Document:

Ex-10.2

 

EXHIBIT 10.2

FIRST AMENDMENT TO MASTER REPURCHASE AGREEMENT

This FIRST AMENDMENT TO MASTER REPURCHASE AGREEMENT (this “Amendment”) is dated as of April 4, 2006
and entered into by and between WINSTON FINANCE PARTNERS LLC (“Seller”) and MARATHON STRUCTURED
FINANCE FUND, L.P. (“Buyer”), and is made with reference to that certain Master Repurchase
Agreement dated as of October 5, 2004, as amended (the “Master Agreement”), between Seller and
Buyer. Capitalized terms used herein without definition shall have the same meanings herein as set
forth in the Master Agreement.

RECITALS

WHEREAS, Seller and Buyer desire to amend the Master Agreement to reduce the Pricing Spread for
non-Construction Loans to 2.75% and for Construction Loans to 3.00%, and to have Seller’s
affiliate, Winston Hotels Inc., guaranty payment to Buyer of all payments due with respect to
Construction Loans.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants
herein contained, the parties hereto agree as follows:

Section 1.

AMENDMENTS TO THE MASTER AGREEMENT

1.1 Amendments to Provisions Relating to Defined Terms

The column labeled Pricing Spread in Schedule 2 is hereby amended as of the Amendment Effective
Date (as hereinafter defined) by replacing 4.50% with 2.75% and by replacing 5.50% with 3.00% each
place those figures appear.

1.2 Amendments to Section 3: Guaranty

Subsection 3.02 of the Master Agreement is hereby amended by adding paragraph (v) as follows:

“The guaranty from Winston Hotels Inc. in the form of Exhibit XI remains in full force and effect.”

1.3 Amendments to Table of Contents and Exhibits.

The Table of Contents is hereby amended by adding “Exhibit XI—Form of Guaranty of Winston Hotels
Inc.” and by adding the form of guaranty appended to this Agreement to the Master Agreement.

1.4 Underlying Documents.

The underlying loan documents will be amended consistent with the terms of this Amendment, but
shall be deemed so modified as of the Amendment Effective Date.

1.5 Construction Loan Stabilization.

When a Construction Loan has “Stabilized” the loan will be treated as a non-Construction Loan, the
Pricing Spread shall be reduced to 2.75% and the Winston Guaranty with respect to that specific
loan will be released by operation of the terms of the Winston Guaranty. “Stabilized” shall mean,
with respect to a particular loan, the property subject to such loan is open to the public, fully
operational for its intended purpose, and is generating positive net operating income, or is
reasonably expected to generate positive net operating income (based on projections reasonably
satisfactory to Buyer), all as reasonably determined by Buyer at the written request of Seller.

 

 

Section 2. CONDITIONS TO EFFECTIVENESS

Section 1 of this Amendment shall become effective only upon the satisfaction of all of the
following conditions precedent (the date of satisfaction of such conditions being referred to
herein as the “Amendment Effective Date”):

A. On or before the Amendment Effective Date, Seller shall deliver to Buyers (or to Buyer for
Buyers with sufficient originally executed copies, where appropriate, for each Buyer and its
counsel) copies of this Amendment, executed by Seller.

B. On or before the Amendment Effective Date, all corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents incidental thereto
not previously found acceptable by Buyer, acting on behalf of Buyers, and its counsel shall be
satisfactory in form and substance to Buyer and such counsel, and Buyer and such counsel shall have
received all such counterpart originals or certified copies of such documents as Buyer may
reasonably request.

Section 3. SELLER’S REPRESENTATIONS AND WARRANTIES

In order to induce Buyers to enter into this Amendment and to amend the Master Agreement in the
manner provided herein, Seller represents and warrants to each Buyer that the following statements
are true, correct and complete:

A. Corporate Power and Authority. Seller has all requisite corporate power and authority to enter
into this Amendment and to carry out the transactions contemplated by, and perform its obligations
under, the Master Agreement as amended by this Amendment (the “Amended Agreement”).

B. Authorization of Agreements. The execution and delivery of this Amendment and the performance
of the Amended Agreement have been duly authorized by all necessary corporate action on the part of
Seller.

C. No Conflict. The execution and delivery by Seller of this Amendment and the performance by
Seller of the Amended Agreement do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Seller or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Seller or any of its Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on Seller or any of its Subsidiaries;
(ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both)
a default under any Contractual Obligation of Seller or any of its Subsidiaries; (iii) result in or
require the creation or imposition of any Lien upon any of the properties or assets of Seller or
any of its Subsidiaries; or (iv) require any approval of stockholders or any approval or consent of
any Person under any Contractual Obligation of Seller or any of its Subsidiaries.

D. Governmental Consents. The execution and delivery by Seller of this Amendment and the
performance by Seller of the Amended Agreement do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.

E. Binding Obligation. This Amendment and the Amended Agreement have been duly executed and
delivered by Seller and are the legally valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights
generally or by equitable principles relating to enforceability.

G. Absence of Default. No event has occurred and is continuing or will result from the
consummation of the transactions contemplated by this Amendment that would constitute a Default or
Event of Default.

 

 

Section 4. MISCELLANEOUS

A. Reference to and Effect on the Master Agreement and the Other Loan Documents.

(i) On and after the Amendment Effective Date, each reference in the Master Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Master
Agreement, “thereunder”, “thereof” or words of like import referring to the Master Agreement shall
mean and be a reference to the Amended Agreement.

(ii) Except as specifically amended by this Amendment, the Master Agreement shall remain in full
force and effect and are hereby ratified and confirmed.

(iii) The execution, delivery and performance of this Amendment shall not, except as expressly
provided herein, constitute a waiver of any provision of, or operate as a waiver of any right,
power or remedy of Buyer under, the Master Agreement.

(iv) This Amendment shall not apply to any Transactions consummated prior to the date hereof.

B. Fees and Expenses. Seller acknowledges that all costs, fees and expenses incurred by Buyer and
its counsel with respect to this Amendment and the documents and transactions contemplated hereby
shall be for the account of Seller.

C. Headings. Section and subsection headings in this Amendment are included herein for convenience
of reference only and shall not constitute a part of this Amendment for any other purpose or be
given any substantive effect.

D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE
STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

E. Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to the same document.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered
by their respective officers thereunto duly authorized as of the date first written above.

	 	 	 	 	 	 	 
	 	 	WINSTON FINANCE PARTNERS LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jacob A. Darling	 	 
	 

	 	Name:
	 	 

Jacob A. Darling
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	MARATHON STRUCTURED FINANCE FUND, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Andrew Rabinowitz	 	 
	 

	 	Name:
	 	 

Andrew Rabinowitz
	 	 
	 

	 	Title:
	 	CFO, COOEx-10.3

 

EXHIBIT 10.3

Loan No.                     

 

GENERAL ELECTRIC CAPITAL CORPORATION

(Lender)

to

[WINSTON SPECIAL PURPOSE ENTITY]

(Borrower)

 

FORM OF LOAN AGREEMENT

 

Dated as of: May 9, 2006

Property Location:                     ,                     

DOCUMENT PREPARED BY:

Andrews Kurth LLP

1717 Main Street, Suite 3700

Dallas, Texas 75201

Attention: Charles T. Marshall, Esq.

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE 1 CERTAIN DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 1.1
	 	Certain Definitions
	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 2 LOAN TERMS	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 2.1
	 	The Loan
	 	 	7	 
	 

	 	Section 2.2
	 	Interest Rate; Late Charge
	 	 	7	 
	 

	 	Section 2.3
	 	Terms of Payment
	 	 	7	 
	 

	 	Section 2.4
	 	Security; Establishment of Funds
	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 3 INSURANCE, CONDEMNATION, AND IMPOUNDS	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 3.1
	 	Insurance
	 	 	11	 
	 

	 	Section 3.2
	 	Use and Application of Insurance Proceeds
	 	 	13	 
	 

	 	Section 3.3
	 	Condemnation Awards
	 	 	14	 
	 

	 	Section 3.4
	 	Impounds
	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 4 ENVIRONMENTAL MATTERS	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 4.1
	 	Certain Definitions
	 	 	16	 
	 

	 	Section 4.2
	 	Representations and Warranties on Environmental Matters
	 	 	16	 
	 

	 	Section 4.3
	 	Covenants on Environmental Matters
	 	 	17	 
	 

	 	Section 4.4
	 	Allocation of Risks and Indemnity
	 	 	17	 
	 

	 	Section 4.5
	 	No Waiver
	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 5 LEASING MATTERS	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 5.1
	 	Representations and Warranties on Leases
	 	 	19	 
	 

	 	Section 5.2
	 	Standard Lease Form; Approval Rights
	 	 	19	 
	 

	 	Section 5.3
	 	Covenants
	 	 	19	 
	 

	 	Section 5.4
	 	Tenant Estoppels
	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 6 REPRESENTATIONS AND WARRANTIES	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 6.1
	 	Organization, Power and Authority
	 	 	20	 
	 

	 	Section 6.2
	 	Validity of Loan Documents
	 	 	20	 
	 

	 	Section 6.3
	 	Liabilities; Litigation
	 	 	21	 
	 

	 	Section 6.4
	 	Taxes and Assessments
	 	 	21	 
	 

	 	Section 6.5
	 	Other Agreements; Defaults
	 	 	21	 
	 

	 	Section 6.6
	 	Compliance with Law
	 	 	21	 
	 

	 	Section 6.7
	 	Location of Borrower
	 	 	22	 

Page i

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	Section 6.8
	 	ERISA
	 	 	22	 
	 

	 	Section 6.9
	 	Forfeiture
	 	 	22	 
	 

	 	Section 6.10
	 	Tax Filings
	 	 	22	 
	 

	 	Section 6.11
	 	Solvency
	 	 	23	 
	 

	 	Section 6.12
	 	Full and Accurate Disclosure
	 	 	23	 
	 

	 	Section 6.13
	 	Flood Zone
	 	 	23	 
	 

	 	Section 6.14
	 	Single Purpose Entity/Separateness
	 	 	23	 
	 

	 	Section 6.15
	 	Anti-Terrorism and Anti-Money Laundering Laws
	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 7 FINANCIAL REPORTING	 	 	27	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 7.1
	 	Financial Statements
	 	 	27	 
	 

	 	Section 7.2
	 	Accounting Principles
	 	 	28	 
	 

	 	Section 7.3
	 	Other Information; Access
	 	 	28	 
	 

	 	Section 7.4
	 	Annual Budget
	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 8 COVENANTS	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 8.1
	 	Due On Sale and Encumbrance; Transfers of Interests
	 	 	28	 
	 

	 	Section 8.2
	 	Taxes; Utility Charges
	 	 	29	 
	 

	 	Section 8.3
	 	Control; Management
	 	 	29	 
	 

	 	Section 8.4
	 	Operation; Maintenance; Inspection
	 	 	29	 
	 

	 	Section 8.5
	 	Taxes on Security
	 	 	29	 
	 

	 	Section 8.6
	 	Legal Existence; Name, Etc
	 	 	30	 
	 

	 	Section 8.7
	 	Further Assurances
	 	 	30	 
	 

	 	Section 8.8
	 	Estoppel Certificates
	 	 	30	 
	 

	 	Section 8.9
	 	Notice of Certain Events
	 	 	30	 
	 

	 	Section 8.10
	 	Indemnification
	 	 	31	 
	 

	 	Section 8.11
	 	Cooperation
	 	 	32	 
	 

	 	Section 8.12
	 	Payment For Labor and Materials
	 	 	33	 
	 

	 	Section 8.13
	 	Certain Hotel Covenants
	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 9 EVENTS OF DEFAULT	 	 	37	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 9.1
	 	Payments
	 	 	37	 
	 

	 	Section 9.2
	 	Insurance
	 	 	37	 
	 

	 	Section 9.3
	 	Sale, Encumbrance, Etc
	 	 	37	 
	 

	 	Section 9.4
	 	Covenants
	 	 	37	 
	 

	 	Section 9.5
	 	Representations and Warranties
	 	 	37	 
	 

	 	Section 9.6
	 	Other Encumbrances
	 	 	38	 
	 

	 	Section 9.7
	 	Involuntary Bankruptcy or Other Proceeding
	 	 	38	 
	 

	 	Section 9.8
	 	Voluntary Petitions, etc
	 	 	38	 
	 

	 	Section 9.9
	 	Anti-Terrorism
	 	 	38	 
	 

	 	Section 9.10
	 	Franchise and Management Agreements
	 	 	38	 
	 

	 	Section 9.11
	 	Operating Lease
	 	 	39	 

Page ii

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE 10 REMEDIES	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 10.1
	 	Remedies — Insolvency Events
	 	 	39	 
	 

	 	Section 10.2
	 	Remedies — Other Events
	 	 	39	 
	 

	 	Section 10.3
	 	Lender’s Right to Perform the Obligations
	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 11 MISCELLANEOUS	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 11.1
	 	Notices
	 	 	40	 
	 

	 	Section 11.2
	 	Amendments and Waivers
	 	 	41	 
	 

	 	Section 11.3
	 	Limitation on Interest
	 	 	41	 
	 

	 	Section 11.4
	 	Invalid Provisions
	 	 	42	 
	 

	 	Section 11.5
	 	Reimbursement of Expenses
	 	 	42	 
	 

	 	Section 11.6
	 	Approvals; Third Parties; Conditions
	 	 	42	 
	 

	 	Section 11.7
	 	Lender Not in Control; No Partnership
	 	 	43	 
	 

	 	Section 11.8
	 	Contest of Certain Claims
	 	 	43	 
	 

	 	Section 11.9
	 	Time of the Essence
	 	 	44	 
	 

	 	Section 11.10
	 	Successors and Assigns
	 	 	44	 
	 

	 	Section 11.11
	 	Renewal, Extension or Rearrangement
	 	 	44	 
	 

	 	Section 11.12
	 	Waivers
	 	 	44	 
	 

	 	Section 11.13
	 	Cumulative Rights; Joint and Several Liability
	 	 	44	 
	 

	 	Section 11.14
	 	Singular and Plural
	 	 	44	 
	 

	 	Section 11.15
	 	Phrases
	 	 	44	 
	 

	 	Section 11.16
	 	Exhibits and Schedules
	 	 	44	 
	 

	 	Section 11.17
	 	Titles of Articles, Sections and Subsections
	 	 	45	 
	 

	 	Section 11.18
	 	Promotional Material
	 	 	45	 
	 

	 	Section 11.19
	 	Survival
	 	 	45	 
	 

	 	Section 11.20
	 	WAIVER OF JURY TRIAL
	 	 	45	 
	 

	 	Section 11.21
	 	Waiver of Punitive or Consequential Damages
	 	 	46	 
	 

	 	Section 11.22
	 	Governing Law; Jurisdiction
	 	 	46	 
	 

	 	Section 11.23
	 	Entire Agreement
	 	 	47	 
	 

	 	Section 11.24
	 	Counterparts
	 	 	47	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE 12 LIMITATIONS ON LIABILITY	 	 	47	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 12.1
	 	Limitation on Liability
	 	 	47	 
	 

	 	Section 12.2
	 	Limitation on Liability of Lender’s Officers, Employees, etc
	 	 	49	 

Page iii

 

LIST OF EXHIBITS AND SCHEDULES

	 	 	 
	EXHIBIT A

	 	LEGAL DESCRIPTION OF PROJECT
	SCHEDULE I

	 	DEFEASANCE
	SCHEDULE II

	 	REQUIRED REPAIRS
	SCHEDULE III

	 	REPLACEMENT MANAGERS
	SCHEDULE IV

	 	RADIUS HOTELS

page iv

 

LOAN AGREEMENT

     THIS LOAN AGREEMENT (this “Agreement”) is entered into as of May 9, 2006, between
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (“Lender”), and [WINSTON
SPECIAL PURPOSE ENTITY], a Delaware limited liability company, whose organizational number is                      (“Borrower”).

ARTICLE 1

CERTAIN DEFINITIONS

     Section 1.1 Certain Definitions. As used herein, the following terms have the
meanings indicated:

     “Affiliate” means (a) any corporation in which Borrower or any partner, shareholder,
director, officer, member, or manager of Borrower directly or indirectly owns or controls more than
ten percent (10%) of the beneficial interest, (b) any partnership, joint venture or limited
liability company in which Borrower or any partner, shareholder, director, officer, member, or
manager of Borrower is a partner, joint venturer or member, (c) any trust in which Borrower or any
partner, shareholder, director, officer, member or manager of Borrower is a trustee or beneficiary,
(d) any entity of any type which is directly or indirectly owned or controlled by Borrower or any
partner, shareholder, director, officer, member or manager of Borrower, (e) any partner,
shareholder, director, officer, member, manager or employee of Borrower, (f) any Person related by
birth, adoption or marriage to any partner, shareholder, director, officer, member, manager, or
employee of Borrower, (g) any Borrower Party, or (f) Operating Lessee and Manager.

     “Agreement” means this Loan Agreement, as amended from time to time.

     “Assignment of Leases and Rents” means the Assignment of Leases and Rents, executed by
Borrower for the benefit of Lender, and pertaining to leases of space in the Project.

     “Award” has the meaning assigned in Section 3.3.

     “Bankruptcy Party” has the meaning assigned in Section 9.7.

     “Borrower Party” means any Joinder Party, any general partner of Borrower, and any
general partner in any partnership that is a general partner of Borrower, any managing member of
Borrower, and any managing member in any limited liability company that is a managing member of
Borrower, at any level.

     “Budget” has the meaning assigned in Section 7.4.

     “Business Day” means a day other than a Saturday, a Sunday, or a legal holiday on
which national banks located in the State of New York are not open for general banking business.

Page 1

 

     “Casualty” has the meaning assigned in Section 3.2.

     “Closing Date” means the date the Loan is funded by Lender.

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

     “Condemnation” has the meaning assigned in Section 3.3.

     “Contract Rate” has the meaning assigned in Section 2.2.

     “Debt” means, for any Person, without duplication: (a) all indebtedness of such
Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase
price of property for which such Person or its assets is liable, (b) all unfunded amounts under a
loan agreement, letter of credit, or other credit facility for which such Person would be liable,
if such amounts were advanced under the credit facility, (c) all amounts required to be paid by
such Person as a guaranteed payment to partners or a preferred or special dividend, including any
mandatory redemption of shares or interests, (d) all indebtedness guaranteed by such Person,
directly or indirectly, (e) all obligations under leases that constitute capital leases for which
such Person is liable, and (f) all obligations of such Person under swaps, caps, floors, collars
and other hedge agreements, in each case whether such Person is liable contingently or otherwise,
as obligor, Joinder Party or otherwise, or in respect of which obligations such Person otherwise
assures a creditor against loss.

     “Debt Service” means the aggregate interest, fixed principal, and other payments due
under the Loan, and on any other outstanding permitted Debt relating to the Project approved by
Lender for the period of time for which calculated. The foregoing calculation shall exclude
payments applied to escrows or reserves required by Lender.

     “Debt Service Coverage” means, for the period of time for which calculation is being
made, the ratio of Underwritten NOI to annualized Debt Service.

     “Default Rate” means the lesser of (a) the maximum rate of interest allowed by
applicable law, and (b) five percent (5%) per annum in excess of the Contract Rate.

     “Defeasance Option” has the meaning assigned in Section 2.3(c).

     “Environmental Indemnity Agreement” means that Hazardous Materials Indemnity Agreement
dated the date hereof in favor of Lender.

     “Environmental Laws” has the meaning assigned in Section 4.1(a).

     “ERISA” has the meaning assigned in Section 6.8.

     “Event of Default” has the meaning assigned in Article 9.

Page 2

 

     “FF&E” has the meaning assigned in Section 2.4(a).

     “FF&E Account” has the meaning assigned in Section 2.4(a).

     “FF&E Account Conditions” has the meaning assigned in Section 2.4(a).

     “Funds” means the FF&E Account.

     “GAAP” means generally accepted accounting principles in the United States of America
in effect from time to time.

     “Hazardous Materials” has the meaning assigned in Section 4.1(b).

     “Impound Trigger Event” means either (i) the occurrence of an Event of Default, (ii)
the transferring of the Project to a Person other than a Qualified Transferee (as defined in the
Mortgage), or (iii) the Debt Service Coverage for the Project falls below 1.15:1 on a trailing
twelve (12) month basis as reasonably determined by Lender.

     “Insurance Premiums” has the meaning assigned in Section 3.1(c).

     “Interest Only Period” means the first forty-eight (48) Payment Dates commencing with
the first Payment Date on July 1, 2006.

     “Joinder Party” means the Persons, if any, executing the Joinder hereto.

     “Lease Subordination Agreement” means that Subordination and Attornment Agreement
between Borrower, Operating Lessee and Lender of even date herewith.

     “Lien” means any interest, or claim thereof, in the Project securing an obligation
owed to, or a claim by, any Person other than the owner of the Project, whether such interest is
based on common law, statute or contract, including the lien or security interest arising from a
deed of trust, mortgage, assignment, encumbrance, pledge, security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes. The term “Lien” shall
include encroachments, easements, rights of way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances affecting the Project.

     “Loan” means the loan made by Lender to Borrower under this Agreement and all other
amounts secured by the Loan Documents.

     “Loan Documents” means: (a) this Agreement, (b) the Note, (c) the Mortgage, (d) the
Assignment of Leases and Rents, (e) the Lease Subordination Agreement, (f) Uniform Commercial Code
financing statements, (g) the Management Subordination Agreement, (h) all other documents
evidencing, securing, or governing the Loan, and (i) all amendments, modifications, renewals, substitutions and replacements of any of the foregoing; provided
however, in no event shall the term “Loan Documents” include that certain Environmental Indemnity
Agreement.

Page 3

 

     “Loan Year” means (a) for the first Loan Year, the period between the date hereof and
one (1) calendar year from the last day of the month in which the Closing Date occurs (unless the
Closing Date is on the first day of a month, in which case the first Loan Year shall commence on
such Closing Date and end one (1) calendar year from the last day of the month immediately
preceding the Closing Date) and (b) each consecutive twelve (12) month calendar period after the
first Loan Year until the Maturity Date.

     “Management Agreement” means the Management Agreement entered into between Manager and
Borrower or Operating Lessee dated July 1, 2003, as amended, pertaining to the management of the
Project in the form approved by Lender.

     “Management Subordination Agreement” means that Multi-Party Agreement or similar
document between Manager, Borrower, Operating Lessee, and Lender of even date herewith.

     “Manager” means                     , the manager under the Management Agreement and any
replacement property manager approved or permitted under Section 8.13(b).

     “Maturity Date” means, as applicable, the earlier of (a) June 1, 2016, or (b) any
earlier date on which the entire Loan is required to be paid in full, by acceleration or otherwise,
under this Agreement or any of the other Loan Documents.

     “Mortgage” means the Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing, executed by Borrower in favor of Lender, covering the Project.

     “Net Cash Flow” means, for any period, the amount by which Operating Revenues exceed
the sum of (a) Operating Expenses, (b) Debt Service paid during such period, and (c) capital
expenditures, each approved by Lender and paid by Borrower during such period.

     “Note” means the Promissory Note of even date, in the stated principal amount of                                     
            
            
DOLLARS ($                    ), executed by Borrower, and payable to the order of Lender in evidence of the Loan.

     “Operating Expenses” means, for any period, all reasonable and necessary expenses of
operating the Project in the ordinary course of business which are accounted for by Borrower during
such period using the accrual method in accordance with GAAP and the Uniform System of Accounts and
which are directly associated with and fairly allocable to the Project for the applicable period,
including ad valorem real estate taxes and assessments, insurance premiums, maintenance costs,
management fees and costs, wages, salaries, personnel expenses, accounting, legal and other
professional fees, fees and other expenses incurred by Lender and reimbursed by Borrower under the
Loan Documents and deposits to any capital replacement, leasing or other reserves required by any Licensor. Operating Expenses shall exclude Debt Service, capital
expenditures, tenant improvement costs, leasing commissions, any of the foregoing operating
expenses which are paid from deposits to cash reserves and such deposits were previously included
as Operating Expenses, any payment or expense for which Borrower was or is to be

Page 4

 

reimbursed from
proceeds of the Loan or insurance or by any third party, and any non-cash charges such as
depreciation and amortization. Operating Expenses shall not include federal, state or local income
taxes.

     “Operating Lease” shall mean the Lease Agreement dated as of the date hereof, entered
into by and between Borrower and the Operating Lessee, which governs the operation of the Project,
as amended, restated, replaced, supplemented or modified from time to time, in accordance with the
terms hereof.

     “Operating Lessee” shall mean Barclay Hospitality Services, Inc., the operating lessee
under the Operating Lease, which is an Affiliate of Borrower.

     “Operating Revenues” means, for any period, all receipts, revenues, income and
proceeds of sales or services of every kind earned by Borrower or Operating Lessee, directly or
indirectly, from the ownership or operation of the Project during such period, determined on an
accrual basis in accordance with GAAP and the Uniform System of Accounts, including, without
limitation or duplication, revenues from rentals, expense pass-throughs, fees and service charges
to tenants, subtenants, licensees or other occupants of commercial or retail space in the Project,
revenues from the use or rental of guest rooms and suites, conference and banquet rooms, revenue
from food and beverage service and facilities, including off-site catering, telephone services,
guest laundry services, vending, including mini-bars, television, recreational and health club
facilities and parking and any other items of revenue, receipts or income identified in the Uniform
System of Accounts, interest income, proceeds of insurance or condemnation not used or escrowed for
repairs, forfeited guest deposits, damage recoveries to the extent not used or escrowed for repairs
and proceeds of the sale of damaged or obsolete furniture, fixtures or equipment to the extent not
used or escrowed to purchase replacement furniture, fixtures or equipment, but not including (i)
taxes collected by Borrower or Operating Lessee for payment to governmental authorities, (ii)
gratuities or service charges collected by Borrower or Operating Lessee for payment to employees or
other persons performing services in the Project or (iii) such other exclusions as may be
reasonably approved by Lender.

     “Payment Date” has the meaning assigned in Section 2.3(a), and is the date that a
regularly scheduled payment of interest, during the Interest Only Period, and principal and
interest, after the expiration of the Interest Only Period, is due, without including in such
calculation the payment of interest, if any, made on the Closing Date.

     “Person” means any individual, corporation, partnership, joint venture, association,
joint stock company, trust, trustee, estate, limited liability company, unincorporated
organization, real estate investment trust, government or any agency or political subdivision
thereof, or any other form of entity.

     “Potential Default” means the occurrence of any event or condition which, with the
giving of notice, the passage of time, or both, would constitute an Event of Default.

Page 5

 

     “Project” means                     ,                     ,                     , and all related facilities,
amenities, fixtures, and personal property owned by Borrower and any improvements now or hereafter
located on the real property described in Exhibit A.

     “Rating Agencies” means each of Standard & Poor’s Ratings Group, a division of
McGraw-Hill, Inc., Moody’s Investors Service, Inc., and Fitch, Inc., or any other
nationally-recognized statistical rating agency which has been approved by Lender.

     “Secondary Market Transaction” has the meaning assigned in Section 8.11.

     “Securitization” has the meaning assigned in Section 8.11.

     “Securitization Date” means the “startup date,” as defined in Section 860G(a)(9) of
the Code, of a “real estate mortgage investment conduit,” as defined in Section 860D of the Code,
that holds the Note.

     “Single Purpose Entity” shall mean a Person (other than an individual, a government or
any agency or political subdivision thereof), which exists solely for the purpose of owning or
leasing the Project, observes corporate, company or partnership formalities, as applicable,
independent of any other entity, and which otherwise complies with the covenants set forth in
Section 6.14 hereof.

     “Site Assessment” means an environmental engineering report for the Project prepared
at Borrower’s expense by an engineer engaged by Borrower, or Lender on behalf of Borrower, and
approved by Lender, and in a manner reasonably satisfactory to Lender, based upon an investigation
relating to and making appropriate inquiries concerning the existence of Hazardous Materials on or
about the Project, and the past or present discharge, disposal, release or escape of any such
substances, all consistent with ASTM Standard E1527-93 or any successor thereto published by ASTM
and good customary and commercial practice.

     “Standard Adjustments” means the following assumptions to be made when calculating
Underwritten NOI: (a) management fees equal to the greater of (i) actual management fees paid or
(ii) three percent (3%) of Operating Revenues; (b) FF&E expenditures equal to the greater of (i)
four percent (4%) of Operating Revenues or (ii) such amounts required under the Franchise
Agreement; and (c) a mortgage constant equal to the greater of actual mortgage constant or seven
percent (7.0%.)

     “State” means the State of                                         .

     “Tax and Insurance Escrow Fund” has the meaning assigned in Section 3.4.

     “Taxes” has the meaning assigned in Section 8.2.

     “Underwritten NOI” means the amount by which Underwritten Operating Revenues exceed
Underwritten Operating Expenses, as reasonably determined by Lender for the trailing twelve
(12)-month period.

Page 6

 

     “Underwritten Operating Expenses” means Operating Expenses as reasonably determined
and adjusted by Lender to reflect the Standard Adjustments and otherwise in accordance with its
then current audit policies and procedures for properties similar to the Projects.

     “Underwritten Operating Revenues” means Operating Revenues as reasonably determined
and adjusted by Lender to reflect the Standard Adjustments and otherwise in accordance with its
then current audit policies and procedures for properties similar to the Project.

     “Uniform System of Accounts” means the most current Uniform System of Accounts for the
Lodging Industry published by the International Association of Hospitality Accountants.

     “Yield Maintenance Amount” has the meaning assigned in Schedule I.

ARTICLE 2

LOAN TERMS

     Section 2.1 The Loan. Lender agrees to make a Loan of                                                              DOLLARS ($                     ) to the
Borrower, which shall be funded in one advance and repaid in accordance with the terms of this
Agreement and the Note. Borrower hereby agrees to accept the Loan on the Closing Date, subject to
and upon the terms and conditions set forth herein.

     Section 2.2 Interest Rate; Late Charge. The outstanding principal balance of the Loan
shall bear interest at a rate of interest equal to five and nine hundred thirty-nine thousandths
percent (5.939%) per annum (the “Contract Rate”). Interest at the Contract Rate shall be
computed on the basis of a fraction, the denominator of which is three hundred sixty (360) days and
the numerator of which is the actual number of days elapsed from the date of the initial
disbursement under the Loan or the date of the preceding interest installment due date, as the case
may be, to the date of the next interest installment due date or the Maturity Date. If Borrower
fails to pay any installment of interest or principal within five (5) days after the date on which
the same is due, Borrower shall pay to Lender a late charge on such past-due amount, as liquidated
damages and not as a penalty, equal to five percent (5%) of such amount, but not in excess of the
maximum amount of interest allowed by applicable law. While any Event of Default exists, the Loan
shall bear interest at the Default Rate.

     Section 2.3 Terms of Payment. The Loan shall be payable as follows:

     (a) Interest and Principal.

	 	(i)	 	A payment of interest only on the date hereof for the period
from the date hereof through the last day of the current month.
	 
	 	(ii)	 	Commencing on July 1, 2006, and continuing on the first
(1st) day of each calendar month thereafter (each such date a
“Payment Date”) during the

Page 7

 

	 	 	 	Interest Only Period, Borrower shall pay
interest only in arrears computed at the Contract Rate on the outstanding
principal balance of the Loan.
	 
	 	(iii)	 	Thereafter, commencing on the forty-ninth (49th)
Payment Date, and continuing on each Payment Date thereafter until the Maturity
Date, Borrower shall make a constant payment of $                    . Each of such
payments shall be applied (i) to the payment of interest computed at the
Contract Rate and (ii) the balance applied toward reduction of the principal
sum. The constant payment required hereunder is based on a thirty (30)-year
amortization schedule.

     (b) Maturity. On the Maturity Date, Borrower shall pay to Lender all outstanding
principal, accrued and unpaid interest, default interest, late charges and any and all other
amounts due under the Loan Documents.

     (c) Prepayment. Except as set forth herein, the Loan is closed to prepayment in whole
or in part. Notwithstanding the foregoing, the Loan may be prepaid in whole, but not in part, on
or after the one hundred eighteenth (118th) Payment Date.

     If the Loan is accelerated for any reason other than casualty or condemnation, and the Loan is
otherwise closed to prepayment, and Borrower prepays the Loan, Borrower shall pay, in addition to
all other amounts outstanding under the Loan Documents, a prepayment premium equal to the sum of
(i) the Yield Maintenance Amount, if any, that would be required under the Defeasance Option and
(ii) three percent (3%) of the outstanding balance of the Loan. If for any reason the Loan is
prepaid on a day other than a scheduled monthly payment date, the Borrower shall pay, in addition
to the principal, interest and premium, if any, required under this Section, an amount equal to the
interest that would have accrued on the Loan from the date of prepayment to the next scheduled
monthly payment date. In the event of a prepayment resulting from Lender’s application of
insurance or condemnation proceeds pursuant to Article 3 hereof, no prepayment penalty or premium
shall be imposed.

     (d) Defeasance. On any Business Day following the earlier to occur of (i) two (2)
years after the Securitization Date or (ii) the fourth (4th) anniversary of the Closing Date,
provided no Event of Default exists that would not be cured by such defeasance, Borrower may obtain the release of the Project from the lien of the Mortgage in accordance with the terms
and provisions of Schedule I attached hereto (the “Defeasance Option”).

     Section 2.4 Security; Establishment of Funds. The Loan shall be secured by the Mortgage
creating a first lien on the Project, the Assignment of Leases and Rents and the other Loan
Documents.

     (a) Borrower agrees to establish the following reserves with Lender, to be held by Lender as
further security for the Loan:

Page 8

 

	 	(i)	 	Although no escrow is required therefor, Borrower shall
complete the required repairs set forth on Schedule II annexed hereto
on or before six (6) months from the date hereof;
	 
	 	(ii)	 	subject to the last sentence of this Section 2.4(a)(ii), to the
extent not already required under the Franchise Agreement (as hereinafter
defined), (x) Borrower will be required to deposit into an escrow with Lender
(the “FF&E Account”) four percent (4%) of the monthly Operating
Revenues of the Project each month for the repair and replacement of the
furniture, fixtures and equipment used in connection with the operation, use
and occupancy of the Project (the “FF&E”), and (y) on the date hereof
Borrower shall deposit in the FF&E Account the amount of any existing funds
maintained by or for the benefit of Borrower for the repair and replacement of
the FF&E, unless such funds are required to be deposited with the franchisor.
Notwithstanding the foregoing, no deposits shall be required in the FF&E
Account so long as (A) Borrower is, directly or indirectly, controlled by
Winston Hotels, Inc., (B) no monetary or other material Event of Default
exists, and (C) Borrower provides evidence satisfactory to Lender on or before
July 15 of each calendar year commencing July 15, 2007, that over the preceding
sixty (60) month period an amount equal to four percent (4%) of Operating
Revenues, or such greater amounts as required by the Franchise Agreement, for
such period has been spent on capital improvements, replacements, and FF&E for
the Project (the “FF&E Account Conditions”); and
	 
	 	(iii)	 	Borrower shall deliver to Lender reservation payments made for
guest, meeting, banquet or other rooms made more than six (6) months in advance
and exceeding $150,000 in the aggregate which shall be disbursed to Borrower
upon receipt of notice to Lender of the occurrence of the applicable event to
which such deposit is related or the required return or forfeiture of the
deposit.

     (b) Pledge and Disbursement of Funds. Borrower hereby pledges to Lender, and grants a
security interest in, any and all monies now or hereafter deposited in the Funds as additional security for the payment of the Loan. Subject to the conditions set forth in
Section 2.4(c), Lender shall make disbursements from the Funds as requested by Borrower, and
approved by Lender in its reasonable discretion, on a monthly basis in increments of no less than
$5,000.00 upon delivery by Borrower of Lender’s standard form of draw request accompanied by copies
of invoices for the amounts requested and, if required by Lender, lien waivers and releases from
all parties furnishing materials and/or services in connection with the requested payment. Such
advances may be made, at Lender’s election, either (i) in reimbursement for expenses paid by
Borrower, or (ii) for payment of expenses incurred and invoiced but not yet paid by Borrower.
Lender may require an inspection of the Project at Borrower’s expense prior to making a monthly
disbursement in order to verify completion of replacements and repairs for which reimbursement is
sought. The Funds shall be held in Lender’s name and may be

Page 9

 

commingled with Lender’s own funds at
financial institutions selected by Lender in its reasonable discretion. Upon the occurrence and
during the continuance of an Event of Default, Lender may apply any sums then present in the Funds
to the payment of the Loan in any order in its reasonable discretion. Until expended or applied as
above provided, the Funds shall constitute additional security for the Loan. Lender shall have no
obligation to release any of the Funds while any monetary or other material Event of Default exists
or any material adverse change has occurred in Borrower or any Joinder Party or the Project which
is reasonably likely to render Borrower’s or Joinder Party’s unable to perform its obligations
under the Loan Documents. All reasonable out-of-pocket costs and expenses incurred by Lender in
the disbursement of any of the Funds shall be paid by Borrower promptly upon demand or, at Lender’s
sole discretion, deducted from the Funds. All work for which payment is made from the Funds shall
be performed and completed lien-free and in a good and workmanlike manner.

     (c) Regardless of whether the FF&E Account is held by Lender or deposited with the franchisor,
the FF&E Account shall be pledged to Lender on a first priority basis as additional collateral for
the Loan, and notwithstanding the provisions of Section 2.4(b) above, Borrower shall not be
entitled to any disbursement from such account unless:

	 	(i)	 	following the occurrence of any FF&E Account Condition, if such
repair and repair and replacement are not in accordance with the Budget, Lender
has approved the repairs and replacements and related plans and specifications,
which approval shall be deemed approved if not disapproved within thirty (30)
days after receipt of documents reasonably required in connection with such
review;
	 
	 	(ii)	 	Lender determines that the repairs and replacements of the FF&E
are capital expenditures rather than normal repair and maintenance expenses;
	 
	 	(iii)	 	the requested disbursement is made not more frequently than
once monthly and in increments of not less than Five Thousand Dollars
($5,000.00);
	 
	 	(iv)	 	the work for which the disbursement is requested does not
include any immediate repairs required under Section 2.4(a) above;
	 
	 	(v)	 	Borrower has fulfilled all conditions precedent under the
Franchise Agreement (if applicable) for the work related to the requested
disbursement; and
	 
	 	(vi)	 	there exist no monetary or other material Event of Default
under the Loan Documents.

     (d) Interest Payable by Lender. Lender shall cause all monies on deposit in the Funds
to be deposited into interest bearing accounts of the type customarily maintained by Lender or its
servicing agent for the investment of (and may be commingled with) similar reserves, which accounts
may not yield the highest interest rate then available. The Funds shall

Page 10

 

be held in an account in
Lender’s name (or such other account name as Lender may elect) at a financial institution or other
depository selected by Lender (or its servicer) in its sole discretion (collectively, the
“Depository Institution”). Borrower shall earn no more than an amount of interest on the
Funds equal to an amount determined by applying to the average monthly balance of such Funds the
quoted interest rate for the Depository Institution’s money market savings account, as such rate
is determined from time to time (such allocated amount being referred to as “Borrower’s
Interest”) and Lender shall keep appropriate records of the Borrower’s Interest. Lender or its
Depository Institution shall be entitled to report under Borrower’s Federal tax identification
number the Borrower’s Interest on the Funds. If the Depository Institution does not have an
established money market savings account (or if an interest rate for such account cannot otherwise
be determined in connection with the deposit of such Funds), a comparable interest rate quoted by
the Depository Institution and acceptable to Lender (or its servicer) in its reasonable discretion
shall be used. The amount of Borrower’s Interest allocated to the Funds shall be added to the
balance in the applicable Fund, and shall be disbursed for payment of the items for which the
applicable Fund is to be disbursed. Any interest earned above the Borrower’s Interest shall be
retained by Lender as compensation for its administration and investment of such Funds.

ARTICLE 3

INSURANCE, CONDEMNATION, AND IMPOUNDS

     Section 3.1 Insurance. Borrower shall maintain insurance as follows:

     (a) Casualty; Business Interruption. Borrower shall keep the Project insured against
damage by fire and the other hazards covered by a standard extended coverage and all-risk insurance
policy for the full insurable value thereof on a replacement cost claim recovery basis (without
reduction for depreciation or co-insurance), and shall maintain such other casualty insurance as
reasonably required by Lender. Such insurance shall include coverage against acts of terrorism to
the extent and up to the level commercially reasonably available. Lender reserves the right to
require from time to time the following additional insurance: boiler and machinery; flood;
earthquake/sinkhole; worker’s compensation; and/or building law or ordinance. Borrower shall keep
the Project insured against loss by flood if the Project is located currently or at any time in the future in an area identified by the Federal Emergency Management Agency as an area
having special flood hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National
Flood Insurance Reform Act of 1994 (as such acts may from time to time be amended) in an amount at
least equal to the lesser of (i) the maximum amount of the Loan or (ii) the maximum limit of
coverage available under said acts. Any such flood insurance policy shall be issued in accordance
with the requirements and current guidelines of the Federal Insurance Administration. Borrower
shall maintain use and occupancy insurance covering, as applicable, rental income or business
interruption, with coverage in an amount not less than twelve (12) months anticipated gross rental
income or gross business earnings, as applicable in each case, attributable to the Project.
Borrower shall not maintain any separate or additional insurance which is contributing in the event
of loss unless it is properly endorsed and otherwise reasonably

Page 11

 

satisfactory to Lender in all
respects. The proceeds of insurance paid on account of any damage or destruction to the Project
shall be paid to Lender to be applied as provided in Section 3.2.

     (b) Liability. Borrower shall maintain (i) commercial general liability insurance
with respect to the Project providing for limits of liability of not less than Five Million Dollars
($5,000,000.00) for both injury to or death of a person and for property damage per occurrence, and
(ii) other liability insurance as reasonably required by Lender.

     (c) Additional Insurance: In addition to the insurance requirements set forth in
Sections 3.1(a) and (b) above, Borrower shall be required to maintain, or shall require Operating
Lessee and/or Manager to maintain, the following types of insurance, which must be satisfactory to
Lender in all respects (including the deductible and the amount of coverage):

	 	(i)	 	“Dram Shop” and/or “Innkeeper’s Liability” insurance in an
amount not less than the greater of One Million Dollars ($1,000,000.00) or as
required by applicable law, against claims or liabilities arising directly or
indirectly to Persons or property on account of the sale or dispensing of beer,
wine or other alcoholic beverage, including in such coverage loss of means of
support; and
	 
	 	(ii)	 	employee dishonesty, and money and securities insurance (inside
and out), depositors forgery, and liability for guests’ property on a blanket
basis covering all employees of Borrower or Manager who have access to or are
responsible for the handling of Borrower’s funds, guest property or tenant
security deposits, in such amounts as Lender shall require from time to time,
but in no event less than One Million Dollars ($1,000,000.00); and
	 
	 	(iii)	 	Builder’s risk insurance, as applicable, in amounts and with
coverages reasonably required by Lender.

     (d) Form and Quality. All insurance policies shall be endorsed in form and substance
acceptable to Lender to name Lender as an additional insured, loss payee or mortgagee thereunder,
as its interest may appear, with loss payable to Lender, without contribution, under a standard New York (or local equivalent) mortgagee clause. All such insurance policies and
endorsements shall be fully paid for and contain such provisions and expiration dates and be in
such form and issued by such insurance companies licensed to do business in the State, with a
general company and financial size rating of “A-IX” or better as established by Best’s Rating Guide
or “AA” or better by Standard & Poor’s Ratings Group. Each policy shall provide that such policy
may not be canceled or materially changed except upon thirty (30) days’ prior written notice of
intention of non-renewal, cancellation or material change to Lender and that no act or thing done
by Borrower shall invalidate any policy as against Lender. Blanket policies shall be permitted
only if (i) Lender receives appropriate endorsements and/or duplicate policies containing Lender’s
right to continue coverage on a pro rata pass-through basis and that coverage will not be affected
by any loss on other properties covered by the policies and (ii) the policy contains a sublimit
equal to the replacement cost of the Project in an amount approved by Lender

Page 12

 

which is expressly
allocated for the Project, and any such policy shall in all other respects comply with the
requirements of this Section. Borrower authorizes Lender to pay the premiums for such policies
(the “Insurance Premiums”) from the Tax and Insurance Escrow Fund as the same become due
and payable annually in advance. If Borrower fails to deposit funds into the Tax and Insurance
Escrow Fund sufficient to permit Lender to pay the premiums when due, Lender may obtain such
insurance and pay the premium therefor and Borrower shall, on demand, reimburse Lender for all
expenses incurred in connection therewith. Borrower shall assign the policies or proofs of
insurance to Lender, in such manner and form that Lender and its successors and assigns shall at
all times have and hold the same as security for the payment of the Loan. Borrower shall deliver
copies of all original policies certified to Lender by the insurance company or authorized agent as
being true copies, together with the endorsements required hereunder. The proceeds of insurance
policies coming into the possession of Lender shall not be deemed trust funds, and Lender shall be
entitled to apply such proceeds as herein provided.

     (e) Adjustments. Borrower shall give immediate written notice of any loss to the
insurance carrier and to Lender. Borrower hereby irrevocably authorizes and empowers Lender, as
attorney-in-fact for Borrower coupled with an interest, to make proof of loss, to adjust and
compromise any claim under insurance policies (unless Borrower is otherwise taking such actions),
to appear in and prosecute any action arising from such insurance policies, to collect and receive
insurance proceeds, and to deduct therefrom Lender’s reasonable expenses incurred in the collection
of such proceeds. Nothing contained in this Section 3.1(d), however, shall require Lender to incur
any expense or take any action hereunder.

     Section 3.2 Use and Application of Insurance Proceeds.

     (a) If the Project shall be damaged or destroyed, in whole or in part, by fire or other
casualty (a “Casualty”), Borrower shall give prompt notice thereof to Lender. Following
the occurrence of a Casualty, Borrower, if insurance proceeds are made available, shall promptly
proceed to restore, repair, replace or rebuild the same to be of at least equal value and of
substantially the same character as prior to such damage or destruction, all to be effected in
accordance with applicable law.

     (b) Insurance proceeds shall be applied as follows:

	 	(i)	 	if the loss is less than or equal to Three Hundred Fifty
Thousand Dollars ($350,000.00), Lender shall permit Borrower to apply the
insurance proceeds to restoration provided (A) no Event of Default or
Potential Default exists that would not be cured by the application of the
insurance proceeds to and the restoration of the Project, and (B) Borrower
promptly commences and is diligently pursuing restoration of the Project;
	 
	 	(ii)	 	if the loss exceeds Three Hundred Fifty Thousand Dollars
($350,000.00) but is not more than twenty-five percent (25%) of the replacement
value of the improvements, the insurance proceeds shall be deposited with a
financial institution or third-party insurance intermediary reasonable

Page 13

 

	 	 	 	acceptable to Borrower and Lender for application, prior to the occurrence of
an Event of Default, to restoration provided that (A) at all times during such
restoration no Event of Default or Potential Default exists that would not be
cured by the application of the insurance proceeds to and the restoration of
the Project; (B) Lender determines throughout the restoration that there are
sufficient funds available to restore and repair the Project to a condition and
value, substantially as prior to the casualty; (C) Lender determines that the
Operating Revenues of the Project during restoration, taking into account rent
loss or business interruption insurance, will be sufficient to pay Debt
Service; (D) Lender reasonably determines (based on leases which will remain in
effect after restoration is complete if the Project is not a multi-family
project) that after restoration the ratio of net operating income to Debt
Service will equal at least the ratio that existed on the Closing Date; (E)
Lender reasonably determines that the ratio of the outstanding principal
balance of the Loan to appraised value of the project after restoration will
not exceed the loan-to-value ratio that existed on the date of the casualty;
(F) Lender reasonably determines that restoration and repair of the Project to
a condition approved by Lender will be completed within nine (9) months after
the date of loss or casualty and in any event ninety (90) days prior to the
Maturity Date; (G) Borrower promptly commences and is diligently pursuing
restoration of the Project; and (H) the Project after the restoration will be
in compliance with and permitted under all applicable zoning, building and land
use laws, rules, regulations and ordinances; and
	 
	 	(iii)	 	if the conditions set forth in (i) and (ii) above are not
satisfied in Lender’s reasonable discretion, Lender may apply any insurance
proceeds it may receive to the payment of the Loan or allow all or a portion of
such proceeds to be used for the restoration of the Project.

     (c) Insurance proceeds applied to restoration will be disbursed by Lender to Borrower on
receipt of reasonably satisfactory plans and specifications, contracts and subcontracts, schedules,
budgets, lien waivers and architects’ certificates, and otherwise in accordance with prudent
commercial construction lending practices for construction loan advances (including appropriate retainages to ensure that all work is completed in a workmanlike manner). Any
surplus insurance proceeds not required for the restoration and repair of the Project as provided
herein shall be disbursed to Borrower.

     Section 3.3 Condemnation Awards. Borrower shall promptly give Lender written notice
of the actual or threatened commencement of any condemnation or eminent domain proceeding (a
“Condemnation”) and shall deliver to Lender copies of any and all papers served in
connection with such Condemnation. Following the occurrence of a Condemnation, Borrower,
regardless of whether any award or compensation (an “Award”) is available, shall promptly
proceed to restore, repair, replace or rebuild the same to the extent practicable to be of at least
equal value and of substantially the same character as prior to such Condemnation, all to

Page 14

 

be effected in accordance with applicable law. Lender may participate in any such proceeding and
Borrower will deliver to Lender all instruments necessary or required by Lender to permit such
participation. Without Lender’s prior consent which shall not be unreasonably withheld,
conditioned or delayed, Borrower (a) shall not agree to any Award, and (b) shall not take any
action or fail to take any action which would cause the Award to be determined. All Awards for the
taking or purchase in lieu of condemnation of the Project or any part thereof are hereby assigned
to and shall be paid to Lender. Borrower authorizes Lender to collect and receive such Awards, to
give proper receipts and acquittances therefor, and in Lender’s sole discretion to apply the same
toward the payment of the Loan, notwithstanding that the Loan may not then be due and payable, or
to the restoration of the Project; provided, however, if the Award is less than or equal to Two
Hundred Fifty Thousand Dollars ($250,000.00) and Borrower requests that such proceeds be used for
non-structural site improvements (such as landscape, driveway, walkway and parking area repairs)
required to be made as a result of such condemnation, Lender will apply the Award to such
restoration in accordance with disbursement procedures applicable to insurance proceeds provided
there exists no Event of Default that would not be cured by such application of the Award.
Borrower, upon request by Lender, shall execute all instruments requested to confirm the assignment
of the Awards to Lender, free and clear of all liens, charges or encumbrances. Any portion of any
Award not applied toward payment of the Loan or to the restoration of the Project shall be
disbursed promptly to Borrower, but in no event more than thirty (30) days from receipt by Lender.

     Section 3.4 Impounds. Upon the occurrence and during the continuance of an Impound
Trigger Event, Borrower shall deposit with Lender, monthly, (a) one-twelfth (1/12th) of the Taxes
that Lender estimates will be payable during the next ensuing twelve (12) months in order to
accumulate with Lender sufficient funds to pay all such Taxes at least thirty (30) days prior to
their respective due dates, and (b) one-twelfth (1/12th) of the Insurance Premiums that
Lender estimates will be payable for the renewal of the coverage afforded by the insurance policies
required by Lender upon the expiration thereof in order to accumulate with Lender sufficient funds
to pay all such Insurance Premiums at least thirty (30) days prior to expiration (said amounts in
(a) and (b) above hereinafter called the “Tax and Insurance Escrow Fund”). Deposits shall be made on the basis of Lender’s estimate from time to time of the charges for
the current year (after giving effect to any reassessment or, at Lender’s election, on the basis of
the charges for the prior year, with adjustments when the charges are fixed for the then current
year). All funds so deposited shall be held by Lender with interest in the manner set forth in
Section 2.4(c) hereof and may be commingled with Lender’s general funds and Lender shall keep
appropriate records of Borrower’s Interest earned on the Tax and Insurance Escrow Fund. Borrower
hereby grants to Lender a security interest in all funds so deposited with Lender for the purpose
of securing the Loan. While an Event of Default exists, the funds deposited may be applied in
payment of the charges for which such funds have been deposited, or to the payment of the Loan or
any other charges affecting the security of Lender, as Lender may elect, but no such application
shall be deemed to have been made by operation of law or otherwise until actually made by Lender.
Borrower shall furnish Lender with bills for the charges for which such deposits are required at
least thirty (30) days prior to the date on which the charges first become payable. If at any time
the amount on deposit with Lender, together with amounts to be deposited by Borrower before such
charges are payable, is insufficient to pay such charges,

Page 15

 

Borrower shall, to the extent deposits
are otherwise required by this Section 3.4, deposit any deficiency with Lender immediately upon
demand. Lender shall pay such charges when the amount on deposit with Lender is sufficient to pay
such charges and Lender has received a bill for such charges.

ARTICLE 4

ENVIRONMENTAL MATTERS

     Section 4.1 Certain Definitions. As used herein, the following terms have the
meanings indicated:

     (a) “Environmental Laws” means any federal, state or local law (whether imposed by
statute, ordinance, rule, regulation, administrative or judicial order, or common law), now or
hereafter enacted, governing health, safety, industrial hygiene, the environment or natural
resources, or Hazardous Materials, including, without limitation, such laws governing or regulating
(i) the use, generation, storage, removal, recovery, treatment, handling, transport, disposal,
control, release, discharge of, or exposure to, Hazardous Materials, (ii) the transfer of property
upon a negative declaration or other approval of a governmental authority of the environmental
condition of such property, or (iii) requiring notification or disclosure of releases of Hazardous
Materials or other environmental conditions whether or not in connection with a transfer of title
to or interest in property.

     (b) “Hazardous Materials” means (i) petroleum or chemical products, whether in
liquid, solid, or gaseous form, or any fraction or by-product thereof, (ii) asbestos or
asbestos-containing materials, (iii) polychlorinated biphenyls (pcbs), (iv) radon gas, (v)
underground storage tanks, (vi) any explosive or radioactive substances, (vii) lead or lead-based
paint, or (viii) any other substance, material, waste or mixture which is or shall be listed,
defined, or otherwise determined by any governmental authority to be hazardous, toxic, dangerous or
otherwise regulated, controlled or giving rise to liability under any Environmental Laws.

     Section 4.2 Representations and Warranties on Environmental Matters. To Borrower’s
knowledge, except as set forth in the Site Assessment, (a) no Hazardous Material is now or was
formerly used, stored, generated, manufactured, installed, treated, discharged, disposed of or
otherwise present at or about the Project or any property adjacent to the Project (except for
cleaning and other products currently used in connection with the routine maintenance or repair of
the Project in full compliance with Environmental Laws) and no Hazardous Material was removed or
transported from the Project, (b) all permits, licenses, approvals and filings required by
Environmental Laws have been obtained, and the use, operation and condition of the Project does
not, and did not previously, violate any Environmental Laws, (c) no civil, criminal or
administrative action, suit, claim, hearing, investigation or proceeding has been brought or, to
Borrower’s knowledge, been threatened, nor have any settlements been reached by or with any parties
or any liens imposed in connection with the Project concerning Hazardous Materials or Environmental
Laws; and (d) to Borrower’s knowledge, no underground storage tanks exist on any part of the
Project.

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     Section 4.3 Covenants on Environmental Matters.

     (a) Borrower shall, and shall cause Operating Lessee to, (i) comply strictly and in all
respects with applicable Environmental Laws; (ii) notify Lender immediately upon Borrower’s
discovery of any spill, discharge, release or presence of any Hazardous Material at, upon, under,
within, contiguous to or otherwise affecting the Project; (iii) promptly remove such Hazardous
Materials and remediate the Project in full compliance with Environmental Laws ; and (iv) promptly
forward to Lender copies of all orders, notices, permits, applications or other communications and
reports in connection with any spill, discharge, release or the presence of any Hazardous Material
or any other matters relating to the Environmental Laws or any similar laws or regulations, as they
may affect the Project, Borrower or Operating Lessee.

     (b) Borrower shall not cause, and shall cause Operating Lessee not to cause, and Borrower
shall, and shall cause Operating Lessee to, prohibit any other Person within the control of
Borrower or Operating Lessee from, and shall use prudent, commercially reasonable efforts to
prohibit other Persons (including tenants) from causing, (i) any spill, discharge or release, or
the use, storage, generation, manufacture, installation, or disposal, of any Hazardous Materials
at, upon, under, within or about the Project or the transportation of any Hazardous Materials to or
from the Project (except for cleaning and other products used in connection with routine
maintenance or repair of the Project in full compliance with Environmental Laws), (ii) installing
any underground storage tanks at the Project, or (iii) conducting any activity that requires a
permit or other authorization under Environmental Laws (other than as necessary to effect repairs,
restoration, remediation, or other capital improvements to the Project in accordance with this
Agreement).

     (c) Borrower shall provide to Lender, at Borrower’s expense promptly upon the written request
of Lender from time to time, a Site Assessment or, if required by Lender, an update to any existing
Site Assessment, to assess the presence or absence of any Hazardous Materials and the potential
costs in connection with abatement, cleanup or removal of any Hazardous Materials found on, under, at or within the Project if Lender reasonably believes
that Hazardous Materials are on, under, at, or within the Project, but not more than one such Site
Assessment or update in any twelve (12)-month period, unless Lender’s request for a Site Assessment
is based on new information provided under Section 4.3(a), a reasonable suspicion of Hazardous
Materials at or near the Project in violation of applicable Environmental Laws, a breach of
representations under Section 4.2, or during the continuance of an Event of Default, in which case
any such Site Assessment or update shall be at Borrower’s expense.

     Section 4.4 Allocation of Risks and Indemnity. As between Borrower and Lender, all
risk of loss associated with non-compliance with Environmental Laws, or with the presence of any
Hazardous Material at, upon, within, contiguous to or otherwise affecting the Project, shall lie
solely with Borrower. Accordingly, Borrower shall bear all risks and costs associated with any
loss (including any loss in value attributable to Hazardous Materials), damage or liability
therefrom, including all costs of removal of Hazardous Materials or other remediation required by
Lender or by law. Borrower shall indemnify, defend and hold Lender and its shareholders,
directors, officers, employees and agents harmless from and against all loss,

Page 17

 

liabilities, damages,
claims, costs and expenses (including reasonable costs of defense and consultant fees,
investigation and laboratory fees, court costs, and other litigation expenses) arising out of or
associated, in any way, with (a) the non-compliance with Environmental Laws, or (b) the existence
of Hazardous Materials in, on, or about the Project, (c) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to Hazardous Materials; (d)
any lawsuit brought or threatened, settlement reached, or government order relating to such
Hazardous Materials, (e) a breach of any representation, warranty or covenant contained in this
Article 4, whether based in contract, tort, implied or express warranty, strict liability, criminal
or civil statute or common law, or (f) the imposition of any environmental lien encumbering the
Project; provided, however, Borrower shall not be liable under such indemnification to the extent
such loss, liability, damage, claim, cost or expense results solely from Lender’s gross negligence
or willful misconduct. Borrower’s obligations under this Section 4.4 shall arise whether or not
any governmental authority has taken or threatened any action in connection with the presence of
any Hazardous Material, and whether or not the existence of any such Hazardous Material or
potential liability on account thereof is disclosed in the Site Assessment and shall continue
notwithstanding the repayment of the Loan or any transfer or sale of any right, title and interest
in the Project (by foreclosure, deed in lieu of foreclosure or otherwise). Additionally, if any
Hazardous Materials affect or threaten to affect the Project, Lender may (but shall not be
obligated to) give such notices and take such actions as it reasonably deems necessary pursuant to
Environmental Laws at the expense of the Borrower in order to abate the discharge of any Hazardous
Materials or remove the Hazardous Materials. Any amounts payable to Lender by reason of the
application of this Section 4.4 shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is actually paid by Lender and invoiced to Borrower
until Borrower has reimbursed Lender for such loss or damage. The obligations and liabilities of
Borrower under this Section 4.4 shall survive any termination, satisfaction, assignment, entry of a
judgment of foreclosure or delivery of a deed in lieu of foreclosure. Notwithstanding the
foregoing, subject to the conditions specified below in this Section 4.4, Borrower shall not be liable under this Section 4.4 for such indemnified matters
directly created or arising from events or conditions not caused or created by Borrower and first
existing after Lender (or its designee) acquires title to the Project by foreclosure or acceptance
of a deed in lieu thereof or title is otherwise transferred, but only if (a) Borrower delivers to
Lender a site assessment dated not earlier than ninety (90) days prior to such foreclosure, deed in
lieu thereof or other transfer of title evidencing the presence of no Hazardous Materials on the
Project and no material violation of any Environmental Laws with respect to the Project, provided,
however, that Borrower shall remain liable to Lender for any non-material violations of any
Environmental Laws disclosed by such current site assessment, and (b) such loss, liability, damage,
claim, cost, or expense does not directly or indirectly arise from or relate to any release of or
exposure to any Hazardous Materials (including personal injury or damage to property),
non-compliance with any Environmental Laws, or remediation existing or occurring prior to the date
Lender (or its designee) acquires title to the Project or title to the Project is otherwise
transferred to a third party.

     Section 4.5 No Waiver. Notwithstanding any provision in this Article 4 or elsewhere
in the Loan Documents, or any rights or remedies granted by the Environmental Indemnity Agreement
or the Loan Documents, Lender does not waive and expressly reserves all rights and

Page 18

 

benefits now or
hereafter accruing to Lender under the “security interest” or “secured creditor” exception under
applicable Environmental Laws, as the same may be amended. No action taken by Lender pursuant to
the Environmental Indemnity Agreement or the Loan Documents shall be deemed or construed to be a
waiver or relinquishment of any such rights or benefits under the “security interest exception.”

ARTICLE 5

LEASING MATTERS

     Section 5.1 Representations and Warranties on Leases. Borrower represents and
warrants to Lender with respect to leases of the Project that: (a) the leases (including
amendments) are in writing, and there are no oral agreements with respect thereto; (b) the copies
of the leases delivered to Lender are true and complete; (c) neither the landlord nor any tenant is
in default under any of the leases; (d) Borrower has no knowledge of any notice of termination or
default with respect to any lease; (e) Borrower has not assigned or pledged any of the leases, the
rents or any interests therein except to Lender; (f) no tenant or other party has an option to
purchase all or any portion of the Project; (g) no tenant has the right to terminate its lease
prior to expiration of the stated term of such lease; (h) no tenant has prepaid more than one (1)
month’s rent in advance (except for bona fide security deposits not in excess of an amount equal to
two (2) month’s rent); and (i) all existing leases are subordinate to the Mortgage either pursuant
to their terms or a recorded subordination agreement.

     Section 5.2 Standard Lease Form; Approval Rights. All leases and other rental arrangements valued at more than five percent (5%) of the
Project’s annual Operating Revenues (“Material Leases”) shall in all respects be approved
by Lender, which approval shall not be unreasonably withheld, conditioned or delayed and shall
contain terms customarily required by prudent property management practices for similar properties.
Borrower shall, or shall cause Operating Lessee to, hold, in trust, all tenant security deposits
in a segregated account, and, to the extent required by applicable law, shall not commingle any
such funds with any other funds of Borrower or Operating Lessee. Within ten (10) days after
Lender’s request, Borrower shall, or shall cause Operating Lessee to, furnish to Lender a statement
of all tenant security deposits, and copies of all leases not previously delivered to Lender,
certified by Borrower or Operating Lessee as being true and correct. Notwithstanding anything
contained in the Loan Documents, Lender’s approval shall not be required for future leases or lease
extensions if the following conditions are satisfied: (i) there exists no Potential Default or
Event of Default; (ii) the lease is on the standard lease form approved by Lender with no material
modifications; (iii) the lease does not conflict with any restrictive covenant affecting the
Project or any other lease for space in the Project; and (iv) the lease is for a market rental rate
and contains terms customarily required by prudent property management practices for similar
properties.

     Section 5.3 Covenants. Borrower shall, or shall cause Operating Lessee to, (a)
perform the obligations which Borrower is required to perform under the leases; (b) enforce the
obligations to be performed by the tenants; (c) promptly furnish to Lender any notice of default or
termination received by Borrower or Operating Lessee from any tenant, and any notice of default or
termination given by Borrower to any tenant; (d) not collect any rents for more than

Page 19

 

one (1) month
in advance of the time when the same shall become due, except for bona fide security deposits not
in excess of an amount equal to two (2) month’s rent; (e) not enter into any ground lease or master
lease of any part of the Project (other than the Operating Lease); (f) not further assign or
encumber any lease; (g) not, except with Lender’s prior written consent (which shall not be
unreasonably withheld, conditioned or delayed), cancel or accept surrender or termination of any
Material Lease; and (h) not, except with Lender’s prior written consent, not modify or amend any
Material Lease (except for minor modifications and amendments entered into in the ordinary course
of business, consistent with prudent property management practices, not affecting the economic
terms of the lease). Any action in violation of clauses (e), (f), (g), and (h) of this Section 5.3
shall be void at the election of Lender.

     Section 5.4 Tenant Estoppels. At Lender’s request, Borrower shall use commercially
reasonable efforts to obtain and furnish to Lender, but not more than once during any twelve (12)
month period, written estoppels in form and substance reasonably satisfactory to Lender, executed
by tenants under Material Leases in the Project and confirming the term, rent, and other provisions
and matters relating to the Material Leases.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants, as of the date hereof, and covenants (where so specified) to
Lender that:

     Section 6.1
Organization, Power and Authority. Borrower and each Borrower Party (a)
is duly organized, validly existing and in good standing under the laws of the state of its
formation or existence, (b) is in compliance with all legal requirements applicable to doing
business in the State, and (c) has the necessary governmental approvals to own and operate the
Project and conduct the business now conducted or to be conducted thereon. Borrower has the full
power, authority and right to execute, deliver and perform its obligations pursuant to this Loan
Agreement and the other Loan Documents, and to mortgage the Project pursuant to the terms of the
Mortgage and to keep and observe all of the terms of this Loan Agreement and the other Loan
Documents on Borrower’s part to be performed. Borrower is not a “foreign person” within the
meaning of § 1445(f)(3) of the Internal Revenue Code.

     Section 6.2 Validity of Loan Documents. The execution, delivery and performance by
Borrower and each Borrower Party of the Loan Documents to which it is a party: (a) are duly
authorized and do not require the consent or approval of any other party or governmental authority
which has not been obtained; and (b) will not violate any law or result in the imposition of any
lien, charge or encumbrance upon the assets of any such party, except as contemplated by the Loan
Documents. The Loan Documents constitute the legal, valid and binding obligations of Borrower and
each Borrower Party that is a party thereto, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, or similar laws generally affecting the enforcement
of creditors’ rights.

Page 20

 

     Section 6.3 Liabilities; Litigation.

     (a) The financial statements delivered by Borrower and each Borrower Party are true and
correct in all material respects with no significant change since the date of preparation. Except
as disclosed in such financial statements, there are no liabilities (fixed or contingent) affecting
the Project, Borrower or any Borrower Party. Except as disclosed in such financial statements,
there is no litigation, administrative proceeding, investigation or other legal action (including
any proceeding under any state or federal bankruptcy or insolvency law) pending or, to the
knowledge of Borrower, threatened, against the Project, Borrower or any Borrower Party which if
adversely determined could have a material adverse effect on such party, the Project or the Loan.

     (b) Neither Borrower nor any Borrower Party is contemplating either the filing of a petition
by it under state or federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of its assets or property, and neither Borrower nor any Borrower Party has knowledge of any
Person contemplating the filing of any such petition against it.

     Section 6.4
Taxes and Assessments. The Project is comprised of one or more parcels,
each of which constitutes a separate tax lot and none of which constitutes a portion of any other
tax lot. There are no pending or, to Borrower’s knowledge, proposed, special or other assessments
for public improvements or otherwise affecting the Project, nor are there any contemplated
improvements to the Project that may result in such special or other assessments.

     Section 6.5 Other Agreements; Defaults. Neither Borrower nor any Borrower Party is a
party to any agreement or instrument or subject to any court order, injunction, permit, or
restriction which might materially adversely affect the Project or the business, operations, or
condition (financial or otherwise) of Borrower or any Borrower Party. Neither Borrower nor any
Borrower Party is in violation of any agreement which violation would have a material adverse
effect on the Project, Borrower, or any Borrower Party or Borrower’s or any Borrower Party’s
business, properties, or assets, operations or condition, financial or otherwise.

     Section 6.6 Compliance with Law. 

     (a) Borrower or Operating Lessee have all requisite licenses, permits, franchises,
qualifications, certificates of occupancy or other governmental authorizations to own, lease and
operate the Project and carry on its business, including, without limitation, occupancy permits
required for the legal use, occupancy and operation of the Project as a hotel and any applicable
liquor license, and the Project is in material compliance with all applicable legal requirements,
including without limitation, restrictive covenants, and is free of structural defects, and all
building systems contained therein are in good working order, subject to ordinary wear and tear.
The Project does not constitute, in whole or in part, a legally non-conforming use under applicable
legal requirements;

Page 21

 

     (b) No condemnation has been commenced or, to Borrower’s knowledge, is contemplated with
respect to all or any portion of the Project or for the relocation of roadways providing access to
the Project; and

     (c) The Project has adequate rights of access to public ways and is served by adequate water,
sewer, sanitary sewer and storm drain facilities. All public utilities necessary or convenient to
the full use and enjoyment of the Project are located in the public right-of-way abutting the
Project, and all such utilities are connected so as to serve the Project without passing over other
property, except to the extent such other property is subject to a perpetual easement for such
utility benefiting the Project. All roads necessary for the full utilization of the Project for
its current purpose have been completed and dedicated to public use and accepted by all
governmental authorities.

     Section 6.7 Location of Borrower. Borrower’s principal place of business and chief executive offices are located at the
address stated in Section 11.1.

     Section 6.8 ERISA.

     (a) As of the date hereof and throughout the term of the Loan, (i) Borrower is not and will
not be an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), which is subject to Title I of ERISA, and (ii)
the assets of Borrower do not and will not constitute “plan assets” of one or more such plans for
purposes of Title I of ERISA; and

     (b) As of the date hereof and throughout the term of the Loan (i) Borrower is not and will not
be a “governmental plan” within the meaning of Section 3(3) of ERISA and (ii) transactions by or
with Borrower are not and will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.

     Section 6.9 Forfeiture. There has not been committed during the ownership by Borrower
of the Project or, to Borrower’s knowledge, any predecessor in title, and shall never be committed
by Borrower or any other person in occupancy of or involved with the operation or use of the
Project, any act or omission affording the federal government or any state or local government the
right of forfeiture as against the Project or any part thereof or any monies paid in performance of
Borrower’s obligations under any of the Loan Documents. Borrower hereby covenants and agrees not
to commit, permit or suffer to exist any act or omission affording such right of forfeiture.

     Section 6.10 Tax Filings. Borrower and each Borrower Party have filed (or have
obtained effective extensions for filing) all federal, state and local tax returns required to be
filed and have paid or made adequate provision for the payment of all federal, state and local
taxes, charges and assessments due and payable by Borrower and each Borrower Party, respectively.
Borrower and each Borrower Party believe that their respective tax returns (to the extent tax
returns are required) properly reflect the income and taxes of Borrower and each Borrower Party,

Page 22

 

respectively, for the periods covered thereby, subject only to reasonable adjustments required by
the Internal Revenue Service or other applicable tax authority upon audit.

     Section 6.11 Solvency. Giving effect to the Loan, the fair saleable value of
Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s
total liabilities, including, without limitation, subordinated, unliquidated, disputed and
contingent liabilities. The fair saleable value of Borrower’s assets is and will be, immediately
following the making of the Loan, greater than Borrower’s probable liabilities, including the
maximum amount of its contingent liabilities on its Debts as such Debts become absolute and
matured, 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. Borrower
does not intend to, and does not believe that it will, incur Debts and liabilities (including
contingent liabilities and other commitments) beyond its ability to pay such Debts as they mature
(taking into account the timing and amounts of cash to be received by Borrower and the amounts to
be payable on or in respect of obligations of Borrower). Except as expressly disclosed to Lender
in writing, no petition in bankruptcy has been filed against Borrower or any Borrower Party in the
last seven (7) years, and neither Borrower or any Borrower Party in the last seven (7) years has
ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for
the benefit of debtors.

     Section 6.12 Full and Accurate Disclosure. No statement of fact made by or on behalf
of Borrower or any Borrower Party in this Agreement or in any of the other Loan Documents 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
Borrower which has not been disclosed to Lender which materially adversely affects, nor as far as
Borrower can foresee, might materially adversely affect, the Project or the business, operations or
condition (financial or otherwise) of Borrower or any Borrower Party.

     Section 6.13 Flood Zone. Other than as shown on the survey delivered to Lender in
connection with the Loan, no portion of the improvements comprising the Project is located in an
area identified by the Secretary of Housing and Urban Development or any successor thereto as an
area having special flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Act of 1994, as amended, or any
successor law, or, if located within any such area, Borrower has obtained and will maintain the
insurance prescribed in Section 3.1 hereof.

     Section 6.14 Single Purpose Entity/Separateness. Borrower represents, warrants and
covenants as follows:

     (a) Borrower has not owned, does not own, and will not own any asset or property other than
(i) the Project, and (ii) incidental personal property necessary for the ownership or operation of
the Project.

Page 23

 

     (b) Borrower has not engaged in and will not engage in any business other than the ownership,
management and operation of the Project and Borrower will conduct and operate its business as
presently conducted and operated.

     (c) Borrower has not entered into and will not enter into any contract or agreement with any
Affiliate of the Borrower, any constituent party of Borrower, or any Affiliate of any constituent
party, except upon terms and conditions that have been, are and shall be intrinsically fair and substantially similar to those that would be available on an arms-length basis with
third parties other than any such party.

     (d) Borrower has not incurred and will not incur any Debt other than (i) the Loan, (ii)
trade and operational debt incurred in the ordinary course of business with trade creditors and in
amounts as are normal and reasonable under the circumstances, provided such debt is not evidenced
by a note and is paid within ninety (90) days after the date when due, and (iii) Debt incurred in
the financing of equipment and other personal property used on the Project in the ordinary course
of business of prudent hotel management for similar hotels to the Project. No indebtedness other
than the Loan may be secured (subordinate or pari passu) by the Project.

     (e) Borrower has not made and will not make any loans or advances to any third party
(including any affiliate or constituent party or any affiliate of any constituent party), and has
not and shall not acquire obligations or securities of its affiliates or any constituent party.

     (f) Borrower has been, is and will remain solvent and Borrower has paid, and will pay its
debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its
own funds and assets as the same have become due and as same shall become due.

     (g) Borrower has done or caused to be done and will do all things necessary to observe
organizational formalities and preserve its existence, and Borrower will not permit any constituent
party to amend, modify or otherwise change the partnership certificate, partnership agreement,
articles of incorporation and bylaws, operating agreement, trust or other organizational documents
of Borrower or such constituent party without the prior written consent of Lender which consent
shall not be unreasonably withheld, conditioned or delayed.

     (h) Borrower has maintained, and will maintain, all of its books, records, financial
statements and bank accounts separate from those of its Affiliates and any constituent party and
Borrower will file its own tax returns to the extent that it is required to file any tax return,
and may file a consolidated federal income tax return with any other person as required by
applicable law or in accordance with GAAP. Borrower shall maintain its books, records, resolutions
and agreements as official records.

     (i) Borrower has been and will be, and at all times has held itself out and will hold itself
out to the public as, a legal entity separate and distinct from any other entity (including any
Affiliate of Borrower, any constituent party of Borrower, or any Affiliate of any constituent
party), shall correct any known misunderstanding regarding its status as a separate entity, shall

Page 24

 

conduct business in its own name, shall not identify itself or any of its Affiliates as a division
or part of the other and shall maintain and utilize a separate invoices and checks.

     (j) Borrower has maintained, and will maintain, adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of its contemplated
business operations.

     (k) Neither Borrower nor any constituent party will seek the dissolution, winding up,
liquidation, consolidation or merger in whole or in part, of the Borrower.

     (l) Borrower has not commingled and will not commingle the funds and other assets of Borrower
with those of any Affiliate or constituent party, or any Affiliate of any constituent party, or any
other person other than legally permissible and authorized distributions to equity owners.

     (m) Borrower has and will maintain its assets in such a manner that it will not be costly or
difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or
constituent party, or any Affiliate of any constituent party, or any other person.

     (n) Borrower has not, does not, and will not hold itself out to be responsible for the debts
or obligations of any other person except for guaranties issued in connection with the Franchise
Agreement to the franchisor or licensor thereunder in the ordinary course of business of operating
the Project.

     (o) If Borrower is a single member limited liability company, Borrower shall be formed and
organized under Delaware law and otherwise comply with all other Rating Agency criteria for single
member limited liability companies (including, without limitation, the inclusion of a “springing
member” and delivery of Delaware single member liability company opinions acceptable in all
respects to Lender and to the Rating Agencies.

     Section 6.15 Anti-Terrorism and Anti-Money Laundering Laws.

     (a) Borrower, Operating Lessee and each partner, member or stockholder in Borrower, Operating
Lessee and all beneficial owners of Borrower and any such partner, member or stockholder, are in
compliance with the requirements of the Anti-Money Laundering Laws (as defined below). Borrower
and Operating Lessee agree to make its policies, procedures and practices regarding compliance with
the Anti-Money Laundering Laws of any Persons who, pursuant to transfers permitted by the Mortgage,
become stockholders, members, partners or other investors of Borrower available to Lender for its
review and inspection during normal business hours and upon reasonable prior notice.

     (b) Neither Borrower nor Operating Lessee, any partner, member or stockholder in Borrower or
Operating Lessee nor the beneficial owner of Borrower or Operating Lessee or any such partner,
member or stockholder:

	 	(i)	 	is listed on the Lists (as defined below);

Page 25

 

	 	(ii)	 	is a Person who has been determined by competent authority to
be subject to the prohibitions contained in the Anti-Money Laundering Laws;
	 
	 	(iii)	 	is owned or controlled by, nor acts for or on behalf of, any
Person on the Lists or any other Person who has been determined by competent
authority to be subject to the prohibitions contained in the Anti-Money
Laundering Laws;
	 
	 	(iv)	 	shall transfer or permit the transfer of any interest in
Borrower or any Borrower Party to any Person who is or whose beneficial owners
are listed on the Lists; or
	 
	 	(v)	 	shall knowingly lease space in the Project to any Person who is
listed on the Lists or who is engaged in illegal activities.

     (c) If Borrower obtains knowledge that Borrower or Operating Lessee or any of its partners,
members or stockholders or their beneficial owners become listed on the Lists or are indicted,
arraigned, or custodially detained on charges involving money laundering or predicate crimes to
money laundering, Borrower shall immediately notify Lender.

     (d) If Borrower obtains knowledge that any tenant in the Project has become listed on the
Lists or is convicted, pleads nolo contendere, indicted, arraigned, or custodially detained on
charges involving money laundering or predicate crimes to money laundering, Borrower shall
immediately notify Lender.

     (e) If a tenant at the Project is listed on the Lists or is convicted or pleads nolo
contendere to charges related to activity prohibited in the Anti-Money Laundering Laws, then
proceeds from the rents of such tenant shall not be used to pay Debt Service and Borrower shall
provide Lender such representations and verifications as Lender shall reasonably request that such
rents are not being so used.

     (f) If a tenant at the Project is arrested on such charges, and such charge is not dismissed
within thirty (30) days thereafter, Lender may at its option notify Borrower to exclude such rents
from the Debt Service payments.

     (g) If Borrower or any Borrower Party is listed on the Lists, no earn-out disbursements,
escrow disbursements, or other disbursements under the Loan Documents shall be made and all of such
funds shall be paid in accordance with the direction of a court of competent jurisdiction.

     As used herein, the following terms have the meanings indicated:

     “Anti-Money Laundering Laws” means those laws, regulations and sanctions, state and
federal, criminal and civil, that (a) limit the use of and/or seek the forfeiture of proceeds from
illegal transactions; (b) limit commercial transactions with designated countries or individuals
believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the

Page 26

 

interests of the United States; (c) require identification and documentation of the parties with
whom a financial institution conducts business; or (d) are designed to disrupt the flow of funds to
terrorist organizations. Such laws, regulations and sanctions shall be deemed to include the USA
PATRIOT ACT of 2001, Publ. L. No. 107-56, the Bank Secrecy Act, 31 U.S.C. Section 5311, et seq.,
the Trading with the Enemy Act, 50 U.S.C. App. Section 1, et seq., the International Emergency
Economic Powers Act, 50 U.S.C. Section 1701, et seq., and the sanction regulations promulgated
pursuant thereto by OFAC (as defined below), as well as laws relating to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957, and executive orders
promulgated pursuant to any of the foregoing.

     “Lists” means the Specially Designated National and Blocked Persons List maintained by
OFAC pursuant to the Anti-Money Laundering Laws and/or on any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any of
the Anti-Money Laundering Laws.

     “OFAC” means the Office of Foreign Assets Control, Department of the Treasury.

     “Tenant” shall mean a tenant under a lease of commercial space in the Project, and
shall not include any person occupying a hotel room as a guest on a transient basis in the ordinary
course of the operation of the Project.

     The term “knowledge” as used herein shall mean the actual knowledge of Borrower,
without any separate investigation or inquiry.

ARTICLE 7

FINANCIAL REPORTING

     Section 7.1 Financial Statements.

     (a) Monthly Reports. Until the Loan is sold in a Secondary Market Transaction,
Borrower shall, and shall cause Operating Lessee to, furnish to Lender within twenty-five (25) days
after the end of each calendar month a detailed operating statement (showing monthly activity and
year-to-date) stating operating revenues, operating expenses, operating income and net cash flow
for the calendar month just ended and any and all franchise inspection reports received by Borrower
or Operating Lessee during the subject period.

     (b) Quarterly Reports. Within forty-five (45) days after the end of each calendar
quarter, Borrower shall, and shall cause Operating Lessee to, furnish to Lender a detailed
operating statement (showing quarterly activity and year-to-date) stating operating revenues,
operating expenses, operating income and net cash flow for the calendar quarter just ended and any
and all franchise inspection reports received by Borrower or Operating Lessee during the subject
period.

     (c) Annual Reports. Within ninety (90) days after the end of each fiscal year of
Borrower’s operation of the Project, Borrower shall, and shall cause Operating Lessee to, furnish
to Lender a current (as of the end of such fiscal year) balance sheet, a detailed operating

Page 27

 

statement stating operating revenues, operating expenses, operating income and net cash flow for
each of Borrower and the Project, and, if required by Lender following the occurrence of an Event
of Default, prepared on a review basis and certified by an independent public accountant reasonably
satisfactory to Lender.

     (d) Certification; Supporting Documentation. Each such financial statement shall be
in scope and detail reasonably satisfactory to Lender and certified by an authorized officer of
Borrower.

     Section 7.2 Accounting Principles. All financial statements shall be prepared in
accordance with generally accepted accounting principles in the United States of America in effect
on the date so indicated and consistently applied (or such other accounting basis reasonably
acceptable for Lender).

     Section 7.3 Other Information; Access. Borrower shall deliver to Lender such
additional information regarding Borrower, Operating Lessee, its subsidiaries, its business, any
Borrower Party, and the Project within thirty (30) days after Lender’s request therefor. Borrower
and Operating Lessee shall permit Lender to examine such records, books and papers of Borrower
which reflect upon its financial condition and the income and expenses of the Project. In the
event that Borrower or Operating Lessee fails to forward the financial statements required in this
Article 7 within thirty (30) days after written request, Lender shall have the right to audit such
records, books and papers at Borrower’s expense.

     Section 7.4 Annual Budget. At least thirty (30) days prior to the commencement of
each fiscal year, Borrower shall, or shall cause Operating Lessee to, provide to Lender its
proposed annual operating and capital improvements budget (the “Budget”) for such fiscal
year for review and, following the occurrence and during the continuance of an Event of Default,
approval by Lender. If Lender shall object to the Budget or any portion thereof, Lender shall
specify its objections and Borrower shall submit to Lender a new proposed Budget or relevant
portion thereof within fifteen (15) days after notice of Lender’s objections; provided that Lender
shall advise Borrower of any objection to the Budget or relevant portion thereof within thirty (30)
days of each such submission by Borrower, and in the absence of any objection by Lender during such
thirty (30)-day period the submission shall be deemed approved. This procedure shall be repeated
until a complete Budget exist. So long as Lender objects to a portion of the Budget, the portion
approved, if any, shall be the Budget and the Budget for the fiscal year then ending, with such
changes as Lender specifies, shall be in effect in place of the portion of the Budget to which
Lender objects.

ARTICLE 8

COVENANTS

     Borrower covenants and agrees with Lender as follows:

     Section 8.1 Due On Sale and Encumbrance; Transfers of Interests.
Without the prior written consent of Lender, neither Borrower nor any other Person having an ownership or

Page 28

 

beneficial interest in Borrower shall sell, transfer, convey, mortgage, pledge, or
assign any interest in the Project or any part thereof or further encumber, alienate, grant a Lien
or grant any other interest in the Project or any part thereof, whether voluntarily or
involuntarily, in violation of the covenants and conditions set forth in the Mortgage.

     Section 8.2 Taxes; Utility Charges. Except to the extent sums sufficient to pay all
Taxes (defined herein) have been previously deposited with Lender as part of the Tax and Insurance
Escrow Fund and subject to Borrower’s right to contest in accordance with Section 11.8 hereof,
Borrower shall pay before any fine, penalty, interest or cost may be added thereto, and shall not
enter into any agreement to defer, any real estate taxes and assessments, franchise taxes and
charges, and other governmental charges (the “Taxes”) that may become a Lien upon the
Project or become payable during the term of the Loan. Borrower’s compliance with Section 3.4 of
this Agreement relating to impounds for Taxes shall, with respect to payment of such Taxes, be
deemed compliance with this Section 8.2. Borrower shall not suffer or permit the joint assessment
of the Project with any other real property constituting a separate tax lot or with any other real
or personal property. Borrower shall promptly pay for all utility services provided to the
Project.

     Section 8.3 Control; Management. There shall be no change in the day-to-day control
and management of Borrower or Borrower’s general partner or managing member without the prior
written consent of Lender, which shall not be unreasonably withheld, conditioned or delayed.
Except as expressly permitted in Section 8.13(b), Borrower shall not terminate, replace or appoint
any Manager, change in ownership or control of the Manager or terminate or amend the Management
Agreement for the Project without Lender’s prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed. Each Manager shall hold and maintain all
necessary licenses, certifications and permits required by law. Borrower shall fully perform all
of its covenants, agreements and obligations under the Management Agreement.

     Section 8.4 Operation; Maintenance; Inspection. Borrower shall observe and comply
in all material respects with all legal requirements applicable to the ownership, use and operation
of the Project, including, without limitation, restrictive covenants. Borrower shall maintain the
Project in good condition and promptly repair any damage or casualty, subject to and as provided in
Section 3.2. Borrower shall permit Lender and its agents, representatives and employees, upon
reasonable prior notice to Borrower, to inspect the Project and conduct such environmental and
engineering studies as Lender may require, provided such inspections and studies do not materially
interfere with the use and operation of the Project.

     Section 8.5 Taxes on Security. Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and
levies payable with respect to the Note or the Liens created or secured by the Loan Documents,
other than income, franchise and doing business taxes imposed on Lender. If there shall be enacted
any law (a) deducting the Loan from the value of the Project for the purpose of taxation, (b)
affecting any Lien on the Project, or (c) changing existing laws of taxation of mortgages, deeds
of trust, security deeds, or debts secured by real property, or changing the manner of collecting
any such taxes, Borrower shall promptly

Page 29

 

pay to Lender, on demand, all taxes, costs and charges for
which Lender is or may be liable as a result thereof; however, if such payment would be prohibited
by law or would render the Loan usurious, then instead of collecting such payment, Lender may
declare all amounts owing under the Loan Documents to be immediately due and payable.

     Section 8.6 Legal Existence; Name, Etc. Borrower shall, and shall cause Operating
Lessee to, preserve and keep in full force and effect its entity status, franchises, rights and
privileges under the laws of the state of its formation, and all qualifications, licenses and
permits applicable to the ownership, use and operation of the Project. Neither Borrower, Operating
Lessee, nor any general partner or managing member of Borrower shall wind up, liquidate, dissolve,
reorganize, merge, or consolidate with or into, or convey, sell, assign, transfer, lease, or
otherwise dispose of all or substantially all of its assets, or acquire all or substantially all of
the assets of the business of any Person, or permit any subsidiary of Borrower to do so. Neither
Borrower nor Operating Lessee shall change its name, identity, state of formation, or
organizational structure, or the location of its chief executive office or principal place of
business unless Borrower (a) shall have obtained the prior written consent of Lender to such
change, and (b) shall have taken all actions necessary or requested by Lender to file or amend any
financing statement or continuation statement to assure perfection and continuation of perfection
of security interests under the Loan Documents. The name of Borrower, type of entity, organization
number, and state of formation set forth in this Agreement accurately reflect such information as
shown on the public record of Borrower’s jurisdiction of organization.

     Section 8.7 Further Assurances. Borrower shall, and shall cause Operating Lessee to,
promptly (a) cure any defects in the execution and delivery of the Loan Documents and the
Environmental Indemnity Agreement, and (b) execute and deliver, or cause to be executed and
delivered, all such other documents, agreements and instruments as Lender may reasonably request to
further evidence and more fully describe the collateral for the Loan, to correct any omissions in
the Loan Documents, to perfect, protect or preserve any liens created under any of the Loan
Documents and the Environmental Indemnity Agreement, or to make any recordings, file any notices,
or obtain any consents, as may be necessary or appropriate in connection therewith. Borrower
grants Lender an irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Lender under the Loan
Documents and the Environmental Indemnity Agreement, at law and in equity, including without
limitation such rights and remedies available to Lender pursuant to this Section 8.7.

     Section 8.8 Estoppel Certificates. Borrower, within ten (10) days after request,
shall furnish to Lender a written statement, duly acknowledged, setting forth the amount due on the
Loan, the terms of payment of the Loan, the date to which interest has been paid, whether any
offsets or defenses exist against the Loan and, if any are alleged to exist, the nature thereof in
detail, and such other matters as Lender reasonably may request.

     Section 8.9 Notice of Certain Events. Borrower shall promptly notify Lender of (a)
any Event of Default, together with a detailed statement of the steps being taken to cure such
Event of Default; (b) any notice of default received by Borrower under other obligations relating

Page 30

 

to the Project or otherwise material to Borrower’s business; and (c) any threatened or pending
legal, judicial or regulatory proceedings, including any dispute between Borrower and any
governmental authority, affecting Borrower or the Project.

     Section 8.10 Indemnification.

     (a) Borrower shall protect, defend, indemnify and save harmless Lender its shareholders,
directors, officers, employees and agents from and against all liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including without limitation reasonable
attorneys’ fees and expenses), imposed upon or incurred by or asserted against Lender by reason of
(a) ownership of the Mortgage, the Project or any interest therein or receipt of any rents; (b)
any accident, injury to or death of persons or loss of or damage to property occurring in, on or
about the Project or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (c) any use, nonuse or condition in, on or about the
Project or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (d) performance of any labor or services or the furnishing of any
materials or other property in respect of the Project or any part thereof; and (e) the failure of
any Person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for
Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be
required in connection with this Agreement, or to supply a copy thereof in a timely fashion to the
recipient of the proceeds of the transaction in connection with which this Agreement is made. Any
amounts payable to Lender by reason of the application of this section shall become immediately due
and payable and shall bear interest at the Default Rate from the date that is fifteen (15) days
from the date that the loss or damage is actually paid by Lender and Lender requests reimbursement
therefor by submission to Borrower of complete copies of paid invoices reimbursed to Lender.

     (b) Notwithstanding anything herein to the contrary, (i) effective as of the Maturity Date or
such other date that the Loan is paid in full or defeased in full pursuant to this Agreement, as
applicable, Borrower shall be released from any such indemnified matters arising pursuant to Section 8.10(a) that are created or arise from events or conditions first existing
after the Maturity Date, or such other date as the Loan is paid in full or defeased in full, as
applicable, and (ii) Borrower shall not be liable under Section 8.10(a) for such matters that are
created or arise from events or conditions first existing after succession by Lender or its nominee
to title in the Project by foreclosure or acceptance of a deed in lieu of foreclosure, or
otherwise, or a transfer of title in the Project to a purchaser as a result of foreclosure or
acceptance of a deed in lieu of foreclosure or otherwise. No person shall be entitled to be
indemnified hereunder against its own gross negligence or willful misconduct.

     (c) Lender shall promptly notify Borrower in writing of any claim, occurrence, legal action,
or proceeding with respect to which Lender could seek indemnification under this Section 8.10 (each
a “Claim”). Borrower may elect within a reasonable time after receipt of Lender’s notice
of a Claim, but in no event later than twenty (20) days thereafter, to contest and defend against
such Claim and employ counsel reasonably satisfactory to Lender at Borrower’s expense. Borrower
shall give written notice to Lender of the commencement of such contest or defense.

Page 31

 

In such event,
Lender shall not be entitled in any way to release, waive, settle, modify, or pay such Claim
without the written consent of Borrower if Borrower shall have assumed the defense of, or otherwise
be contesting, such Claim (provided that such written consent shall not be unreasonably withheld).
If Borrower shall have assumed the defense of any Claim as provided herein, and has employed
counsel with respect thereto as provided herein, Lender shall be entitled to employ counsel to
participate in such defense at its own cost and expense.

     (d) In the event that Borrower fails timely so to defend, Lender shall have the exclusive
right to undertake the defense, compromise or settlement of such Claim on behalf of, at the expense
of, and for the account and risk of Borrower. If Borrower does not elect to contest or defend the
Claim as provided in this Section, Lender shall have the exclusive right to prosecute, defend,
compromise, settle, or pay the Claim in its sole discretion and pursue its rights under this
Agreement. If Borrower shall assume the defense, the parties hereto shall cooperate in the defense
of such action and the records of each shall be available to the other and to Lender with respect
to such defense.

     (e) Notwithstanding anything in this Section 8.10 to the contrary, (i) if there is a
reasonable probability that a Claim may materially and adversely affect Lender other than as a
result of money damages or other money payments, Lender shall have the right, at its own cost and
expense, to defend, compromise or settle such Claim, (ii) Borrower shall not, without Lender’s
written consent, settle or compromise any Claim or consent to entry of any judgment which does not
include an unconditional release by the claimant of Lender from all liability with respect to such
Claim, and (iii) Borrower shall not be entitled to control and assume responsibility for the
defense of the Claim if, in the good faith opinion of counsel to lender, there exists any actual or
potential conflict of interest such that it is advisable for Lender to retain control of such
proceeding. If Borrower fails to perform its obligations under this Section 8.10, Lender shall be
subrogated to any rights Borrower may have under any indemnifications from any present, future or
former owners or other occupants or users of the Project.

     Section 8.11 Cooperation. Borrower acknowledges that Lender and its successors and assigns shall have the right (a)
to sell or otherwise transfer the Loan or any portion thereof and any and all servicing rights
thereto as a whole loan, (b) to sell participation interests in the Loan, or (c) to securitize the
Loan or any portion thereof in a single asset securitization or a pooled loan securitization (the
transactions referred to in clauses (a), (b) and (c) shall hereinafter be referred to collectively
as “Secondary Market Transactions,” the transactions referred to in clause (c) shall
hereinafter be referred to as a “Securitization,” and any certificates, notes or other
securities issued in connection with a Securitization are hereinafter referred to as
“Securities”). Upon written request from Borrower, Lender shall notify Borrower of the
Securitization Date. Borrower shall reasonably cooperate with Lender in effecting any such
Secondary Market Transaction and shall reasonably cooperate to implement all requirements imposed
by any Rating Agency involved in any Secondary Market Transaction. Notwithstanding the foregoing,
Borrower shall not be required to modify any material economic term of the Loan or materially
increase the other obligations of Borrower or its member under the Note, this Agreement or the Loan
Documents, subject to Section 8.7 hereof. Borrower shall provide such information, legal opinions
and documents relating to the Borrower, the Project as Lender may reasonably request

Page 32

 

in connection
with such Secondary Market Transaction provided Borrower is not required to incur any third-party
professional cost or expense unless otherwise required by the Loan Documents. In addition,
Borrower shall make available to Lender all information concerning its business and operations that
Lender may reasonably request. Lender shall be permitted to share all such information with the
investment banking firms, Rating Agencies, accounting firms, law firms and other third-party
advisory firms involved with the Loan and the Loan Documents or the applicable Secondary Market
Transaction. It is understood that the information provided by Borrower to Lender may ultimately
be incorporated into the offering documents for the Secondary Market Transaction and thus various
investors may also see some or all of the information. Lender and all of the aforesaid third-party
advisors and professional firms shall be entitled to rely on the information supplied by, or on
behalf of, Borrower and Borrower indemnifies Lender as to any losses, claims, damages or
liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in such information or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated in such information or
necessary in order to make the statements in such information, or in light of the circumstances
under which they were made, not misleading.

     Section 8.12 Payment For Labor and Materials. Subject to Borrower’s right to contest
in accordance with Section 11.8 hereof, Borrower shall, and shall cause Operating Lessee to,
promptly pay when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Project and never permit to exist beyond the due date
thereof in respect of the Project or any part thereof any Lien, even though inferior to the Liens
hereof, and in any event never permit to be created or exist in respect of the Project or any part
thereof any other or additional Lien other than the Liens hereof, except for the Permitted
Encumbrances (defined in the Mortgage).

     Section 8.13 Certain Hotel Covenants.

     (a) The Franchise Agreement, dated                     ,                     , as amended (the “Franchise
Agreement”), between Operating Lessee and                     , pursuant to which Borrower has the
right to operate the Project under a name and/or hotel system controlled by such franchisor, is in
full force and effect and there is no default, breach or violation existing thereunder by any party
thereto and no event has occurred (other than payments due but not yet delinquent) that, with the
passage of time or the giving of notice, or both, would constitute a default, breach or violation
by any party thereunder.

     (b) The Management Agreement, pursuant to which Manager operates the Project as a hotel, is in
full force and effect and there is no default, breach or violation existing thereunder by any party
thereto and no event has occurred (other than payments due but not yet delinquent) that, with the
passage of time or the giving of notice, or both, would constitute a default, breach or violation
by any party thereunder, and Manager has been approved by the franchisor under the Franchise
Agreement. Any management fee payable to Manager under the Management Agreement in excess of three
percent (3%) of Operating Revenues, except for reimbursable expenses payable under the Management
Agreement, shall be subordinate to payment of Debt

Page 33

 

Service on the Loan. Borrower shall not
terminate, replace or appoint any manager, or terminate, cancel, modify, renew or extend the
Management Agreement, or enter into any agreement relating to the management or operation of the
Project with Manager or any other party without the express written consent of Lender, which
consent shall not be unreasonably withheld, conditioned or delayed. Any change in majority
ownership or control of the Manager shall be cause for Lender to re-approve such manager and
management agreement. Borrower will enter into and cause the Manager, or any successor manager, to
enter into an assignment and subordination of the Management Agreement in form satisfactory to
Lender, assigning and subordinating any such manager’s interest in the Project, and all fees and
other rights of such manager pursuant to such Management Agreement, to the rights of Lender. Upon
an Event of Default, Borrower at Lender’s request made at any time while such Event of Default
continues, shall terminate or shall cause the Operating Lessee to terminate the Management
Agreement in accordance with the Management Subordination Agreement and replace the Manager with a
manager selected by Lender from among the parties listed on Schedule III or otherwise
reasonably approved by Lender. Notwithstanding the foregoing, Lender hereby approves the parties
listed on Schedule III attached hereto as replacement managers, subject to compliance with
the other terms and conditions of this Section 8.13(b) and to approval by the franchisor under the
Franchise Agreement.

     (c) Neither the execution nor the delivery of the Loan Documents, the Borrower’s performance
thereunder, the recordation of the Mortgage, nor the exercise of any remedies by Lender, will
adversely affect Borrower’s rights under the Franchise Agreement, the Management Agreement, or any
of the licenses affecting the Project.

     (d) Borrower shall cause the Project to be operated pursuant to the Franchise Agreement and
the Management Agreement.

     (e) Borrower shall:

	 	(i)	 	promptly perform and/or observe all of the covenants and
agreements required to be performed and observed by it under the Franchise
Agreement and the Management Agreement and do all things necessary to preserve
and to keep unimpaired its material rights thereunder;
	 
	 	(ii)	 	promptly notify Lender of any material default under the
Franchise Agreement or the Management Agreement of which it is aware;
	 
	 	(iii)	 	promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditures plan, or material notice, report and
estimate received by it under the Franchise Agreement or the Management
Agreement;
	 
	 	(iv)	 	promptly enforce the performance and observance of all of the
material covenants and agreements required to be performed and/or observed by

Page 34

 

	 	 	 	the franchisor under the Franchise Agreement and the Manager under the
Management Agreement; and
	 
	 	(v)	 	ensure that each Manager shall hold and maintain all necessary
licenses, certifications and permits required by law.
	 
	 	(vi)	 	require Manager, or any successor manager, to execute an
agreement with Lender, in form and substance satisfactory to Lender, which
shall provide, among other things, that the Manager, or any successor manager:

	 	(1)	 	agrees to give Lender a simultaneous copy of
any notice of default sent to Borrower;
	 
	 	(2)	 	grants Lender the right, but not the
obligation, to cure monetary defaults of Borrower under the Management
Agreement within thirty (30) days and cure non-monetary defaults of
Borrower within sixty (60) days;
	 
	 	(3)	 	allows Lender to foreclose its lien and will,
thereafter, upon request, reinstate the Management Agreement, without
charge, if such is suspended prior to or during the foreclosure
proceedings, provided all defaults have been cured; and
	 
	 	(4)	 	agrees that if Lender, any affiliate of Lender,
or any nominee of Lender or other transferee acquires ownership of the
property, such party may terminate the Management Agreement without
payment or liability to the Manager upon thirty (30) days notice to the
Manager; and

	 	(vii)	 	Perform all of the work set forth in the Property Improvement
Plan (“PIP”), if any, set forth in the Franchise Agreement in
accordance with the following:

	 	(1)	 	Borrower shall complete the PIP at its sole
cost and expense in accordance with the budget therefor reasonably
approved by Lender within the time periods set forth the PIP in a
lien-free and good and workmanlike manner, and such work shall be
performed in compliance with all applicable local, State and federal
laws, and in compliance with franchisor’s fire protection and life
safety standards set forth in the PIP, even if such standards exceed
the requirements of applicable local, State and federal laws;
	 
	 	(2)	 	Borrower shall deliver to franchisor all plans,
specifications, permits, certificates, professional opinions and other
related requirements within the time periods set forth in the PIP;

Page 35

 

	 	(3)	 	Borrower shall deliver to Lender a copy of
franchisor’s final inspection report for the PIP and franchisor’s
written approval acknowledging Borrower’s completion of all of the
requirements set forth in the PIP to franchisor’s complete
satisfaction; and
	 
	 	(4)	 	Borrower shall deliver to Lender the written
certification that all of the work set forth in the PIP meet all of
franchisor’s requirements and evidence of completion to franchisor’s
full satisfaction.

     (f) Borrower shall promptly notify Lender if persons or entities key to Borrower’s operations
as designated by Lender are terminated or cease providing services to Borrower.

     (g) At Lender’s request, Borrower and the Manager shall meet with representatives of Lender to
discuss the operation, management (including personnel), financial condition and physical condition
of the Project, as well as guest, tenant, and customer satisfaction, marketing and other issues
pertinent to the success of the Project. In addition, at Lender’s request, Borrower shall provide
Lender with reports relating to the aforementioned matters.

     (h) If requested, Borrower shall furnish Lender with copies of all such contracts and
agreements which shall be subject to Lender’s approval hereunder as to form and content. With
respect to any such contracts and agreements deemed material by Lender, no modification,
termination or expiration thereof shall be permitted without Lender’s approval.

     (i) Borrower shall not, without Lender’s prior consent which shall not be unreasonably
withheld, conditioned or delayed:

	 	(i)	 	surrender, terminate or cancel the Franchise Agreement or the
Management Agreement;
	 
	 	(ii)	 	reduce or consent to the reduction of the term of the Franchise
Agreement or the Management Agreement;
	 
	 	(iii)	 	increase or consent to the increase of the amount of any
charges under the Franchise Agreement or the Management Agreement; or
	 
	 	(iv)	 	otherwise modify, change, supplement, alter or amend, or waive
or release any of its rights and remedies under, the Franchise Agreement or the
Management Agreement in any material respect; provided that the Franchise
Agreement and Management Agreement may be extended or renewed so long as no
default has occurred and is continuing thereunder and no Event of Default has
occurred and is continuing hereunder.

     (j) Except as set forth in Schedule IV, neither Borrower nor any principal, partner,
officer, director or significant shareholder thereof shall acquire, construct, operate or manage
any hotel within a one (1) mile radius of the Project at any time while the Loan is outstanding.

Page 36

 

     (k) Borrower shall (i) promptly perform and observe all of the covenants required to be
performed and observed by it under the Operating Leases and do all things necessary to preserve and
to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any material
default under the Operating Lease of which it is aware; (iii) promptly deliver to Lender a copy of
any notice of default or other material notice under any Operating Lease delivered to the Operating
Lessee by Borrower; (iv) promptly give notice to Lender of any notice or information that Borrower
receives which indicates that the Operating Lessee is terminating its Operating Lease or that the
Operating Lessee is otherwise discontinuing its operation of the Project; (v) promptly enforce the
performance and observance of all of the material covenants required to be performed and observed
by the Operating Lessee under the Operating Lease; and (vi) cause Operating Lessee to execute the
Subordination and Attornment Agreement with respect to the Operating Lease.

ARTICLE 9

EVENTS OF DEFAULT

     Each of the following shall constitute an Event of Default under the Loan:

     Section 9.1 Payments. Borrower’s failure to pay any regularly scheduled installment
of principal, interest or other amount due under the Loan Documents within five (5) days of (and
including) the date when due, or Borrower’s failure to pay the Loan at the Maturity Date, whether
by acceleration or otherwise.

     Section 9.2 Insurance. Borrower’s failure to maintain insurance as required under
Section 3.1 of this Agreement.

     Section 9.3 Sale, Encumbrance, Etc. The sale, transfer, conveyance, pledge, mortgage
or assignment of any part or all of the Project, or any interest therein, or of any interest in
Borrower, in violation of the Mortgage.

     Section 9.4 Covenants. Borrower’s or Operating Lessee’s failure to perform or observe
any of the agreements and covenants contained in this Agreement or in any of the other Loan
Documents (other than payments under Section 9.1, insurance requirements under Section 9.2,
transfers and encumbrances under Section 9.3, and the Events of Default described in Sections 9.7
and 9.8 below), and the continuance of such failure for thirty (30) days after notice by Lender to
Borrower; however, Borrower shall have an additional sixty (60) days to cure such failure if (a)
such failure does not involve the failure to make payments on a monetary obligation; (b) such
failure cannot reasonably be cured within thirty (30) days; (c) Borrower is diligently undertaking
to cure such default, and (d) Borrower has provided Lender with security reasonably satisfactory
to Lender against any interruption of payment or impairment of collateral as a result of such
continuing failure.

     Section 9.5 Representations and Warranties. Any representation or warranty made in
any Loan Document proves to be untrue in any material respect when made.

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     Section 9.6 Other Encumbrances. Any default under any document or instrument, other
than the Loan Documents, evidencing or creating a Lien on the Project or any part thereof, not
cured within any applicable grace or cure period therein.

     Section 9.7 Involuntary Bankruptcy or Other Proceeding. Commencement of an
involuntary case or other proceeding against Borrower, any Borrower Party, Operating Lessee, or any
other Person having an ownership interest in the Project (each, a “Bankruptcy Party”) which
seeks liquidation, reorganization or other relief with respect to it or its debts or other
liabilities under any bankruptcy, insolvency or other similar law now or hereafter in effect or
seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official of it
or any of its property, and such involuntary case or other proceeding shall remain undismissed or
unstayed for a period of ninety (90) days; or an order for relief against a Bankruptcy Party shall
be entered in any such case under the Federal Bankruptcy Code.

     Section 9.8 Voluntary Petitions, etc. Commencement by a Bankruptcy Party of a
voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect
to itself or its Debts or other liabilities under any bankruptcy, insolvency or other similar law or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for it or any of its property, or consent
by a Bankruptcy Party to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or the making by a
Bankruptcy Party of a general assignment for the benefit of creditors, or the failure by a
Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its inability, to pay its
debts generally as they become due, or any action by a Bankruptcy Party to authorize or effect any
of the foregoing.

     Section 9.9 Anti-Terrorism. If Borrower or any Borrower Party is listed on the Lists
or is convicted or pleads nolo contendere to charges related to activity prohibited in the
Anti-Money Laundering Laws, or if Borrower or any Borrower Party is arrested on charges related to
activity prohibited in the Anti-Money Laundering Laws and such charge is not dismissed within
thirty (30) days thereafter.

     Section 9.10 Franchise and Management Agreements.

     (a) Any of the following events occur without Lender’s prior consent, (i) the hotel manager
for the Project under the Management Agreement (or any successor management agreement) resigns or
is removed, or (ii) the ownership, management or control of such hotel manager is transferred to a
person or entity other than a replacement manager listed on Schedule III or otherwise
reasonably approved by Lender, or (iii) there is any material change in the Management Agreement
(or any successor management agreement);

     (b) A default has occurred and continues beyond any applicable cure period under the
Management Agreement (or any successor management agreement) if such default permits the hotel
manager to terminate or cancel the Management Agreement (or any successor management agreement);

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     (c) There is any material change in the Franchise Agreement (or any successor franchise
agreement) without Lender’s prior consent or if the Franchise Agreement expires pursuant to its
terms or a successor franchise agreement is executed by Borrower and such successor franchise
agreement is not approved by Lender;

     (d) A default has occurred and continues beyond any applicable cure period under the Franchise
Agreement (or any successor franchise agreement) if such default permits the franchisor to
terminate or cancel the Franchise Agreement (or any successor franchise agreement); or

     (e) Borrower ceases to operate the Project as a hotel or motel or terminates such business for
any reason whatsoever (other than temporary cessation in connection with any casualty, condemnation
or renovations to the Project).

     Section 9.11
Operating Lease If without Lender’s prior written consent (i)
Operating Lessee resigns or is removed or is replaced or (ii) there is any material adverse change
in or termination of any Operating Lease.

     (b) If Operating Lessee is in material default under the Operating Lease beyond any applicable
notice or cure period under the Operating Lease.

ARTICLE 10

REMEDIES

     Section 10.1 Remedies — Insolvency Events. Upon the occurrence of any Event of
Default described in Section 9.7 or 9.8, all amounts due under the Loan Documents immediately shall
become due and payable, all without written notice and without presentment, demand, protest, notice
of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration
of the maturity thereof, or any other notice of default of any kind, all of which are hereby
expressly waived by Borrower; however, if the Bankruptcy Party under Sections 9.7 or 9.8 is other
than Borrower, then all amounts due under the Loan Documents shall become immediately due and
payable at Lender’s election, in Lender’s sole discretion.

     Section 10.2 Remedies — Other Events. Except as set forth in Section 10.1 above,
while any Event of Default exists, Lender may (a) declare the entire Loan to be immediately due
and payable without presentment, demand, protest, notice of protest or dishonor, notice of intent
to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or other notice
of default of any kind, all of which are hereby expressly waived by Borrower, and (b) exercise all
rights and remedies therefor under the Loan Documents and at law or in equity.

     Section 10.3 Lender’s Right to Perform the Obligations. If Borrower shall fail,
refuse or neglect to make any payment or perform any act required by the Loan Documents, then while
any Event of Default exists, and without notice to or demand upon Borrower and without waiving or
releasing any other right, remedy or recourse Lender may have because of such Event of Default,
Lender may (but shall not be obligated to) make such payment or perform such act for the account of
and at the expense of Borrower, and shall have the right to enter upon the

Page 39

 

Project for such purpose
and to take all such action thereon and with respect to the Project as it may deem necessary or
appropriate. If Lender shall elect to pay any sum due with reference to the Project, Lender may do
so in reliance on any bill, statement or assessment procured from the appropriate governmental
authority or other issuer thereof without inquiring into the accuracy or validity thereof.
Similarly, in making any payments to protect the security intended to be created by the Loan
Documents, Lender shall not be bound to inquire into the validity of any apparent or threatened
adverse title, lien, encumbrance, claim or charge before making an advance for the purpose of preventing or
removing the same. Borrower shall indemnify Lender for all losses, expenses, damages, claims and
causes of action, including reasonable out-of-pocket attorneys’ fees, incurred or accruing by
reason of any acts performed by Lender pursuant to the provisions of this Section 10.3. All sums
paid by Lender pursuant to this Section 10.3, and all other sums expended by Lender to which it
shall be entitled to be indemnified, together with interest thereon at the Default Rate from the
date of such payment or expenditure until paid, shall constitute additions to the Loan, shall be
secured by the Loan Documents and shall be paid by Borrower to Lender upon demand.

ARTICLE 11

MISCELLANEOUS

     Section 11.1 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and either shall be mailed by certified mail, postage prepaid, return
receipt requested, or sent by overnight air courier service, or personally delivered to a
representative of the receiving party, or sent by telecopy (provided an identical notice is also
sent simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this
Section 11.1). All such communications shall be mailed, sent or delivered, addressed to the party
for whom it is intended at its address set forth below

	 	 	 	 	 
	 

	 	If to Borrower:
	 	[Winston Special Purpose Entity]
	 

	 	 	 	c/o Winston Hotels, Inc.
	 

	 	 	 	2626 Glenwood Avenue
	 

	 	 	 	Raleigh, North Carolina 27608
	 

	 	 	 	Attention: Joe Green
	 

	 	 	 	Telecopy: (919) 510-5251
	 
	 	 	 	 
	 

	 	If to Lender:
	 	General Electric Capital Corporation
	 

	 	 	 	c/o GEMSA Loan Services, L.P.
	 

	 	 	 	1500 City West Blvd., Suite 200
	 

	 	 	 	Houston, Texas 77042-2300
	 

	 	 	 	Attention: Portfolio Manager/Access Program
	 

	 	 	 	Telecopy: (713) 458-7500

Page 40

 

	 	 	 	 	 
	 

	 	with a copy to:
	 	General Electric Capital Corporation
	 

	 	 	 	16479 Dallas Parkway, Suite 500
	 

	 	 	 	Two Bent Tree Tower
	 

	 	 	 	Addison, Texas 75001-2512
	 

	 	 	 	Attention: David R. Martindale
	 

	 	 	 	Telecopy: (972) 728-7650

Any communication so addressed and mailed shall be deemed to be given on the earliest of (a) when
actually delivered, (b) on the first (1st) Business Day after deposit with an overnight air courier service, or (c) on the third (3rd) Business Day after deposit in the United States mail,
postage prepaid, in each case to the address of the intended addressee, and any communication so
delivered in person shall be deemed to be given when receipted for by, or actually received by
Lender or Borrower, as the case may be. If given by telecopy, a notice shall be deemed given and
received when the telecopy is transmitted to the party’s telecopy number specified above and
confirmation of complete receipt is received by the transmitting party during normal business hours
or on the next Business Day if not confirmed during normal business hours. Either party may
designate a change of address by written notice to the other by giving at least ten (10) days prior
written notice of such change of address.

     Section 11.2 Amendments and Waivers. No amendment or waiver of any provision of the
Environmental Indemnity Agreement and the Loan Documents shall be effective unless in writing and
signed by the party against whom enforcement is sought.

     Section 11.3 Limitation on Interest. It is the intention of the parties hereto to
conform strictly to applicable usury laws. Accordingly, all agreements between Borrower and Lender
with respect to the Loan are hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to be paid to Lender or
charged by Lender for the use, forbearance or detention of the money to be lent hereunder or
otherwise, exceed the maximum amount allowed by law. If the Loan would be usurious under
applicable law (including the laws of the State and the laws of the United States of America),
then, notwithstanding anything to the contrary in the Loan Documents: (a) the aggregate of all
consideration which constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received under the Loan Documents shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be credited on the Note
by the holder thereof; and (b) if maturity is accelerated by reason of an election by Lender, or
in the event of any prepayment, then any consideration which constitutes interest may never include
more than the maximum amount allowed by applicable law. In such case, excess interest, if any,
provided for in the Loan Documents or otherwise, to the extent permitted by applicable law, shall
be amortized, prorated, allocated and spread from the date of advance until payment in full so that
the actual rate of interest is uniform through the term hereof. If such amortization, proration,
allocation and spreading is not permitted under applicable law, then such excess interest shall be
canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid,
shall be credited on the Note. The terms and provisions of this Section 11.3 shall control and
supersede every other provision of the Loan Documents. The Loan Documents are contracts made under
and shall be construed in accordance with and governed by

Page 41

 

the laws of the State of New York, except
that if at any time the laws of the United States of America permit Lender to contract for, take,
reserve, charge or receive a higher rate of interest than is allowed by the laws of the State of
New York (whether such federal laws directly so provide or refer to the law of any state), then
such federal laws shall to such extent govern as to the rate of interest which Lender may contract
for, take, reserve, charge or receive under the Loan Documents.

     Section 11.4 Invalid Provisions. If any provision of any Loan Document or the
Environmental Indemnity Agreement is held to be illegal, invalid or unenforceable, such provision
shall be fully severable; the Environmental Indemnity Agreement and the Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a
part thereof; the remaining provisions thereof shall remain in full effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance therefrom; and in
lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a
part of such Environmental Indemnity Agreement and such Loan Document a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible to be legal, valid and
enforceable.

     Section 11.5 Reimbursement of Expenses. Borrower shall pay all reasonable expenses
incurred by Lender in connection with the Loan, including reasonable out-of-pocket fees and
expenses of Lender’s attorneys, environmental, engineering and other consultants, and fees, charges
or taxes for the recording or filing of Loan Documents. Borrower shall pay all expenses of Lender
in connection with the administration of the Loan, including audit costs, inspection fees,
settlement of condemnation and casualty awards, premiums for title insurance and endorsements
thereto, and Rating Agency fees and expenses in connection with confirmation letters, if required.
Borrower shall, upon request, promptly reimburse Lender for all amounts expended, advanced or
incurred by Lender to collect the Note, or to enforce the rights of Lender under this Agreement,
the Environmental Indemnity Agreement, or any Loan Document, or to defend or assert the rights and
claims of Lender under the Environmental Indemnity Agreement or the Loan Documents or with respect
to the Project (by litigation or other proceedings), which amounts will include all court costs,
reasonable attorneys’ fees and expenses, fees of auditors and accountants, and investigation
expenses as may be incurred by Lender in connection with any such matters (whether or not
litigation is instituted), together with interest at the Default Rate on each such amount from
fifteen (15) days after Lender’s submission to Borrower of an invoice for such amounts together
with evidence reasonably documenting such fees and expenses actually paid by Lender until the date
of reimbursement to Lender, all of which shall constitute part of the Loan and shall be secured by
the Loan Documents.

     Section 11.6 Approvals; Third Parties; Conditions. All approval rights retained or
exercised by Lender with respect to leases, contracts, plans, studies and other matters are solely
to facilitate Lender’s credit underwriting, and shall not be deemed or construed as a determination
that Lender has passed on the adequacy thereof for any other purpose and may not be relied upon by
Borrower or any other Person. This Agreement is for the sole and exclusive use of Lender and
Borrower and may not be enforced, nor relied upon, by any Person other than Lender and Borrower.
All conditions of the obligations of Lender hereunder, including the

Page 42

 

obligation to make advances,
are imposed solely and exclusively for the benefit of Lender, its successors and assigns, and no
other Person shall have standing to require satisfaction of such conditions or be entitled to assume that Lender will refuse to
make advances in the absence of strict compliance with any or all of such conditions, and no other
Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and
all of which may be freely waived in whole or in part by Lender at any time in Lender’s sole
discretion.

     Section 11.7 Lender Not in Control; No Partnership. None of the covenants or other
provisions contained in this Agreement shall, or shall be deemed to, give Lender the right or power
to exercise control over the affairs or management of Borrower, the power of Lender being limited
to the rights to exercise the remedies referred to in the Environmental Indemnity Agreement or the
Loan Documents. The relationship between Borrower and Lender is, and at all times shall remain,
solely that of debtor and creditor. No covenant or provision of the Environmental Indemnity
Agreement or the Loan Documents is intended, nor shall it be deemed or construed, to create a
partnership, joint venture, agency or common interest in profits or income between Lender and
Borrower or to create an equity in the Project in Lender. Lender neither undertakes nor assumes
any responsibility or duty to Borrower or to any other person with respect to the Project or the
Loan, except as expressly provided in the Environmental Indemnity Agreement and the Loan Documents;
and notwithstanding any other provision of the Environmental Indemnity Agreement or the Loan
Documents: (a) Lender is not, and shall not be construed as, a partner, joint venturer, alter
ego, manager, controlling person or other business associate or participant of any kind of Borrower
or its stockholders, members, or partners and Lender does not intend to ever assume such status;
(b) Lender shall in no event be liable for any Debts, expenses or losses incurred or sustained by
Borrower; and (c) Lender shall not be deemed responsible for or a participant in any acts,
omissions or decisions of Borrower or its stockholders, members, or partners. Lender and Borrower
disclaim any intention to create any partnership, joint venture, agency or common interest in
profits or income between Lender and Borrower, or to create an equity in the Project in Lender, or
any sharing of liabilities, losses, costs or expenses.

     Section 11.8 Contest of Certain Claims. Borrower may contest the validity of Taxes or
any mechanic’s or materialman’s lien asserted against the Project so long as (a) Borrower notifies
Lender that it intends to contest such Taxes or liens, as applicable, (b) Borrower provides Lender
with an indemnity, bond or other security reasonably satisfactory to Lender assuring the discharge
of Borrower’s obligations for such Taxes or liens, as applicable, including interest and penalties,
(c) Borrower is diligently contesting the same by appropriate legal proceedings in good faith and
at its own expense and concludes such contest prior to the tenth (10th) day preceding the earlier
to occur of the Maturity Date or the date on which the Project is scheduled to be sold for
non-payment, (d) Borrower promptly upon final determination thereof pays the amount of any such
Taxes or liens, as applicable, together with all costs, interest and penalties which may be payable
in connection therewith, and (e) notwithstanding the foregoing, Borrower shall immediately upon
request of Lender pay any such Taxes or liens, as applicable, notwithstanding such contest if, in
the opinion of Lender, the Project or any part thereof or interest therein may be in danger of
being sold, forfeited, foreclosed, terminated, canceled or lost. Lender may pay over

Page 43

 

any cash deposit or
part thereof to the claimant entitled thereto at any time when, in the reasonable judgment of
Lender, the entitlement of such claimant is established.

     Section 11.9 Time of the Essence. Time is of the essence with respect to this
Agreement.

     Section 11.10 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Lender and Borrower and their respective successors and assigns, provided that
neither Borrower nor any other Borrower Party shall, without the prior written consent of Lender,
assign any rights, duties or obligations hereunder, other than as provided herein.

     Section 11.11 Renewal, Extension or Rearrangement. All provisions of the
Environmental Indemnity Agreement and the Loan Documents shall apply with equal effect to each and
all promissory notes and amendments thereof hereinafter executed which in whole or in part
represent a renewal, extension, increase or rearrangement of the Loan.

     Section 11.12 Waivers. No course of dealing on the part of Lender, its officers,
employees, consultants or agents, nor any failure or delay by Lender with respect to exercising any
right, power or privilege of Lender under the Environmental Indemnity Agreement and any of the
Loan Documents, shall operate as a waiver thereof.

     Section 11.13 Cumulative Rights; Joint and Several Liability. Rights and remedies of
Lender under the Environmental Indemnity Agreement and the Loan Documents shall be cumulative, and
the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy. If more than one person or entity has executed this Agreement as “Borrower,”
the obligations of all such persons or entities hereunder shall be joint and several.

     Section 11.14 Singular and Plural. Words used in this Agreement, the other Loan
Documents, and the Environmental Indemnity Agreement in the singular, where the context so
permits, shall be deemed to include the plural and vice versa. The definitions of words in the
singular in this Agreement, the other Loan Documents, and the Environmental Indemnity Agreement
shall apply to such words when used in the plural where the context so permits and vice versa.

     Section 11.15 Phrases. Except as otherwise expressly provided herein, when used in this Agreement, the other Loan
Documents, and the Environmental Indemnity Agreement, the phrase “including” shall mean
“including, but not limited to,” the phrase “satisfactory to Lender” shall mean “in form and
substance satisfactory to Lender in all respects,” the phrase “with Lender’s consent” or “with
Lender’s approval” shall mean, unless otherwise specified, such consent or approval at Lender’s
sole discretion, and the phrase “acceptable to Lender” shall mean “acceptable to Lender at Lender’s
sole discretion.”

     Section 11.16 Exhibits and Schedules. The exhibits and schedules attached to this
Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes
stated herein.

Page 44

 

     Section 11.17 Titles of Articles, Sections and Subsections. All titles or headings to
articles, sections, subsections or other divisions of this Agreement, the other Loan Documents, and
the Environmental Indemnity Agreement or the exhibits hereto and thereto are only for the
convenience of the parties and shall not be construed to have any effect or meaning with respect to
the other content of such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.

     Section 11.18 Promotional Material. Borrower authorizes Lender at Lender’s expense to
issue press releases, advertisements and other promotional materials in connection with Lender’s
own promotional and marketing activities, and describing the Loan in general terms or in detail and
Lender’s participation in the Loan. Lender shall provide copies of all of the foregoing materials
to Borrower within a reasonable period of time before release thereof and shall cooperate with
Borrower to ensure that all of the foregoing materials comply with any applicable SEC or NYSE
requirements. All references to Lender or Borrower contained in any press release, advertisement
or promotional material issued by either party hereto shall be approved in writing by the other
party in advance of issuance, except that (a) no such approval from Borrower shall be required with
respect to promotional materials used in Lender’s sale or participation activities under Section
8.11, and (b) no such approval from either party shall be required to the extent that the other
party or any Affiliate thereof is required to make disclosures as a matter of applicable law, court
order or compulsory process.

     Section 11.19 Survival. All of the representations, warranties, covenants, and
indemnities hereunder (including environmental matters under Article 4), under the indemnification
provisions of the other Loan Documents and under the Environmental Indemnity Agreement, shall
survive the repayment in full of the Loan and the release of the liens evidencing or securing the
Loan, and shall survive the transfer (by sale, foreclosure, conveyance in lieu of foreclosure or
otherwise) of any or all right, title and interest in and to the Project to any party, whether or
not an Affiliate of Borrower.

     Section 11.20 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER
AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT, OR THE ENVIRONMENTAL INDEMNITY AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE
BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY
AGREEMENT OR IN ANY WAY RELATING TO THE LOAN OR THE PROJECT (INCLUDING, WITHOUT LIMITATION, ANY
ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT
WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT
FOR LENDER TO ENTER THIS AGREEMENT.

Page 45

 

     Section 11.21 Waiver of Punitive or Consequential Damages. Neither Lender nor
Borrower shall be responsible or liable to the other or to any other Person for any punitive,
exemplary or consequential damages which may be alleged as a result of the Loan or the transaction
contemplated hereby, including any breach or other default by any party hereto.

     Section 11.22 Governing Law; Jurisdiction.

     (a) THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM 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 LOAN
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER 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
(WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF
THE LIEN AND SECURITY INTEREST CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS
(OTHER THAN WITH RESPECT TO LIENS AND SECURITY INTERESTS IN PROPERTY WHOSE PERFECTION AND PRIORITY
IS COVERED BY ARTICLE 9 OF THE UCC WHICH SHALL BE GOVERNED BY THE LAW OF THE JURISDICTION APPLICABLE THERETO IN
ACCORDANCE WITH SECTIONS 9 301 THROUGH 9 307 OF THE UCC AS IN EFFECT IN THE STATE OF NEW YORK)
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROJECT IS
LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN
DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY AGREEMENT AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR
THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS LOAN
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THE ENVIRONMENTAL INDEMNITY AGREEMENT AND
THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE ENVIRONMENTAL INDEMNITY
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 EXCEPT AS SPECIFICALLY SET FORTH
ABOVE.

     (b) Borrower and Lender each hereby consents and submits to the non-exclusive jurisdiction and
venue of any state or federal court sitting in the county and state where the

Page 46

 

Project is located
with respect to any legal action or proceeding arising with respect to the Loan Documents and
waives all objections which it may have to such jurisdiction and venue. Nothing herein shall,
however, preclude or prevent Lender from bringing actions against Borrower in any other
jurisdiction as may be necessary to enforce or realize upon the security for the Loan provided in
any of the Loan Documents. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING
OUT OF OR RELATING TO THIS LOAN AGREEMENT MAY AT LENDER’S OR BORROWER’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 LENDER AND BORROWER EACH WAIVES ANY OBJECTIONS WHICH IT
MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND LENDER AND BORROWER EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUIT, ACTION OR PROCEEDING.

     Section 11.23 Entire Agreement. This Agreement, the other Loan Documents and the
Environmental Indemnity Agreement embody the entire agreement and understanding between Lender and
Borrower and supersede all prior agreements and understandings between such parties relating to the
subject matter hereof and thereof. Accordingly, the Loan Documents and the Environmental Indemnity
Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the parties. If any
conflict or inconsistency exists between the Commitment and this Agreement, any of the other Loan Documents, or the Environmental Indemnity Agreement, the terms of this Agreement, the
other Loan Documents, and the Environmental Indemnity Agreement shall control.

     Section 11.24 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, but all of which shall constitute one document.

ARTICLE 12

LIMITATIONS ON LIABILITY

     Section 12.1 Limitation on Liability. Except as provided below, Borrower shall not
be personally liable for amounts due under the Loan Documents. Borrower shall be personally liable
to Lender to the extent of any deficiency, loss or damage suffered by Lender because of:

     (a) Borrower’s commission of a criminal act;

     (b) the failure to comply with provisions of the Loan Documents prohibiting the sale, transfer
or encumbrance of the Project, any other collateral, or any direct or indirect ownership interest
in Borrower;

     (c) the misapplication, misappropriation or conversion by Borrower or any Borrower Party or
Operating Lessee of any funds derived from the Project, including proceeds of rents or

Page 47

 

any other
payments in respect of the leases and other income of the Project or any other collateral, security
deposits, insurance proceeds, and condemnation awards in violation of this Agreement or any of the
other Loan Documents;

     (d) the fraud or misrepresentation by Borrower or any Borrower Party made in or in connection
with the Loan Documents or the Loan;

     (e) Borrower’s collection of rents more than one month in advance or entering into or
modifying leases, or receipt of monies by Borrower or any Borrower Party in connection with the
modification of any leases, in violation of this Agreement or any of the other Loan Documents;

     (f) Borrower’s or Operating Lessee’s interference with Lender’s exercise of rights in
accordance with the Assignment of Leases and Rents;

     (g) Borrower’s or Operating Lessee’s failure to maintain insurance as required by this
Agreement unless (i) there are sufficient funds in the Tax and Insurance Escrow Fund to pay such
amounts when due and (ii) no Event of Default is then continuing;

     (h) physical waste to the Project caused by the intentional or negligent acts or omissions of
Borrower, Operating Lessee, or any agents, employees, or contractors;

     (i) Borrower’s obligations with respect to environmental matters under Article 4;

     (j) Borrower’s failure to pay for any loss, liability or expense (including reasonable
attorneys’ fees) incurred by Lender arising out of any claim or allegation made by Borrower, or
Operating Lessee, their successors or assigns, or any creditor of Borrower or Operating Lessee
based on representations of Borrower or any Borrower Party or Operating Lessee, that this Agreement
or the transactions contemplated by the Loan Documents and the Environmental Indemnity Agreement
establishes a joint venture, partnership or other similar arrangement between Borrower and Lender;

     (k) any brokerage commission or finder’s fees claimed in connection with the transactions
contemplated by the Loan Documents in connection with Loan origination;

     (l) uninsured damage to the Project resulting from acts of terrorism;

     (m) the filing by Borrower or Operating Lessee or any of their members, partners, or
shareholders, or the filing against Borrower or Operating Lessee in which Borrower, any Borrower
Party, or Operating Lessee cooperates or colludes, of a petition under the United States Bankruptcy
Code or similar state insolvency laws;

     (n) any action of any kind or nature whatsoever, either directly or indirectly by Borrower or
Operating Lessee to oppose, impede, obstruct, challenge, hinder, frustrate, enjoin or otherwise
interfere (except to the extent of Borrower’s good faith contest, as determined by a court with
jurisdiction in respect of such proceeding, that Lender did not act in accordance with

Page 48

 

the terms of
the Lease Subordination Agreement or Management Subordination Agreement) with (A) Lender’s
termination of the Operating Lease in accordance with the Lease Subordination Agreement or the
Management Agreement in accordance with the Management Subordination Agreement, (B) Lender or the
party acquiring the Project following the occurrence of a foreclosure or deed in lieu thereof (in
full substitution of the applicable Operating Lessee) being deemed the “Lessee” under the
Management Agreement, (C) the execution, delivery or effectiveness of a new Management Agreement
directly between Lender or the party acquiring the Project following a foreclosure or deed in lieu
thereof and Manager or (D) any payment or other transfer by Manager of funds which would otherwise
be paid to any Operating Lessee under any Operating Lease directly to Lender or the party acquiring
the Project following the occurrence of a foreclosure or deed in lieu thereof, in each case after
or as a result of any automatic termination of the Operating Lease or of Lender exercising its
right to terminate the Operating Lease, in each case pursuant to the Lease Subordination Agreement
and this Agreement, or shall, either directly or indirectly, cause any other person to take any
action which, if taken by Borrower or Operating Lessee, would constitute an event described in this
Section 12.1(n); or

     (o) the non-compliance by Borrower, Operating Lessee or Manager with any material covenant in
any restrictive covenants or shared cost agreements affecting the Project for which Borrower has
not provided an estoppel certificate from applicable parties (other than Borrower or any
Affiliates) in form satisfactory to Lender.

     Borrower also shall be personally liable to Lender for any and all reasonable, third-party
out-of-pocket attorneys’ fees and expenses and court costs incurred by Lender in enforcing this
Section 12.1 or otherwise incurred by Lender in connection with any of the matters within the scope
of this Section 12.1, regardless whether such matters are legal or equitable in nature or arise
under tort or contract law. The limitation on the personal liability of Borrower in the first
sentence hereof shall not modify, diminish or discharge the personal liability of any Joinder
Party. Nothing herein shall be deemed to be a waiver of any right which Lender may have under
Sections 506(a), 506(b), 1111(b) or any other provision of the United States Bankruptcy Code, to
file a claim for the full amount due to Lender under the Loan Documents or to require that all
collateral shall continue to secure the amounts due under the Loan Documents.

     Section 12.2 Limitation on Liability of Lender’s Officers, Employees, etc. Any
obligation or liability whatsoever of Lender which may arise at any time under this Agreement, any
other Loan Document, or the Environmental Indemnity Agreement shall be satisfied, if at all, out of
the Lender’s assets only. No such obligation or liability shall be personally binding upon, nor
shall resort for the enforcement thereof be had to, the property of any of Lender’s shareholders,
directors, officers, employees or agents, regardless of whether such obligation or liability is in
the nature of contract, tort or otherwise.

Page 49

 

     IN WITNESS WHEREOF, Borrower has caused this Agreement to be executed under seal by its duly
authorized officers as of the date first above written.

	 	 	 	 	 	 	 	 	 	 
	LENDER:	 	GENERAL ELECTRIC CAPITAL CORPORATION,
	 	 	a Delaware corporation
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ David R. Martindale
	 	 	 	 	 
	 	 	 	 	David R. Martindale, Managing Director
	 
	 	 	 	 	 	 	 	 
	BORROWER:	 	[WINSTON SPECIAL PURPOSE ENTITY],
	 	 	a Delaware limited liability company
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	WINN LIMITED PARTNERSHIP,
	 	 	 	 	a North Carolina limited partnership,
	 	 	 	 	its Sole Member
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	WINSTON HOTELS, INC.,
	 	 	 	 	 	 	a North Carolina corporation,
	 	 	 	 	 	 	its General Partner
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Jacob A. Darling
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Jacob A. Darling, Vice President

Signature Page

 

JOINDER

     By executing this Joinder (the “Joinder”), the undersigned (“Joinder Parties”)
jointly and severally guaranty the performance by Borrower of all obligations and liabilities for
which Borrower is personally liable under Section 12.1 of this Agreement. This Joinder is a
guaranty of full and complete payment and performance and not of collectability.

     1. Waivers. To the fullest extent permitted by applicable law, each Joinder Party
waives all rights and defenses of sureties, guarantors, accommodation parties and/or co-makers and
agrees that its obligations under this Joinder shall be primary, absolute and unconditional, and
that its obligations under this Joinder shall be unaffected by any of such rights or defenses,
including:

          a. the unenforceability of any Loan Document against Borrower and/or any other Joinder Party;

          b. any release or other action or inaction taken by Lender with respect to the collateral, the
Loan, Borrower and/or other Joinder Party, whether or not the same may impair or destroy any
subrogation rights of any Joinder Party, or constitute a legal or equitable discharge of any surety
or Borrower;

          c. the existence of any collateral or other security for the Loan, and any requirement that
Lender pursue any of such collateral or other security, or pursue any remedies it may have against
Borrower and/or any other Joinder Party;

          d. any requirement that Lender provide notice to or obtain a Joinder Party’s consent to any
modification, increase, extension or other amendment of the Loan, including the guaranteed
obligations;

          e. any right of subrogation (until payment in full of the Loan, including the guaranteed
obligations, and the expiration of any applicable preference period and statute of limitations for
fraudulent conveyance claims);

          f. any payment by Borrower to Lender if such payment is held to be a preference or fraudulent
conveyance under bankruptcy laws or Lender is otherwise required to refund such payment to Borrower
or any other party; and

          g. any voluntary or involuntary bankruptcy, receivership, insolvency, reorganization or
similar proceeding affecting Borrower or any of its assets.

     2. Agreements. Each Joinder Party further represents, warrants and agrees that:

          a. The obligations under this Joinder are enforceable against each such party and are not
subject to any defenses, offsets or counterclaims;

          b. The provisions of this Joinder are for the benefit of Lender and its successors and
assigns;

Joinder Page 51

 

          c. Lender shall have the right to (i) renew, modify, extend or accelerate the Loan, (ii)
pursue some or all of its remedies against Borrower or any Joinder Party, (iii) add, release or
substitute any collateral for the Loan or party obligated thereunder, and (iv) release Borrower or
any Joinder Party from liability, all without notice to or consent of any Joinder Party (or other
Joinder Party) and without affecting the obligations of any Joinder Party (or other Joinder Party)
hereunder;

          d. Each Joinder Party covenants and agrees to furnish to Lender, within ninety (90) days after
the end of each fiscal year of such Joinder Party, a current (as of the end of such fiscal year)
balance sheet of such Joinder Party, in scope and detail reasonably satisfactory to Lender,
certified by the chief financial representative of such Joinder Party and, if required by Lender,
prepared on a review basis and certified by an independent public accountant reasonably
satisfactory to Lender; and

          e. To the maximum extent permitted by law, each Joinder Party hereby knowingly, voluntarily
and intentionally waives the right to a trial by jury in respect of any litigation based hereon.
This waiver is a material inducement to Lender to enter into this Agreement.

     This Joinder shall be governed by the laws of the State of New York and Joinder Party shall be
subject to and bound by the same terms and conditions of Section 11.22 of this Agreement as though
expressly named therein.

Joinder Page 52

 

     Executed as of May                     , 2006.

	 	 	 	 	 	 
	JOINDER PARTY:	 	WINSTON HOTELS, INC.,
	 	 	a North Carolina corporation
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Jacob A. Darling
	 

	 	 	 
	 

	 	 	 	   Jacob A. Darling, Vice President

Joinder Signature Page

 

EXHIBIT A

Legal Description

Exhibit Page

 

SCHEDULE I

DEFEASANCE

     1. In accordance with Section 2.3 of the Loan Agreement, Borrower may obtain the release of
the Project from the lien of the Mortgage upon the satisfaction of the following conditions
precedent:

          (a) not less than thirty (30) days prior written notice to Lender specifying a regularly
scheduled payment date (the “Release Date”) on which the Defeasance (hereinafter defined)
is to occur;

          (b) the payment to Lender of interest accrued and unpaid on the principal balance of the Note
to and including the Release Date;

          (c) the payment to Lender of all other sums, not including scheduled interest or principal
payments, due under the Note, the Mortgage, the Assignment of Leases and Rents, and the other Loan
Documents;

          (d) the payment to Lender of a $5,000 non-refundable processing fee;

          (e) the delivery by Borrower to Lender of:

	 	i)	 	a security agreement in form and substance
satisfactory to Lender, creating a first priority lien on the U.S.
Obligations (hereinafter defined) purchased by or on behalf of Borrower
that will provide payments on or prior to, but as close as possible to
all successive Payment Dates after the Release Date, including the
amounts due on the Maturity Date, as it may be accelerated in
accordance with Section 2.3(c) of the Agreement and Section 2 of this
Schedule I (the “Security Agreement”);
	 
	 	ii)	 	a release of the Project from the lien of the
Mortgage and the release of Borrower from its obligations under this
Agreement, the Mortgage and the Note (for execution by Lender) in a
form appropriate for the jurisdiction in which the Project is located;
	 
	 	iii)	 	an officer’s certificate of Borrower certifying
that the requirements set forth in this paragraph (e) have been
satisfied;
	 
	 	iv)	 	an opinion of counsel in form and substance,
and rendered by counsel satisfactory to Lender at the expense of
Borrower, stating, among other things, that Lender has a perfected
first priority security interest in the U.S. Obligations purchased by
or on behalf

Schedule Page 55

 

	 	 	 	of Borrower and pledged to Lender and as to enforceability of the
Security Agreement and other documents delivered in connection
therewith;
	 
	 	v)	 	if required by the Rating Agencies and/or
pooling and servicing agreement relating to the Secondary Market
Transaction, evidence in writing from the applicable Rating Agencies to
the effect that such release will not result in a qualification,
downgrade or withdrawal of any rating in effect immediately prior to
such defeasance for any securities issued in connection with a
Secondary Market Transaction;
	 
	 	vi)	 	evidence of satisfaction of all requirements of
the Successor Borrower, including payment if required of administrative
expenses and applicable federal income taxes associated with or to be
incurred by Successor Borrower during the remaining term of, and
applicable to, the Loan; and
	 
	 	vii)	 	such other certificates, documents or
instruments as Lender may reasonably request.

          (f) if the Loan has been sold in a Secondary Market Transaction, Lender shall have received an
opinion of counsel acceptable to Lender in form satisfactory to Lender stating, among other things,
that the substitution of collateral shall not cause the holder of the Loan to fail to maintain its
status as a real estate mortgage investment conduit (REMIC); and

          (g) Lender shall have received a certificate from a nationally recognized independent
certified public accountant acceptable to Lender, in form and substance satisfactory to Lender,
certifying that the U.S. Obligations purchased by or on behalf of Borrower in accordance with this
Schedule with the Defeasance Deposit will generate sufficient sums to satisfy the obligations of
Borrower under the Note and this Schedule I as and when such obligations become due.

     In connection with the conditions set forth above, Borrower hereby appoints Lender as its
agent and attorney-in-fact for the purpose of purchasing or causing to be purchased U.S.
Obligations which provide payments on or prior to, but as close as possible to, all successive
scheduled Payment Dates after the Release Date upon which interest and principal payments are
required under the Note including the amounts due on the Maturity Date and in amounts equal to the
scheduled payments due on such dates under the Note (the “Scheduled Defeasance Payments”).
Borrower, pursuant to the Security Agreement or other appropriate document, shall authorize and
direct that the payments received from the U.S. Obligations may be made directly to Lender and
applied to satisfy the obligations of Borrower under the Note and this Schedule I.

Schedule Page 56

 

     2. In connection with the Defeasance, Borrower shall have the right to accelerate the Maturity
Date to any Payment Date that is or occurs after the 118th Payment Date, which
acceleration shall become effective simultaneously with Borrower’s delivery of the U.S. Obligations
and satisfaction of all other requirements of this Schedule I. Borrower shall specify any
such acceleration in the notice provided to Lender pursuant to Section 1(a) of this Schedule
I.

     3. Upon compliance with the requirements of this Schedule I, the Project shall be
released from the lien of the Mortgage and the pledged U.S. Obligations shall be the sole source of
collateral securing the Note. In connection with such release, a successor entity meeting Lender’s
Single Purpose Entity criteria, adjusted, as applicable, for the Defeasance contemplated by this
Schedule (the “Successor Borrower”), shall be established by Borrower subject to
Lender’s approval and Borrower shall transfer and assign all obligations, rights and duties under
and to the Note and this Loan Agreement together with the pledged U.S. Obligations to such
Successor Borrower pursuant to an assignment and assumption agreement in form and substance
satisfactory to Lender (the “Assignment Agreement”). Such Successor Borrower shall assume
the obligations under the Note and this Loan Agreement and the Security Agreement and Borrower
shall be relieved of its obligations thereunder, except that Borrower shall be required to perform
its obligations pursuant to this Schedule I, including maintenance of the Successor
Borrower, if applicable. Borrower shall pay $1,000.00 to any such Successor Borrower as
consideration for assuming the obligations under the Note and the Security Agreement pursuant to
the Assignment Agreement. Notwithstanding anything in the Mortgage to the contrary, no other
assumption fee shall be payable upon a transfer of the Note in accordance with this paragraph, but
Borrower shall pay all costs and expenses incurred by Lender in connection with this
Schedule, including Lender’s reasonable attorneys’ fees and expenses, cost and expenses in
obtaining review and confirmation by the applicable Rating Agencies as required herein, and any
administrative and tax expenses associated with or incurred by the Successor Borrower in connection
with the defeasance.

     4. For purposes of this Schedule I, the following terms shall have the following
meanings:

          (a) The term “Yield Maintenance Amount” shall mean the amount which will be sufficient
to purchase U.S. Obligations providing the required Scheduled Defeasance Payments; and

          (b) The term “U.S. Obligations” shall mean “Government Securities” be as defined in
the REMIC regulations, specifically, Treasury Regulation § 1.860G-2(a)(8)(i).

Schedule Page 57

 

SCHEDULE II

REQUIRED REPAIRS

Schedule Page 58

 

SCHEDULE III

REPLACEMENT MANAGERS

Schedule Page 59

 

SCHEDULE IV

RADIUS HOTELS

Schedule Page 60

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