court in which
that Proceeding is or was pending, or to any other court of competent
jurisdiction, for the purpose of enforcing the Indemnitee’s right to
indemnification pursuant to this Agreement. Such enforcement action shall
consider the Indemnitee’s entitlement to indemnification de novo, and the
Indemnitee shall not be prejudiced by reason of a prior determination that the
Indemnitee is not entitled to indemnification. The Company shall be precluded
from asserting that the procedures and presumptions of this Agreement are not
valid, binding and enforceable. The Company further agrees to stipulate in any
such judicial proceeding that the Company is bound by all the provisions of this
Agreement and is precluded from making any assertion to the
contrary.

 

F.  Right
to Seek Judicial Determination.
Notwithstanding any other provision of this Agreement to the contrary, at any
time after sixty (60) days after a request for indemnification has been made to
the Company (or upon earlier receipt of written notice that a request for
indemnification has been rejected) and before the third (3rd) anniversary of the
making of such indemnification request, the Indemnitee may petition a court of
competent jurisdiction, whether or not the court has jurisdiction over, or is
the forum in which is pending, the Proceeding, to determine whether the
Indemnitee is entitled to indemnification hereunder, and such court thereupon
shall have the exclusive authority to make such determination, unless and until
such court dismisses or otherwise terminates the Indemnitee’s action without
having made such determination. The court, as petitioned, shall make an
independent determination of whether the Indemnitee is entitled to
indemnification hereunder, without regard to any prior determination in any
other forum as provided hereby.

 

G.  Expenses
under this Agreement.
Notwithstanding any other provision in this Agreement to the contrary, the
Company shall indemnify the Indemnitee against all Expenses incurred by the
Indemnitee in connection with any hearing or proceeding under this Section Vi
involving the Indemnitee and against all Expenses incurred by the Indemnitee in
connection with any other action between the Company and the Indemnitee
involving the interpretation or enforcement of the rights of the Indemnitee
under this Agreement, even if it is finally determined that the Indemnitee is
not entitled to indemnification in whole or in part hereunder.

 

VII.
  

PRESUMPTIONS
AND EFFECT

OF
CERTAIN PROCEEDINGS

 

A.  Burden
of Proof. In
making a determination with respect to entitlement to indemnification hereunder,
the person, persons, entity or entities making such determination shall presume
that the Indemnitee is entitled to indemnification under this Agreement and the
Company shall have the burden of proof to overcome that
presumption.

 

B.  Effect
of Other Proceedings. The
termination of any Proceeding or of any claim, issue or matter therein, by
judgment, order or settlement shall not create a presumption that the act(s) or
omission(s) giving rise to the Proceeding were not Good Faith Act(s) or
Omission(s). 

9

 

The
termination of any Proceeding by conviction, or upon a plea of non contendere,
or its equivalent, or an entry of an order of probation prior to judgment, shall
create a rebuttable presumption that the act(s) or omission(s) of the Indemnitee
giving rise to the Proceeding were not Good Faith Act(s) or
Omission(s).

 

C.  Reliance
as Safe Harbor. For
purposes of any determination of whether any act or omission of the Indemnitee
was a Good Faith Act or Omission, each act of the Indemnitee shall be deemed to
be a Good Faith Act or Omission if the indemnitee’s action is based on the
records or books of accounts of the Company, including financial statements, or
on information supplied to the Indemnitee by the officers of the Company in the
course of their duties, or on the advice of legal counsel for the Company or on
information or records given or reports made to the Company by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Company. The provisions of this Section VII.C. shall not
be deemed to be exclusive or to limit in any way the other circumstances in
which the Indemnitee may be deemed to have met the applicable standard of
conduct set forth in this Agreement or under applicable law.

 

D.  Actions
of Others. The
knowledge and/or actions, or failure to act, of any director, officer, agent or
employee of the Company shall not be imputed to the Indemnitee for purposes of
determining the right to indemnification under this Agreement.

 

VIII.
  

INSURANCE

 

In the
event that the Company maintains officers’ and directors’ or similar liability
insurance to protect itself and any director or officer of the Company against
any expense, liability or loss, such insurance shall cover the Indemnitee to at
least the same degree as each other director and/or officer of the
Company.

 

 

IX.
  

OBLIGATIONS
OF THE COMPANY

UPON
A CHANGE IN CONTROL

 

In the
event of a Change in Control, upon written request of the Indemnitee the Company
shall establish a trust for the benefit of the Indemnitee hereunder (a “Trust”)
and from time to time, upon written request from the Indemnitee, shall fund the
Trust in an amount sufficient to satisfy all amounts actually paid hereunder as
indemnification for Liabilities or Expenses (including those paid in advance) or
which the Indemnitee reasonably determines and demonstrates, from time to time,
may be payable by the Company hereunder. The amount or amounts to be deposited
in the Trust shall be determined by legal counsel selected by the Indemnitee and
approved by the Company, which approval shall not be unreasonably withheld. The
terms of the Trust shall provide that (i) the Trust shall not be dissolved or
the principal thereof invaded without the written consent of the Indemnitee;
(ii) the trustee of the Trust (the “Trustee”) shall be selected by the
Indemnitee; (iii) the Trustee shall make advances to the Indemnitee for Expenses
within ten (10) business days following receipt of a written request therefor
(and the Indemnitee hereby agrees to reimburse the Trust under the circumstances
under 

 

10

 

which the
Indemnitee would be required to reimburse the Company under Article V hereof;
(iv) the Company shall continue to fund the Trust from time to time in
accordance with its funding obligations hereunder; (v) the Trustee promptly
shall pay to the Indemnitee all amounts as to which indemnification is due under
this Agreement; (vi) unless the Indemnitee agrees otherwise in writing, the
Trust for the Indemnitee shall be kept separate from any other trust established
for any other person to whom indemnification might be due by the Company; and
(vii) all unexpended funds in the Trust shall revert to the Company upon final,
nonappealable determination by a court of competent jurisdiction that the
Indemnitee has been indemnified to the full extent required under this
Agreement.

 

 

X.
  

NON-EXCLUSIVITY,

SUBROGATION
AND MISCELLANEOUS

 

A.  Non-Exclusivity. The
rights of the Indemnitee hereunder shall not be deemed exclusive of any other
rights to which the Indemnitee may at any time be entitled under any provision
of law, the Articles of Incorporation, the Bylaws of the Company, as the same
may be in effect from time to time, any agreement, a vote of shareholders of the
Company or a resolution of directors of the Company or otherwise, and to the
extent that during the term of this Agreement the rights of the then-existing
directors and officers of the Company are more favorable to such directors or
officers than the rights currently provided to the Indemnitee under this
Agreement, the Indemnitee shall be entitled to the full benefits of such more
favorable rights.

 

No
amendment, alteration, rescission or replacement of this Agreement or any
provision hereof which would in any way limit the benefits and protections
afforded to an Indemnitee hereby shall be effective as to such Indemnitee with
respect to any action or inaction by such Indemnitee in the Indemnitee’s
Corporate Status prior to such amendment, alteration, rescission or
replacement.

 

 

B.  Subrogation. In the
event of any payment under this Agreement, the Company shall be subrogated to
the extent of such payment to all of the rights of recovery of the Indemnitee,
who shall execute all documents required and take all action necessary to secure
such rights, including execution of such documents as are necessary to enable
the Company to bring suit to enforce such rights.

 

C.  Notices. All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given (i) if delivered by hand, by
courier or by telegram and receipted for by the party to whom said notice or
other communication shall have been directed at the time indicated on such
receipt; (ii) if by facsimile at the time shown on the confirmation of such
facsimile transmission; or (iii) if by U.S. certified or registered mail, with
postage prepaid, on the third business day after the date on which it is so
mailed:

11

 

 

If to the
Indemnitee, as shown with the Indemnitee’s signature below.

 

If to the
Company to:

 

CNL
Hotels & Resorts, Inc.

450 South
Orange Avenue

Orlando,
FL 32801

Attention: President

Facsimile
No. (407)423-2894

 

or to
such other address as may have been furnished to the Indemnitee by the Company
or to the Company by the Indemnitee, as the case may be.

 

 

D.  Governing
Law. The
parties agree that this Agreement shall be governed by, and construed and
enforced in accordance with, the substantive laws of the State of Maryland,
without application of the conflict of laws principles thereof.

 

E.  Binding
Effect. Except
as otherwise provided in this Agreement, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns. The
Company shall require any successor or assignee (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of its
respective assets or business, by written agreement in form and substance
reasonably satisfactory to the Indemnitee, expressly to assume and agree to be
bound by and to perform this Agreement in the same manner and to the same extent
as the Company would be required to perform absent such succession or
assignment.

 

F.  Waiver. No
termination, cancellation, modification, amendment, deletion, addition or other
change in this Agreement, or any provision hereof, or waiver of any right or
remedy herein, shall be effective for any purpose unless specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.

 

G.  Entire
Agreement. This
Agreement, constitutes the entire agreement and understanding among the parties
hereto in reference to the subject matter hereof, and supersedes in all respects
that certain Indemnification Agreement dated April 29, 2004, by and among the
Company and the Indemnitee; provided, however, that the parties acknowledge and
agree that the Amended and Restated Articles of Incorporation of the Company
contain provisions on the subject matter hereof and that this Agreement is not
intended to, and does not, limit the rights or obligations of the parties hereto
pursuant to such instruments.

 

H.  Titles. The
titles to the articles and sections of this Agreement are inserted for
convenience of reference only and should not be deemed a part hereof or affect
the construction or interpretation of any provisions hereof.

12

 

 

I.  Invalidity
of Provisions. Every
provision of this Agreement is severable, and the invalidity or unenforceability
of any term or provision shall not effect the validity or of the remainder of
this Agreement.

 

J.  Pronouns
and Plurals.
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice
versa.

 

K.  Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together constitute one agreement binding
on all the parties hereto.

 

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

 

 

	 	
       

      CNL
      HOTELS & RESORTS, INC.

       

       

      By:
            

      Name:
      John
      A. Griswold   

      Title:
       President
      and Chief Operating Officer

       

      ________________________,
      as INDEMNITEE

       

      Name: _________________________________

      Title:
      __________________________________

      Address:_______________________________  

      Facsimile
      No.: ___________________________ 

       

	 	 

13

EXHIBIT
A

 

FORM
OF UNDERTAKING TO REPAY EXPENSES ADVANCED

 

 

The Board
of Directors of CNL Hotels & Resorts, Inc.

 

Re: Undertaking
to Repay Expenses Advanced 

 

Ladies
and Gentlemen:

 

 

This
undertaking is being provided pursuant to that certain Indemnification Agreement
dated the ____ day of May, 2005, by and among CNL Hotels & Resorts, Inc.
(the “Company”) and the undersigned Indemnitee (the “Indemnification
Agreement”), pursuant to which I am entitled to advancement of expenses in
connection with [Description of Proceeding] (the “Proceeding”). Terms used
herein and not otherwise defined shall have the meanings specified in the
Indemnification Agreement.

 

 

I am
subject to the Proceeding by reason of my Corporate Status or by reason of
alleged actions or omissions by me in such capacity. During the period of time
to which the Proceeding relates I was — [name of office(s) held] of CNL Hotels
& Resorts, Inc. Pursuant to Section IV of the Indemnification Agreement, the
Company is obligated to reimburse me for Expenses that are actually and
reasonably incurred by or for me in connection with the Proceeding, provided
that I execute and submit to the Company an Undertaking in which I (i) undertake
to repay any Expenses paid by the Company on my behalf, together with the
applicable legal rate of interest thereon, if it shall be ultimately determined
that I am not entitled to be indemnified thereby against such Expenses; (ii)
affirm my good faith belief that I have met the standard of conduct necessary
for indemnification; and (iii) reasonably evidence the Expenses incurred by or
for me.

 

 

[Description
of expenses incurred by or for Indemnitee]

 

 

This
letter shall constitute my undertaking to repay to the Company any Expenses paid
by it on my behalf, together with the applicable legal rate of interest thereon,
in connection with the Proceeding if it is ultimately determined that I am not
entitled to be indemnified with respect to such Expenses as set forth above. I
hereby affirm my good faith belief that I have met the standard of conduct
necessary for indemnification and that I am entitled to such
indemnification.

 

__________________________

Signature

 

__________________________

Name

 

__________________________

Date

10-Q

 

14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}]]