Document:

Exhibit 10.1

 

$353,475,000 TERM FACILITY

 

LOAN AND SECURITY AGREEMENT

 

by and among

 

CNL HOSPITALITY PARTNERS, LP

 

as the Borrower

 

CNL HOTELS & RESORTS, INC.

 

as a Guarantor

 

DEUTSCHE BANK TRUST COMPANY
AMERICAS,

 

and

 

THE INSTITUTIONS FROM TIME TO
TIME PARTY HERETO

as Lenders

 

DEUTSCHE BANK TRUST COMPANY
AMERICAS,

as the Administrative Agent for
the Lenders

 

DEUTSCHE BANK SECURITIES INC.,

 

as the Lead Arranger

 

 

Dated as of October 13,
2004

 

 

TABLE OF
CONTENTS

 

 

	
  ARTICLE I. CREDIT FACILITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Loan Amount

  	
   

  
	
   

  	
  1.2

  	
  Funding of Loan

  	
   

  
	
   

  	
  1.3

  	
  Repayment of Principal

  	
   

  
	
   

  	
  1.4

  	
  Loan Extension.

  	
   

  
	
   

  	
  1.5

  	
  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II. INTEREST RATE AND
  YIELD-RELATED PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Interest Rate

  	
   

  
	
   

  	
  2.2

  	
  Payment of Interest

  	
   

  
	
   

  	
  2.3

  	
  Inability to Determine Rate

  	
   

  
	
   

  	
  2.4

  	
  Illegality

  	
   

  
	
   

  	
  2.5

  	
  Funding

  	
   

  
	
   

  	
  2.6

  	
  Requirements of Law; Increased Costs.

  	
   

  
	
   

  	
  2.7

  	
  Obligation of Lenders to Mitigate;
  Replacement of Lenders

  	
   

  
	
   

  	
  2.8

  	
  Funding Indemnification

  	
   

  
	
   

  	
  2.9

  	
  Taxes.

  	
   

  
	
   

  	
  2.10

  	
  Post-Default Interest

  	
   

  
	
   

  	
  2.11

  	
  Computations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III. PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Evidence of Indebtedness

  	
   

  
	
   

  	
  3.2

  	
  Nature and Place of Payments

  	
   

  
	
   

  	
  3.3

  	
  Prepayments.

  	
   

  
	
   

  	
  3.4

  	
  Allocation of Payments Received.

  	
   

  
	
   

  	
  3.5

  	
  Release of Property Upon Loan Repayment in
  Full

  	
   

  
	
   

  	
  3.6

  	
  Release of Individual Properties

  	
   

  
	
   

  	
  3.7

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV. CREDIT SUPPORT AND
  SECURITY DOCUMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Guaranty

  	
   

  
	
   

  	
  4.2

  	
  Pledge Agreements

  	
   

  
	
   

  	
  4.3

  	
  Borrower Security Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V. CONDITIONS PRECEDENT

  	
   

  
	
   

  	
  5.1

  	
  Conditions to Funding of Loan

  	
   

  
	
   

  	
  5.2

  	
  Outside Closing Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI. REPRESENTATIONS AND
  WARRANTIES

  	
   

  

 

 

	
   

  	
  6.1

  	
  Financial Condition

  	
   

  
	
   

  	
  6.2

  	
  No Material Adverse Effect

  	
   

  
	
   

  	
  6.3

  	
  Compliance with Laws and Agreements

  	
   

  
	
   

  	
  6.4

  	
  Organization, Powers; Authorization;
  Enforceability.

  	
   

  
	
   

  	
  6.5

  	
  No Conflict

  	
   

  
	
   

  	
  6.6

  	
  No Material Litigation

  	
   

  
	
   

  	
  6.7

  	
  Taxes

  	
   

  
	
   

  	
  6.8

  	
  Investment Company Act

  	
   

  
	
   

  	
  6.9

  	
  Subsidiary Entities

  	
   

  
	
   

  	
  6.10

  	
  Federal Reserve Board Regulations

  	
   

  
	
   

  	
  6.11

  	
  ERISA Compliance

  	
   

  
	
   

  	
  6.12

  	
  Assets and Liens.

  	
   

  
	
   

  	
  6.13

  	
  Securities Acts

  	
   

  
	
   

  	
  6.14

  	
  Consents, Etc

  	
   

  
	
   

  	
  6.15

  	
  Hazardous Materials

  	
   

  
	
   

  	
  6.16

  	
  Regulated Entities

  	
   

  
	
   

  	
  6.17

  	
  Copyrights, Patents, Trademarks and
  Licenses, etc

  	
   

  
	
   

  	
  6.18

  	
  REIT Status

  	
   

  
	
   

  	
  6.19

  	
  Insurance

  	
   

  
	
   

  	
  6.20

  	
  Full Disclosure

  	
   

  
	
   

  	
  6.21

  	
  Indebtedness

  	
   

  
	
   

  	
  6.22

  	
  Real Property

  	
   

  
	
   

  	
  6.23

  	
  Brokers

  	
   

  
	
   

  	
  6.24

  	
  No Default

  	
   

  
	
   

  	
  6.25

  	
  Solvency

  	
   

  
	
   

  	
  6.26

  	
  Advisory Agreement

  	
   

  
	
   

  	
  6.27

  	
  Agreements

  	
   

  
	
   

  	
  6.28

  	
  Condemnation

  	
   

  
	
   

  	
  6.29

  	
  Utilities and Public Access

  	
   

  
	
   

  	
  6.30

  	
  Not a Foreign Person

  	
   

  
	
   

  	
  6.31

  	
  Separate Lots

  	
   

  
	
   

  	
  6.32

  	
  Assessments

  	
   

  
	
   

  	
  6.33

  	
  No Prior Assignment

  	
   

  
	
   

  	
  6.34

  	
  Use of Property

  	
   

  
	
   

  	
  6.35

  	
  Certificate of Occupancy; Licenses

  	
   

  
	
   

  	
  6.36

  	
  Flood Zone

  	
   

  
	
   

  	
  6.37

  	
  Physical Condition

  	
   

  
	
   

  	
  6.38

  	
  Boundaries

  	
   

  
	
   

  	
  6.39

  	
  Leases

  	
   

  
	
   

  	
  6.40

  	
  Filing and Recording Taxes

  	
   

  
	
   

  	
  6.41

  	
  Management Agreements

  	
   

  
	
   

  	
  6.42

  	
  Illegal
  Activity

  	
   

  
	
   

  	
  6.43

  	
  Initial Rate Cap Agreement

  	
   

  
	
   

  	
  6.44

  	
  Labor

  	
   

  

 

ii

 

	
   

  	
  6.45

  	
  Taxpayer Identification Number

  	
   

  
	
   

  	
  6.46

  	
  Leases

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII. COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Affirmative Covenants.

  	
   

  
	
   

  	
  7.2

  	
  Negative Covenants.

  	
   

  
	
   

  	
  7.3

  	
  Insurance; Casualty; Condemnation;
  Restoration

  	
   

  
	
   

  	
  7.4

  	
  Impositions, Other Charges, Liens and Other
  Items.

  	
   

  
	
   

  	
  7.5

  	
  Transfers, Indebtedness and Subordinate
  Liens

  	
   

  
	
   

  	
  7.6

  	
  Interest Rate Cap Agreements.

  	
   

  
	
   

  	
  7.7

  	
  Maintenance of the Property.

  	
   

  
	
   

  	
  7.8

  	
  Books and Records, Financial Statements,
  Reports and Other Information.

  	
   

  
	
   

  	
  7.9

  	
  Environmental Matters.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII. CASH
  MANAGEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Cash
  Management.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX. EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Event of Default

  	
   

  
	
   

  	
  9.2

  	
  Remedies.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X. THE ADMINISTRATIVE AGENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Appointment

  	
   

  
	
   

  	
  10.2

  	
  Delegation of Duties

  	
   

  
	
   

  	
  10.3

  	
  Exculpatory Provisions

  	
   

  
	
   

  	
  10.4

  	
  Reliance by the Agents

  	
   

  
	
   

  	
  10.5

  	
  Notice
  of Default

  	
   

  
	
   

  	
  10.6

  	
  Non-Reliance on Agents and Other Lenders

  	
   

  
	
   

  	
  10.7

  	
  Indemnification

  	
   

  
	
   

  	
  10.8

  	
  Agents in Their Individual Capacity

  	
   

  
	
   

  	
  10.9

  	
  Successor Administrative Agent

  	
   

  
	
   

  	
  10.10

  	
  Limitations on Agents Liability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI. MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  No Assignment by Borrower

  	
   

  
	
   

  	
  11.2

  	
  Modification

  	
   

  
	
   

  	
  11.3

  	
  Cumulative Rights; No Waiver

  	
   

  
	
   

  	
  11.4

  	
  Entire
  Agreement

  	
   

  
	
   

  	
  11.5

  	
  Survival

  	
   

  

 

iii

 

	
   

  	
  11.6

  	
  Notices

  	
   

  
	
   

  	
  11.7

  	
  Governing
  Law

  	
   

  
	
   

  	
  11.8

  	
  Assignments,
  Participations, Syndication, Etc.

  	
   

  
	
   

  	
  11.9

  	
  Counterparts

  	
   

  
	
   

  	
  11.10

  	
  Sharing of Payments

  	
   

  
	
   

  	
  11.11

  	
  Confidentiality

  	
   

  
	
   

  	
  11.12

  	
  Consent to Jurisdiction

  	
   

  
	
   

  	
  11.13

  	
  Waiver of Jury Trial

  	
   

  
	
   

  	
  11.14

  	
  Indemnity

  	
   

  
	
   

  	
  11.15

  	
  Telephonic Instruction

  	
   

  
	
   

  	
  11.16

  	
  Marshalling; Payments Set Aside

  	
   

  
	
   

  	
  11.17

  	
  Set-off

  	
   

  
	
   

  	
  11.18

  	
  Severability

  	
   

  
	
   

  	
  11.19

  	
  No Third Parties Benefited

  	
   

  
	
   

  	
  11.20

  	
  Time

  	
   

  
	
   

  	
  11.21

  	
  Reinstatement

  	
   

  

 

iv

 

SCHEDULE OF
ANNEXES, SCHEDULES AND EXHIBITS

 

	
  ANNEXES:

  	
   

  	
   

  

 

	
  Annex
  1

  	
   

  	
  Glossary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 5.1(2)

  	
   

  	
  Conditions to Funding of Loan

  	
   

  
	
  Schedule 6.6

  	
   

  	
  Material Litigation

  	
   

  
	
  Schedule 6.9

  	
   

  	
  Subsidiary Entities

  	
   

  
	
  Schedule 6.11

  	
   

  	
  ERISA Compliance

  	
   

  
	
  Schedule 6.12(1)

  	
   

  	
  Liens

  	
   

  
	
  Schedule 6.14

  	
   

  	
  Required Consents

  	
   

  
	
  Schedule 6.15

  	
   

  	
  Hazardous Materials

  	
   

  
	
  Schedule 6.19

  	
   

  	
  Insurance

  	
   

  
	
  Schedule 6.21

  	
   

  	
  Indebtedness

  	
   

  
	
  Schedule 6.44

  	
   

  	
  Labor

  	
   

  
	
  Schedule 6.45

  	
   

  	
  Taxpayer Identification Number

  	
   

  
	
  Schedule 7.2(1)

  	
   

  	
  Permitted Debt

  	
   

  
	
  Schedule 7.2(21)

  	
   

  	
  Affiliate Transactions

  	
   

  
	
  Schedule 7.6(3)

  	
   

  	
  Interest Rate Cap Requirements

  	
   

  
	
  Schedule 7.7(2)(I)

  	
   

  	
  Existing Projects

  	
   

  
	
  Schedule 8.4

  	
   

  	
  Deferred Maintenance and Environmental
  Remediation

  	
   

  
	
  Schedule 11.6

  	
   

  	
  Notices

  	
   

  
	
  Schedule I

  	
   

  	
  Percentage Shares

  	
   

  
	
  Schedule II

  	
   

  	
  Allocated Loan Amounts

  	
   

  
	
  Schedule III

  	
   

  	
  Acceptable Managers

  	
   

  
	
  Schedule IV

  	
   

  	
  Mortgaged Properties

  	
   

  
	
  Schedule V

  	
   

  	
  De Minimis Subsidiaries

  	
   

  
	
  Schedule VI

  	
   

  	
  Mortgaged Property Owners

  	
   

  
	
  Schedule VII

  	
   

  	
  Operating Leases

  	
   

  
	
  Schedule VIII

  	
   

  	
  Pledged Subsidiaries

  	
   

  
	
  Schedule IX

  	
   

  	
  Managers and Management Agreements

  	
   

  
	
  Schedule X

  	
   

  	
  Operating Lessees

  	
   

  
	
  Schedule XI

  	
   

  	
  Security Instruments

  	
   

  
	
  Schedule XII

  	
   

  	
  Pledgors

  	
   

  

 

v

 

	
  EXHIBITS

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Guaranty

  	
   

  
	
  Exhibit B

  	
  Form of Assignment and Acceptance Agreement

  	
   

  
	
  Exhibit C

  	
  Form of Closing Certificate

  	
   

  
	
  Exhibit D

  	
  Form of Account Agreement

  	
   

  
	
  Exhibit E

  	
  Form of Note

  	
   

  
	
  Exhibit F

  	
  Form of Pledge Agreement

  	
   

  
	
  Exhibit G

  	
  Form of Non-Disturbance Agreement

  	
   

  

 

vi

 

LOAN AND
SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (the “Agreement”) is made and
dated as of the 13th day of October, 2004, by and among CNL
HOSPITALITY PARTNERS, LP, a limited partnership organized under the laws of the
state of Delaware (the “Borrower”); CNL HOTELS & RESORTS, INC., a
corporation organized under the laws of the State of Maryland (“CNL REIT”)
as a Guarantor; THE LENDERS FROM TIME TO TIME PARTY HERETO (collectively and
severally, the “Lenders”); and DEUTSCHE BANK TRUST COMPANY AMERICAS (“DBTCA”), as administrative agent
for the Lenders (in such capacity, the “Administrative Agent”).

 

RECITALS

 

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

 

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

 

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

 

AGREEMENT

ARTICLE I.

CREDIT FACILITY

 

1.1                                 Loan
Amount.  On the terms and
subject to the conditions set forth herein, the Lenders severally agree that
they shall fund their respective Percentage Shares of a term loan (the “Loan”),
in the amount of $353,475,000
(the “Facility Amount”). 
Principal amounts on the Loan that are repaid or prepaid by Borrower may
not be reborrowed.

 

1.2                                 Funding
of Loan.  Each Lender shall
make its Percentage Share of the Loan available to the Administrative Agent, in
same-day funds, on the Closing Date at the Contact Office, ABA 021-001-033 for the Administrative
Agent’s Account No. 99-401-268,
Ref: CNL Hotels & Resorts,
no later than 12:00 p.m. (New York time) on the Closing Date.

 

1.3                                 Repayment
of Principal.  Subject to (i)
the mandatory prepayment provisions of Section 3.3(2), (ii) the
Loan extension provisions of Section 1.4 below, and (iii) any
earlier acceleration of the Loan following an Event of Default, the principal
balance of the Loan shall be payable in full on October 13, 2006 (the “Initial
Maturity Date”).

 

1

 

1.4                                 Loan
Extension.

 

(1)                                  Provided that no
Potential Default or Event of Default shall have occurred and be continuing,
the Borrower shall have the option, to be exercised by giving written notice to
the Administrative Agent at least fifteen (15) Business Days prior to the
Initial Maturity Date, subject to the terms and conditions set forth in this
Agreement, to extend the Initial Maturity Date by twelve (12) months to October 12,
2007 (the “Extended Maturity Date”). 
The request by the Borrower for the extension of the Initial Maturity
Date shall constitute a representation and warranty by the Transaction Parties
that no Potential Default or Event of Default then exists and that all of the
conditions set forth in Section 1.4(2) below shall have been
satisfied on the Initial Maturity Date.

 

(2)                                  The obligations of
the Administrative Agent and the Lenders to extend the Initial Maturity Date as
provided in Section 1.4(1) shall be subject to the prior
satisfaction of each of the following conditions precedent as determined by the
Administrative Agent in its good faith judgment: (A) on the Initial Maturity
Date there shall exist no Potential Default or Event of Default; (B) taking
into account any voluntary or mandatory prepayments made by Borrower pursuant
to Section 3.3(1) or Section 3.3(2)(B), (C), (D),
(E) or (F), the Borrower shall have paid to the Administrative
Agent on or prior to the Initial Maturity Date, one or more prepayments of the
principal balance of the Loan in the aggregate amount of not less than
$88,368,750; (C) the Borrower shall have paid to the Administrative Agent on or
prior to the Initial Maturity Date, for the ratable benefit of the Lenders, an
extension fee equal to one quarter of one percent (0.25%) of the outstanding
principal balance of the Loan on the Initial Maturity Date (which fee the
Borrower hereby agrees shall be fully earned and nonrefundable under any
circumstances when paid); (D) the Borrower shall have delivered to the
Administrative Agent the Extension Rate Cap Agreement duly executed by the
appropriate Persons, (E) to the extent required by the Administrative Agent,
Borrower shall have obtained at its expense updated or new appraisals of all or
a portion of the Mortgaged Properties satisfactory in form and substance to the
Administrative Agent and the Required Lenders, and the outstanding principal
balance of the Loan on the Initial Maturity Date (after giving effect to any
prepayment made on the Initial Maturity Date) shall not exceed 65% of the
aggregate value of the Mortgaged Properties, as determined by such appraisals
and such other appraisals of any remaining Mortgaged Properties as are satisfactory
in form and substance to Administrative Agent and the Required
Lenders, (F) the representations and warranties made by the Transaction
Parties in the Loan Documents shall have been true and correct in all material
respects when made and shall also be true and correct in all material respects
on the Initial Maturity Date (provided, however, that any factual matters
disclosed in the Schedules referenced in Article 6 shall be subject
to update in accordance with clause (G) below); (G) the Transaction Parties
shall have delivered updates to the Administrative Agent of all the Schedules
set forth in Article 6 hereof and such updated Schedules shall not
disclose any conditions which would have a Portfolio Material Adverse Effect or
a Material Adverse Effect, in each case as determined by Administrative Agent
in its reasonable judgment; (H) Borrower shall have paid all reasonable
out-of-pocket costs and expenses incurred by the Administrative Agent and all
reasonable fees and expenses paid to third party consultants (including
reasonable attorneys’ fees and expenses) by Administrative Agent in connection
with such extension; and (I) each Guarantor and each Pledgor shall have
acknowledged and ratified that their respective obligations under the
Guaranties and the Pledge Agreements remain in full force and effect, and
continue to guaranty or secure (as applicable) the Obligations under the Loan
Documents, as extended.

 

2

 

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

 

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

 

ARTICLE II.

INTEREST RATE AND YIELD-RELATED PROVISIONS

 

2.1                                 Interest
Rate.  The outstanding
principal balance of the Loan shall bear interest from the date disbursed to
but not including the date of payment calculated at a per annum rate equal to
(subject to the provisions of Sections 2.3, 2.4 and 2.10
below) the Applicable LIBO Rate for the then-current Interest Period; provided,
however, that in the event the Borrower does not provide the
Administrative Agent with irrevocable notice of its election to fund the Loan
based on the Applicable LIBO Rate no later than 1:00 p.m. (New York time) on
the third Eurodollar Business Day preceding the Closing Date (which election
shall be subject to Section 2.8 below), the Loan shall initially
bear interest at the Applicable Base Rate. 
The Borrower may thereafter elect to convert from the Applicable Base
Rate to the Applicable LIBO Rate by giving the Administrative Agent irrevocable
notice of such election no later than 1:00 p.m. (New York time) on the third
Eurodollar Business Day preceding the conversion date.  The initial three (3) Interest Periods, and
each Interest Period which commences prior to the date of conversion to the
Applicable LIBO Rate, shall each be one month in duration. Thereafter, prior to
the termination of any Interest Period during which the Loan bears interest at
the Applicable LIBO Rate, the Borrower may select the duration of the next
succeeding Interest Period by giving the Administrative Agent irrevocable
notice of such selection no later than 1:00 p.m. (New York time) on the third
Eurodollar Business Day preceding the last day of the then-current Interest
Period; provided, however, that in the event the Borrower does
not timely provide such notice, the Borrower shall be deemed to have
irrevocably selected a one-month Interest Period.  At any time, the Borrower may have only five
(5) Interest Periods then in effect.

 

2.2                                 Payment
of Interest.  The Borrower
shall pay interest on the Loan on the last day of each Interest Period, and, in
the case of any Interest Period which is six months in duration, on the date
ninety (90) days following the first day of such Interest Period, as set forth
on an interest billing delivered by the Administrative Agent to the Borrower
(which delivery may be by facsimile transmission) no later than 1:00 p.m. (New
York time) on the second (2nd) business day prior to such date.

 

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

 

3

 

relevant Interest Period, and, following withdrawal of such notice by
the Administrative Agent, the outstanding principal balance of the Loan shall
bear interest pursuant to Section 2.1 above.

 

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

 

2.5                                 Funding.  Each Lender shall be entitled to fund all or
any portion of its Percentage Share of the Loan in any manner it may determine
in its sole discretion, including, without limitation, in the Grand Cayman
inter-bank market, the London inter-bank market and within the United States,
but all calculations and transactions hereunder shall be conducted as though all
Lenders actually fund the Loan through the purchase of offshore dollar deposits
in the amount of such Lender’s Percentage Share of the Loan with a maturity
corresponding to the applicable Interest Period.

 

2.6                                 Requirements of Law; Increased Costs.

 

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

 

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

 

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

 

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

 

and the result of any of the foregoing is to increase the cost to such
Lender of making, renewing or maintaining its Percentage Share of the Loan or
to reduce any amount receivable in respect thereof or the rate of return on the
capital of such Lender or any corporation controlling such

 

4

 

Lender, then, in any such case, the Borrower shall, without duplication
of amounts payable pursuant to Section 2.9, promptly pay to such
Lender, upon its written demand made through the Administrative Agent, any
additional amounts necessary to compensate such Lender for such additional cost
or reduced amounts receivable or rate of return as determined by such Lender
with respect to this Agreement or such Lender’s Percentage Share of the Loan,
so long as such Lender requires substantially all obligors under other
commitments of this type made available by such Lender to similarly so
compensate such Lender.

 

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

 

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

 

2.7                                 Obligation of Lenders to Mitigate;
Replacement of Lenders.  Each
Lender agrees that:

 

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

 

(2)                                  If the Borrower receives a notice
pursuant to Section 2.6 above or pursuant to Section 2.9
below or a notice pursuant to Section 2.4 above stating that a
Lender is unable to maintain the Loan based on the LIBO Rate (for reasons not
generally applicable to the Required Lenders), so long as (i) no Potential
Default or Event of Default shall have occurred and be continuing, (ii) the
Borrower has obtained a commitment from another Lender or an Eligible Assignee
to purchase at par such Lender’s Percentage Share of the Loan and accrued
interest and fees and to assume all obligations of the Lender to be replaced
under the Loan Documents and (iii) such Lender to be replaced is unwilling to
withdraw the notice delivered to

 

5

 

the Borrower, upon thirty (30) days’ prior written notice to such
Lender and the Administrative Agent, the Borrower may require, at the Borrower’s
expense, the Lender giving such notice to assign, without recourse, all of its
Percentage Share of the Loan and accrued interest and fees to such other Lender
or Eligible Assignee pursuant to the provisions of Section 11.8
below.

 

2.8                                 Funding Indemnification.  In addition to all other payment obligations
hereunder, in the event (1) the Loan is prepaid in full or in part prior
to the last day of the applicable Interest Period, whether following a
voluntary prepayment, a mandatory prepayment or otherwise, or (2) the
Borrower shall fail to borrow the Loan on the Closing Date, then the Borrower
shall immediately pay to each Lender, through the Administrative Agent, an
additional premium sum compensating such Lender for losses, costs and expenses
incurred by such Lender in connection with such prepayment or such failure to
borrow.  Without limiting the foregoing,
such compensation shall include an amount equal to the present value (using as
the discount rate an interest rate equal to the rate determined under (2)
below) of the excess, if any, of (1) the amount of interest which otherwise
would have accrued on the principal amount so paid or prepaid (or not borrowed)
(the “Incremental Payment”) for the period from the date of such payment
or prepayment (or failure to borrow) to the last day of then current Interest
Period (or, in the case of a failure to borrow, to the last day of the Interest
Period which would have commenced on the date specified therefor in the
relevant notice) at the Applicable LIBO Rate provided for herein with respect
to such Incremental Payment, over (2) the amount of interest that would have
accrued (as reasonably determined by such Lender), based upon the interest rate
established in the London interbank market for Dollar deposits, on amounts
comparable to the Incremental Payment and maturities comparable to such
period.  A determination of any Lender as
to the amounts payable pursuant to this Section 2.8 shall be
conclusive absent manifest error.

 

2.9                                 Taxes.

 

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

 

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

 

(3)                                  The Borrower shall indemnify the
Administrative Agent and each Lender, within ten (10) Business Days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 2.9) paid by the
Administrative Agent or such Lender, as the case may be, and any penalties,
interest (except to the extent such penalties and/or interest arise as a result
of a Lender’s delay in dealing with any such

 

6

 

Indemnified Tax) and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the
amount of such payment or liability delivered to the Borrower by a Lender or by
the Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

 

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

 

(5)                                  Each Foreign Lender shall deliver to
the Borrower (with copies to the Administrative Agent) on or before the date
hereof (or in the case of a Foreign Lender who became a Lender by way of an
assignment, on or before the date of the assignment) or at least five (5)
Business Days prior to the first date for any payment herewith to such Lender,
and from time to time as required for renewal under applicable law, such
certificates, documents or other evidence, as required by the Code or Treasury
Regulations issued pursuant thereto, including, without limitation, Internal
Revenue Service Form W-8BEN or W-ECI, as appropriate, and any other certificate
or statement of exemption required by Section 871(h) or Section 881(c)
of the Code or any subsequent version thereof, properly completed and duly
executed by such Lender establishing that payments to such Lender hereunder are
not subject to withholding or are subject to a reduced rate of withholding
under the Code or applicable tax treaty (“Evidence of No Withholding”).  Each Foreign Lender shall promptly notify the
Borrower and the Administrative Agent of any change in its applicable lending
office and upon written request of the Borrower or the Administrative Agent
shall, prior to the immediately following due date of any payment by the
Borrower hereunder or under any other Loan Document, deliver Evidence of No
Withholding to the Borrower and the Administrative Agent.  The Borrower shall be entitled to rely on
such forms in their possession until receipt of any revised or successor form
pursuant to this Section 2.9(5). 
If a Lender fails to provide Evidence of No Withholding as required
pursuant to this Section 2.9(5), then (i) the Borrower (or the
Administrative Agent) shall be entitled to deduct or withhold from payments to
Administrative Agent or such Lender as a result of such failure, as required by
law, and (ii) the Borrower shall not be required to make payments of additional
amounts with respect to such withheld Taxes pursuant to Section 2.9(1)
to the extent such withholding is required solely by reason of the failure of
such Lender to provide the necessary Evidence of No Withholding.  A Foreign Lender shall not be required to
deliver any form or statement pursuant to Section 2.9(5) that such
foreign Lender is not legally able to deliver.

 

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

 

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

 

7

 

ARTICLE III.

PAYMENTS

 

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

 

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

 

3.3                                 Prepayments.

 

(1)                                  Upon not less than five (5) Business
Days’ prior written notice to the Administrative Agent (which shall promptly
provide telephonic notice of the receipt thereof to each of the Lenders), the
Borrower may voluntarily prepay principal amounts outstanding under the Loan in
whole or in part (without any release of collateral securing the Loan except as
provided in Section 3.6 hereof); provided, however, that voluntary
prepayments shall be in the minimum amount of $250,000 and integral multiples
of $100,000 in excess thereof.  Voluntary
prepayments of principal pursuant to this Section 3.3(1), shall not
relieve Borrower from the obligation to make prepayments pursuant to Section 3.3(2).

 

(2)                                  The Borrower shall remit to the
Administrative Agent as a mandatory prepayment for application against the
outstanding principal balance of the Loan:

 

(A)                              In connection with an extension of
the Initial Maturity Date, the unpaid balance, if any, of the prepayment
amounts set forth in Section 1.4.

 

(B)           Concurrently with the consummation of
any Disposition of a Mortgaged Property, the Release Amount for such Mortgaged
Property; provided that in the event the Portfolio LTV Ratio (taking into
consideration the Disposition in question and the mandatory prepayment to be
made under this subsection (B) in conjunction therewith) would be

 

8

 

greater than 50%, the mandatory prepayment shall equal the greater of
(i) the Release Amount for such Mortgaged Property; and (ii) one hundred
percent (100%) of the Net Cash Proceeds in respect of such Disposition (but in
all events any such transaction shall otherwise comply with the terms of this
Agreement, including the provisions of Sections 3.6); provided
further, that with respect to any Disposition of the Mortgaged Property
known as the “Holiday Inn Express” located in Bloomington, Indiana or the
Mortgaged Property known as the “Holiday Inn Express” located in Austin, Texas,
the mandatory prepayment amount required to be remitted shall be the greater of
(i) the Allocated Loan Amount for such Mortgaged Property, or (ii) one hundred
percent (100%) of the Net Cash Proceeds in respect of such Disposition.

 

(C)                                Concurrently with the consummation
of any Securities issuance or incurrence of borrowed Indebtedness (except for
(i) an issuance or incurrence in respect of Permitted Debt (other than a
refinancing of Indebtedness described in clause (v)(b) of the definition of “Permitted
Debt” hereunder), (ii) non-cash Permitted Acquisitions made with equity
Securities or (iii) the issuance of Capital Stock of CNL REIT or Borrower in
connection with the investment in the acquisition of the Advisor), by CNL REIT,
Borrower or their respective Subsidiary Entities, the dollar amount equal to
100% of Net Cash Proceeds in respect of such issuance (but in all events any
such issuance shall otherwise comply with the terms of this Agreement); provided,
that if at the time of such issuance, or as a result of the mandatory
prepayment in conjunction therewith (a “Ratio Trigger Prepayment”): (i)
the Portfolio LTV Ratio is less than 65%, the mandatory prepayment amount
required to be remitted (including that portion of the Net Cash Proceeds
generated in connection with a Ratio Trigger Payment in excess of that
necessary to reduce the Portfolio LTV Ratio to 65%) shall be the dollar amount
equal to 50% of Net Cash Proceeds in respect of such issuance (or in the case
of a Ratio Trigger Prepayment, such excess); and (ii) the Portfolio LTV Ratio
is less than 50%, then no mandatory prepayment shall be required in respect
thereof (or, in the case of a Ratio Trigger Prepayment, in respect of that
portion of the Net Cash Proceeds generated in connection therewith in excess of
that necessary to reduce the Portfolio LTV to 50%).

 

(D)                               With respect to any payments to be
made to or on behalf of the CNL REIT, Borrower or their respective Subsidiary
Entities as compensation for such Person entering into or transferring a
management, franchise, or similar agreement with respect to any Real Property
(whether or not such compensation is paid upon execution or transfer, in a lump
sum, over time, or pursuant to a deferred payment arrangement, but not
including any rent guaranty, credit support or enhancement, contribution or
payment in return for capital improvements or similar arrangement entered into
in the Ordinary Course of Business), promptly, but in no event more than three
(3) Business Days after entering or transferring into such compensation
arrangement, one hundred percent (100%) of any such compensation.

 

(E)                                 During any Low DSCR Period or if a
Noticed Event of Default shall have occurred and is then continuing, the
prepayments applied in the amounts and at the times determined pursuant to Section 8.1(4)(i)(b).

 

(F)                                 The Proceeds of a Casualty or
Condemnation of a Mortgaged Property, in an amount up to (and which shall be
applicable toward payment of) the Release Amount for such Mortgaged Property,
to the extent required to be applied to the prepayment of the Loan under Sections
7.3(2)(B) or 7.3(2)(C).

 

9

 

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

 

3.4                                 Allocation of Payments Received.

 

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

 

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

 

(A)                              First, to the payment of expenses
incurred by the Administrative Agent in the performance of its duties and the
enforcement of the rights of the Lenders under the Loan Documents, including,
without limitation, all costs and expenses of collection, reasonable attorneys’
fees (including all allocated costs of internal counsel), court costs and other
amounts payable as provided in Section 7.1(23) below;

 

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

 

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

 

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

 

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

 

3.5                                 Release of Property Upon Loan
Repayment in Full.  The
Administrative Agent shall, at the reasonable expense of the Borrower, upon
payment in full of the outstanding principal amount of, and interest on, the
Loan and all other amounts due and payable under the Loan Documents in
accordance with the terms and provisions of this Agreement, release the

 

10

 

Lien of (i) this Agreement upon the Account Collateral and the Rate Cap
Collateral and (ii) the Pledge Agreements, and (iii) the Security Instruments
on the Mortgaged Property or, upon Borrower’s written request and without
representation or warranty, assign it, in whole or in part, to a new
lender.  In such event, the Borrower
shall submit to the Administrative Agent, on a date prior to the date of such
release or assignment sufficient to provide a reasonable period for review
thereof, a release of lien or assignment of lien, as applicable, for such
property for execution by the Administrative Agent.  Such release or assignment, as applicable,
shall be in a form appropriate in each jurisdiction in which the Mortgaged
Property is located and satisfactory to the Administrative Agent in its
reasonable discretion. In addition, the Borrower shall provide all other
documentation the Administrative Agent reasonably requires to be delivered by the
Borrower in connection with such release or assignment, as applicable.

 

3.6                                 Release of Individual Properties.  On one or more occasions, subject to
satisfaction of each of the conditions set forth in subsections (1) through (6)
below, the Borrower may obtain, in connection with a bona fide sale of a
Mortgaged Property or Mortgaged Properties to an unaffiliated third party, (i)
the release of such Mortgaged Property or Mortgaged Properties from the Lien of
the applicable Security Instrument (and Pledge Agreement, if applicable)
thereon and related Loan Documents, (ii) the release of the obligations of the
Borrower under the Loan Documents with respect to such released Mortgaged
Property or Mortgaged Properties (other than those expressly stated to survive)
and (iii) the remittance to the Borrower of any amounts held in any Collateral
Accounts specifically relating to, or otherwise equitably allocable to, the
subject Mortgaged Property or Mortgaged Properties:

 

(1)                                  the Borrower shall have paid the
mandatory payment specified in Section 3.3(2), which payment shall
be in an amount not less than the Release Amount for such Mortgaged Property or
Mortgaged Properties (or with respect to the Mortgaged Property known as the “Holiday
Inn Express” located in Bloomington, Indiana and the Mortgaged Property known
as the “Holiday Inn Express” located in Austin, Texas, not less than the
respective Allocated Loan Amount for such Mortgaged Property.

 

(2)                                  the Borrower shall submit to the
Administrative Agent not less than fifteen (15) days prior to the date of such
release (which must be on a Business Day), a release of Liens (and related Loan
Documents) for each applicable Mortgaged Property (for execution by the
Administrative Agent) in a form appropriate in the applicable state and
otherwise satisfactory to the Administrative Agent in its reasonable discretion
and all other documentation the Administrative Agent reasonably requires to be
delivered by the Borrower in connection with such release (collectively, “Release
Instruments”) for each applicable Mortgaged Property (for execution by the
Administrative Agent) together with an Officer’s Certificate certifying that
the requirement described in paragraph (3) below is satisfied in connection
with such release (together with calculations demonstrating the same in
reasonable detail).

 

(3)                                  With respect to any release of a
Mortgaged Property and related sale, after giving effect to such release and
sale (and to any voluntary prepayment of principal the Borrower may elect to
make in excess of the mandatory prepayment amount under subsection (1)
above in order to satisfy the standard described in this Section 3.6(3))
and determined on a pro forma basis, (i) each of the covenants set forth in Section 7.2(22)
will remain satisfied and (ii) no Low DSCR Period will occur.

 

11

 

(4)                                  No Event of Default shall exist on
the date the prepayment is made or will arise as a result of the release of
such Mortgaged Property or Mortgaged Properties.

 

(5)                                  Borrower shall have paid all
reasonable out-of-pocket costs and expenses incurred by the Administrative
Agent and all reasonable fees and expenses paid to third party consultants
(including reasonable attorneys’ fees and expenses) by Administrative Agent and
the Lenders in connection with such release.

 

(6)                                  If required by the Administrative
Agent, each Guarantor and Pledgor shall have acknowledged and ratified that
their respective obligations under the Guaranties and Pledge Agreements remain
in full force and effect, and continue to guaranty and secure (as applicable)
the Obligations under the Loan Documents.

 

In addition to
the foregoing, in the event a Portfolio Material Adverse Effect Default has
occurred and Required Lenders have not agreed in writing to waive the release
of the Mortgaged Property in respect thereof as provided in Section 9.1(4),
upon (x) Administrative Agent’s receipt of the Release Amount in respect of any
Mortgaged Property subject to Portfolio Material Adverse Effect Default, and (y)
the satisfaction of the conditions set forth in subsections (2) through (6)
above, the Administrative Agent shall release such Mortgaged Property and take
such further actions with respect thereto as provided in clauses (i) through
(iii) above.

 

3.7                                 Further Assurances. To the extent any Release
Instrument executed and delivered under Section 3.6(2) is
insufficient to effect the release to be effected in accordance with the terms
hereof, the Administrative Agent  shall
remain obligated to execute and deliver, at the expense of the Borrower, such
further Release Instruments as the Borrower may reasonably request and submit
to the Administrative Agent, together with an Officer’s Certificate covering
the matters to be covered in the Officer’s Certificate described in Section 3.6(2).

 

ARTICLE IV.

CREDIT SUPPORT AND SECURITY DOCUMENTS

 

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

 

4.2                                 Pledge
Agreements.  As credit support
for the Obligations, on or before the Closing Date, the Pledgors shall execute
and deliver to the Administrative Agent, the Pledge Agreements.

 

4.3                                 Borrower Security Documents.  As collateral security for the Obligations, on
or before the Closing Date, the Borrower, Mortgaged Property Owners and
Operating Affiliates (as applicable) shall execute and deliver to the
Administrative Agent, each Security Instrument, Assignment of Leases (if
applicable), Assignment of Management Agreement, the Assignment of Interest
Rate Cap Collateral with respect to the Initial Rate Cap Agreement and the
Account Agreement.

 

12

 

ARTICLE V.

CONDITIONS PRECEDENT

 

5.1                                 Conditions to Funding of Loan.  As conditions precedent to the agreement of
the Lenders to fund their respective Percentage Shares of the Loan:

 

(1)                                  The Borrower, Mortgaged Property
Owners, Operating Affiliates, Operating Non-Affiliates, Pledgors and
Guarantors, as applicable, shall have delivered or shall have caused to be
delivered to the Administrative Agent, in form and substance satisfactory to
the Lenders and their counsel and duly executed by the appropriate Persons
(with sufficient copies for each of the Lenders), each of the following:

 

(A)                              This Agreement;

 

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

 

(C)                                the Guaranties;

 

(D)                               the Pledge Agreements;

 

(E)                                 each Security Instrument;

 

(F)                                 each Assignment of Leases (if
applicable);

 

(G)                                each Assignment of Management
Agreement;

 

(H)                               each Subordination of Operating
Leases and Operating Non-Affiliate Estoppel;

 

(I)                                    the Assignment of Interest Rate Cap
Collateral respect to the Initial Rate Cap Agreement;

 

(J)                                   the Environmental Indemnity;

 

(K)                               each Comfort Letter;

 

(L)                                 the Indemnity and Contribution
Agreement;

 

(M)                            each Contribution Agreement;

 

(N)                               A certificate of the Secretary or
Assistant Secretary of the general partner or managing member of those
Transaction Parties which are partnerships or limited liability companies
attaching copies of resolutions duly adopted by the Board of Directors of such
general partner or managing member approving the execution, delivery and
performance of the Loan Documents on behalf of such Transaction Parties and
certifying the names and true signatures of the officers of such general
partner or managing member authorized to sign the Loan Documents to which such
Transaction Parties are party;

 

13

 

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

 

(P)                                 Opinions of counsel for the
Transaction Parties, in form and substance reasonably acceptable to the
Administrative Agent and the Lenders;

 

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

 

(R)                                Accurate and complete copies of the
Organizational Documents of each of the Pledged Subsidiaries;

 

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

 

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

 

(U)                               Confirmation from the Administrative
Agent that all fees required to be paid by the Borrower on or before the
Closing Date (including pursuant to the Fee Letter) have been, or will upon the
funding of the Loan be, paid in full;

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES

 

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

 

6.1                                 Financial
Condition.  Complete and
accurate copies of the audited financial statements of CNL REIT  for 2002 and 2003 (the “Initial
Financial Statements”) have been delivered to the Administrative Agent or
have been made available to Administrative Agent as part of required public
filings by CNL REIT with the Securities and Exchange Commission (“SEC
Filings”). All financial statements included in the Initial Financial
Statements were prepared in all material respects in conformity with GAAP,
except as otherwise noted therein, and fairly present in all material respects
the respective consolidated financial positions, and the consolidated results
of operations and cash flows for each of the periods covered thereby of CNL
REIT and its consolidated Subsidiaries as at the respective dates thereof.  None of the Transaction Parties or any of
their Subsidiaries has any Contingent Obligation, contingent liability or
liability for any taxes, long-term leases or commitments, not reflected in its
audited financial statements delivered to the Administrative Agent on or prior
to the Closing Date or otherwise disclosed to the Administrative Agent and the
Lenders in writing, which will have or is reasonably likely to have a Material
Adverse Effect.

 

(1)                                  Complete and accurate copies of the
statements of income and operating expense for each of the Mortgaged Properties
for the quarter ended June 30, 2004 have been delivered to the Administrative
Agent.  All financial data including,
without limitation, the statements of income and operating expense, that have
been delivered by or on behalf of Borrower to Lender in respect of the
Mortgaged Properties (but limited to the Best of Borrower’s

 

15

 

Knowledge as to information provided by any Manager or Operating
Non-Affiliate) (i) are true, complete and correct in all material
respects, (ii) fairly represent the financial condition of the Mortgaged
Properties as of the date of such reports, and (iii) to the extent prepared or
audited by an independent certified public accounting firm, have been prepared
in accordance with GAAP throughout the periods covered, except as disclosed
therein.  Borrower does not have any
material contingent liabilities, liabilities for delinquent taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments that could reasonably be expected to have a Portfolio
Material Adverse Effect, except as referred to or reflected in said financial
statements and operating statements and SEC Filings. Since the date of such
financial statements, there has been no material adverse change in the
financial condition, operations or business of Borrower from that set forth in
said financial statements and SEC Filings.

 

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

 

6.3                                 Compliance with Laws and Agreements.  Each of the CNL Entities is in compliance
with all Requirements of Law and Contractual Obligations and is not in default
or in violation of any order, writ, injunction, decree or demand of any
Governmental Authority, except where the failure to do so or such default,
individually or in the aggregate, could not reasonably be expected to result in
(i) a Material Adverse Effect, or (ii) a Portfolio Material Adverse
Effect.  There has not been committed by
Borrower any act or omission affording the federal government or any other
Governmental Authority the right of forfeiture as against any Mortgaged
Property or any part thereof or any monies paid in performance of Borrower’s
obligations under any of the Loan Documents.

 

6.4                                 Organization, Powers; Authorization;
Enforceability.

 

(1)                                  Each Transaction Party and Pledged
Subsidiary (A) is either a corporation, a limited partnership or a limited
liability company duly incorporated, formed or organized, validly existing, and
in good standing under the laws of the State of its incorporation, organization
and/or formation, (B) is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which failure to be so qualified and in
good standing will have or is reasonably expected to have a Material Adverse
Effect, and (C) has all requisite corporate, partnership or limited liability
company power and authority to own, operate and encumber its Property and to
conduct its business as presently conducted and as proposed to be conducted in
connection with and following the consummation of the transactions contemplated
by this Agreement.  Borrower is a
partnership for purposes of federal income taxation and for purposes of the tax
laws of any state or locality in which it is subject to taxation based on its
income.

 

(2)                                  True, correct and complete copies of
the Organizational Documents of each Transaction Party and Pledged Subsidiary
have been delivered to the Administrative Agent and have not been Modified
except to the extent indicated therein. 
All of the Organization Documents are in full force and effect, and
there are no defaults under such Organizational Documents (including with
respect to any restrictions on Indebtedness contained therein), and no events
which, with the passage of time or giving of notice or both, would constitute a
default

 

16

 

under such Organizational Documents (including with respect to any
restrictions on Indebtedness contained therein).

 

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

 

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

 

6.5                                 No
Conflict.  The execution,
delivery and performance of the Loan Documents, the borrowing hereunder, and
the use of the proceeds thereof, will not violate any material Requirement of
Law or any Organizational Document or any material Contractual Obligation of
any of the CNL Entities; or create or result in the creation of any Lien on any
material assets of any of the CNL Entities other than the Liens created by the
Loan Documents.

 

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

 

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

 

17

 

that will have or is reasonably likely to have a Material Adverse
Effect.  There are no pending or proposed
special or other assessments for public improvements or otherwise affecting the
Mortgaged Property, nor are there any contemplated improvements to the
Mortgaged Property that may result in such special or other assessments, which
would, individually or collectively have or would be reasonably likely to have
a Portfolio Material Adverse Effect.

 

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

 

6.9                                 Subsidiary Entities.  The Borrower Parties have fully disclosed to Administrative
Agent all material aspects of the ownership structure of the Transaction
Parties and their respective Subsidiary Entities and have disclosed to
Administrative Agent the correct legal name of each such Person, the type of
organization, and the jurisdiction of its incorporation or organization, and
(2) the class of outstanding Capital Stock of Transaction Parties along with
the percentage thereof owned by the Transaction Parties and their
Subsidiaries.  None of such issued and
outstanding Capital Stock or Securities is subject to any vesting, redemption,
or repurchase agreement, and there are no warrants or options outstanding with
respect to such Securities, except as disclosed to Administrative Agent in
writing prior to the Closing Date. The outstanding Capital Stock of each
Subsidiary Entity is duly authorized, validly issued, fully paid and
nonassessable.  Except for De Minimis
Subsidiaries, each Subsidiary Entity of Transaction Parties: (A) is a corporation,
limited liability company, or partnership, which is duly organized, validly
existing and, if applicable, in good standing under the laws of the
jurisdiction of its organization, (B) is duly qualified to do business and, if
applicable, is in good standing under the laws of each jurisdiction in which
failure to be so qualified and in good standing would limit its ability to use
the courts of such jurisdiction to enforce any and all material Contractual
Obligations to which it is a party, and (C) has all requisite power and
authority to own, operate and encumber its Property and to conduct its business
as presently conducted and as proposed to be conducted hereafter.

 

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

 

6.11                           ERISA Compliance.  Except as disclosed on Schedule 6.11:

 

(1)                                  Each Plan is in
compliance with the applicable provisions of ERISA, the Code and other federal
or state law failure to comply with which would reasonably be likely to result
in a Material Adverse Effect.  Each Plan
which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the Best of the Borrower’s
Knowledge, nothing has occurred which would cause the loss of such
qualification.

 

18

 

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

 

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

 

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

 

(5)                                  None of the
Transaction Parties or their respective Subsidiaries, nor any ERISA Affiliate
has incurred, nor reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA) which has resulted or
could reasonably be expected to result in a Material Adverse Effect.

 

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

 

(7)                                  None of the
Transaction Parties or their respective Subsidiaries, nor any ERISA Affiliate
has transferred any Unfunded Pension Liability to any person or otherwise
engaged in a transaction that is subject to Section 4069 or 4212(c) of
ERISA which has resulted or could reasonably be expected to result in a
Material Adverse Effect.

 

6.12                           Assets and Liens.

 

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

 

(2)                                  The Mortgaged
Property Owners have good, marketable and insurable fee simple title (or
leasehold title, as applicable, and as disclosed in the Title Report) to the
Land and the Improvements, free and clear of all Liens whatsoever except the
Permitted Encumbrances. The Mortgaged Property Owners have good and marketable
title to the remainder of the Mortgaged Property, free and clear of all Liens
whatsoever except the Permitted Encumbrances. The Security Instruments, when
properly recorded in the appropriate records, together with any Uniform
Commercial Code financing statements required to be filed in connection
therewith, will create (a) a valid, perfected first mortgage lien on the Land
and the Improvements, subject

 

19

 

only to Permitted Encumbrances and (b) perfected security interests in
and to, and perfected collateral assignments of, all personalty (including the
Leases), all in accordance with the terms thereof, in each case subject only to
any applicable Permitted Encumbrances. Except as may be indicated in and
insured over by the Title Policy, to the Best of Borrower’s knowledge there are
no claims for payment for work, labor or materials affecting the Mortgaged
Property which are or may become a lien prior to, or of equal priority with,
the Liens created by the Loan Documents. 
None of the Permitted Encumbrances will have a Portfolio Material
Adverse Effect.  The Mortgaged Property
Owners shall each preserve its right, title and interest in and to the Mortgaged
Property for so long as any Obligations remain outstanding and will warrant and
defend same and the validity and priority of the Lien hereof from and against
any and all claims whatsoever other than the Permitted Encumbrances.

 

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

 

6.14                           Consents,
Etc.  Except as disclosed in Schedule 6.14,
no consent, approval or authorization of, or registration, declaration or
filing with any Governmental Authority or any other Person is required (i) in
connection with the execution and delivery of the Loan Documents by the
Transaction Parties; or (ii) the performance of or compliance with the terms,
provisions and conditions of the Loan Documents by such Persons, other than
those that have been obtained or will be obtained by the legally required time.

 

6.15                           Hazardous Materials.  The CNL Entities have caused Phase I and the
other environmental assessments as set forth in Schedule 6.15 to be
conducted or have taken other steps to investigate the past and present
environmental condition and use of their Real Properties.  Based on such investigation, except as otherwise
disclosed in the assessments listed on Schedule 6.15 and subject to
Section 7.9(1): (1) to the Best of Borrower’s Knowledge, no
Hazardous Materials have been discharged, disposed of, or otherwise released
on, under, or from the Real Properties so as to be reasonably expected to
result in a violation of Hazardous Materials Laws and a material adverse effect
to such Real Property or the owner thereof; (2) the Mortgaged Property Owners
with respect to the Mortgaged Properties, and to the Best of Borrower’s
Knowledge, the owners of the other Real Properties, have obtained all material
environmental, health and safety permits and licenses necessary for their
respective operations, and all such permits are in good standing and the holder
of each such permit is currently in compliance with all terms and conditions of
such permits, except with respect to Real Properties other than the Mortgaged
Properties, to the extent the failure to obtain such permits or comply
therewith is not reasonably expected to result in a Material Adverse Effect or
any material violation of Hazardous Materials Laws or in a material adverse
effect to such Real Property or the owner thereof; (3) none of the Mortgaged
Properties, or to the Best of Borrower’s Knowledge, the other Real Properties
is listed or proposed for listing on the National Priorities List (“NPL”)
pursuant to CERCLA or on the Comprehensive Environmental Response Compensation
Liability

 

20

 

Information System List (“CERCLIS”) or any similar applicable state
list of sites requiring remedial action under any Hazardous Materials Laws; (4)
none of the Mortgaged Property Owners with respect to the Mortgaged Properties,
or to the Best of Borrower’s Knowledge, the owners of the other Real Properties
has sent or directly arranged for the transport of any hazardous waste to any
site listed or proposed for listing on the NPL, CERCLIS or any similar state
list; (5) to the Best of Borrower’s Knowledge, there is not now on or in any
Real Property: (a) any landfill or surface impoundment; (b) any underground
storage tanks; (c) any asbestos-containing material; or (d) any polychlorinated
biphenyls (PCB), which in the case of any of clauses (a) through (d) could
reasonably result in a violation of any Hazardous Materials Laws and a material
adverse effect to such Real Property or the owner thereof; (6) to the Best of
Borrower’s Knowledge, no environmental Lien has attached to any Real
Properties; and (7) to the Best of Borrower’s Knowledge, no other event has
occurred with respect to the presence of Hazardous Materials on or under the
Real Properties, which would reasonably be expected to result in a Material
Adverse Effect.

 

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

 

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

 

6.18                           REIT
Status.  CNL REIT (1) is
organized and operated so as to qualify as REIT for its taxable year ending December 31,
2004, (2) has qualified as a REIT for each of its taxable years beginning with
its first taxable year ended December 31, 1997, and (3) has not engaged in
any “prohibited transaction” as defined in Section 857(b)(6)(B)(iii) of
the Code other than any such transaction that would not have a Material Adverse
Effect.

 

6.19                           Insurance.  Schedule 6.19 accurately
describes the overall company wide insurance coverages for the CNL Entities as
of the Closing Date.  Such insurance
coverages are currently in full force and effect and in compliance with the
applicable requirements of Section 7.3.  The Borrower has obtained and delivered to
the Administrative Agent evidence of all insurance policies as required under Section 7.3.  The Borrower has not, and to the Best of the
Borrower’s Knowledge no Person has, done by act or omission anything which
would impair the coverage of any such policy.

 

21

 

6.20                           Full Disclosure. 
The information provided to the Administrative Agent and the Lenders by
or on behalf of the Transaction Parties relating to the CNL Entities and the
transactions contemplated under the Loan Documents shall not result in any Core
Material Inaccuracy.

 

6.21                           Indebtedness. 
Schedule 6.21 sets forth, as of the Closing Date, on a pro
forma basis after giving effect to the making of the Loan on the Closing Date,
all Indebtedness for borrowed money of each of the CNL Entities, and, except as
set forth on such Schedule 6.21, there are no defaults in the
payment of principal or interest on any such Indebtedness, and no payments
thereunder have been deferred or extended beyond their stated maturity.

 

6.22                           Real Property.  The Mortgaged Property constitutes all of the
real property, personal property, equipment and fixtures currently (i) owned,
leased or licensed by the Mortgaged Property Owners or the Operating
Affiliates, or (ii) except as otherwise disclosed on the property condition
reports regarding the Mortgaged Property delivered to the Administrative Agent
prior to the Closing Date, used in the operation of the business located on the
Mortgaged Property, other than items owned by any Manager or any Tenants.

 

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

 

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

 

6.25                           Solvency.  After
giving effect to the Loan, and the disbursement of the proceeds thereof
pursuant to the Borrower’s instructions, the Transaction Parties are each
Solvent.  None of the Transaction Parties
is contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of such entity’s assets or property, and no Transaction Party has any
knowledge of any Person contemplating the filing of any such petition against
it or against any other Transaction Party.

 

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

 

6.27                           Agreements. 
None of the Borrower, any Mortgaged Property Owner nor Operating Lessee
is a party to any agreement or instrument or subject to any restriction which
is reasonably likely to have a Portfolio Material Adverse Effect.  None of Borrower, any Mortgaged Property
Owner nor Operating Affiliate, nor to the Best of Borrower’s Knowledge any
Operating Non-Affiliate, is in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party or by which it
or the Mortgaged Property is bound, which default is reasonably likely to have
a Portfolio Material Adverse Effect. 
None of the Borrower, any Mortgaged Property Owner nor Operating Lessee
has any material financial obligation

 

22

 

(contingent or otherwise) under any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which it is a party or by
which it or any Mortgaged Property is otherwise bound, other than (a)
obligations incurred in the ordinary course of the operation of the Mortgaged
Property, including membership programs disclosed in writing to the
Administrative Agent on or prior to the date hereof, and (b) obligations under
the Loan Documents.

 

6.28                           Condemnation. 
No Condemnation has been commenced or, to the Best of the Borrower’s
Knowledge, is contemplated with respect to all or any portion of the Mortgaged
Property.

 

6.29                           Utilities and Public Access.  Each parcel comprising each Mortgaged
Property has rights of access to public ways and is served by water, sewer,
sanitary sewer and storm drain facilities adequate to service its intended
uses.  All utilities necessary to the
existing use of the Mortgaged Property are located either in the public
right-of-way abutting the Mortgaged Property (which are connected so as to
serve the Mortgaged Property without passing over other property) or in
recorded easements serving the Mortgaged Property. All roads necessary for the
use of the Mortgaged Property for its current purposes have been completed and,
if necessary, dedicated to public use.

 

6.30                           Not a Foreign Person.  None of the Borrower, any Mortgaged Property
Owner nor Operating Affiliate is a foreign person within the meaning of § 1445(f)(3)
of the Code.

 

6.31                           Separate Lots.  Each Mortgaged Property is comprised of one
(1) or more parcels which constitute a separate tax lot or lots and does not
constitute or include a portion of any other tax lot not a part of such
Mortgaged Property, unless and to the extent otherwise set forth in the Title
Policy.

 

6.32                           Assessments.  To
the Best of the Borrower’s Knowledge, except as disclosed in the Title Policy,
there are no pending or proposed special or other assessments for public
improvements or otherwise affecting the Mortgaged Property, nor are there any
contemplated improvements to the Mortgaged Property that may result in such
special or other assessments.

 

6.33                           No Prior Assignment.  There are no prior sales, transfers or
assignments of the Leases or any portion of the Rents due and payable or to
become due and payable which are presently outstanding following the funding of
the Loan, other than those being terminated or assigned to the Administrative
Agent concurrently herewith.

 

6.34                           Use of Property. 
The Mortgaged Property is used exclusively for hotel purposes and other
appurtenant and related uses.

 

6.35                           Certificate of Occupancy; Licenses.
All material certifications, permits, licenses and approvals, including without
limitation, certificates of completion and occupancy permits required of the
Mortgaged Property Owners or Operating Lessee for the legal use, occupancy and
operation of the Mortgaged Property for hotel purposes (collectively, the “Licenses”),
have been obtained and are in full force and effect and in compliance with all
Requirements of Law except where the failure to have any such License is not
reasonably expected to result in a Portfolio Material Adverse Effect. The
Borrower shall, and shall cause the Mortgaged Property Owners and Operating
Lessee to, keep and maintain all Licenses necessary for the operation of

 

23

the Mortgaged Property for hotel purposes. The use being made of each
Mortgaged Property is in conformity with the applicable certificate of
occupancy issued for the Mortgaged Property.

 

6.36                           Flood Zone. 
Except as may be shown on the Survey with respect to portions of the
Improvements other than buildings and enclosed structures, or noted on a flood
plain search, none of the Improvements on the Mortgaged Property are located in
an area as identified by the Federal Emergency Management Agency as an area having
special flood hazards.

 

6.37                           Physical Condition.  To the Best of the Borrower’s Knowledge and
except as expressly disclosed in the Physical Conditions Report, the Mortgaged Property, including,
without limitation, all buildings, Improvements, parking facilities, sidewalks,
storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, are in good condition,
order and repair in all material respects, ordinary wear and tear excepted; and
to the Best of the Borrower’s Knowledge and except as disclosed in the Physical
Conditions Report, there exists no structural or other material defects or
damages in or to the Mortgaged Property, whether latent or otherwise.  Neither the Borrower nor any Mortgaged
Property Owner has received any written notice from any insurance company or
bonding company of any defects or inadequacies in the Mortgaged Property, or
any part thereof, which would materially adversely affect the insurability of
the same or cause the imposition of material extraordinary premiums or charges
thereon or of any termination or threatened termination of any policy of
insurance or bond.

 

6.38                           Boundaries. 
Except as disclosed on the Survey, all of the Improvements lie wholly
within the boundaries and building restriction lines of the Real Property
included within each Mortgage Property, and no improvements on adjoining
properties encroach upon said Real Property, and no easements or other
encumbrances upon said Real Property encroach upon any of the Improvements, so
as to have a Portfolio Material Adverse Effect on the value or marketability of
the Mortgaged Property except those which are insured against by the Title
Policy.

 

6.39                           Leases.  The
Mortgaged Property is not subject to any Leases demising a premises within the
Mortgaged Property of more than 5,000 net rentable square feet other than the
Operating Leases.  Except as described in
the Operating Leases, no Person has any possessory interest in the Mortgaged
Property or right to occupy the same (other than typical short-term occupancy
rights of hotel guests which are not the subject of a written agreement) except
under and pursuant to the provisions of the Leases.  The current Operating Leases and other Leases
are in full force and effect and there are no material defaults thereunder by
any Transaction Party or CNL Entity, or to the Best of Borrower’s Knowledge any
third party (other than as expressly disclosed to the Administrative Agent in
writing in connection with the closing of the Loan) and to the Best of Borrower’s
Knowledge there are no conditions that, with the passage of time or the giving
of notice, or both, would constitute material defaults thereunder.  All construction and other obligations of a
material nature to be performed by the Borrower or any Mortgaged Property Owner
under the Operating Leases and other Leases have been satisfied and any required
payments by the Borrower or any Mortgaged Property Owner to the Tenants under
the Leases for tenant improvements have been made to the extent required to be
satisfied.  No Tenant under any Operating
Lease is entitled to any offsets, abatements, deductions against the

 

24

 

Rent payable under any Operating Lease from and after the date
hereof.  The Rent has been paid current
under the Operating Leases.  No Rent has
been paid more than one (1) month in advance of its due date under the Operating
Leases, except as disclosed in the Tenant estoppel certificates delivered to
the Administrative Agent in connection with the closing of the Loan.  There has been no prior sale, transfer or
assignment, hypothecation or pledge by the Borrower or any Mortgaged Property
Owner of any Operating Lease or of the Rents received therein, which will be
outstanding following the funding of the Loan, other than those being assigned
to the Administrative Agent concurrently herewith.  No Tenant or other Person under any Lease
(including any Operating Lease) or other agreement has any right or option
pursuant to such Lease or other agreement or otherwise to purchase all or any
part of the Mortgaged Property.  The
Administrative Agent hereby agrees that on the date the Borrower delivers to
the Administrative Agent a “clean” tenant estoppel certificate in the form
attached hereto as Exhibit G regarding any Lease for which the Borrower
has not delivered a tenant estoppel certificate to the Administrative Agent on
the date hereof (each such Lease, a “Certifying Lease”), the Borrower’s
representations in this Section 6.39 with respect to such
Certifying Lease shall automatically expire.

 

6.40                           Filing and Recording Taxes.  All mortgage, mortgage recording, stamp,
intangible or other similar Tax required to be paid by any Person under
applicable Requirements of Law currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents, including, without limitation, the
Security Instruments, have been paid, and, under current Requirements of Law,
the Security Instruments are enforceable against the Mortgaged Property Owners
in accordance with their terms by the Administrative Agent (or any subsequent
holder thereof) subject only to applicable bankruptcy, insolvency and similar
laws affecting rights of creditors generally, and subject as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at law.

 

6.41                           Management Agreements.  Each Management Agreement is in full force
and effect and (to the Best of Borrower’s Knowledge as to any non-CNL Entity),
as of the Closing Date there is no material default thereunder by any party
thereto and no event has occurred that, with the passage of time and/or the
giving of notice would constitute a material default thereunder.

 

6.42                           Illegal Activity.  No portion of the Mortgaged Property has been
or will be purchased with proceeds of any illegal activity.

 

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

 

6.44                           Labor.  Except as
set forth on attached Schedule 6.44, (a) to the Best of Borrower’s
Knowledge, no work stoppage, labor strike, slowdown or lockout is pending or
threatened by employees and other laborers at the Mortgaged Property, and (b)
none of the Borrower, Mortgaged Property Owners, Operating Affiliates, or, to
the Best of Borrower’s

 

25

 

Knowledge, Operating Non-Affiliates or Managers (i) is involved in or,
to the Best of Borrower’s Knowledge, threatened with any material labor
dispute, material grievance or litigation relating to labor matters involving
any employees and other laborers at the Mortgaged Property, including, without
limitation, violation of any federal, state or local labor, safety or
employment laws (domestic or foreign) and/or charges of unfair labor practices
or discrimination complaints, (ii) has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor Act
or (iii) is a party to, or bound by, any collective bargaining agreement or
union contract with respect to employees and other laborers at the Mortgaged
Property, in each case which could have a Portfolio Material Adverse
Effect.  None of the matters set forth on
attached Schedule 6.44 would, if determined against the Borrower,
Mortgaged Property Owners or Guarantors have a Portfolio Material Adverse
Effect on any individual Mortgaged Property or all of the Mortgaged Property.

 

6.45                           Taxpayer Identification Number.  The Borrower’s federal taxpayer
identification number is as set forth on attached Schedule 6.45.

 

6.46                           Leases. 
The Borrower has heretofore delivered to the Administrative Agent
true and complete copies of all Operating Leases and other Material Leases and
any and all Modifications thereof.

 

ARTICLE VII.

COVENANTS

 

Each of the Borrower Parties, jointly and severally, hereby covenants
and agrees with the Administrative Agent and each Lender that, as long as any
Obligations remain unpaid it will do, and cause any Transaction Party to do (or
in the case of any negative covenants or other restrictive or prohibitive
provisions contained in this Article VII, will not do, or allow any
Transaction Party to do), directly or indirectly, the following (and in such
connection, references in this Article VII to Borrower shall also
refer to Mortgaged Property Owners or Operating Affiliates, as the context may
require):

 

7.1                                 Affirmative
Covenants.

 

(1)                                  Performance by the
Transaction Parties.  The Transaction
Parties shall observe, perform and fulfill each and every covenant, term and
provision of each Loan Document executed and delivered by, or applicable to,
the Transaction Parties, in accordance with the provisions of each Loan
Document, and shall not enter into or otherwise suffer or permit any
Modification or  termination of any Loan
Document executed and delivered by, or applicable to, the Transaction Parties,
as applicable, without the prior written consent of the Administrative Agent.

 

(2)                                  Existence; Compliance
with Requirements of Law; Insurance. 
Subject to the Borrower’s right of contest pursuant to Section 7.4(3),
each of the Transaction Parties shall comply and cause the Mortgaged Property
to be in compliance with all Requirements of Law applicable to the Borrower,
Mortgaged Property Owners, Operating Lessees, Managers, and the Mortgaged
Property and the uses permitted upon the Mortgaged Property, except in the case
of Requirements of Law applicable to the Operating Non-Affiliates where the
failure to comply

 

26

 

would not have a Portfolio Material Adverse Effect.  The Borrower Parties shall do or cause to be
done, and shall cause Mortgaged Property Owners and Operating Affiliate to do
or cause to be done, all things necessary to preserve, renew and keep in full
force and effect such Person’s existence, rights, licenses, permits and
franchises necessary to comply with all Requirements of Law applicable to them
and the Mortgaged Property.  There shall
never be committed by the Borrower or Mortgaged Property Owners, and the
Borrower and Mortgaged Property Owners shall not knowingly permit, any other
Person in occupancy of or involved with the operation or use of the Mortgaged
Property to commit, any act or omission affording the federal government or any
state or local government the right of forfeiture as against the Mortgaged
Property or any part thereof or any monies paid in performance of the Borrower’s
obligations under any of the Loan Documents. 
Borrower hereby covenants and agrees not to commit, knowingly permit or
suffer to exist any act or omission affording such right of forfeiture.  Each of the Borrower Parties shall, and shall
cause the Mortgaged Property Owners and Operating Affiliate to, at all times
maintain, preserve and protect all franchises and trade names and preserve all
the remainder of its property used in the conduct of its business and shall
keep the Mortgaged Property in good working order and repair, and from time to
time make, or cause to be made, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto, all as more fully set forth
in the Security Instruments. The Borrower shall keep or cause to be kept the
Mortgaged Property insured at all times to such extent and against such risks,
and maintain liability and such other insurance, as is more fully set forth in
this Agreement.

 

(3)                                  Litigation.  The Borrower Parties shall give prompt
written notice to the Administrative Agent of any litigation or governmental
proceedings pending or threatened in writing against any of the Transaction
Parties which, if determined adversely to the Transaction Parties, would have a
Portfolio Material Adverse Effect or Material Adverse Effect.

 

(4)                                  INTENTIONALLY OMITTED

 

(5)                                  INTENTIONALLY OMITTED

 

(6)                                  Access to Mortgaged
Property.  The Borrower, Mortgaged
Property Owners and Operating Affiliates shall permit agents, representatives
and employees of the Administrative Agent to inspect any Mortgaged Property or
any part thereof during normal business hours on Business Days upon reasonable
advance notice and subject to the applicable terms and conditions of any
Management Agreement.

 

(7)                                  Notice of
Default.  The Borrower shall promptly
advise the Administrative Agent (a) of any event or condition that has or is
likely to have a Material Adverse Effect or Portfolio Material Adverse Effect
and (b) of the occurrence of any Potential Default or Event of Default of which
Borrower has knowledge.

 

(8)                                  Cooperate in Legal
Proceedings.  The Transaction Parties
shall cooperate fully with the Administrative Agent with respect to any proceedings
before any court, board or other Governmental Authority which would reasonably
be expected to affect in any material adverse way the rights of the
Administrative Agent hereunder or under any of the other Loan Documents and, in
connection therewith, permit the Administrative Agent, at its election, to

 

27

 

participate in any such proceedings which may have a Portfolio Material
Adverse Effect or a Material Adverse Effect.

 

(9)                                  Perform Loan
Documents.  Each of the Transaction
Parties shall observe, perform and satisfy all the terms, provisions, covenants
and conditions of, and shall pay when due all costs, fees and expenses to the
extent required, under the Loan Documents executed and delivered by, or applicable
to, such Transaction Parties.

 

(10)                            Insurance.

 

(A)                              The Borrower and the Mortgaged
Property Owners shall cooperate with the Administrative Agent in obtaining for
the Administrative Agent the benefits of any Proceeds lawfully or equitably
payable in connection with the Mortgaged Property, and the Administrative Agent
shall be reimbursed for any expenses incurred in connection therewith
(including reasonable attorneys’ fees and disbursements) out of such Proceeds,
subject to the terms and conditions of any Operating Lease with other than an
Operating Affiliate and of any Management Agreement.

 

(B)                                The Borrower and the Mortgaged
Property Owners shall comply with all Insurance Requirements and shall not
bring or keep or permit to be brought or kept any article upon any of the
Mortgaged Property or cause or permit any condition to exist thereon which
would be prohibited by any Insurance Requirement, or would invalidate insurance
coverage required hereunder to be maintained by the Borrower on or with respect
to any part of the Mortgaged Property pursuant to Section 7.3.

 

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

 

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

 

(13)                            Operation.  The Borrower, Mortgaged Property Owners and
Operating Affiliates shall, and shall
cause each Operating Non-Affiliate to (i) promptly perform and/or
observe all of the covenants and agreements required to be performed and
observed by it under each Management Agreement and do all commercially
reasonable things necessary to preserve

 

28

 

and to keep unimpaired its material rights thereunder; (ii) promptly
notify the Administrative Agent of any “event of default” under any Management
Agreement of which it is aware; (iii) enforce in a commercially reasonable
manner the performance and observance of all of the covenants and agreements
required to be performed and/or observed by each Manager under the Management
Agreements, including any agreement to incur obligations and make expenditures
in accordance with the Budget then in effect and Approved Mortgaged Property
Operating Expenses and Approved Capital Expenditures contemplated therein.

 

(14)                            Business and Operations.  The Borrower and the Mortgaged Property
Owners shall continue to engage in the businesses presently conducted by it as
and to the extent the same are necessary for the ownership, maintenance,
management and operation of the Mortgaged Property. Each of the Mortgaged
Property Owners shall qualify to do business and shall remain in good standing
under the laws of the State in which the Mortgaged Property is located and as
and to the extent required for the ownership, maintenance, management and
operation of the Mortgaged Property.

 

(15)                            Title to the Mortgaged Property.  Each of the Mortgaged Property Owners shall
warrant and defend (a) its title to the Mortgaged Property and every part
thereof, subject only to Liens permitted hereunder (including Permitted
Encumbrances) and (b) the validity and priority of the Liens of the applicable
Security Instrument, Assignment of Leases and this Agreement on the Mortgaged
Property, subject only to Liens permitted hereunder (including Permitted Encumbrances),
in each case against the claims of all Persons whomsoever. The Borrower shall
reimburse the Administrative Agent for any losses, costs, damages or expenses
(including reasonable attorneys’ fees and court costs) incurred by the
Administrative Agent if an interest in the Mortgaged Property, other than as
permitted hereunder, is claimed by another Person.

 

(16)                            Costs of Enforcement.  In the event (a) that this Agreement or any
Security Instrument is foreclosed upon in whole or in part or that this Agreement
or any Security Instrument is put into the hands of an attorney for collection,
suit, action or foreclosure, (b) of the foreclosure of any security agreement
prior to or subsequent to this Agreement in which proceeding the Administrative
Agent is made a party, or a mortgage prior to or subsequent to any Security
Instrument in which proceeding the Administrative Agent is made a party, or (c)
of the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of Borrower or any of its constituent Persons or an assignment by
Borrower or any of its constituent Persons for the benefit of its creditors,
Borrower, its successors or assigns, shall be chargeable with and agrees to pay
all costs of collection and defense, including reasonable attorneys’ fees and
costs, incurred by the Administrative Agent or such Borrower in connection
therewith and in connection with any appellate proceeding or post-judgment
action involved therein, together with all required service or use taxes.

 

(17)                            Estoppel Statements.

 

(A)                              The Borrower shall, from time to
time, upon thirty (30) days’ prior written request from the Administrative
Agent, but not more than twice in any one (1) calendar year so long as no Event
of Default has occurred and is continuing, execute, acknowledge and deliver to
the Administrative Agent, an Officer’s Certificate, stating that this Agreement
and the

 

29

 

other Loan Documents are unmodified and in full force and effect (or,
if there have been Modifications, that this Agreement and the other Loan
Documents are in full force and effect as Modified and setting forth such
Modifications), stating the amount of accrued and unpaid interest and the
outstanding principal amount of the Loan and containing such other information,
qualified to the Best of the Borrower’s Knowledge, with respect to the
Borrower, the Mortgaged Property and the Loan as the Administrative Agent shall
reasonably request. The estoppel certificate shall also state either that no
Event of Default exists hereunder or, if any Event of Default shall exist
hereunder, specify such Event of Default and the steps being taken to cure such
Event of Default.

 

(B)                                The Borrower shall use commercially
reasonable efforts to deliver to the Administrative Agent, within thirty (30)
days of the Administrative Agent’s request, tenant estoppel certificates from
each Operating Lessee and from each other Tenant under Material Leases in
substantially the form and substance of the estoppel certificates delivered by
the Operating Non-Affiliates in connection with the Closing, provided that the
Borrower shall not be required to deliver such certificates more frequently
than one time in any calendar year; provided, however, that there shall be no
limit on the number of times the Borrower may be required to use commercially
reasonable efforts to obtain such certificates if an Event of Default hereunder
or under any of the Loan Documents has occurred and is continuing.

 

(18)                            Loan Proceeds.  The Borrower shall use the proceeds of the
Loan received by it on the Closing Date only to repay the Existing Bridge Loan.

 

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

 

(20)                            No Further Encumbrances.  The Borrower and the Mortgaged Property Owners
shall do, or cause to be done, all things necessary to keep and protect the
Mortgaged Property and all portions thereof unencumbered from any Liens,
easements or agreements granting rights in or restricting the use or
development of the Mortgaged Property, except for Permitted Encumbrances.

 

(21)                            Material Leases.  The Borrower and the Mortgaged Property
Owners shall promptly after receipt thereof deliver to the Administrative Agent
a copy of any notice received with respect to the Material Leases claiming that
a Mortgaged Property Owner is in default in the performance or observance of
any of the material terms, covenants or conditions of any of the Leases, if
such default is reasonably likely to have a Portfolio Material Adverse Effect.

 

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

 

30

 

(A)                              The occurrence of any Potential
Default or Event of Default and what action the Borrower has taken, is taking,
or is proposing to take in response thereto;

 

(B)                                The institution of, or written
threat of, any action, suit, proceeding, governmental investigation or
arbitration against or affecting the CNL Entities and not previously disclosed
pursuant to this Section 7.1(22), which action, suit, proceeding,
governmental investigation or arbitration (i) exposes, or in the case of
multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances
expose, such Persons, in the Borrower’s reasonable judgment, to liability in an
amount aggregating $10,000,000
or more and is or are not covered by insurance, or (ii) seeks injunctive or
other relief which, if obtained, may have a Material Adverse Effect, providing
such other information as may be reasonably available to enable Administrative
Agent and its counsel to evaluate such matters. 
The Borrower, upon request of the Administrative Agent, shall promptly
give written notice of the status of any action, suit, proceeding, governmental
investigation or arbitration.

 

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

 

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

 

(E)                                 Any event not disclosed pursuant to
paragraphs (A) through (D) above which could reasonably be expected to
result in a Material Adverse Effect.

 

(23)                            Expenses.  The Borrower shall pay all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of outside
counsel) (1) of the Administrative Agent incident to the preparation,
negotiation and administration and performance of the Loan Documents, including
any proposed Modifications or waivers with respect thereto, the due diligence
review undertaken in connection therewith, and the syndication of the Loan (but
such expenses shall not include any fees paid to the syndicate members), and
the preservation and protection of the rights of the Lenders and the
Administrative Agent under the Loan Documents (including expenses incurred in
creating and perfecting the Lien in favor of the Administrative Agent pursuant
to this Agreement and the other Loan Documents), and (2) of the
Administrative Agent and each of the Lenders incident to the enforcement of
payment of the Obligations, whether by judicial proceedings or otherwise,
including, without limitation, in connection with bankruptcy, insolvency, liquidation,
reorganization, moratorium or other similar proceedings involving any
Transaction Party or a “workout” of the Obligations.  The obligations of the Borrower under this Section 7.1(23)
shall survive payment of all other Obligations.

 

(24)                            REIT Status.  CNL REIT shall maintain its status as a
REIT.  All of the representations and
warranties set forth in Section 6.18 shall remain true and correct
at all times. Borrower will do or cause to be done all things necessary to
cause it to be treated as either a partnership or a disregarded entity for
purposes of federal income taxation and the tax laws of any state or locality
in which Borrower is subject to taxation based on its income.

 

31

 

(25)                            Subordination.

 

(A)                              Each Transaction Party (each a “Subordinated
Creditor”) hereby absolutely and irrevocably subordinates, both in right of
payment and in time of payment, (a) in the case of the Guarantors and the
Operating Affiliates, any and all present or future obligations and liabilities
of the Borrower to such Persons, and (b) in the case of the Borrower, any
and all present and future obligations and liabilities of the Guarantors and
the Operating Affiliates to the Borrower (such obligations and liabilities referred
to in clauses (a) or (b) being “Subordinated Indebtedness”), to the
prior payment in full in cash of the Obligations or the obligations of the
Guarantors under the Guaranties, as applicable. Each Subordinated Creditor
agrees to make no claim for, or receive payment with respect to, such
Subordinated Indebtedness until all Obligations and such obligations have been
fully discharged in cash. Notwithstanding the foregoing, the Borrower shall be
entitled to declare and pay dividends or make distributions to equity holders
with respect to their Capital Stock, as long as no Noticed Event of Default
then exists, but subject to Section 7.1(25) and Section 7.2(12),
and the Transaction Parties may at any time prior to a Noticed Event of Default
repay intercompany advances between and among themselves and their Wholly Owned
Subsidiaries.

 

(B)                                All amounts and other assets that
may from time to time be paid or distributed to or otherwise received by any
Subordinated Creditor in respect of Subordinated Indebtedness in violation of
this Section 7.1(25) shall be segregated and held in trust by the
Subordinated Creditor for the benefit of the Lenders and promptly paid over to
the Administrative Agent.

 

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

 

(D)                               In any bankruptcy or other
proceeding in which the filing of claims is required by Requirements of Law,
each Subordinated Creditor shall file all claims relating to the Subordinated
Indebtedness that the Subordinated Creditor may have against the obligor
thereunder and shall assign to the Administrative Agent, for the benefit of the
Lenders, all rights relating to the Subordinated Indebtedness thereunder. If
any Subordinated Creditor does not file any such claim, the Administrative
Agent, as attorney-in-fact for the Subordinated Creditor, is

 

32

 

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

 

(E)                                 Each of the Subordinated Creditors
hereby agrees that the Administrative Agent and the Lenders may at any time in
their discretion renew or extend the time of payment of the Obligations or
exercise, fail to exercise, waive or Modify any other of their rights under
this Agreement, any Loan Document or any instrument evidencing or securing or
delivered in connection therewith, and in reference thereto may make and enter
into such agreements as to them may seem proper or desirable, all without
notice to or further assent from the Subordinated Creditors (except as
otherwise expressly required pursuant to this Agreement), and any such action
shall not in any manner impair or affect the subordination set forth in this Section 7.1(25)
or any of the Administrative Agent’s or Lenders’ rights hereunder.  The Subordinated Creditors each hereby waive
and agree not to assert against the Administrative Agent or the Lenders any
rights which a guarantor or surety could exercise with respect to any
indebtedness of any Transaction Party, but nothing in this Section 7.1(25)
shall constitute the Subordinated Creditors as a guarantor or surety.

 

7.2                                 Negative
Covenants.

 

(1)                                  Incur Debt.  Incur, create or assume any Indebtedness
other than Permitted Debt, or Transfer all or any part of the Mortgaged
Property or any interest therein, except as permitted in the Loan Documents.

 

(2)                                  Encumbrances.  Incur, create or assume or permit the
incurrence, creation or assumption of any Liens on any Property or assets of
the Transaction Parties other than Permitted Encumbrances, and shall not
Transfer or permit the Transfer of any direct or indirect interest (at any
tier) in the Transaction Parties except as permitted pursuant to Section 7.5.

 

(3)                                  Engage in Different Business.  Engage to any material extent in any business
other than such Person’s business as conducted on the date hereof and
businesses which are substantially similar, related or incidental thereto.

 

(4)                                  INTENTIONALLY OMITTED

 

(5)                                  Partition.  Partition or permit the partition of any
Mortgaged Property.

 

(6)                                  INTENTIONALLY OMITTED

 

33

 

(7)                                  INTENTIONALLY OMITTED

 

(8)                                  Transfer Assets.  Transfer or permit any Mortgaged Property
Owner or Operating Lessee to Transfer, any asset other than in the Ordinary
Course of Business and not in violation of the terms of Section 7.5
or any interest in the Mortgaged Property except as may be expressly permitted
hereby or in the other Loan Documents.

 

(9)                                  Modify Organizational Documents.  Modify or permit any Mortgaged Property Owner
or Operating Affiliate to Modify any of its Organizational Documents without
the Administrative Agent’s consent, other than (a) Modifications necessary to
clarify existing provisions of such Organizational Documents;
(b) Modifications which would have no adverse, substantive effect on the
right or interests of the Lenders in conjunction with the Loan or under the
Loan Documents as permitted under this Agreement; or (c) to reflect any
change in capital accounts, contributions, distributions, and allocations that
do not and could not reasonably be expected to have a Material Adverse Effect
or a Portfolio Material Adverse Effect.

 

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

 

(11)                            Bankruptcy.  (i) File (or permit any Mortgaged Property
Owner or Operating Affiliate to file) a bankruptcy or insolvency petition or
otherwise institute insolvency proceedings, (ii) dissolve, liquidate,
consolidate, merge or sell all or substantially all of any Transaction Party’s
assets other than in connection with the repayment of the Loan, (iii) 
file or solicit the filing (or permit any Mortgaged Property Owner or Operating
Affiliate to file or solicit the filing) of an involuntary bankruptcy petition
against any of the Transaction Parties, Manager, or any Close Affiliate of any
of the Transaction Parties.

 

(12)                            Distributions.  (i) No Borrower Party shall make any
Distribution if such Distribution would cause such Person to be in violation of
the mandatory prepayment requirements set forth in Section 3.3;
(ii) CNL REIT shall not make, declare
or become liable for any Distribution to the extent that such
Distribution exceeds the sum of (A) $75,000,000, and (B) the aggregate Cash
Available for Distribution for each Fiscal Quarter ended since the Closing
Date, less the sum of (C) all Distributions paid or declared by CNL
REIT, or for which CNL REIT is liable, on or after the Closing Date, and (D)
all funds utilized on or after the Closing Date by CNL REIT or any of its
Affiliates to purchase, redeem or retire any Capital Stock of CNL REIT; provided,
however, that this clause (ii) shall not restrict any Distributions necessary to maintain CNL REIT’s status as a
REIT; or (iii) in the event CNL REIT has become a Public Company,
CNL REIT shall not make, declare or become liable for any Distributions during
any period while a Noticed Event of Default has occurred and is continuing; or
(iv) in the event CNL REIT has not become a Public Company, CNL REIT shall not
make, declare or become liable for (A) any Distributions after the occurrence
of a monetary Event of Default (provided Administrative Agent has delivered
written notice thereof to the Borrower Parties); or (B) any Distributions after
the occurrence of any other Noticed Event of Default, unless such
Distributions: (x) are necessary to
maintain CNL REIT’s status as a REIT, or (y) are paid in accordance with each
of the following restrictions: (1) the Distribution is a payment of dividends
consistent with CNL REIT’s dividend policy in effect as of the Closing Date,
and (2) the

 

34

 

Distribution does not exceed a dividend of $0.775 per share.]  Nothing contained in this Section 7.2(12)  shall constitute a limitation on any remedies
Administrative Agent or Lenders may have under any guaranty or security
instrument provided in connection with the Loan (including the Guaranties and
the Pledge Agreements), other than the restrictions on the right to make
Distributions as proved herein.

 

(13)                            Manager.

 

(A)                              The Borrower represents, warrants
and covenants on behalf of itself, each Mortgaged Property Owner and Operating
Affiliate that the Mortgaged Property shall at all times be managed by an
Acceptable Manager pursuant to an Acceptable Management Agreement, except to
the extent provisions relating to management of the Mortgaged Property are
incorporated into an Operating Lease in effect on the Closing Date or otherwise
approved by Administrative Agent.

 

(B)                                Notwithstanding any provision to the
contrary contained herein or in the other Loan Documents, except as provided in
this Section 7.2(13), the Borrower may not Modify or waive any
terms under any Management Agreement (or permit any such action) without the
consent of the Administrative Agent.  Without
the consent of the Administrative Agent, the Borrower shall be permitted to
make any nonmaterial Modification to a Management Agreement and to waive any
nonmaterial rights thereunder, provided that no such Modification or waiver
shall affect the cash management procedures set forth in the Management
Agreement or the Loan Documents, decrease the cash flow of any Mortgaged
Property, adversely affect the marketability of the Mortgaged Property, change
the definitions of “default” or “event of default,” change the definitions of “operating
expense” or words of similar meaning to add additional items to such
definitions, change any definitions or provisions so as to reduce the payments
due the Borrower or applicable Operating Lessee thereunder, change the timing
of remittances to the Borrower or applicable Operating Lessee thereunder,
increase or decrease reserve requirements, change the term of the Management
Agreement or increase any Management Fees payable under the Management
Agreement.

 

(C)                                In the event Borrower desires to
replace a Manager, it shall promptly deliver to Administrative Agent written
notice thereof, along with the form of proposed replacement Management
Agreement.  So long as the proposed new
manager is an Acceptable Manager, Administrative Agent shall not unreasonably
withhold its consent to the replacement Management Agreement.

 

(D)                               The Borrower hereby agrees that,
subject to the provisions of the applicable Assignment of Management Agreement,
in the event that (i) any Manager is in material default of its
obligations under the applicable Management Agreement, and (ii) an
Acceptable Manager has agreed to replace such defaulting Manager upon its
termination, the Administrative Agent shall have the right to terminate such
defaulting Manager subsequent to an Event of Default under this Agreement and
an acceleration of the Loan.

 

(14)                            Franchise Fee and Management Fee.  The Borrower may not, without the prior
written consent of the Administrative Agent (which may be withheld in its sole
and absolute discretion) take or permit to be taken any action not expressly
required under any

 

35

 

Management Agreement that would increase the percentage amount of the
Management Fee, or add a new type of fee payable to any Manager relating to any
Mortgaged Property, including, without limitation, the Franchise Fee and
Management Fee.

 

(15)                            Modify Account Agreement.  Without the prior consent of the
Administrative Agent, which shall not be unreasonably withheld, delayed or
conditioned, the Borrower shall not Modify (or permit the Modification of) the
Account Agreement.

 

(16)                            Zoning Reclassification.  Without the prior written consent of the
Administrative Agent, which consent shall not be unreasonably withheld or delayed,
(a) initiate or consent to any zoning reclassification of any portion of the
Mortgaged Property, (b) seek any variance under any existing zoning ordinance
that could result in the use of the Mortgaged Property becoming a
non-conforming use under any zoning ordinance or any other applicable land use
law, rule or regulation, or (c) allow any portion of the Mortgaged Property to
be used in any manner that could result in the use of the Mortgaged Property
becoming a non-conforming use under any zoning ordinance or any other
applicable land use law, rule or regulation.

 

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

 

(18)                            Misapplication of Funds.  Distribute any revenue from the Mortgaged
Property or any Proceeds in violation of the provisions of this Agreement, fail
to remit amounts to the Suspense Account or Payments Account as required by Section 8.1,
misappropriate any security deposit or portion thereof or apply the proceeds of
the Loan in violation of Section 7.1(18).

 

(19)                            Advisory Agreement.  Modify in any material respect the Advisory
Agreement in a manner adverse to the Transaction Parties without the consent of
the Administrative Agent, or replace the Advisor as the Advisor to CNL REIT and
Borrower without the consent of the Administrative Agent, such consent not to
be unreasonably withheld if such replacement provider is an Affiliate of CNL REIT.

 

(20)                            Investments.  Make any Investment, except Investments in
the following, subject to the limitations set forth below:

 

(A)                              Investments in cash and Cash
Equivalents;

 

(B)                                Investments made by a Transaction
Party (other than in the Mortgaged Real Property) in the Ordinary Course of
Business, provided that (i) construction, development, renovation, and other
similar capital expenditure programs (“Development Investments”) with
respect to any Real Property shall be deemed in the Ordinary Course of Business
for purposes of this Section 7.2(21) so long as either (A) such
Development Investment is made pursuant to projects or contracts that have
already been initiated or executed, respectively, as of the Closing Date; or
(B) the amount of such Investment with respect to any individual Real Property
does not exceed 10% of the gross revenues generated by such Real Property; and
(ii) any Indebtedness incurred in respect of such Investment, including any
Capitalized Lease Obligations, shall be limited as provided in Section 7.5;

 

36

 

(C)                                Investments consisting of the
acquisition of Projects, and investments in subsidiaries and joint ventures for
the acquisition of Projects, in each case made by (i) the Borrower, or (ii) any
other Transaction Party other than any Mortgaged Property Owner; provided that
the cash invested in excess of any acquisition debt which is Permitted Debt in
any such acquisition as equity may only be obtained from cash available to the
Borrower Parties and not otherwise required to be applied or retained pursuant
to the Loan Documents; and

 

(D)                               Investment
in the acquisition, whether
directly or by merger or similar corporate transaction, of the Advisor;
provided that (i) such transaction is recommended by a committee of independent
directors of the Board of Directors of CNL REIT, (ii) the purchase price for
the Advisor (a) does not exceed $309 million, and (b) does not include
the payment of cash or any other property (other than Capital Stock of CNL REIT
or Borrower) by any CNL Entity in excess of $30.3 million, and (iii) Lehman Brothers or another internationally
recognized investment banking firm has rendered a fairness opinion indicating
that the compensation paid to Advisor in connection with such transaction is
fair to the purchaser from a financial point of view.

 

(21)                            Transactions with Affiliates. 
The Transaction Parties shall not, and shall not permit any of the CNL
Entities to directly or indirectly enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with (i) a holder or holders of more
than five percent (5%) of any class of equity Securities of CNL REIT; or (ii)
with any Affiliate of CNL REIT which is not its Subsidiary (a “Transactional
Affiliate”), except as set forth on Schedule 7.2(21) or except
upon fair and reasonable terms no less favorable to the Transaction Parties
than would be obtained in a comparable arm’s-length transaction with a Person
not a Transactional Affiliate.

 

(22)                            Financial Covenants of Borrower
Parties.

 

(A)                              Maximum Leverage. 
At any time during the periods indicated below, the ratio of Total
Liabilities for the twelve months then most recently ended to EBITDA for the
four Fiscal Quarters then most recently ended, shall not be less than the
ratios set forth below:

 

	
  Period Ratio

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  From the
  Closing Date through December 31, 2004

  	
   

  	
  8.50:1

  
	
   

  	
   

  	
   

  
	
  During calendar year 2005

  	
   

  	
  8.25:1

  
	
   

  	
   

  	
   

  
	
  From January 1,
  2006 to the Initial Maturity Date

  	
   

  	
  8.00:1

  
	
   

  	
   

  	
   

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

  	
   

  	
  7.00:1

  

 

37

 

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

 

(C)                                Minimum Fixed Charge
Coverage Ratio.
As of the last day of any Fiscal Quarter, the Fixed Charge Coverage Ratio shall
not be less than 1.50.

 

(D)                               Minimum Net Worth. At any time, Net Worth shall not be
less than $950,000,000.

 

(E)                                 Mortgaged
Property DSCR.  As of the last day of any Fiscal Quarter, the
Mortgaged Property DSCR shall not be less than (a) 1.20 during the period from
the Closing Date to the Initial Maturity Date, and (b) upon extension of the
Maturity Date, 1.30 from the first day following the Initial Maturity Date to
the Extended Maturity Date.

 

7.3                                 Insurance;
Casualty; Condemnation; Restoration. 
The Administrative Agent has accepted the Borrower’s current insurance
program and policies through December 31, 2004 and any requirements set
forth in this Section 7.3 which are not satisfied by said current
insurance program are hereby waived through such date.

 

(1)                                  On
and after December 31, 2004, the Borrower shall, at its sole cost and
expense, keep in full force and effect (or, where applicable, cause the
Mortgaged Property Owners or Operating Lessees to keep in full force and
effect) insurance coverage of the types and minimum limits as follows during
the term of this Agreement for the mutual benefit of the Borrower and the
Administrative Agent:

 

(A)                              Property Insurance. 
Insurance insuring against loss or damage by standard perils
included within the classification “All Risks of Physical Loss”. Except as
otherwise provided in Section 7.3.(1)(K), such insurance (i) shall
be Replacement Cost Coverage in an amount equal to 100% of the actual
replacement cost of each property (exclusive of costs of excavation,
foundation, footings and underground utilities) and with respect to named storm
windstorm insurance, 100% of the actual replacement cost of each property
(exclusive of costs of excavation, foundation, footings and underground
utilities) subject to Borrower’s best efforts to obtain such limits at commercially
reasonable prices as approved by Administrative 
Agent and Borrower, and (ii) shall have deductibles no greater than $1,000,000 for each individual
Mortgaged Property for insurance required hereunder (or, with respect to named
storm windstorm insurance, deductibles no greater than 5% of the unit value of
insurance  applicable to the Mortgaged
Property and with respect to non-Federal flood insurance, deductibles no
greater than $11,000,000 per occurrence). The policies of insurance carried in
accordance with this paragraph shall be paid annually in advance or approved
periodic installments and shall contain a “Replacement Cost Endorsement” with a
waiver of depreciation and with an “Agreed Amount Endorsement”;

 

(B)                                Liability Insurance. 
Commercial general liability insurance, including broad form
property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages and containing minimum limits per occurrence of
$1,000,000 with a $2,000,000 general aggregate for each
Mortgaged Property for any policy year. In addition, at least $100,000,000 excess and/or umbrella
liability insurance shall be obtained and

 

38

 

maintained for claims, including legal liability imposed upon the
Borrower and all related court costs and attorneys’ fees and disbursements;

 

(C)                                Workers’ Compensation Insurance. 
Worker’s compensation insurance with respect to all employees of the
Borrower as and to the extent required by any Governmental Authority or
Requirement of Law and employer’s liability coverage of at least $1,000,000 which is scheduled to the
excess and/or umbrella liability insurance as referenced in Section 7.3(1)(B)
above;

 

(D)                               Commercial Rents Insurance. 
Business or rental interruption insurance in an amount sufficient to
avoid any co-insurance penalty and equal to the greater of (A) the estimated
gross revenues (minus estimated variable costs which will no longer be incurred
due to the business interruption) from the operation of the Mortgaged Property
(including (x) the total payable under the Leases and all Rents and (y) the
total of all other amounts to be received by the Borrower or third parties that
are the legal obligation of the Tenants), net of non-recurring expenses, for a
period of up to the next succeeding eighteen (18) months (subject to adjustment
for each such 18 month period), or (B) the projected Operating Expenses
(including Debt Service) for the maintenance and operation of the Mortgaged
Property for a period of up to the next succeeding eighteen (18) months as the
same may be reduced or increased from time to time due to changes in such
Operating Expenses. The amount of such insurance shall be (a) increased from
time to time as and when the Rents increase or the estimates of (or the actual)
gross revenue (minus estimated (or actual) variable costs which will no longer
be incurred due to the business interruption) increases or (b) decreased from
time to time to the extent Rents or the estimates of such gross revenue or
variable costs decreases;

 

(E)                                 Builder’s All-Risk Insurance. During any period of repair or
restoration, builder’s “all risk” insurance in an amount equal to not less than
the full insurable value of the Mortgaged Property against such risks
(including fire and extended coverage and collapse of the Improvements to
agreed limits) as the Administrative Agent may request, in form and substance
acceptable to the Administrative Agent;

 

(F)                                 Boiler and Machinery Insurance.  Insurance against loss or
damage from explosion of steam boilers, air conditioning equipment, high
pressure piping, machinery and equipment, pressure vessels or similar apparatus
now or hereafter installed in any of the Improvements and insurance against
loss of occupancy or use arising from any breakdown, in such amounts as are
generally available at reasonable premiums and are generally required by
institutional lenders for properties comparable to the Mortgaged
Property;

 

(G)                                Flood Insurance. Flood insurance if any part
of any structure or improvement comprising the Mortgaged Property is located in
an area identified by the Federal Emergency Management Agency as an area
federally designated a “100 year flood plain” and (a) flood insurance is
generally available at reasonable premiums and in such amount as generally
required by institutional lenders for similar properties or (b) if not so
available from a private carrier, from the federal government at commercially
reasonable premiums to the extent available.

 

39

 

(H)                               Terrorism Insurance. 
Provided that foreign insurance coverage (“Terrorism Insurance”) relating to the acts of terrorism on
behalf of foreign individuals or interests as contemplated by the Foreign
Terrorism Insurance Act is either (i) commercially available, (ii) commonly
obtained by owners of commercial properties in the same geographic area as the
Mortgaged Property and which are similar to the Mortgaged Property or (iii)
maintained for another hotel property in the same geographic area as the
Mortgaged Property which is at least 51% owned directly or indirectly by any
Borrower Party, the Borrower shall carry Terrorism Insurance throughout the
term of the Loan (including any extension terms) on a per occurrence basis in
policy amounts as required under Sections 7.3.(1)(A), (D) and (F).

 

(I)                                    Demolition and Increased
Construction Costs.
Coverage to compensate for the cost of demolition and the increased cost of
construction for the Mortgaged Property;

 

(J)                                   Law and Ordinance Insurance. Law and ordinance insurance
coverage in an amount no less than that set forth in the insurance policies
covering the Mortgaged Property as of the date hereof;

 

(K)                               Other Insurance. Upon sixty (60) days’ written notice,
such other reasonable types of insurance not covered in Sections 7.3(1)(A)
through 7.3(1)(J) and in such reasonable amounts as the Administrative
Agent from time to time may reasonably request against such other insurable
hazards (but not earthquake) which at the time are commonly insured against for
property similar to the Mortgaged Property located in or around the region in
which the Mortgaged Property is located and as may be reasonably required to
protect the Administrative Agent’s interests. 
The Borrower must maintain seismic insurance as follows:

 

(i)                                     If a Mortgaged Property is located
in an “earthquake prone zone” as determined by the U.S. Geological Survey,
earthquake insurance in an amount no less than the probable maximum loss less
any applicable deductibles not exceeding 10% of the full replacement value of
such property, including business interruption coverage, in an amount not less
than the amount required under Section 7.3.(1), all as determined
by a recognized earthquake engineering firm, and

 

(ii)                                  sinkhole and mine subsidence insurance,
if required, as determined by Administrative Agent in its sole discretion and
in form and substance satisfactory to Administrative Agent, provide that the
insurance pursuant to this Section 7.3 (1)(K)(ii) shall be on terms
consistent with the all risk insurance policy required under Section 7.3(1)(A);

 

(L)                                 Ratings of Insurers. All insurance provide for
in Section 7.3(1) shall be obtained and maintain, or cause to be
maintained, at all times insurance for itself and its Properties under valid
and enforceable policies, in form and substance acceptable to Administrative
Agent.  Any new Policies for Mortgaged
Property shall be issued by financially sound and responsible insurance
companies authorized to do business in the State and having a claims paying
ability rating of “A-” or better by S&P (or such other debt rating agencies
approved by Administrative Agent) and a general policy rating of “A-” or better
and a Financial size of XII or better by A.M. Best Company, Inc.  The Policies for Mortgaged Properties shall
designate Administrative Agent and   its
successors and assigns as additional insureds,

 

40

 

mortgagees and/or loss payee as deemed appropriate by Administrative
Agent.  Not less than ten (10) days prior
to the expiration dates of the Policies theretofore furnished to Administrative
Agent, renewal Policies accompanied by evidence satisfactory to Administrative
Agent of payment of the premiums due thereunder (the “Insurance Premiums”)
shall be delivered by Borrower to Administrative Agent.

 

(M)                            Form of Insurance Policies;
Endorsements.
The Policies (i) shall name the Administrative Agent and its successors
and/or assigns as their interest may appear as an additional insured, mortgagee
or as a loss payee (except that in the case of general liability insurance, the
Administrative Agent shall be named an additional insured and not a loss
payee); (ii) shall contain a Non-Contributory Standard Mortgagee Clause and,
except with respect to general liability insurance and workers’ compensation
insurance, a Lender’s Mortgagee Endorsement, or their equivalents; (iii) shall
include effective waivers by the insurer of all claims for insurance premiums
against all loss payees, additional insureds and named insureds (other than the
Borrower) and all rights of subrogation against any loss payee, additional
insured or named insured; (iv) shall contain such provisions as the
Administrative Agent deems reasonably necessary or desirable to protect its
interest, including endorsements providing that neither the Borrower, the
Administrative Agent nor any other party shall be a Contributor- insurer
(except deductibles) under said Policies and that no material modification,
reduction, cancellation or termination in amount of, or material change (other
than an increase) in, coverage of any of the Policies shall be effective until
at least thirty (30) days after receipt by each named insured, additional
insured and loss payee of written notice thereof or ten (10) days after receipt
of such notice with respect to nonpayment of premium; (v) shall permit the
Administrative Agent to pay the premiums and continue any insurance upon
failure of the Borrower to pay premiums when due, upon the insolvency of any of
the Borrower or through foreclosure or other transfer of title to the Mortgaged
Property (it being understood that the Borrower’s rights to coverage under such
policies may not be assignable without the consent of the insurer); and (vi)
shall provide that any proceeds shall be payable to the Administrative Agent
and Borrower as their interests may appear and that the insurance shall not be
impaired or invalidated by virtue of (A) any act, failure to act, negligence
of, or violation of declarations, warranties or conditions contained in such
policy by the Borrower, the Administrative Agent or any other named insured,
additional insured or loss payee, except for the willful misconduct of the
Administrative Agent knowingly in violation of the conditions of such policy,
(B) the occupation, use, operation or maintenance of the Mortgaged Property for
purposes more hazardous than permitted by the terms of the Policy, (C) any
foreclosure or other proceeding or notice of sale relating to the Mortgaged
Property, or (D) any change in the possession of the Mortgaged Property without
a change in the identity of the holder of actual title to the Mortgaged
Property (provided that with respect to items (C) and (D), any notice
requirements of the applicable Policies are satisfied).

 

(N)                               Premiums; Certificates; Renewals.

 

(i)                                     The Borrower shall pay or cause to
be paid the premiums for such Policies (the “Insurance Premiums”) as the same become due and payable
and shall furnish to the Administrative Agent the receipts for the payment of
the Insurance Premiums or other evidence of such payment reasonably
satisfactory to the Administrative Agent (provided, however, that Borrower is
not required to furnish such evidence of payment to the Administrative Agent if
such Insurance Premiums are to be paid by the Administrative Agent

 

41

 

pursuant to the terms of this Agreement).  Within thirty (30) days after request by the
Administrative Agent, the Borrower shall obtain such increases in the amounts
of coverage required hereunder as may be reasonably requested in writing by the
Administrative Agent (except with respect to the Terrorism Insurance and
seismic insurance required hereunder), taking into consideration changes in
liability laws, changes in prudent customs and practices, and the like. In the
event the Borrower satisfies the requirements under this Section 7.3(1)(N)
through the use of a Policy covering properties in addition to the Mortgaged
Property, then (unless such policy is provided in substantially the same manner
as it is as of the date hereof), the Borrower shall provide evidence
satisfactory to the Administrative Agent that the Insurance Premiums for the
Mortgaged Property are separately allocated under such Policy to the Mortgaged
Property and that payment of such allocated amount (A) shall maintain the
effectiveness of such Policy as to the Mortgaged Property and (B) shall
otherwise provide the same protection as would a separate policy that complies
with the terms of this Agreement as to the Mortgaged Property, notwithstanding
the failure of payment of any other portion of the insurance premiums.

 

(ii)                                  The Borrower shall deliver to the
Administrative Agent on or prior to the Closing Date acceptable insurance
evidence in the form of certificates setting forth in reasonable detail the
material terms (including any applicable notice requirements) of all Policies
from the respective insurance companies (or their authorized agents) that
issued the Policies, including that such Policies may not be canceled or
modified in any material respect without thirty (30) days’ prior notice to the
Administrative Agent, or ten (10) days’ notice with respect to nonpayment of
premium.

 

(iii)                               Prior to the expiration, termination
or cancellation of any Policy, the Borrower shall renew such policy or obtain a
replacement policy or policies (or a binding commitment for such replacement
policy or policies), which shall be effective no later than the date of the
expiration, termination or cancellation of the previous policy, and shall
deliver to the Administrative Agent acceptable insurance evidence in the form
of a certificate in respect of such policy or policies (A) containing the same
information as the certificates required to be delivered by the Borrower
pursuant to clause (ii) above, or a copy of the binding commitment for such
policy or policies and (B) confirming that such policy complies with all
requirements hereof.

 

(iv)                              If the Borrower does not furnish to
the Administrative Agent the certificates as required under clause (iii) above,
upon three (3) Business Days prior notice to the Borrower, the Administrative
Agent may procure, but shall not be obligated to procure, such replacement
policy or policies and pay the Insurance Premiums therefor, and the Borrower
agrees to reimburse the Administrative Agent for the cost of such Insurance
Premiums promptly on demand.

 

(O)                               Separate Insurance. The Borrower shall not take
out separate insurance contributing in the event of loss with that required to
be maintained pursuant to this Section 7.3(1) unless such insurance
complies with this Section 7.3(1).

 

(P)                                 Blanket Policies. The insurance coverage required
under this Section 7.3(1) may be effected under a blanket policy or
policies covering the Mortgaged

 

42

 

Property and other properties and assets not constituting a part of the
Mortgaged Property; provided that any such blanket policy shall specify, except
in the case of public liability insurance, the portion of the total coverage of
such policy that is allocated to the Mortgaged Property, and any sublimits in
such blanket policy applicable to the Mortgaged Property, which amounts shall
not be less than the amounts required pursuant to this Section 7.3(1)
and which shall in any case comply in all other respects with the requirements
of this Section 7.3(1). Upon the Administrative Agent’s request,
the Borrower shall deliver to the Administrative Agent an Officer’s Certificate
setting forth (i) the number of properties covered by such policy, (ii) the
location by city (if available, otherwise, county) and state of the properties,
(iii) the average square footage of the properties (or the aggregate square
footage or room count, if applicable), (iv) a brief description of the typical
construction type included in the blanket policy and (v) such other information
as the Administrative Agent may reasonably request.

 

(2)                                  Condemnation and Insurance Proceeds.

 

(A)                              Right to Adjust.

 

(i)                                     If one or more Mortgaged Property is
damaged or destroyed, in whole or in part in any material respect, by a
Casualty, the Borrower shall give prompt written notice thereof to the
Administrative Agent, generally describing the nature and extent of such
Casualty. Following the occurrence of a Casualty, the Borrower, regardless of
whether proceeds are available, shall in a reasonably prompt manner proceed to
restore, repair, replace or rebuild the Mortgaged Property to the extent
practicable to be of at least equal value and of substantially the same
character as prior to the Casualty, all in accordance with the terms hereof
applicable to Alterations.

 

(ii)                                  Subject to clause (v) below, in the
event of a Casualty where the loss does not exceed $5,000,000, the Borrower may
settle and adjust such claim; provided that such adjustment is carried out in a
competent and timely manner. In such case, the Borrower is hereby authorized to
collect and receipt for the Administrative Agent any Proceeds.

 

(iii)                               Subject to clause (v) below, in the
event of a Casualty where the loss exceeds $5,000,000, the Borrower may settle
and adjust such claim only with the consent of the Administrative Agent (which
consent shall not be unreasonably withheld or delayed) and the Administrative
Agent shall have the opportunity to participate, at the Borrower’s cost, in any
such adjustments.

 

(iv)                              The proceeds of any Policy in excess
of $1,000,000 shall be due and
payable jointly to the Administrative Agent and Borrower as their interests may
appear and held and applied in accordance with the terms hereof, with
Administrative Agent to be shown as Mortgagee and Loss Payee on all Property
Insurance except as otherwise expressly required under the terms of any
Management Agreement or Operating Lease with other than an Operating Affiliate.

 

(v)                                 Notwithstanding the terms of clauses
(i) and (ii) above, the Administrative Agent shall have the sole authority to
adjust any claim with respect to a Casualty and to collect all Proceeds if an
Event of Default shall have occurred and is continuing.

 

43

 

(B)                                Right of the Borrower to Apply to
Restoration.
In the event of (a) a Casualty that does not constitute a Material Casualty, or
(b) a Condemnation that does not constitute a Material Condemnation, the
Administrative Agent shall permit the application of the Proceeds (after
reimbursement of any expenses incurred by the Administrative Agent) to
reimburse the Borrower for the cost of restoring, repairing, replacing or
rebuilding or otherwise curing title defects at the Mortgaged Property (the “Restoration”), in the manner required hereby,
provided and on the condition that (1) no Event of Default shall have occurred
and be then continuing and (2) in the reasonable judgment of the Administrative
Agent:

 

(i)                                     the Mortgaged Property can be
restored to an economic unit not materially less valuable (taking into account
the effect of the termination of any Leases and the proceeds of any rental loss
or business interruption insurance which the Borrower receives or is entitled
to receive, in each case, due to such Casualty or Condemnation) and not
materially less useful than the same was prior to the Casualty or Condemnation,

 

(ii)                                  the Mortgaged Properties, after such
Restoration and stabilization, will adequately secure the outstanding balance
of the Loan,

 

(iii)                               the Restoration can be completed by
the earliest to occur of:

 

(A) the date on which the business interruption insurance carried by
the Borrower with respect to the Mortgaged Property shall expire;

 

(B) the 180th day prior to the Maturity Date, and

 

(C) with respect to a Casualty, the expiration of the payment period on
the rental loss or business interruption insurance coverage in respect of such
Casualty; and

 

(iv)                              after receiving reasonably
satisfactory evidence to such effect, during the period of the Restoration, the
sum of (A) income derived from each Mortgaged Property (collectively), plus (B)
proceeds of rental loss insurance or business interruption insurance, if any,
payable together with such other monies as the Borrower may irrevocably make
available for the Restoration, will equal or exceed 105% of the sum of (x)
Operating Expenses and (y) the Debt Service.

 

Notwithstanding the foregoing, if any of the conditions set forth in
sub-clauses (1) and (2) of the proviso in this Section 7.3(2)(B) is
not satisfied, then, unless the Administrative Agent shall otherwise elect, at
its sole option, the Proceeds shall be applied in the following order of
priority: (A) first, to prepay the principal of the Loan up to the Release Amount
for such Mortgaged Property; (B) second, to pay the amount of (1) all accrued
and unpaid interest in respect of the principal amount of the Loan so prepaid
through the date which is the final day of the Interest Period in which such
prepayment is made (including, if an Event of Default has occurred and is then
continuing, interest owed at the Default Rate), and (2) all other sums  then due and owing under the Loan Documents
and (C) third, to reimburse the Administrative Agent for any fees and expenses
of the Administrative Agent incurred in connection therewith (it being agreed
that, upon satisfaction in full of the entitlements under clauses (A), (B) and
(C) of this sentence, the

 

44

 

Borrower shall be entitled to receive the balance of the Proceeds, if
any, and a release of the Lien of the applicable Security Instrument and the
other Loan Documents with respect to the Mortgaged Property in accordance with
and subject to the terms of this Agreement). 
Notwithstanding the foregoing, or the provisions of Section (C)
below, Proceeds must be applied in accordance with the requirements of any
Management Agreement or Operating Lease which is not with an Operating
Affiliate.

 

(C)                                Material Casualty or Condemnation and
the Administrative Agent’s Right to Apply. In the event of a Material Casualty or a Material
Condemnation, then the Administrative Agent shall have the option to (i) apply
the Proceeds hereof in the following order of priority: (A) first, to prepay
the principal of the Loan up to the Release Amount for such Mortgaged Property;
(B) second, to pay the amount of (1) all accrued and unpaid interest in respect
of the principal amount of the Loan so prepaid through the date which is the
final day of the Interest Period in which such prepayment is made (including,
if an Event of Default has occurred and is then continuing, interest owed at
the Default Rate), and (2) all other sums then due and owing under the Loan
Documents; and (C) third, to reimburse the Administrative Agent for any fees
and expenses of the Administrative Agent incurred in connection therewith (it
being agreed that, upon satisfaction in full of the entitlements under clauses
(A), (B) and (C) of this sentence, the Borrower shall be entitled to receive
the balance of the Proceeds, if any and a release of the Lien of the applicable
Security Instrument and the other Loan Documents with respect to the Mortgaged
Property in accordance with and subject to the terms of this Agreement), or
(ii) make such Proceeds available to reimburse the Borrower for the cost of any
Restoration in the manner set forth below in Section 7.3(2)(D)
hereof.  Notwithstanding anything to the
contrary contained herein, in the event of a Material Casualty or a Material
Condemnation, where the Borrower cannot restore, repair, replace or rebuild the
Mortgaged Property to be of at least substantially equal value and of
substantially the same character as prior to the Material Casualty or Material
Condemnation or title defect because the Mortgaged Property is a legally
non-conforming use or as a result of any other Legal Requirement, the Borrower
hereby agrees that the Administrative Agent may apply the Proceeds payable in
connection therewith in accordance with clauses (A),(B) and (C).

 

(D)                               Manner of Restoration and
Reimbursement.
If the Borrower is entitled pursuant to Sections 7.3(2)(B) or 7.3(2)(C)
above to reimbursement out of Proceeds (and the conditions specified therein
shall have been satisfied), such Proceeds shall be disbursed on a monthly basis
upon the Administrative Agent being furnished with (i) such architect’s
certificates, waivers of lien, contractor’s sworn statements, title insurance
endorsements, bonds, plats of survey and such other evidences of cost, payment
and performance as the Administrative Agent may reasonably require and approve,
and(ii) all plans and specifications for such Restoration, such plans and
specifications to be approved by the Administrative Agent prior to commencement
of any work (such approval not to be unreasonably withheld or delayed). In
addition, no payment made prior to the Final Completion of the Restoration
(excluding punch-list items) shall exceed ninety percent (90%) of the aggregate
value of the work performed from time to time; funds other than Proceeds shall
be disbursed prior to disbursement of such Proceeds; and at all times, the
undisbursed balance of such Proceeds remaining in the hands of the
Administrative Agent, together with funds deposited for that purpose or
irrevocably committed to the satisfaction of the Administrative Agent by or on
behalf of the Borrower for that purpose, shall be at least sufficient in the
reasonable judgment of the Administrative Agent

 

45

 

to pay for the cost of completion of the Restoration, free and clear of
all Liens or claims for Lien. Prior to any disbursement, the Administrative
Agent shall have received evidence reasonably satisfactory to it of the
estimated cost of completion of the Restoration (such estimate to be made by
the Borrower’s architect or contractor and approved by the Administrative Agent
in its reasonable discretion), and the Borrower shall have deposited with the
Administrative Agent Eligible Collateral in an amount equal to the excess (if
any) of such estimated cost of completion over the net Proceeds.  Any surplus which may remain out of Proceeds
received pursuant to a Casualty shall be paid to the Borrower after payment of
such costs of Restoration. Any surplus which may remain out of Proceeds
received pursuant to a Condemnation shall be delivered to the Administrative
Agent for deposit into the Payments Account to be held and disbursed in
accordance with the terms of this Agreement.

 

(E)                                 Condemnation. 
Borrower shall promptly notify, or cause to be notified, Administrative
Agent of the actual or threatened commencement of any proceeding for the
Condemnation of any Mortgaged Properties of which Borrower or any Operating
Affiliate has knowledge and deliver or cause to be diligently delivered to
Administrative Agent copies of any and all papers served in connection with
such proceedings.  Administrative Agent
may participate in any such proceedings, and Borrower shall from time to time
deliver to Administrative Agent all instruments requested by it to permit such
participation.  Borrower shall, at its
expense, diligently prosecute or cause to be diligently prosecuted any such
proceedings, and shall consult with Administrative Agent, its attorneys, and
experts, and cooperate with them in the carrying on or defense of any such
proceedings.  Borrower may settle and
compromise the Proceeds of any Condemnation where the loss exceeds $5,000,000
only with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld or delayed). 
Notwithstanding any taking by any public or quasi-public authority
through Condemnation or otherwise (including but not limited to any transfer
made in lieu of or in anticipation of the exercise of such taking), the
Borrower shall continue to pay the Obligations at the time and in the manner
provided for herein and the other Loan Documents, and the Obligations shall not
be reduced unless and until any Proceeds shall have been actually received and
applied by Administrative Agent, after the deduction of expenses of collection,
to the reduction or discharge of the Obligations pursuant to the terms of Section 7.3(2)(B)
or 7.3(2)(C) above. 
Administrative Agent shall not be limited to the interest paid on such
Proceeds by the condemning authority but shall be entitled to receive out of
such Proceeds interest at the rate or rates provided herein applicable to the
Loan.  To the extent the Proceeds of any
Condemnation are to be applied by Administrative Agent pursuant to Section 7.3(2)(B)
or 7.3(2)(C) above, the Borrower shall cause such Proceeds to be paid
directly to the Administrative Agent to be held and applied pursuant to such
provisions.  If any Mortgaged Property or
any portion thereof is taken by a condemning authority, the Borrower shall or
shall cause the Operating Lessee thereof to promptly commence and diligently
prosecute the Restoration of such Mortgaged Property to the extent practicable
to be of at least equal value and of substantially the same character as prior
to such Condemnation.

 

7.4                                 Impositions,
Other Charges, Liens and Other Items.

 

(1)                                  Borrower to Pay Impositions and
Other Charges.  The
Borrower shall pay, or cause the applicable Mortgaged Property Owner or
Operating Lessee to pay, all Impositions now or hereafter levied or assessed or
imposed against the Mortgaged Property or any part

 

46

 

thereof prior to the imposition of any interest, charges or expenses
for the non-payment thereof and shall pay all Other Charges on or before the date
they are due. Subject to the Borrower’s right of contest set forth in Section 7.4(3),
the Administrative Agent, on behalf of the Borrower, may pay, but shall not be
obligated to pay, all Impositions and Other Charges which are attributable to
or affect the Mortgaged Property or the Borrower directly to the applicable
taxing authority with respect thereto, and the Borrower agrees to reimburse the
Administrative Agent for such payments promptly on demand. Nothing contained in
this Agreement or the Security Instruments shall be construed to require the
Borrower to pay any tax, assessment, levy or charge imposed on the
Administrative Agent in the nature of a franchise, capital levy, estate,
inheritance, succession, income or net revenue tax.

 

(2)                                  No Liens.  Subject to its right of contest set forth in Section 7.4(3),
the Borrower shall at all times keep, or cause to be kept, the Mortgaged
Property free from all Liens (other than Permitted Encumbrances) and shall pay
when due and payable (or bond over) all claims and demands of mechanics,
materialmen, laborers and others which, if unpaid, might result in or permit
the creation of a Lien on the Mortgaged Property or any portion thereof and
shall in any event cause the prompt, full and unconditional discharge of all
Liens imposed on or against the Mortgaged Property or any portion thereof
within forty-five (45) days after receiving written notice of the filing
(whether from the Administrative Agent, the lienor or any other Person)
thereof.  The Borrower shall do or cause
to be done, at the sole cost of the Borrower, everything reasonably necessary
to fully preserve the first priority of the Lien of the Security Instruments
against the Mortgaged Property, including the payment of all charges, filing,
registration and recording fees, excises and levies payable with respect to
such Lien, subject to the Permitted Encumbrances.  Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (but shall not
be obligated to) make such payment or discharge such Lien, and the Borrower
shall reimburse the Administrative Agent on demand for all such advances
pursuant to Section 7.1(23) (together with interest thereon at the
Default Rate).

 

(3)                                  Contest. Nothing
contained herein shall be deemed to require the Borrower to pay, or cause to be
paid, any Imposition or to satisfy any Lien, or to comply with any Requirement
of Law or Insurance Requirement, so long as the Borrower is in good faith, and
by proper legal proceedings, where appropriate, diligently contesting the
validity, amount or application thereof, provided that in each case, at the
time of the commencement of any such action or proceeding, and during the
pendency of such action or proceeding (i) no Event of Default shall exist and be
continuing hereunder, (ii) the Borrower shall keep the Administrative Agent
informed of the status of such contest at reasonable intervals, (iii) if the
Borrower is not providing security as provided in clause (vi) below, adequate
reserves with respect thereto are maintained on the Borrower’s books in
accordance with GAAP, (iv) either such contest operates to suspend collection
or enforcement as the case may be, of the contested Imposition, Lien or Legal
Requirement and such contest is maintained and prosecuted continuously and with
diligence or the Imposition or Lien is bonded, (v) in the case of any Insurance
Requirement, the failure of the Borrower to comply therewith shall not impair
the validity of any insurance required to be maintained by the Borrower under Section 7.3(1)
or the right to full payment of any claims thereunder, and (vi) in the case of
Impositions and Liens which are not bonded in excess of $1,000,000 individually, or in the aggregate, during such contest,
the Borrower, shall deposit with or deliver to the Administrative Agent either
cash and Cash Equivalents or a Letter or Letters of Credit in an amount equal
to 125% of (A) the amount of the Borrower’s obligations

 

47

 

being contested plus (B) any additional interest, charge, or penalty
arising from such contest. Notwithstanding the foregoing, the creation of any
such reserves or the furnishing of any bond or other security, the Borrower
promptly shall comply with any contested Requirement of Law or Insurance
Requirement or shall pay any contested Imposition or Lien, and compliance
therewith or payment thereof shall not be deferred, if, at any time the
Mortgaged Property or any portion thereof shall be, in the Administrative Agent’s
reasonable judgment, in imminent danger of being forfeited or lost or the
Administrative Agent is likely to be subject to civil or criminal damages as a
result thereof. If such action or proceeding is terminated or discontinued
adversely to the Borrower, the Borrower shall deliver to the Administrative
Agent reasonable evidence of the Borrower’s compliance with such contested
Imposition, Lien, Requirements of Law or Insurance Requirements, as the case
may be.

 

7.5                                 Transfers,
Indebtedness and Subordinate Liens

 

(1)                                  Restrictions on Transfers and
Indebtedness.

 

(A)                              Unless such action is permitted by Section 3.6
or the subsequent provisions of this Section 7.5, no Transaction
Party shall, without the Administrative Agent’s prior written consent in its
sole and absolute discretion, (A) Transfer, or permit or suffer any Person to
Transfer, at any tier, legal, Beneficial or direct or indirect equitable
interests in all or any part of the Mortgaged Property, or in any other
Transaction Party or Pledged Subsidiary, or (B) mortgage, hypothecate, pledge
or otherwise encumber or grant a security interest in, at any tier, any part of
the legal, Beneficial or direct or indirect equitable interests in all or any
part of the Mortgaged Property, or in any other Transaction Party or Pledged
Subsidiary.

 

(B)                                None of CNL REIT, the Borrower, any
Mortgaged Property Owner nor their respective Subsidiary Entities shall incur,
create or assume any Indebtedness or incur any liabilities without the consent
of the Required Lenders; provided, however, such Persons may, without the
consent of the Administrative Agent, incur, create or assume Permitted Debt.

 

(2)                                  Sale of Personal Property.  The Borrower or Mortgaged Property Owners may
Transfer or dispose of Personal Property (other than Capital Stock of any CNL
Entity) which is being replaced or which is no longer necessary in connection
with the operation of the Mortgaged Property free from the Lien of the
applicable Security Instrument provided that such Transfer or disposal will not
have a Portfolio Material Adverse Effect, will not materially impair the
utility of the subject Mortgaged Property, and will not result in a reduction
or abatement of, or right of offset against, the Rents payable under any Lease,
in either case as a result thereof, and provided further that any new Personal
Property acquired by the Borrower, Mortgaged Property Owners or Operating
Affiliates (and not so disposed of) shall be subject to the Lien of the
applicable Security Instrument. The Administrative Agent shall, from time to
time, upon receipt of an Officer’s Certificate requesting the same and
confirming satisfaction of the conditions set forth above, execute a written
instrument in form reasonably satisfactory to the Administrative Agent to
confirm that such Personal Property which is to be, or has been, sold or
disposed of is free from the Lien of the applicable Security Instrument.

 

48

 

(3)                                  Immaterial Transfers and Easements,
etc.  The Borrower and Operating Lessees may, without
the consent of the Administrative Agent, (i) make immaterial Transfers
(including, but not limited to, lot line adjustments) of portions of the
Mortgaged Property to Governmental Authorities for dedication or public use
(subject to the provisions of Section 7.3(2)) or, portions of the
Mortgaged Property to third parties for the purpose of erecting and operating
additional structures whose use is integrated with the use of the Mortgaged
Property or resolving encroachment issues, and (ii) grant easements,
restrictions, covenants, reservations and rights of way in the ordinary course
of business for resolving encroachment issues for access, water and sewer
lines, telephone and telegraph lines, electric lines or other utilities or for
other similar purposes, provided that no such Transfer, conveyance or
encumbrance set forth in the foregoing clauses (i) and (ii) shall materially
impair the utility and operation of the subject Mortgaged Property or have a
Portfolio Material Adverse Effect. In connection with any Transfer permitted
pursuant to this Section 7.5(3), the Administrative Agent shall
execute and deliver any instrument reasonably necessary or appropriate, in the
case of the Transfers referred to in clause (i) above, to release the portion
of the Mortgaged Property affected by such Condemnation or such Transfer from
the Lien of the applicable Security Instrument or, in the case of clause (ii)
above, to subordinate the Lien of such Security Instrument to such easements,
restrictions, covenants, reservations and rights of way or other similar grants
upon receipt by the Administrative Agent of:

 

(A)                              thirty (30) days prior written
notice thereof;

 

(B)                                a copy of the instrument or
instruments of Transfer;

 

(C)                                an Officer’s Certificate stating (x)
with respect to any Transfer, the consideration, if any, being paid for the
Transfer and (y) that such Transfer does not materially impair the utility and
operation of the subject Mortgaged Property, materially reduce the value of the
Mortgaged Property or have a Portfolio Material Adverse Effect; and

 

(D)                               reimbursement of all of the
Administrative Agent’s reasonable costs and expenses incurred in connection
with such Transfer.

 

(4)                                  Leases.

 

(A)                              New Leases and Lease Modifications. 
Except as otherwise provided in this Section 7.5(4), none of
the Borrower nor the Mortgage Property Owners shall (i) enter into any
Lease on terms other than “market” rental rates (in Borrower’s good faith
judgment), (ii) enter into any new Material Lease following the Closing
Date (a “New Lease”)
(iii) consent to the assignment of any Material Lease (unless required to
do so by the terms of such Lease) that releases the original Tenant from its
obligations under the Lease, or (iv) Modify (other than a renewal pursuant
to the existing renewal provisions of) any Material Lease (including, without
limitation, accept a surrender of any portion of the Mortgaged Property subject
to a Material Lease (unless otherwise permitted or required by law), allow a
reduction in the term of any Material Lease or a reduction in the Rent payable
under any Material Lease, change any renewal provisions of any Material Lease,
materially increase the obligations of the landlord or materially decrease the
obligations of any Tenant) or terminate any Material Lease (any such action
referred to in clauses (iii) and (iv) being referred to herein as a “Lease

 

49

 

Modification”) without the prior written consent
of the Administrative Agent which consent shall not be unreasonably withheld or
delayed. Any New Lease or Lease Modification that requires the Administrative
Agent’s consent shall be delivered to the Administrative Agent for approval not
less than ten (10) Business Days prior to the effective date of such New Lease
or Lease Modification.

 

(B)                                Leasing
Conditions. Subject to terms of this Section 7.5(4), provided
no Event of Default shall have occurred and be continuing, the Borrower and the
Mortgage Property Owners, as applicable, may enter into a New Lease or Lease
Modification, without the Administrative Agent’s prior written consent, that
satisfies each of the following conditions (as evidenced by an Officer’s
Certificate delivered to the Administrative Agent prior to the Borrower’s or
the Mortgage Property Owner’s entry into such New Lease or Lease Modification):

 

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

 

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

 

(iii)                               the New Lease or Lease
Modification provides for “market” rental rates and other terms and does not
contain any terms which would adversely affect the Administrative Agent’s
rights under the Loan Documents or that would have a Portfolio Material Adverse
Effect;

 

(iv)                              the New Lease or Lease
Modification, as applicable, provides that the premises demised thereby cannot
be used for any of the following uses; any pornographic or obscene purposes,
any commercial sex establishment, any pornographic, obscene, nude or semi- nude
performances, modeling, materials, activities or sexual conduct or any other
use that has or could reasonably be expected to have a Portfolio Material
Adverse Effect;

 

(v)                                 the Tenant under such
New Lease or Lease Modification, as applicable, is not an Affiliate of the
Borrower, unless such New Lease or Lease satisfies the requirements of Section 7.2(21);

 

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

 

(vii)                           the New Lease or Lease
Modification, as applicable satisfies the requirements of Section 7.5(4)(G)
and Section 7.5(4)(H).

 

50

 

(C)                                Delivery of New Lease or Lease
Modification.
Upon the execution of any New Lease or Lease Modification, as applicable, the
Borrower shall deliver to the Administrative Agent an executed copy of the
Lease.

 

(D)                               Lease Amendments. Each of the Borrower and Mortgage
Property Owners agrees that it shall not have the right or power, as against
the Administrative Agent without its consent, to cancel, abridge, Modify any
Lease unless such Modification complies with this Section 7.5(4).

 

(E)                                 No Default Under Leases. The Borrower and Mortgage Property
Owners shall (i) promptly perform and observe all of the material terms,
covenants and conditions required to be performed and observed by such Persons
under the Leases, if the failure to perform or observe the same would have a
Portfolio Material Adverse Effect; (ii) exercise, within ten (10) Business Days
after a written request by the Administrative Agent, any right to request from
the Tenant under any Lease a certificate with respect to the status thereof and
(iii) not collect any of the Rents, more than one (1) month in advance (except
that the Borrower and Mortgage Property Owners may collect such security
deposits and last month’s Rents as are permitted by Requirements of Law and are
commercially reasonable in the prevailing market and collect other charges in
accordance with the terms of each Lease).

 

(F)                                 Subordination. All Lease Modifications and New
Leases entered into by any Borrower or Mortgage Property Owner after the date
hereof shall be subject and subordinate to this Agreement and the applicable
Security Instrument (through a subordination provision contained in such Lease
or otherwise) and shall provide that the Person holding any rights thereunder
shall attorn to the Administrative Agent or any other Person succeeding to the
interests of the Administrative Agent upon the exercise of its remedies
hereunder or any transfer in lieu thereof on the terms set forth in this Section 7.5(4).

 

(G)                                Attornment. Each Lease Modification and New
Lease entered into from and after the date hereof shall provide that in the
event of the enforcement by the Administrative Agent of any remedy under this
Agreement or the applicable Security Instrument, the Tenant under such Lease
shall, at the option of the Administrative Agent or of any other Person
succeeding to the interest of the Administrative Agent as a result of such
enforcement, attorn to the Administrative Agent or to such Person and shall
recognize the Administrative Agent or such successor in the interest as lessor
under such Lease without change in the provisions thereof; provided, however,
the Administrative Agent or such successor in interest shall not be liable for
or bound by (i) any payment of an installment of rent or additional rent made
more than thirty (30) days before the due date of such installment, (ii) any
act or omission of or default by the Borrower or Mortgage Property Owner under
any such Lease (but the Administrative Agent, or such successor, shall be
subject to the continuing obligations of the landlord to the extent arising
from and after such succession to the extent of the Administrative Agent’s, or
such successor’s, interest in the Mortgaged Property), (iii) any credits,
claims, setoffs or defenses which any Tenant may have against the Borrower or
Mortgage Property Owner, (iv) any obligation on the Borrower’s or Mortgage
Property Owner’s part, pursuant to such Lease, to perform any tenant
improvement work or (v) any obligation on the Borrower’s or Mortgage Property
Owner’s part, pursuant to such Lease, to pay any sum of money to any Tenant.
Each such New Lease shall also provide that, upon the reasonable request by the
Administrative Agent

 

51

 

or
such successor in interest, the Tenant shall execute and deliver an instrument
or instruments confirming such attornment.

 

(H)                               Non-Disturbance Agreements. The Administrative Agent shall
enter into, and, if required by applicable law to provide constructive notice
or requested by a Tenant, record in the county where the subject Mortgaged
Property is located, a subordination, attornment and non-disturbance agreement,
substantially in form and substance substantially similar to the form attached hereto
as Exhibit G (a “Non-Disturbance Agreement”), with any Tenant (other than an
Affiliate of the Borrower) entering into a New Lease permitted hereunder or
otherwise consented to by the Administrative Agent within ten (10) Business
Days after written request therefor by the Borrower, provided that, such
request is accompanied by an Officer’s Certificate stating that such Lease
complies in all material respects with this Section 7.5(4). All
reasonable third party costs and expenses incurred by the Administrative Agent
in connection with the negotiation, preparation, execution and delivery of any
Non-Disturbance Agreement, including, without limitation, reasonable attorneys’
fees and disbursements, shall be paid by the Borrower (in advance, if requested
by the Administrative Agent).  The
subordination of any Operating Lease with an Operating Non-Affiliate may be
subject to this undertaking on behalf of the Lenders.

 

7.6                                 Interest Rate Cap Agreements.

 

(1)                                  Interest Rate Cap Agreements.  The Borrower shall maintain the Initial Rate
Cap Agreement in effect, without reduction to reflect prepayments of principal
amounts of the Loan, through and including the Initial Maturity Date.  Prior to any extension of the Initial Maturity
Date pursuant to Section 1.4, the Borrower shall enter into the
Extension Rate Cap Agreement, and shall maintain the Extension Rate Cap
Agreement in effect, without reduction to reflect prepayments of principal
amounts of the Loan, through and including the Extended Maturity Date. At all times,
the Borrower shall enter into and maintain such additional Interest Rate
Agreements as shall be necessary to ensure that not less than 65% of all
interest-bearing Indebtedness of Borrower and its Subsidiaries accrues interest
at a fixed or hedged rate.

 

(2)                                  Pledge and Collateral Assignment.  Borrower shall enter into an Assignment of
Interest Rate Cap Collateral with respect to each Interest Rate Cap Agreement
and hereby pledges, assigns, transfers, delivers and grants a continuing first
priority lien to the Administrative Agent, as security for payment of all sums
due in respect of the Loan and the performance of all other terms, conditions
and covenants of this Agreement and any other Loan Document on the Borrower’s
part to be paid and performed, in, to and under all of such Borrower’s right,
title and interest whether now owned or hereafter acquired and whether now
existing or hereafter arising (collectively, the “Rate Cap Collateral”): (i) in the Interest Rate Cap
Agreements; (ii) to receive any and all payments under any Interest Rate Cap
Agreement, whether as contractual obligations, damages or otherwise; and (iii)
to all claims, rights, powers, privileges, authority, options, security
interests, liens and remedies, if any, under or arising out of any Interest
Rate Cap Agreement, in each case including all accessions and additions to,
substitutions for and replacements, products and proceeds of any of the
foregoing.  The Borrower shall notify the
counterparty under each Interest Rate Cap

 

52

 

Agreement of
such assignment. The Borrower shall not, without obtaining the prior written
consent of the Administrative Agent, further pledge, transfer, deliver, assign
or grant any security interest in any Interest Rate Cap Agreement or permit any
Lien or encumbrance to attach thereto, or any levy to be made thereon, or any
UCC-1 Financing Statements or any other notice or instrument as may be required
under the UCC, as appropriate, except those naming the Administrative Agent as
the secured party, to be filed with respect thereto.

 

(3)                                  Covenants.

 

(A)                              The Borrower shall comply with all
of its obligations under the terms and provisions of the Interest Rate Cap
Agreements. All amounts paid by the counterparty under any Interest Rate Cap
Agreement to the Borrower or the Administrative Agent shall be deposited
immediately into the Payments Account pursuant to Section 8.1. The
Borrower shall take all actions reasonably requested by the Administrative
Agent to enforce the Borrower’s rights under each Interest Rate Cap Agreement
in the event of a default by the counterparty thereunder and shall not waive or
otherwise Modify any of its rights thereunder.

 

(B)                                The Borrower shall defend the
Administrative Agent’s right, title and interest in and to the Rate Cap
Collateral pledged by the Borrower pursuant hereto or in which it has granted a
security interest pursuant hereto against the claims and demands of all other
Persons.

 

(C)                                In the event of (x) any downgrade,
withdrawal or qualification (each, a “Downgrade”) of the rating of any counterparty to an Interest Rate Cap
Agreement such that, thereafter, such counterparty shall cease to be an
Acceptable Counterparty or (y) any counterparty shall fail to comply with the
requirements contained in the applicable Interest Rate Cap Agreement which are
described in  Schedule 7.6(3),  upon such occurrence, the Borrower shall
replace the relevant Interest Rate Cap Agreement with a replacement Interest
Rate Agreement satisfying all the requirements of the replaced Interest Rate
Cap Agreement hereunder and otherwise acceptable to the Administrative Agent.

 

(D)                               Except as permitted by Section 7.6(2),
the Borrower shall not (i) without the prior written consent of the
Administrative Agent, Modify the terms of any Interest Rate Cap Agreement, (ii)
without the prior written consent of the Administrative Agent, cause the
termination of any Interest Rate Cap Agreement prior to its stated maturity
date, (iii) without the prior written consent of the Administrative Agent,
except as aforesaid, waive or release any obligation of any counterparty (or
any successor or substitute party to any Interest Rate Cap Agreement) under any
Interest Rate Cap Agreement, (iv) without the prior written consent of the
Administrative Agent, consent or agree to any act or omission to act on the
part of any counterparty (or any successor or substitute party to any Interest
Rate Cap Agreement) which, without such consent or agreement, would constitute
a default under such Interest Rate Cap Agreement, (v) fail to exercise promptly
and diligently each and every material right which it may have under each
Interest Rate Cap Agreement, (vi) take or intentionally omit to take any action
or intentionally suffer or permit any action to be omitted or taken, the taking
or omission of which would result in any right of offset against sums payable
under any Interest Rate Cap Agreement or any defense by any counterparty (or
any successor or substitute party to the Interest Rate Cap Agreement) to
payment or (vii) fail to give prompt notice to the Administrative Agent of any
notice of default given by or to the Borrower under or with respect to any
Interest Rate Cap Agreement, together with a complete copy of such notice.

 

53

 

(4)                                  Representations and Warranties.  The Borrower hereby covenants with, and
represents and warrants to, the Administrative Agent as follows:

 

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

 

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

 

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

 

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

 

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

 

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

 

(6)                                  Remedies.  Subject to the provisions of the Interest
Rate Cap Agreements, if an Event of Default shall occur and then be continuing:

 

(A)                              the
Administrative Agent, without obligation to resort to any other security, right
or remedy granted under any other agreement or instrument, shall have the right
to, in addition to all rights, powers and remedies of a secured party pursuant
to the UCC, at any time and from time to time, sell, resell, assign and
deliver, in its sole discretion, any or all of the

 

54

 

Rate
Cap Collateral (in one or more parcels and at the same or different times) and
all right, title and interest, claim and demand therein and right of redemption
thereof, at public or private sale, for cash, upon credit or for future
delivery, and in connection therewith the Administrative Agent may grant
options and may impose reasonable conditions such as requiring any purchaser to
represent that any “securities” constituting any part of the Rate Cap
Collateral are being purchased for investment only, the Borrower hereby waiving
and releasing any and all equity or right of redemption to the fullest extent
permitted by the UCC or applicable law. If all or any of the Rate Cap Collateral
is sold by the Administrative Agent upon credit or for future delivery, the
Administrative Agent shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such failure, the
Administrative Agent may resell such Rate Cap Collateral. It is expressly
agreed that the Administrative Agent may exercise its rights with respect to
less than all of the Rate Cap Collateral, leaving unexercised its rights with
respect to the remainder of the Rate Cap Collateral, provided, however, that
such partial exercise shall in no way restrict or jeopardize the Administrative
Agent’s right to exercise its rights with respect to all or any other portion
of the Rate Cap Collateral at a later time or times.

 

(B)                                The Administrative Agent may
exercise, either by itself or by its nominee or designee, in the name of the
Borrower, all of the Administrative Agent’s rights, powers and remedies in
respect of the Rate Cap Collateral, hereunder and under law.

 

(C)                                The Borrower hereby irrevocably, in
the name of the Borrower or otherwise, authorizes and empowers the
Administrative Agent and assigns and transfers unto the Administrative Agent,
and constitutes and appoints the Administrative Agent its true and lawful
attorney-in-fact, and as its agent, irrevocably, with full power of
substitution for the Borrower and in the name of the Borrower, upon the
occurrence and during the continuance of an Event of Default, (i) to exercise
and enforce every right, power, remedy, authority, option and privilege of the
Borrower under the Interest Rate Cap Agreements, including any power to
subordinate or modify the Interest Rate Cap Agreements (but not, unless an
Event of Default exists and is continuing, the right to terminate or cancel any
Interest Rate Cap Agreement), or to give any notices, or to take any action
resulting in such subordination, termination, cancellation or modification and
(ii) in order to more fully vest in the Administrative Agent the rights and
remedies provided for herein, to exercise all of the rights, remedies and
powers granted to the Administrative Agent in this Agreement, and the Borrower
further authorizes and empowers the Administrative Agent, as the Borrower’s
attorney-in-fact, and as its agent, irrevocably, with full power of substitution
for the Borrower and in the name of the Borrower, upon the occurrence and
during the continuance of an Event of Default, to give any authorization, to
furnish any information, to make any demands, to execute any instruments and to
take any and all other action on behalf of and in the name of the Borrower
which in the opinion of the Administrative Agent may be necessary or
appropriate to be given, furnished, made, exercised or taken under any Interest
Rate Cap Agreement, in order to comply therewith, to perform the conditions
thereof or to prevent or remedy any default by the Borrower thereunder or to
enforce any of the rights of the Borrower thereunder. These powers-of-attorney
are irrevocable and coupled with an interest, and any similar or dissimilar
powers heretofore given by the Borrower in respect of the Rate Cap Collateral
to any other Person are hereby revoked.

 

(D)                               Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may, without
notice to, or assent by, the Borrower or any 

 

55

 

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

 

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

 

(F)                                 the Administrative Agent may
exercise all of the rights and remedies of a secured party under the UCC.

 

(G)                                Without limiting any other provision
of this Agreement or any of the Borrower’s rights hereunder, and without
waiving or releasing the Borrower from any obligation or default hereunder, the
Administrative Agent shall have the right, but not the obligation, to perform
any act or take any appropriate action, as it, in its reasonable judgment, may
deem necessary to protect the security of this Agreement, to cure such Event of
Default or to cause any term, covenant, condition or obligation required under
this Agreement or any Interest Rate Cap Agreement to be performed or observed
by the Borrower to be promptly performed or observed on behalf of the Borrower.
All amounts advanced by, or on behalf of, the Administrative Agent in
exercising its rights under this Section 7.6(6)(G) (including, but
not limited to, reasonable legal expenses and disbursements incurred in connection
therewith), together with interest thereon at the Default Rate from the date of
each such advance, shall be payable by the Borrower to the Administrative Agent
upon demand and shall be secured by this Agreement.

 

(7)                                  Sales of Rate Cap Collateral.  Upon and during the continuance of an Event
of Default, no demand, advertisement or notice, all of which are, to the
fullest extent permitted by law, hereby expressly waived by the Borrower, shall
be required in connection with

 

56

 

any sale or
other disposition of all or any part of the Rate Cap Collateral, except that
the Administrative Agent shall give the Borrower at least thirty (30) Business
Days’ prior written notice of the time and place of any public sale or of the
time when and the place where any private sale or other disposition is to be
made, which notice the Borrower hereby agree is reasonable, all other demands,
advertisements and notices being hereby waived. To the extent permitted by law,
the Administrative Agent shall not be obligated to make any sale of the Rate
Cap Collateral if it shall determine not to do so, regardless of the fact that
notice of sale may have been given, and the Administrative Agent may without
notice or publication adjourn any public or private sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. Upon each private sale of the Rate Cap Collateral of a type
customarily sold in a recognized market and upon each public sale, unless
prohibited by any applicable statute which cannot be waived, the Administrative
Agent (or its nominee or designee) may purchase any or all of the Rate Cap
Collateral being sold, free and discharged from any trusts, claims, equity or
right of redemption of the Borrower, all of which are hereby waived and
released to the extent permitted by law, and may make payment therefor by
credit against any of the Obligations in lieu of cash or any other obligations.
In the case of all sales of the Rate Cap Collateral, public or private, the
Borrower shall pay all reasonable costs and expenses of every kind for sale or
delivery, including brokers’ and attorneys’ fees and disbursements and any tax
imposed thereon. However, the proceeds of sale of Rate Cap Collateral shall be
available to cover such costs and expenses, and, after deducting such costs and
expenses from the proceeds of sale, the Administrative Agent shall apply any
residue to the payment of the Obligations in the order of priority as set forth
in this Agreement.

 

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

 

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

 

7.7                                 Maintenance of the Property.

 

(1)                                  Maintenance of Mortgaged Property.  The Borrower and Mortgaged Property Owners
shall keep and maintain, or cause to be kept and maintained, the Mortgaged
Property and every part thereof in good condition and repair, subject to
ordinary wear and tear, and, subject to Excusable Delays and the provisions of
this Agreement with respect to damage or destruction caused by a Casualty or
Condemnation, shall not permit or commit any waste, impairment, or
deterioration of any portion of the Mortgaged Property in any material respect.
The Borrower and Mortgage Property Owners further covenant to do all other acts
which from

 

57

 

the character
or use of the Mortgaged Property may be reasonably necessary to protect the
security hereof, the specific enumerations herein not excluding the general.
The Borrower shall not demolish any Improvement on the Mortgaged Property
except as the same may be necessary in connection with an Alteration or a
restoration in connection with a Condemnation or Casualty, or as otherwise
permitted herein, in each case in accordance with the terms and conditions
hereof.

 

(2)                                  Alterations and Expansions.  Without the consent of the Administrative
Agent, neither the Borrower nor any Mortgaged Property Owner shall perform or
undertake or consent to the performance or undertaking of (i) any Alteration or
Expansion which, either during the Alteration or Expansion or upon completion,
could reasonably be expected to have a Portfolio Material Adverse Effect or
adversely affect the annual Mortgaged Property Net Operating Income, or (ii)
any Material Alteration or Material Expansion.

 

7.8                                 Books
and Records, Financial Statements, Reports and Other Information.  

 

(1)                                  Books and Records.  The Borrower shall keep and maintain on a
fiscal year basis proper books and records in which accurate and complete
entries shall be made of all dealings or transactions of or in relation to the
Loan, the Mortgaged Property and the business and affairs of the Borrower
relating to the Mortgaged Property which shall reflect all items of income and
expense in connection with the operation on an individual basis of the
Mortgaged Property and in connection with any services, equipment or
furnishings provided in connection with the operation of the Mortgaged
Property, in accordance with GAAP. The Administrative Agent and its authorized
representatives shall have the right at reasonable times and upon reasonable
notice to examine the books and records of the Borrower relating to the
operation of the Mortgaged Property and to make such copies or extracts thereof
as the Administrative Agent may reasonably require.

 

(2)                                  Financial Statements.

 

(A)                              Quarterly/Monthly Reports. 
The Borrower shall furnish to the Administrative Agent, (i) during a Low
DSCR Period, within thirty (30) days after the end of each calendar month, or
(ii) otherwise, within forty-five (45) days after the end of each Fiscal
Quarter, unaudited operating statements, STAR Reports, occupancy and ADR
reports for the Mortgaged Property, in each case accompanied by an Officer’s
Certificate certifying (i) with respect to the operating statements, that to
the Best of the Borrower’s Knowledge and the best of such officer’s knowledge
such statements are true, correct, accurate and complete and fairly present the
results of the operations of the Borrower and the Mortgaged Property, and
(ii) with respect to the occupancy and ADR reports, that such items are to
the Best of the Borrower’s Knowledge and the best of such officer’s knowledge
true, correct and accurate and fairly present the results of the operations of
the Borrower and the Mortgaged Property. The Borrower will also provide the
Administrative Agent copies of all flash reports as to monthly revenues upon
request;

 

(B)                                Quarterly Reports. 
Commencing with the Fiscal Quarter ended September 30, 2004, the
Borrower will furnish, or cause to be furnished, to the Administrative Agent on
or before the forty-fifth (45th) day after the end of each Fiscal Quarter, the
following items, accompanied by an Officer’s Certificate, certifying that to
the Best of the Borrower’s

 

58

 

Knowledge
and the best of such officer’s knowledge such items are true, correct, accurate
and complete and fairly present the financial condition and results of the
operations of the relevant Person and the Mortgaged Property in a manner
consistent with GAAP (subject to normal year end adjustments) to the extent
applicable:

 

(a) quarterly and year to date financial statements prepared for such
fiscal quarter with respect to the Borrower and CNL REIT and its Subsidiaries
on a consolidated basis, including a balance sheet and a statement of
operations for such quarter;

 

(b) during a Low DSCR Period, a comparison of the budgeted income and
expenses and the actual income and expenses for such quarter for the Mortgaged
Property, together with a detailed explanation of any variances of ten percent
(10%) or more between budgeted and actual amounts in the aggregate and on a
line-item basis for such period and year to date; provided, however, that the
Borrower shall not be obligated to provide such detailed explanation for line
items the actual amounts for such quarter of which are less than $100,000;

 

(c) concurrently with the provision of such reports, the Borrower shall
also furnish a report of Mortgaged Property Operating Income and Mortgaged
Property Operating Expenses (as well as a calculation of Mortgaged Property Net
Operating Income based thereon) with respect to the Borrower and the Mortgaged
Property for the most recently completed quarter;

 

(d) a STAR Report for the most recently completed quarter; and

 

(e) calculations of each of the financial ratios set forth in Section 7.2(22)
as of the end of such Fiscal Quarter.

 

(C)                                Annual Reports. The Borrower shall furnish to the
Administrative Agent within one hundred and twenty (120) days following the end
of each Fiscal Year a complete copy of the annual financial statements of the
Borrower and of CNL REIT and its Subsidiaries on a consolidated basis, audited
by a “Big Four” accounting firm or another independent certified public
accounting firm acceptable to the Administrative Agent in accordance with GAAP
for such Fiscal Year and containing a balance sheet, a statement of operations
and a statement of cash flows.  The
annual financial statements of the Borrower and of CNL REIT and its
Subsidiaries on a consolidated basis shall be accompanied by an Officer’s
Certificate certifying that each such annual financial statement presents
fairly, in all material respects, the financial condition and results of operation
of the relevant Persons and has been prepared in accordance with GAAP.  Together with such annual financial
statements, the Borrower shall furnish to the Administrative Agent (A) an
Officer’s Certificate certifying as of the date thereof whether, to the
Borrower’s knowledge, there exists a Default or Event of Default, and if such
Default or Event of Default exists, the nature thereof, the period of time it
has existed and the action then being taken to remedy the same; and (B) an
annual report, for the most recently completed fiscal year, containing:

 

(a) Capital Expenditures (including for this purpose any and all
additions to, and replacements of, FF&E,) made in respect of the Mortgaged
Property, including separate line items with respect to any project costing in
excess of $500,000 for any Mortgaged Property;

 

(b) occupancy levels for the Mortgaged Property for such period; and

 

59

 

(c) average daily room rates at the Mortgaged Property for such period.

 

(D)                               Management Agreement. 
The Borrower shall deliver to the Administrative Agent, within ten (10)
Business Days of the receipt thereof by the Borrower, a copy of all material or
required reports prepared by any Manager pursuant to any Management Agreement,
including, without limitation, the Budget proposed by Manager and any
inspection reports.

 

(E)                                 Budget.

 

Not later than February 15 of each Fiscal Year hereafter, the
Borrower shall prepare or cause to be prepared and deliver to the
Administrative Agent, a proposed aggregate Budget in respect of the Mortgaged
Properties for such Fiscal Year (including a breakdown of proposed individual
Budgets for each Mortgaged Property and a breakdown by fiscal quarter),
showing, inter alia, proposed
Capital Expenditures for each Mortgaged Property.  If the Borrower subsequently proposes to
materially amend any such Budget, the Borrower shall promptly deliver the
proposed amended Budget to the Administrative Agent.

 

(F)                                 Other Information. 
The Borrower shall, promptly after written request by the Administrative
Agent furnish or cause to be furnished to the Administrative Agent, in such
manner and in such detail as may be reasonably requested by the Administrative
Agent, such reasonable additional information as may be reasonably requested
with respect to the Mortgaged Property. The information required to be
furnished by the Borrower to the Administrative Agent under this Section 7.8(2)
shall be provided in both hard copy format and electronic format; provided that the Borrower shall only be
required to provide the information required under this Section 7.8(2)(F)
in electronic format if such information is so available in the ordinary course
of the operations of the Borrower and the applicable Manager and without significant
expense.  All information to be provided
by the Transaction Parties hereunder which is customarily contained in regular
SEC Filings will be deemed delivered, absent a specific request by
Administrative Agent, upon notice to the Administrative Agent that the relevant
SEC Filing has occurred.

 

7.9                                 Environmental Matters.

 

(1)                                  Except as set forth in the
environmental reports and studies delivered to the Administrative Agent prior
to the date hereof, (i) during the period of ownership of any Mortgaged Property
by any CNL Entity, such Mortgaged Property (or any portion thereof) has not
been used for the purpose of, or in any way involving, the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
dumping or disposal of any Hazardous Materials on, under, in or about the
Mortgaged Property, or transporting any Hazardous Materials to, from or across
the Mortgaged Property, except in all cases in material compliance with
Hazardous Materials Laws and only in the course of legitimate business
operations at the Mortgaged Property, and to the Best of Borrower’s Knowledge,
(a) no such use occurred at any time prior to the period of ownership of such
Mortgaged Property by any CNL Entity, and (b) no such use has occurred on any
property adjacent to such Mortgaged Property at any time prior to the date
hereof; (ii) to the Best of the Borrower’s Knowledge, no Hazardous Materials
are presently constructed, deposited, stored, or otherwise located on, under,
in or about the

 

60

 

Mortgaged
Property except in material compliance with Hazardous Materials Laws; (iv) to
the Best of the Borrower’s Knowledge, no Hazardous Materials have migrated from
the Mortgaged Property upon or beneath other properties which would reasonably
be expected to result in material liability for any Borrower or Mortgaged
Property Owner; and (v) to the Best of the Borrower’s Knowledge, no Hazardous
Materials have migrated or threaten to migrate from other properties upon, about
or beneath the Mortgaged Property which would reasonably be expected to result
in material liability for any Borrower or Mortgaged Property Owner.

 

(2)                                  Compliance with Environmental Laws.  Subject to the Borrower’s right to contest
under Section 7.4(3), the Borrower covenants and agrees with the
Administrative Agent that it shall and shall cause each Mortgaged Property
Owner to, comply with all Hazardous Materials Laws. If at any time during the
continuance of the Lien of the applicable Security Instrument, a Governmental
Authority having jurisdiction over the Mortgaged Property requires remedial
action to correct the presence of Hazardous Materials in, around, or under the
Mortgaged Property (an “Environmental Event”), the Borrower shall deliver prompt notice of the occurrence of
such Environmental Event to the Administrative Agent. Within thirty (30) days
after any Borrower has knowledge of the occurrence of an Environmental Event,
the Borrower shall deliver to the Administrative Agent an Officer’s Certificate
(an “Environmental Certificate”)
explaining the Environmental Event in reasonable detail and setting forth the
proposed remedial action, if any. The Borrower shall promptly provide the
Administrative Agent with copies of all notices which allege or identify any
actual or potential violation or noncompliance received by or prepared by or
for the Borrower in connection with any Hazardous Materials Law. For purposes
of this paragraph, the term “notice” shall mean any summons, citation,
directive, order, claim, pleading, letter, application, filing, report,
findings, declarations or other materials pertinent to compliance of the
Mortgaged Property and the Borrower or any Mortgaged Property Owner with such
Hazardous Materials Laws.  

 

(3)                                  Environmental Reports.  Upon the occurrence and during the
continuance of an Environmental Event with respect to the Mortgaged Property,
the Administrative Agent shall have the right to have its consultants perform a
comprehensive environmental audit of the Mortgaged Property. Such audit shall
be conducted by an environmental consultant chosen by the Administrative Agent
and may include a visual survey, a record review, an area reconnaissance
assessing the presence of hazardous or toxic waste or substances, PCBs or
storage tanks at the Mortgaged Property, an asbestos survey of the Mortgaged
Property, which may include random sampling of the Improvements and air quality
testing, and such further site assessments as the Administrative Agent may
reasonably require due to the results obtained from the foregoing. The Borrower
and Mortgaged Property Owners grant the Administrative Agent, its agents,
consultants and contractors the right to enter the Mortgaged Property as
reasonable or appropriate for the circumstances for the purposes of performing
such studies and the reasonable cost of such studies shall be due and payable
by the Borrower to the Administrative Agent upon demand and shall be secured by
the Lien of the Security Instruments.  The
Administrative Agent shall not unreasonably interfere with, and the
Administrative Agent shall direct the environmental consultant to use its
commercially reasonable efforts not to hinder, the Borrower’s or any Tenant’s,
other occupant’s or Manager’s operations upon the Mortgaged Property when
conducting such audit, sampling or inspections. By undertaking any of the
measures identified in and pursuant to this Section 7.9(3), the
Administrative Agent shall not be deemed to be exercising any control over the
operations of the Borrower or Mortgaged Property Owners or the

 

61

 

handling of
any environmental matter or hazardous wastes or substances of the Borrower or
Mortgaged Property Owners for purposes of incurring or being subject to
liability therefor.

 

(4)                                  Environmental Indemnification.  The Borrower shall protect, indemnify, save,
defend, and hold harmless the Indemnified Parties from and against any and all
liability, loss, damage, actions, causes of action, costs or expenses
whatsoever (including reasonable attorneys’ fees and expenses) and any and all
claims, suits and judgments which any Indemnified Party may suffer, as a result
of or with respect to: (a) any Environmental Claim relating to or arising from
the Mortgaged Property; (b) the violation of any Hazardous Materials Law in
connection with the Mortgaged Property; (c) any release, spill, or the presence
of any Hazardous Materials affecting the Mortgaged Property; and (d) the
presence at, in, on or under, or the release, escape, seepage, leakage,
discharge or migration at or from, the Mortgaged Property of any Hazardous
Materials, whether or not such condition was known or unknown to the Borrower;
provided that, in each case, the Borrower shall be relieved of its obligation
under this subsection if any of the matters referred to in clauses (a)
through (d) above did not occur (but need not have been discovered) prior to
(1) the foreclosure of the applicable Security Instrument, (2) the delivery by
the Borrower to the Administrative Agent or its designee of a deed-in- lieu of
foreclosure with respect to the Mortgaged Property, or (3) the Administrative
Agent’s or its designee’s taking possession and control of the Mortgaged
Property after the occurrence of an Event of Default hereunder. If any such
action or other proceeding shall be brought against the Administrative Agent,
upon written notice from the Borrower to the Administrative Agent (given
reasonably promptly following the Administrative Agent’s notice to the Borrower
of such action or proceeding), the Borrower shall be entitled to assume the
defense thereof, at the Borrower’s expense, with counsel reasonably acceptable
to the Administrative Agent; provided, however, the Administrative Agent may,
at its own expense, retain separate counsel to participate in such defense, but
such participation shall not be deemed to give the Administrative Agent a right
to control such defense, which right the Borrower expressly retains.  Notwithstanding the foregoing, each
Indemnified Party shall have the right to employ separate counsel at the
Borrower’s expense if, in the reasonable opinion of legal counsel, a conflict
or potential conflict exists between the Indemnified Party and the Borrower
that would make such separate representation advisable. The Borrower shall have
no obligation to indemnify an Indemnified Party for damage or loss resulting
from such Indemnified Party’s gross negligence or willful misconduct.

 

(5)                                  Recourse Nature of Certain
Indemnifications. 
Notwithstanding anything to the contrary provided in this Agreement or
in any other Loan Document, the indemnification provided in Section 7.9(4)
shall be fully recourse to the Borrower and shall be independent of, and shall
survive, the discharge of the Obligations, the release of the Lien created by
the Security Instruments, and/or the conveyance of title to the Mortgaged
Property to the Administrative Agent or any purchaser or designee in connection
with a foreclosure of the applicable Security Instrument or conveyance in lieu
of foreclosure.  Notwithstanding anything
to the contrary contained herein, Borrower shall not be liable for any
Hazardous Materials first placed on or under the Mortgaged Property after
possession of the Mortgaged Property has transferred to a third party following
foreclosure under the Security Instruments (“Transfer of Possession”);
provided, however, that (i) the migration of any Hazardous Materials placed in,
under, over, from or affecting the Mortgaged Property, which materials were
present prior to Transfer of

 

62

 

Possession
shall remain the liability of Borrower; and (ii) Borrower shall have the burden
of proving that such environmental condition occurred subsequent to Transfer of
Possession.

 

ARTICLE VIII.

CASH MANAGEMENT

 

8.1                                 Cash Management.

 

(1)                                  Collateral Accounts. 
The Borrower and Administrative Agent hereby confirm that, following the
execution of this Agreement, a special, separate deposit account (the “Payments
Account”) and a sub-account thereof (the “Debt Service Account”),
each in the name of, and under the sole dominion and control of, the
Administrative Agent will be established with DBTCA, solely for the purposes
set forth herein.  The Borrower hereby
authorizes and agrees and the Administrative Agent agrees, that until (i) the
Payments Accounts and the Debt Service Account have been established, and (ii)
the Account Agreement has been executed and delivered by each of the parties
thereto pursuant to Section 8.1(2), the account with Deutsche Bank,
ABA #021001033, Commercial Loan Division, bearing account number AC#99401268
Re: CNL Hospitality Term (10/04) (the “Suspense Account,” and with the
Payments Account and the Debt Service Account, the “Collateral Accounts”)
shall substitute for the Payments Account and Debt Service Account and all
amounts contemplated to be transferred, deposited or disbursed to or from the
Payments Account or Debt Service Account under this Article VIII
shall instead be transferred, deposited or disbursed to, from or within the
Suspense Account in the amounts required under this Agreement as if the
Payments Account and Debt Service Account were in use hereunder.  Each such transfer, deposit or disbursement
shall be credited or debited to the Payments Account or Debt Service Account, as
applicable, on the records of the Suspense Account.  Upon the establishment of the Payments
Account and the Debt Service Account and the execution and delivery of the
Account Agreement by each of the parties thereto pursuant to Section 8.1(2),
amounts on deposit in the Suspense Account for the credit of each such
respective account shall be transferred to such account.  Borrower hereby agrees and confirms to the
Administrative Agent (and shall agree and confirm to DBTCA pursuant to the Account Agreement) that it has no dominion
or control whatsoever of the Collateral Accounts or any funds or amounts in the
Collateral Accounts, and Borrower hereby disclaims any and all rights of any
nature whatsoever to control or otherwise direct or make any claim against the
funds or other amounts in the Collateral Accounts at any time.

 

(2)                                  Pledge of Account Collateral. 
To secure the full and punctual payment and performance of the
Obligations, the Borrower hereby collaterally assigns, grants a security
interest in and pledges (and the Borrower Parties shall cause each Mortgaged
Property Owner and Operating Lessee to so assign, grant and pledge) to the
Administrative Agent for the benefit of the Lenders, to the extent not
prohibited by applicable law (and the Borrower Parties shall cause each
Mortgaged Property Owner and Operating Lessee to execute the Accommodation
Security Documents with respect thereto), a first priority continuing security
interest in and to the following property of such Borrower, Mortgaged Property Owner
and/or Operating Lessee, as applicable, whether now owned or existing or
hereafter acquired or arising and regardless of where located (all of the same,
collectively, the “Account Collateral”):

 

63

 

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

 

(ii)                                  all interest,
dividends, cash, instruments and other property from time to time received,
receivable or otherwise payable in respect of, or in exchange for, any or all
of the foregoing; and

 

(iii)                               to the extent not
covered by clauses (i) or (ii) above, all proceeds (as defined under the UCC)
of any or all of the foregoing.

 

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

 

This Agreement shall constitute a security agreement for purposes of
the Uniform Commercial Code and other applicable law.  In order to perfect the security interest
granted hereunder with respect to the Payments Account and Debt Service
Account, on or prior to the establishment of such accounts, Borrower shall (and
shall cause each Mortgaged Property Owner and Operating Affiliate to) execute
and deliver the Account Agreement to the Administrative Agent.

 

(3)                                  Income; Interest. 
Income and interest accruing on amounts held in the Collateral Accounts
under this Agreement shall be periodically added to the principal amount of
such account and shall be held, disbursed and applied in accordance with the
provisions of this Agreement.  The
Borrower shall be the beneficial owner of the Payments Account and Debt Service
Account for federal income tax purposes and shall report all income on all
amounts held in the Collateral Accounts under this Agreement.

 

(4)                                  Disbursements from Collateral
Account.

 

(i)                                     Subject to Section 8.1(1),
the Borrower hereby irrevocably authorizes the Administrative Agent to transfer,
and the Administrative Agent shall transfer (or cause DBTCA to transfer pursuant to disbursement instructions from the
Administrative Agent) from the Payments Account, funds in the amounts, at the
times and in the order of priority, as follows:

 

(a)                                  to the Debt Service Account, until
the funds deposited therein equal all interest to be paid on the next
applicable Payment Dates in respect of all Interest Periods then outstanding
(e.g., in the event there are multiple Interest Periods then outstanding, the
amount deposited would equal the aggregate of all sums payable on the next
Payment Date applicable to each such Interest Period).

 

(b)                                 during any Low DSCR Period or if a
Noticed Event of Default shall have occurred and is then continuing, on the 15th
day of each calendar month (or the next succeeding Business Day with respect to
any month in which the 15th day is not a

 

64

 

Business
Day), funds in an amount equal to the balance (if any) deposited in the Payments
Account to the extent remaining after the foregoing deposit set forth in Section 8.1(4)(i)(a)
and apply the same, to the prepayment of the Loan and payment of accrued but
unpaid interest on the amount prepaid, pursuant to Sections 3.3.(2)(E)
and 3.3(3) (and all amounts payable pursuant to Section 2.8
as a result of such prepayment); and

 

(c)                                  provided no Noticed Event of Default
or Low DSCR Period shall have occurred and is then continuing, on the 1st
day of each calendar month (or the next succeeding Business Day with respect to
any month in which the 1st day is not a Business Day), funds in an amount equal
to the balance (if any) deposited in the Payments Account to the extent
remaining after the foregoing deposits set forth in Sections 8.1(4)(i)(a)
through (b) (the “Excess Cash Flow”) and transfer the same to the
Borrower’s Account free of any Lien or continuing security interest.

 

(ii)                                  Not less than five
(5) days prior to each Payment Date, Administrative Agent shall notify the
Borrower of the balance on deposit in the Debt Service Account (or in the
Suspense Account to the credit of the Debt Service Account) as of such notice
date.  On any Payment Date, any
deficiency in amounts on deposit in the Debt Service Account (or in the
Suspense Account to the credit of the Debt Service Account) relative to the
Debt Service required to be paid on such date shall constitute an Event of
Default hereunder; provided, that if the Administrative Agent has not
provided timely notice of the balance on deposit in the Debt Service Account
(or in the Suspense Account to the credit of the Debt Service Account) prior to
such Payment Date pursuant to the preceding sentence, such Event of Default
will only occur if the Debt Service required to be paid on such Payment Date remains
unpaid in full five (5) days following the earlier of the date such notice is
provided or the date the notice contemplated by the following sentence is
provided.  Upon the occurrence of a
deficiency in the Debt Service Account (or in amounts held in the Suspense
Account for the credit of the Debt Service Account) on any Payment Date
relative to the Debt Service required to be paid on such date, Administrative
Agent shall notify Borrower of said deficiency within five (5) Business Days
thereafter; provided, however, Administrative Agent’s failure to
notify Borrower shall not be deemed a waiver of any Event of Default arising
from such deficiency.  Notwithstanding
anything to the contrary contained in this Agreement or in the other Loan
Documents, no Event of Default shall be deemed to have occurred hereunder or
thereunder (and no Default Rate shall be applicable) in the event funds
sufficient for a required transfer are held in an appropriate Collateral
Account and the Administrative Agent or DBTCA fails to timely make any transfer
from such Collateral Account as contemplated by this Agreement.

 

(iii)                               Notwithstanding anything
to the contrary contained herein or in the Security Instruments, but subject to
Section 7.4(3), to the extent that the Borrower shall fail to pay
any mortgage recording tax, costs, expenses or other amounts pursuant to Section 7.1(23)
of this Agreement within the time period set forth therein, the Administrative
Agent shall have the right, at any time, upon five (5) Business Days’ notice to
the Borrower, to withdraw from funds constituting Excess Cash Flow in the
Payments Account, an amount equal to such unpaid taxes, costs, expenses and/or
other amounts and pay such amounts to the Person(s) entitled thereto.

 

65

 

(iv)                              Payment from Debt
Service Account.  Subject to Section 8.1(1),
the Borrower irrevocably authorizes the Administrative Agent to make and,
provided no Event of Default shall have occurred and be continuing, the
Administrative Agent hereby agrees to make, to the extent of the monies on
deposit in the Debt Service Account, payment of funds from such account to the
Administrative Agent sufficient to pay Debt Service on each Payment Date, and
the Administrative Agent, on each Payment Date, shall apply such funds to the
payment of the Debt Service payable on such Payment Date.

 

(5)                                  Borrower Parties’ Account
Representations, Warranties and Covenants.

 

(i)                                     The Borrower Parties represent,
warrant and covenant that (a) as of the date hereof, the Borrower Parties
(or the Operating Affiliates) have directed all Tenants (other than the
Operating Affiliates) under the Leases to mail all checks and wire all funds
with respect to any payments due under such Leases directly to the applicable Manager,
(b) the Borrower shall (or the Borrower Parties shall cause the Operating
Affiliates to) cause the Managers to deposit all amounts payable to the
Operating Affiliates (or to any Borrower Party or any Mortgaged Property Owner)
pursuant to the Management Agreements, and the Operating Non-Affiliates to mail
all checks and wire all funds with respect to any payments due to any Borrower
Party or any Mortgaged Property Owner, directly to the Payments Account (or to
the Suspense Account to the extent contemplated by Section 8.1(1)),
(c) all Rents, cash and Cash Equivalents or other items of Mortgaged Property
Operating Income (including, without limitation, payments to any Borrower Party
by any entity or Affiliate that any Borrower Party owns an equity interest in)
not otherwise collected as described in clauses (a) or (b) above, shall be paid
by or caused to be paid by the Borrower Parties within two (2) Business Days
after receipt thereof by any Borrower Party or its Affiliates directly into the
Payments Account (or to the Suspense Account to the extent contemplated by Section 8.1(1))
and, until so deposited, any such amounts held by such Person(s) shall be
deemed to be Account Collateral and shall be held in trust by it for the
benefit, and as the property, of the Administrative Agent and the Lenders and
shall not be commingled with any other funds or property of such
Person, (d) there are no accounts other than the Collateral Accounts
maintained by any Borrower Party or any Operating Affiliate or Mortgaged Property
Owner with respect to Mortgaged Property or the collection of Rents
and (e) so long as the Loan shall be outstanding, neither any Borrower
Party nor any Operating Affiliate or Mortgaged Property Owner shall open any
other operating accounts with respect to the Mortgaged Property or the
collection of Rents, except for the Collateral Accounts; provided, that,
Borrower shall not be prohibited from utilizing one or more separate accounts
for the disbursement or retention of funds that have been transferred to the
Borrower’s Account pursuant to Section 8.1(4)(i)(c).

 

(6)                                  Account Collateral
and Remedies.

 

(i)                                     Upon the occurrence and during the
continuance of an Event of Default, without additional notice from the
Administrative Agent to the Borrower Parties, (i) the Administrative Agent may,
in addition to and not in limitation of the Administrative Agent’s other
rights, make any and all withdrawals from, and transfers between and among, the
Collateral Accounts as the Administrative Agent shall determine in its sole and
absolute discretion to pay any Obligations; and (ii) Subject to Section 8.1(1),
all Excess Cash Flow shall be retained in the Payments Account and applied
pursuant to Section 8.1(4)(i)(b).

 

66

 

(ii)                                  Upon the occurrence and during the
continuance of an Event of Default, the Borrower hereby irrevocably constitutes
and appoints the Administrative Agent as the Borrower’s true and lawful
attorney-in-fact, with full power of substitution, to execute, acknowledge and
deliver any instruments and to exercise and enforce every right, power, remedy,
option and privilege of the Borrower with respect to the Account Collateral,
and do in the name, place and stead of the Borrower, all such acts, things and
deeds for and on behalf of and in the name of the Borrower, which Borrower
could or might do or which the Administrative Agent may deem necessary or
desirable to more fully vest in the Administrative Agent the rights and
remedies provided for herein and to accomplish the purposes of this
Agreement.  The foregoing powers of
attorney are irrevocable and coupled with an interest.  Upon the occurrence and during the
continuance of an Event of Default, the Administrative Agent may perform or
cause performance of any such agreement, and any reasonable expenses of the
Administrative Agent incurred in connection therewith shall be paid by the
Borrower as provided in Section 7.1(23).

 

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

 

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

 

(8)                                  Reasonable Care. 
Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Account Collateral in its
possession or control as agent therefor or bailee thereof or any income thereon
or the preservation of rights against any person or otherwise with respect
thereto.  The Administrative Agent shall
not be liable or responsible for any loss or damage to any of the Account
Collateral, or for any diminution in value thereof, by reason of the act or
omission of the Administrative Agent, its Affiliates, agents, employees or
bailees, except to the extent that such loss or damage results from the
Administrative Agent’s gross negligence or willful misconduct.  In no event shall the Administrative Agent be
liable either directly or indirectly for losses or delays resulting from any
event which may be the basis of an Excusable Delay, computer malfunctions,
interruption of communication facilities, labor difficulties or other causes
beyond the Administrative Agent’s reasonable control or for indirect, special
or consequential damages except to the extent of the Administrative Agent’s
gross negligence or willful misconduct.

 

(9)                                  The Administrative Agent’s Duties
and Liabilities.

 

(i)                                     Following each Fiscal Quarter, the
Administrative Agent shall perform a Mortgaged Property DSCR Test to determine
whether a Low DSCR Period has

 

67

 

occurred
or is continuing (it being hereby agreed that all determinations as to whether
a Low DSCR Period has occurred or is continuing shall be made by the
Administrative Agent based on the financial information delivered by the
Borrower pursuant to Section 7.8(2) hereof).

 

(ii)                                  The Administrative Agent shall be
responsible for the performance only of such duties with respect to the Account
Collateral as are specifically set forth in this Section 8.1 or
elsewhere in the Loan Documents, and no other duty shall be implied from any
provision hereof.  The Administrative
Agent shall not be under any obligation or duty to perform any act with respect
to the Account Collateral which would cause it to incur any expense or
liability or to institute or defend any suit in respect hereof, or to advance
any of its own monies.  The Borrower
shall indemnify and hold the Administrative Agent, its employees and officers
harmless from and against any loss, cost or damage (including, without
limitation, reasonable attorneys’ fees and disbursements) incurred by the
Administrative Agent in connection with the transactions contemplated hereby
with respect to the Account Collateral except as such may be caused by the
gross negligence or willful misconduct of the Administrative Agent, its
employees, officers or agents.

 

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

 

(10)                            Continuing Security Interest. 
This Agreement shall create a continuing security interest in the Account
Collateral and shall remain in full force and effect until payment in full of
the Obligations.  Subject to Section 11.21,
upon payment in full of the Obligations, this security interest shall
automatically terminate without further notice from any party and the Borrower
shall be entitled to the return, upon their request, of such of the Account
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof and the Administrative Agent shall execute such instruments and
documents as may be reasonably requested by the Borrower to evidence such
termination and the release of the Account Collateral.

 

ARTICLE IX.

EVENTS OF DEFAULT

 

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

 

(1)                                  (i) Subject to Section 8.1.4(ii),
the Borrower shall fail to make any payment of principal or interest on the
Loan (including any mandatory prepayments under Section 3.3) on the
date when due, or (ii) shall fail to pay any other Obligation within five days
of the date when due; or

 

68

 

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

 

(3)                                  Any of the Transaction Parties shall
default in the observance or performance of any covenant or agreement contained
in Sections 7.1(18), 7.1(22)(A), 7.1(24), 7.1(25), 7.2
or 7.5.

 

(4)                                  Any of the Transaction Parties shall
fail to observe or perform any term or provision contained in the Loan Documents
(other than those addressed in other subsections of this Section 9.1)
and such failure shall continue for thirty (30) days following the date a
Responsible Officer of such Transaction Party knew of such failure or
Transaction Party received notice thereof from Administrative Agent, or if such
failure is susceptible to cure and a Transaction Party is diligently and
continuously prosecuting such cure, for an additional thirty (30) days; provided,
however, that upon the occurrence of a Portfolio Material Adverse Effect
Default, if the subject default is not cured within the period set forth above,
an Event of Default shall be deemed to occur hereunder unless the Borrower is
otherwise in compliance with the terms of the Loan Documents and is otherwise diligently
attempting to cure the subject default and either: (i) the Pro Forma LTV Ratio
is less than 50%; or (ii) if the Pro Forma LTV Ratio is greater than 50%,
either Required Lenders have elected in writing (in their sole and absolute
discretion) not to permit the release of such Mortgaged Properties, or within
60 days after notice or knowledge of the occurrence of the Portfolio Material
Adverse Effect Default, Borrower pays Administrative Agent in immediately
available funds an amount equal to the Release Amount for the Mortgaged
Properties subject to the Portfolio Material Adverse Effect Default;  or

 

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

 

(6)                                  Any of the Transaction Parties shall
default in any payment of principal of or interest on any non-recourse
Indebtedness in an aggregate amount for all such Persons in excess of $100,000,000, or any of the other CNL
Entities shall default in any payment of principal of or interest on any
non-recourse Indebtedness in an aggregate amount for all such Persons in excess
of $250,000,000, and, prior to
the election of the Lenders to accelerate the Obligations hereunder, such
non-recourse Indebtedness is not paid or the payment thereof waived or cured in
accordance with the terms of the documents, instruments and agreements
evidencing the same; or

 

(7)                                  (1) Any of the CNL Entities shall
commence any case, proceeding or other action (i) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking

 

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

 

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

 

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

 

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

 

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

 

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

 

70

 

(13)                            There shall occur a Change in
Control; or

 

(14)                            If the insurance policies required
by Section 7.3(1) are not kept in full force and effect, or if
certificates of any of such insurance policies are not delivered to the
Administrative Agent within fifteen (15) Business Days following the
Administrative Agent’s request therefor; or

 

(15)                            Subject to the Borrower’s right to
contest as set forth in Section 7.4(3), if any of the Impositions
or Other Charges are not paid prior to the imposition of any interest, penalty,
charge, or expense for the non-payment thereof and remain unpaid for ten (10)
days after Administrative Agent delivers written notice thereof to Borrower; or

 

(16)                            If Borrower shall fail to comply
with any covenants set forth in Section 3.4 or Article 4 of the
Security Instruments or the obligation to execute and deliver (and cause each
Mortgaged Property Owner and Operating Affiliate to execute and deliver) the
Account Agreement as set forth in Section 8.1(2) above, with such
failure continuing for ten (10) Business Days after Administrative Agent
delivers written notice thereof to Borrower; or

 

(17)                            If the Transaction Parties shall fail
to deposit any sums required to be deposited in the Payments Account pursuant
to Article VIII when due; or

 

(18)                            If this Agreement or any other Loan
Document or any Lien granted hereunder or thereunder, in whole or in part,
shall terminate or shall cease to be effective or shall cease to be a legally
valid, binding and enforceable obligation of each applicable Transaction Party,
or any Lien securing the Obligations shall, in whole or in part, cease to be a
perfected first priority Lien, subject to the Permitted Encumbrances (except in
any of the foregoing cases in accordance with the terms hereof or under any
other Loan Document or by reason of any affirmative act of Lender); or

 

(19)                            If Borrower shall default beyond the
expiration of any applicable cure period under any existing easement, covenant
or restriction which affects the Mortgaged Property, the default of which shall
have a Portfolio Material Adverse Effect.

 

9.2                                 Remedies.

 

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

 

71

 

(2)                                  Upon the occurrence and during the
continuance of a Noticed Event of Default, with respect to the Account
Collateral, the Administrative Agent may:

 

(A)                              without notice to the Borrower,
except as required by law, and at any time or from time to time, charge,
set-off and otherwise apply all or any part of the Account Collateral against
the Obligations, Operating Expenses and/or Capital Expenditures for the
Mortgaged Property or any part thereof;

 

(B)                                in the Administrative Agent’s sole
discretion, at any time and from time to time, exercise any and all rights and
remedies available to it under this Agreement, and/or as a secured party under
the UCC;

 

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

 

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

 

(3)                                  With respect to the Borrower, the
Account Collateral, the Rate Cap Collateral and the Mortgaged Property, nothing
contained herein or in any other Loan Document shall be construed as requiring
the Administrative Agent to resort to the Mortgaged Property for the
satisfaction of any of the Obligations, and, subject to Section 9.2(1),
the Administrative Agent may seek satisfaction out of the Mortgaged Property or
any part thereof, in its absolute discretion in respect of the Obligations.  In addition, subject to Section 9.2(1),
the Administrative Agent shall have the right from time to time to partially
foreclose this Agreement and the Security Instruments (or any of them) in any
manner and for any amounts secured by this Agreement or any Security Instrument
then due and payable as determined by the Administrative Agent in its sole
discretion.  Notwithstanding one or more
partial foreclosures, the Mortgaged Property shall remain subject to this Agreement
and the Security Instruments to secure payment of sums secured by this
Agreement and the Security Instruments and not previously recovered.

 

ARTICLE X.

THE ADMINISTRATIVE AGENT

 

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

 

72

 

10.2                           Delegation of Duties.  The Administrative Agent may execute any of
its duties under the Loan Documents by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties.  The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.

 

10.3                           Exculpatory Provisions.  None of the Administrative Agent, the other
Agents, nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (1) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with the Loan Documents (except for its or such Person’s own gross
negligence or willful misconduct), or (2) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by the Transaction Parties or any officer thereof contained in the Loan
Documents or in any certificate, report, statement or other document referred
to or provided for in, or received by the Administrative Agent under or in
connection with the Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Loan Documents or for any
failure of the Transaction Parties to perform their obligations hereunder or
thereunder.  The Administrative Agent and
the other Agents shall not be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, the Loan Documents or to inspect the
properties, books or records of the Transaction Parties.

 

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

 

10.5                           Notice of Default.  The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Potential Default or Event
of Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to the Loan Documents, describing such Potential
Default or Event of Default and stating that such

 

73

 

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

 

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

 

10.7                           Indemnification.  The Lenders agree to indemnify the
Administrative Agent and the other Agents in their respective capacity as such
(to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to the respective
amounts of their Percentage Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Administrative
Agent or the other Agents in any way relating to or arising out of the Loan
Documents or any documents contemplated by or referred to herein or the
transactions

 

74

 

contemplated hereby or any action taken or
omitted by the Administrative Agent or the other Agents under or in connection
with any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent’s or any other Agent’s gross negligence
or willful misconduct, respectively.  The
provisions of this Section 10.7 shall survive the payment of the
Obligations and the termination of this Agreement.

 

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

 

10.9         Successor Administrative Agent.  The Administrative Agent may resign as
Administrative Agent under the Loan Documents upon thirty (30) days’
notice to the Lenders.  If the
Administrative Agent shall resign, then the Lenders (other than the Lender
resigning as Administrative Agent) shall (with, so long as there shall not
exist and be continuing an Event of Default, the consent of the Borrower, such
consent not to be unreasonably withheld or delayed) appoint a successor agent
or, if the Lenders are unable to agree on the appointment of a successor agent,
the Administrative Agent shall appoint a successor agent for the Lenders
whereupon such successor agent shall succeed to the rights, powers and duties
of the Administrative Agent, and the term “Administrative Agent” shall mean
such successor agent effective upon its appointment, and the former
Administrative Agent’s rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any of
the Loan Documents or successors thereto. 
After any retiring Administrative Agent’s resignation hereunder as
Administrative Agent, the provisions of the Loan Documents shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under the Loan Documents.

 

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

 

ARTICLE
XI.

MISCELLANEOUS PROVISIONS

 

11.1         No Assignment by Borrower.  None of the Transaction Parties may assign
its rights or obligations under this Agreement or the other Loan Documents
without the prior written consent of the Administrative Agent and one hundred
percent (100%) of the Lenders.  Subject
to the foregoing, all provisions contained in this Agreement and the other Loan
Documents and in any document or agreement referred to herein or therein or
relating hereto or thereto shall inure to the benefit of the Administrative
Agent and each Lender, their respective successors and

 

75

 

assigns, and
shall be binding upon each of the Transaction Parties and such Person’s
successors and assigns.

 

11.2         Modification
.  Neither this Agreement nor any
other Loan Document may be Modified or waived unless such Modification or
waiver is in writing and signed by the Administrative Agent, CNL REIT, in its
capacity as a Guarantor, the Borrower and, except for the Modifications and
waivers requiring consent of one hundred percent (100%) of the Lenders referred
to below, the Required Lenders.  No such
Modification or waiver shall, without the prior written consent of one hundred
percent (100%) of the Lenders: 
(1) reduce the principal of, or rate of interest on, the Loan or
fees payable hereunder or under the Fee Letter, (2) except as expressly
contemplated by Section 11.8 below, modify the Percentage Share of any
Lender, (3) Modify the definition of “Required Lenders”, (4) extend
or waive any scheduled payment date for any principal, interest or fees,
(5) release CNL REIT from its obligations under the Guaranty entered into
by it, release Borrower from its obligation to repay the Loan, release any of
the pledgors under the Pledge Agreements or release any portion of the
collateral pledged under the Pledge Agreements (except for such releases as may
be specifically authorized by or otherwise approved in accordance with this
Agreement), (6) Modify this Section 11.2, or (7) Modify any
provision of the Loan Documents which by its terms requires the consent or
approval of one hundred percent (100%) of the Lenders.  It is expressly agreed and understood that
the election by the Required Lenders to accelerate amounts outstanding
hereunder and/or to terminate the obligation of the Lenders to make Loans
hereunder shall not constitute a Modification or waiver of any term or
provision of this Agreement or any other Loan Document.  No Modification of any provision of the Loan
Documents relating to the Administrative Agent shall be effective without the
written consent of the Administrative Agent.

 

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

 

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

 

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

 

11.6         Notices.  All notices given by any party to the others
under this Agreement and the other Loan Documents shall be in writing unless
otherwise provided for herein, and any such

 

76

 

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

 

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

 

11.8         Assignments,
Participations, Syndication, Etc.

 

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

 

(2)           The Agent shall, on behalf of the
Borrower, maintain a copy of each Assignment and Acceptance delivered to it and
a register (the “Register”) for the recordation of the names and
addresses of the Lenders and the principal amount of the Loan owing to each
Lender from time to time.  The entries in
the Register shall be conclusive, in the absence of manifest error, and the
Borrower, each Lender and the and the Administrative Agent shall treat each
person whose name is recorded in the Register as the owner of the Loans for all
purposes of this Agreement.  From and
after the date that the Administrative Agent notifies the assignor Lender and
the Borrower that it has received an executed Assignment and Acceptance
Agreement and payment of the above-referenced processing fee, and the
assignment has been recorded in the Register: 
(i) the Assignee thereunder shall be a party hereto and, to the
extent that rights

 

77

 

and
obligations hereunder and under the other Loan Documents have been assigned to
it pursuant to such Assignment and Acceptance Agreement, shall have the rights
and obligations of a Lender under the Loan Documents, (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance Agreement, relinquish its rights and be released from its
obligations under the Loan Documents (but shall be entitled to indemnification
as otherwise provided in this Agreement with respect to any events occurring
prior to the assignment) and (iii) this Agreement shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Percentage Shares resulting
therefrom.

 

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

 

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

 

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

 

(6)           Subject to Section 11.8(1)
above, the Lead Arranger may syndicate the Loan and the other Obligations held
by the Lenders hereunder before or after the Closing Date, and the Lead
Arranger (or its designated Affiliates) shall manage all aspects of such
syndication, including the number and identity of the potential Lenders
participating in the syndication and

 

78

 

the Loan amounts
and compensation offered in connection therewith.  Each Borrower Party agrees to take all
actions as the Lead Arranger (or its designated Affiliates) may reasonably
request to assist in the syndication, including: (i) making its senior
management and representatives available to participate in informational
meetings with potential Lenders at such times and places as the Lead Arranger
(or its designated Affiliates) may reasonably request; (ii) using its
reasonable efforts to ensure that the syndication efforts benefit from such
Borrower Party’s lending relationships; and (iii) providing the Lead
Arranger (or its designated Affiliates) with all information reasonably deemed
necessary to successfully complete the syndication.

 

(7)           Until the date the Lead Arranger
notifies the Borrower that the syndication of the Loan has been completed, the
Borrower Parties shall not, and shall not permit the CNL Entities to engage any
Person to effect any offering, placement or arrangement of debt securities or
any bank financing by or on behalf of any CNL Entity.

 

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

 

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

 

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

 

79

 

Document; (vi) to such
Lender’s independent auditors and other professional advisors; and (vii) to any
Participant or Assignee and to any prospective Participant or Assignee,
provided that each Participant and Assignee or prospective Participant or
Assignee first agrees to be bound by the provisions of this Section 11.11.

 

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

 

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

 

11.14       Indemnity.  Whether or not the transactions contemplated
hereby are consummated, each of the Borrower Parties shall indemnify and hold
the Administrative Agent, the other Agents and each Lender and each of their
respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an “Indemnified Person”) harmless from and
against

 

80

 

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

 

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

 

11.16       Marshalling; Payments Set Aside.  Neither the Administrative Agent nor the
Lenders shall be under any obligation to marshal any assets in favor of any of
the Transaction Parties or any other Person or against or in payment of any or
all of the Obligations.  To the extent
that any of the Transaction Parties makes a payment or payments to the
Administrative Agent or the Lenders, or the Administrative Agent or the Lenders
enforce their Liens or exercise their rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the
Administrative Agent in its discretion) to be repaid to a trustee, receiver or
any other party in connection with any insolvency proceeding, or otherwise,
then (1) to the extent of such recovery the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or
set-off had not occurred, and (2) each Lender severally agrees to pay to the
Administrative Agent upon demand its ratable share of the total amount so
recovered from or repaid by the Administrative Agent.

 

11.17       Set-off.  In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists, each Lender is
authorized at any time and from time to time, without prior notice to the
Transaction Parties, any such notice being waived by the Transaction Parties to
the fullest extent permitted by law, to set off and apply in favor of the
Lenders any and all

 

81

 

deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing to, such Lender to or for the credit or the
account of the Transaction Parties against any and all Obligations owing to the
Lenders, now or hereafter existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under this Agreement
or any Loan Document and although such Obligations may be contingent or
unmatured.  Each Lender agrees promptly
to (i) notify the Transaction Parties and the Administrative Agent after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application and (ii) pay such amounts that are set-off to the Administrative
Agent for the ratable benefit of the Lenders.

 

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

 

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

 

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

 

11.21       Reinstatement.  This Agreement and the security interests
created herein shall continue to be effective or be reinstated, as the case may
be, if at any time payment and performance of the Borrower’s Obligations
hereunder, or any part thereof, is, pursuant to bankruptcy, insolvency or other
applicable laws, rescinded or reduced in amount, or must otherwise be restored
or returned by Administrative Agent or any Lender.  In the event that any payment or any part
thereof is so rescinded, reduced, restored or returned, such Obligations and
the security interests created herein shall continue to be effective or be
reinstated (except to the extent the related collateral has been sold to a bona
fide purchaser for value) and deemed reduced only by such amount paid and not
so rescinded, reduced, restored or returned.

 

[SIGNATURE PAGES FOLLOWING]

 

82

 

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

 

 

BORROWER:

	
   

  	
   

  
	
   

  	
  CNL
  HOSPITALITY PARTNERS, LP,

  
	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By: CNL
  HOSPITALITY GP CORP., a Delaware

  Corporation

  
	
   

  	
  Its general
  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

CNL REIT:

 

	
   

  	
  CNL HOTELS
  & RESORTS, INC.,

  
	
   

  	
  a Maryland
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

S-1

 

 

LENDERS AND AGENTS:

 

	
   

  	
  DEUTSCHE
  BANK TRUST COMPANY

  AMERICAS, as Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

S-2

 

	
   

  	
  DEUTSCHE
  BANK SECURITIES, INC.,

  
	
   

  	
  as the Lead
  Arranger

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

S-3

 

ANNEX I:  GLOSSARY

 

S-4Exhibit
10.1

 

ABBOTT
LABORATORIES

1996
INCENTIVE STOCK PROGRAM

(as amended and restated through the

2nd
Amendment February 20, 2004)

 

1.                                      PURPOSE. 
The purpose of the Abbott Laboratories 1996 Incentive Stock Program (the
“Program”) is to attract and retain outstanding directors, officers and other
employees of Abbott Laboratories (the “Company”) and its subsidiaries, and to
furnish incentives to such persons by providing opportunities to acquire common
shares of the Company, or monetary payments based on the value of such shares
or the financial performance of the Company, or both, on advantageous terms as
herein provided and to further align such persons’ interests with those of the
Company’s other shareholders through compensation that is based on the value of
the Company’s common shares.

 

2.                                      ADMINISTRATION.  The Program will be administered by a
committee (the “Committee”) of at least two persons which shall be either the
Compensation Committee of the Board of Directors of the Company (the “Board of
Directors”) or such other committee comprised entirely of persons who are both:
(i) “disinterested persons” as defined in Rule 16b-3 of the Securities and
Exchange Commission; and (ii) “outside directors” as defined under Section
162(m) of the Internal Revenue Code of 1986, as amended, or any successor
provision; as the Board of Directors may from time to time designate.  The Committee shall interpret the Program,
prescribe, amend and rescind rules and regulations relating thereto and make
all other determinations necessary or advisable for the administration of the
Program. A majority of the members of the Committee shall constitute a quorum
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Program may be made
without notice of meeting of the Committee by a writing signed by all of the
Committee members.  The Committee may,
from time to time, delegate any or all of its duties, powers and authority to
any officer or officers of the Company, except to the extent such delegation
would be inconsistent with Rule 16b-3 of the Securities and Exchange Commission
or other applicable law, rule or regulation. 
The Chief Executive Officer of the Company may, on behalf of the
Committee, grant stock options and restricted stock awards under the Program,
other than to persons subject to Section 16 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). All such grants by the Chief Executive
Officer must be reported to, and ratified by, the Committee within twelve
months of the grant date but, if ratified, shall be effective as of the grant
date.

 

3.                                      PARTICIPANTS. 
Participants in the Program will consist of such officers and other
employees of the Company and its subsidiaries as the Committee in its sole
discretion may designate from time to time to receive Benefits hereunder.  The Committee’s designation of a participant
in any year shall not require the Committee to designate such person to receive
a Benefit in any other year.  The Committee
shall consider such factors as it deems pertinent in selecting participants and
in determining the type and amount of their respective Benefits, including
without limitation (i) the financial condition of the Company; (ii) anticipated
profits for the current or future years; (iii) contributions of participants to
the profitability and development of the Company; (iv) prior awards to
participants; and (v) other compensation provided to participants. Non-Employee
Directors shall also be participants in the Program solely for purposes of
receiving Restricted Stock Awards under paragraph 13 and Non-qualified Stock
Options 

 

1

 

under paragraph 14.  The term “Non-Employee Director” shall mean a
member of the Board of Directors who is not a full-time employee of the Company
or any of its subsidiaries.

 

4.                                      TYPES OF BENEFITS.  Benefits under the Program may be granted in
any one or a combination of (a) Incentive Stock Options; (b) Non-qualified
Stock Options; (c) Stock Appreciation Rights; (d) Limited Stock Appreciation
Rights; (e) Restricted Stock Awards; (f) Performance Awards; and (g) Foreign
Qualified Benefits, all as described below.

 

5.                                      SHARES RESERVED UNDER THE PROGRAM.  There is hereby reserved for issuance under
the Program: (i) an aggregate of Five Million (5,000,000) common shares; plus
(ii) an authorization for each calendar year (the “Annual Authorization”) for
the years 1996 through 1999, of seven-tenths of one percent (0.7%) of the total
common shares of the Company issued and outstanding as of the first day of such
calendar year and for the years from and including 2000, one and a half percent
(1.5%) of the total common shares of the Company issued and outstanding as of
the first day of such calendar year; which may be newly issued or treasury
shares. The shares hereby reserved are in addition to the shares previously
reserved under the Company’s 1981 Incentive Stock Program, 1986 Incentive Stock
Program and 1991 Incentive Stock Program (the “Prior Programs”). Any common
shares reserved for issuance under the Prior Programs in excess of the number
of shares as to which options or other Benefits have been awarded on the date
of shareholder approval of this Program, plus any such shares as to which
options or other Benefits granted under the Prior Programs may lapse, expire,
terminate or be canceled after such date, shall also be reserved and available
for issuance in connection with Benefits under this Program. Any common shares
reserved under the Program for any calendar year under an Annual Authorization
as to which options or other Benefits have not been awarded as of the end of
such calendar year shall be available for issuance in connection with Benefits
granted in subsequent years.

 

If
there is a lapse, expiration, termination or cancellation of any Benefit
granted hereunder without the issuance of shares or payment of cash thereunder,
or if shares are issued under any Benefit and thereafter are reacquired by the
Company pursuant to rights reserved upon the issuance thereof, or shares are
reacquired pursuant to the payment of the purchase price of shares under stock
options by delivery of other common shares of the Company, the shares subject
to or reserved for such Benefit, or so reacquired, may again be used for new
options, rights or awards of any sort authorized under this Program; provided,
however, that in no event may the number of common shares issued under this
Program, and not reacquired by the Company pursuant to rights reserved upon the
issuance thereof or pursuant to the payment of the purchase price of shares
under stock options by delivery of other common shares of the Company, exceed
the total number of shares reserved for issuance hereunder.

 

6.                                      INCENTIVE STOCK OPTIONS.  Incentive Stock Options will consist of
options to purchase common shares at purchase prices not less than One Hundred
percent (100%) of the Fair Market Value of such common shares on the date of
grant. An Incentive Stock Option will not be exercisable after the expiration
of ten (10) years from the date such option is granted. In the event of
termination of employment for any reason other than retirement, disability or
death, the right of the optionee to exercise an Incentive Stock Option shall
terminate upon the earlier of the end of the original term of the option or 

 

2

 

three (3) months after the
optionee’s last day of work for the Company and its subsidiaries. In the event
of termination of employment due to retirement or disability, or if the
optionee should die while employed, the right of the optionee or his or her
successor in interest to exercise an Incentive Stock Option shall terminate
upon the end of the original term of the option. If the optionee should die within
three (3) months after termination of employment for any reason other than
retirement or disability, the right of his or her successor in interest to
exercise an Incentive Stock Option shall terminate upon the earlier of the end
of the original term of the option or three (3) months after the date of such
death. To the extent the aggregate fair market value (determined as of the time
the Option is granted) of the common shares with respect to which any Incentive
Stock Option is exercisable for the first time by any individual during any
calendar year (under all option plans of the Company and its subsidiary
corporations) exceeds $100,000, the excess shall be treated as a Non-qualified
Stock Option. An Incentive Stock Option shall be exercisable as determined by
the Committee, but in no event earlier than six (6) months from its grant date.

 

7.                                      NON-QUALIFIED STOCK OPTIONS.  Non-qualified Stock Options will consist of
options to purchase common shares at purchase prices not less than One Hundred
percent (100%) of the Fair Market Value of such common shares on the date of
grant. A Non-qualified Stock Option will not be exercisable after the
expiration of ten (10) years from the date such option is granted. In the event
of termination of employment for any reason other than retirement, disability
or death, the right of the optionee to exercise a Non-qualified Stock Option
shall terminate upon the earlier of the end of the original term of the option
or three (3) months after the optionee’s last day of work for the Company and
its subsidiaries. In the event of termination of employment due to retirement
or disability, or if the optionee should die while employed, the right of the
optionee or his or her successor in interest to exercise a Non-qualified Stock
Option shall terminate upon the end of the original term of the option. If the
optionee should die within three (3) months after termination of employment for
any reason other than retirement or disability, the right of his or her
successor in interest to exercise a Non-qualified Stock Option shall terminate
upon the earlier of the end of the original term of the option or three (3)
months after the date of such death. A Non-qualified Stock Option shall be
exercisable as determined by the Committee, but in no event earlier than six
(6) months from its grant date.

 

8.                                      STOCK APPRECIATION RIGHTS.  The Committee may, in its discretion, grant a
Stock Appreciation Right to the holder of any stock option granted hereunder or
under the Prior Programs. Such Stock Appreciation Rights shall be subject to
such terms and conditions consistent with the Program as the Committee shall
impose from time to time, including the following:

 

(a)                                  A Stock
Appreciation Right may be granted with respect to a stock option at the time of
its grant or at any time thereafter up to six (6) months prior to its
expiration.

 

3

 

(b)                                 Stock
Appreciation Rights will permit the holder to surrender any related stock
option or portion thereof which is then exercisable and to elect to receive in
exchange therefor cash in an amount equal to:

 

(i)            The excess of the Fair
Market Value on the date of such election of one common share over the option
price multiplied by

 

(ii)           The number of shares covered
by such option or portion thereof which is so surrendered.

 

(c)                                  A Stock
Appreciation Right granted to a participant who is subject to Section 16 of the
Exchange Act may be exercised only after six (6) months from its grant date
(unless such exercise would not affect the exemption under Rule 16b-3 of the
Securities and Exchange Commission).

 

(d)                                 A Stock
Appreciation Right may be granted to a participant regardless of whether such
participant has been granted a Limited Stock Appreciation Right with respect to
the same stock option.  However, a Stock
Appreciation Right may not be exercised during any period that a Limited Stock
Appreciation Right with respect to the same stock option may be exercised.

 

(e)                                  In the
event of the exercise of a Stock Appreciation Right, the number of shares
reserved for issuance hereunder shall be reduced by the number of shares
covered by the stock option or portion thereof surrendered.

 

9.                                      LIMITED STOCK APPRECIATION RIGHTS.  The Committee may, in its discretion, grant a
Limited Stock Appreciation Right to the holder of any stock option granted
hereunder or under the Prior Programs. 
Such Limited Stock Appreciation Rights shall be subject to such terms
and conditions consistent with the Program as the Committee shall impose from
time to time, including the following:

 

(a)                                  A Limited
Stock Appreciation Right may be granted with respect to a stock option at the
time of its grant or at any time thereafter up to six (6) months prior to its
expiration.

 

(b)                                 A Limited
Stock Appreciation Right will permit the holder to surrender any related stock
option or portion thereof which is then exercisable and to receive in exchange
therefor cash in an amount equal to:

 

(i)            The excess of the Fair
Market Value on the date of such election of one common share over the 

option price multiplied by

 

(ii)           The number of shares covered
by such option or portion thereof which is so surrendered.

 

4

 

(c)                                  A Limited
Stock Appreciation Right granted to a participant who is subject to Section 16
of the Exchange Act may be exercised only after six (6) months from its grant
date (unless such exercise would not affect the exemption under Rule 16b-3 of
the Securities and Exchange Commission) and only during the sixty (60) day
period commencing on the later of:

 

(i)            the day following the date
of a Change in Control; or (ii) the first date on which such exercise would be
exempt under Rule 16b-3 of the Securities and Exchange Commission.

 

(d)                                 A Limited
Stock Appreciation Right may be granted to a participant regardless of whether
such participant has been granted a Stock Appreciation Right with respect to
the same stock option.

 

(e)                                  In the
event of the exercise of a Limited Stock Appreciation Right, the number of
shares reserved for issuance hereunder shall be reduced by the number of shares
covered by the stock option or portion thereof surrendered.

 

10.                                RESTRICTED STOCK AWARDS AND RESTRICTED STOCK
UNITS

 

(a)                                  RESTRICTED STOCK AWARDS.  Restricted Stock Awards will consist of
common shares transferred to participants without other payment therefor as
additional compensation for their services to the Company or any of its
subsidiaries. Restricted Stock Awards granted under this paragraph 10 shall be
satisfied from the Company’s available treasury shares.  Restricted Stock Awards shall be subject to
such terms and conditions as the Committee determines appropriate, including,
without limitation, restrictions on the sale or other disposition of such
shares and rights of the Company to reacquire such shares upon termination of
the participant’s employment within specified periods.  Subject to such other restrictions as are
imposed by the Committee, the common shares covered by a Restricted Stock Award
granted to a participant who is subject to Section 16 of the Exchange Act may
be sold or otherwise disposed of only after six (6) months from the grant date
of the award (unless such sale would not affect the exemption under Rule 16b-3
of the Securities and Exchange Commission).

 

(b)                                 RESTRICTED STOCK UNITS.  Restricted Stock Units will consist of an
unfunded promise to deliver shares of stock at some future date to participants
without other payment therefor as additional compensation for their services to
the Company or any of its subsidiaries. 
Stock delivered under this paragraph 10 (b) shall be satisfied from the
Company’s available treasury shares. 
Restricted Stock Units granted under this paragraph 10(b) shall be
subject to such terms and conditions as the Committee determines appropriate,
including, without limitation, restrictions on the sale or other disposition of
such stock units, the rights of the Company to provide for the forfeiture of
such stock units upon termination of the participant’s employment within
specified periods and the right to receive dividend equivalent payments.

 

5

 

(c)                                  No more than ten percent (10%) of the total
number of shares available for grant in any calendar year may be granted as
Restricted Stock Units or Restricted Stock Awards (in the aggregate) under
paragraphs 10 and 13 in that year.

 

11.                                PERFORMANCE AWARDS.  Performance Awards in the form of Performance
Units or Performance Shares may be granted to any participant in the
Program.  Performance Units shall consist
of monetary awards which may be earned in whole or in part if the Company
achieves certain goals established by the Committee over a designated period of
time. Performance Shares shall consist of common shares or awards denominated
in common shares which may be earned in whole or in part if the Company
achieves certain goals established by the Committee over a designated period of
time. The goals established by the Committee shall be based on any one, or
combination of, earnings per share, return on equity, return on assets, total
shareholder return, net operating income, cash flow, increase in revenue,
economic value added, increase in share price or cash flow return on
investment. Partial achievement of the goal(s) may result in a payment or
vesting corresponding to the degree of achievement. Payment of an award earned
may be in cash or in common shares or in a combination of both, and may be made
when earned, or may be vested and deferred, as the Committee in its sole
discretion determines.  The maximum
amount which may be granted under all Performance Awards for any one year for
any one participant shall be Five Million Dollars ($5,000,000). This limit
shall be applied to Performance Shares by multiplying the number of Performance
Shares granted by the fair market value of one common share on the date of the
award.  During the term of the Program,
no more than 5 million shares of Abbott common stock may be granted in the form
of Performance Units and no more than 5 million shares of Abbott common stock
may be granted in the form of Performance Shares. This paragraph 11 is intended
to comply with the performance-based compensation requirements of Section
162(m) of the Internal Revenue Code of 1986, as amended, and shall be
interpreted in accordance with the rules and regulations thereunder.

 

12.                                FOREIGN QUALIFIED BENEFITS.  Benefits under the Program may be granted to
such employees of the Company and its subsidiaries who are residing in foreign
jurisdictions as the Committee in its sole discretion may determine from time
to time.  The Committee may adopt such
supplements to the Program as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no Benefit shall be granted
under any such supplement with terms or conditions which are inconsistent with
the provisions as set forth under the Program.

 

13.                                RESTRICTED STOCK AWARDS FOR NON-EMPLOYEE
DIRECTORS.

 

(a)                                  Each year,
on the date of the annual shareholders meeting, each person who is elected a
Non-Employee Director at the annual shareholders meeting shall be awarded both:
(i) a Restricted Stock Award covering a number of common shares with a fair
market value on the date of the award closest to, but not in excess of, an
amount equal to six times the monthly fee in effect under Section 3.1 of the
Abbott Laboratories Non-Employee Director’s Fee Plan on the date of the award
and (ii) in the years 1996 through 2005, a Restricted Stock Award covering a
number of 

 

6

 

common
shares with a fair market value on the date of the award closest to, but not in
excess of, Twenty-Two Thousand Dollars ($22,000) for awards made in years 1996
through 2000 and Twenty-Five Thousand Dollars ($25,000) for awards made in
years 2001 through 2005.

 

(b)                                 ISSUANCE
OF CERTIFICATES.  As soon as practicable
following the date of the award the Company shall issue certificates (“Certificates”)
to the Non-Employee Director receiving the award, representing the number of
common shares covered by the award. Each Certificate shall bear a legend
describing the restrictions on such shares imposed by this paragraph 13.

 

(c)                                  RIGHTS.  Upon issuance of the Certificates, the
directors in whose names they are registered shall, subject to the restrictions
of this paragraph 13, have all of the rights of a shareholder with respect to
the shares represented by the certificates, including the right to vote such
shares and receive cash dividends and other distributions thereon.

 

(d)                                 RESTRICTED
PERIOD.  The shares covered by awards
granted under this paragraph 13 may not be sold or otherwise disposed of within
six (6) months following their grant date (unless such sale would not affect
the exemption under Rule 16b-3 of the Securities and Exchange Commission) and
in addition shall be subject to the restrictions of this paragraph 13 for a
period (the “Restricted Period”) commencing with the date of the award and
ending on the earliest of the following events:

 

(i)            The date the director
terminates or retires from the Board;

 

(ii)           The date the director dies;
or

 

(iii)          The date of occurrence of a
Change in Control (as defined in paragraph 20(c)).

 

(e)                                  RESTRICTIONS.  All shares covered by awards granted under
this paragraph 13 shall be subject to the following restrictions during the
Restricted Period:

 

(i)            The shares may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of.

 

(ii)           Any additional common shares
of the Company or other securities or property issued with respect to shares
covered by awards granted under this paragraph 13 as a result of any stock
dividend, stock split or reorganization, shall be subject to the restrictions
and other provisions of this paragraph 13.

 

(iii)          A director shall not be
entitled to receive any shares prior to completion of all actions deemed
appropriate by the Company to comply with federal or state securities laws and
stock exchange requirements.

 

7

 

(f)                                    Except in the
event of conflict, all provisions of the Program shall apply to this paragraph
13. In the event of any conflict between the provisions of the Program and this
paragraph 13, this paragraph 13 shall control. Those provisions of paragraph 17
which authorize the Committee to declare outstanding restricted stock awards to
be vested and to amend or modify the terms of Benefits shall not apply to
awards granted under this paragraph 13. 
Restricted Stock Awards granted under this paragraph 13 shall be
satisfied from the Company’s available treasury shares.

 

14.                                NON-QUALIFIED STOCK OPTIONS FOR NON-EMPLOYEE
DIRECTORS.

 

(a)                                  Each
Non-Employee Director may elect to receive any or all of his or her fees earned
during the second half of 1996 and each subsequent calendar year under Section
3 of the Abbott Laboratories Non-Employee Directors’ Fee Plan (the “Directors’
Fee Plan”) in the form of Non-qualified Stock Options under this Section
14.  Each such election shall be
irrevocable, and must be made in writing and filed with the Secretary of the
Company by December 31, 1995 (for fees earned in the second half of 1996) and
(for fees earned in subsequent calendar years) by June 30 of the calendar year
preceding the calendar year in which such fees are earned (or such later date
as may be permissible under Rule 16b-3 of the Securities and Exchange
Commission, but in no event later than December 31 of such preceding calendar
year).

 

(b)                                 A
Non-Employee Director may file a new election each calendar year applicable to
fees earned in the immediately succeeding calendar year. If no new election or
revocation of a prior election is received by June 30 of any calendar year (or
such later date as may be permissible under paragraph (a)), the election, if
any, in effect for such calendar year shall continue in effect for the
immediately succeeding calendar year. Any election made under this Section 14
shall take precedence over any election made by the director for the same
period, under the Directors’ Fee Plan, to the extent necessary to resolve any
conflict between such elections.  If a
director does not elect to receive his or her fees in the form of Non-qualified
Stock Options, the fees due such director shall be paid or deferred as provided
in the Directors’ Fee Plan and any applicable election thereunder by the
director.

 

(c)                                  The number
of common shares covered by each Non-qualified Stock Option granted in any year
under this Section 14 shall be determined based on an independent appraisal for
such year of the intrinsic value of options granted hereunder and the amount of
fees covered by the director’s election for such year.  The number of common shares covered by
options granted in 1996 (as determined under this procedure) shall be the
number of whole shares equal to (i) the product of three (3) times the amount
of fees which the director has elected under paragraph (a) to receive in the
form of Non-qualified Stock Options, divided by (ii) One Hundred percent (100%)
of the Fair Market Value of one common share on the grant date. Any fraction of
a share shall be disregarded, and the remaining amount of the fees
corresponding to such option shall be paid as provided in the 

 

8

 

Directors’
Fee Plan and any applicable election thereunder by the director.

 

(d)                                 Effective
on October 10, 1997, each Non-qualified Stock Option due a director under this
Section 14 prior to the 1998 annual shareholders meeting shall be granted on
October 10, 1997 at a purchase price equal to One Hundred percent (100%) of the
Fair Market Value of the common shares covered by such option on the grant
date.  Effective with the 1998 Annual
Shareholders Meeting, each Non-qualified Stock Option due a director under this
Section 14 shall be granted annually, on the date of the annual shareholders
meeting, at a purchase price equal to One Hundred percent (100%) of the Fair
Market Value of the common shares covered by such option on the grant
date.  Each such option shall be
immediately exercisable and nonforfeitable, and shall not be exercisable after
the expiration of ten (10) years from the date it is granted. Each such option
shall contain provisions allowing payment of the purchase price and, to the
extent permitted, any taxes due on exercise, by delivery of other common shares
of the Company (or, in the case of the payment of taxes, by withholding of
shares).

 

(e)                                  All
Non-qualified Stock Options granted under this Section 14 prior to October 10,
1997, shall be immediately exercisable and nonforfeitable, and shall not be exercisable
after the expiration of ten (10) years from the date granted.

 

15.                                NONTRANSFERABILITY.  Except as provided by the Committee, each
stock option and stock appreciation right granted under this Program shall not
be transferable other than by will or the laws of descent and distribution, and
shall be exercisable, during the participant’s lifetime, only by the
participant or the participant’s guardian or legal representative.

 

16.                                OTHER PROVISIONS.  The award of any Benefit under the Program
may also be subject to other provisions (whether or not applicable to the
Benefit awarded to any other participant) as the Committee determines
appropriate, including, without limitation, provisions for the purchase of
common shares under stock options in installments, provisions for the payment
of the purchase price of shares under stock options by delivery of other common
shares of the Company having a then market value equal to the purchase price of
such shares, restrictions on resale or other disposition, such provisions as
may be appropriate to comply with federal or state securities laws and stock
exchange requirements and understandings or conditions as to the participant’s
employment in addition to those specifically provided for under the Program.

 

In
the case of a participant who is subject to Section 16(a) and 16(b) of the
Exchange Act, the Committee may, at any time, add such conditions and
limitations to any Benefit granted to such participant, or any feature of any
such Benefit, as the Committee, in its sole discretion, deems necessary or
desirable to comply with Section 16(a) or 16(b) and the rules and regulations
thereunder or to obtain any exemption therefrom. A participant may pay the
purchase price of shares under stock options by delivery of a properly executed
exercise notice together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
purchase price.  To facilitate the
foregoing, the Company may enter 

 

9

 

into agreements for coordinated
procedures with one or more brokerage firms.

 

The
Committee may, in its discretion and subject to such rules as it may adopt,
permit or require a participant to pay all or a portion of the federal, state
and local taxes, including FICA and medicare withholding tax, arising in
connection with the following transactions: (a) the exercise of a Non-qualified
Stock Option; (b) the lapse of restrictions on common shares received as a
Restricted Stock Award; or (c) the receipt or exercise of any other Benefit; by
(i) having the Company withhold common shares, (ii) tendering back common
shares received in connection with such Benefit or (iii) delivering other
previously acquired common shares of the Company having a fair market value
approximately equal to the amount to be withheld.

 

The
Committee may grant stock options under the Program (and, for stock options
granted prior to shareholder approval of this Program, under the Company’s 1991
Incentive Stock Program) that provide for the grant of replacement stock
options if all or any portion of the purchase price or taxes incurred in
connection with the exercise, are paid by delivery (or, in the case of payment
of taxes, by withholding of shares) of other common shares of the Company.  The replacement stock option shall cover the
number of common shares surrendered to pay the purchase price, plus the number
of shares surrendered or withheld to satisfy the participant’s tax liability,
shall have an exercise price equal to One Hundred percent (100%) of the Fair
Market Value of such common shares on the date such replacement stock option is
granted, shall first be exercisable six months from the date of grant of the
replacement stock option and shall have an expiration date equal to the
expiration date of the original stock option.

 

17.                                TERM OF PROGRAM AND AMENDMENT, MODIFICATION,
CANCELLATION OR ACCELERATION OF BENEFITS. 
The Program shall continue in effect until terminated by the Board of
Directors, except that no Incentive Stock Option shall be granted after October
13, 2005 and that no other Benefits shall be granted after April 27, 2010. The
terms and conditions applicable to any Benefits may at any time be amended,
modified or canceled by mutual agreement between the Committee and the
participant or such other persons as may then have an interest therein, so long
as any amendment or modification does not increase the number of common shares
issuable under this Program; and provided further, that the Committee may, at
any time and in its sole discretion, declare any or all stock options and stock
appreciation rights then outstanding under this Program or the Prior Programs
to be exercisable and any or all then outstanding Restricted Stock Awards to be
vested, whether or not such options, rights or awards are then otherwise
exercisable or vested. Notwithstanding the foregoing, except as provided in
paragraph 22, the Committee shall neither lower the purchase price of any
option granted under the Program nor grant any option under the Program in
replacement of a cancelled option which had previously been granted at a higher
purchase price, without shareholder approval.

 

18.                                AMENDMENT TO PRIOR PROGRAMS. No options or
other Benefits shall be granted under the Prior Programs on or after the date
of shareholder approval of this Program.

 

19.                                INDIVIDUAL LIMIT ON OPTIONS AND STOCK
APPRECIATION RIGHTS; AGGREGATE LIMIT ON INCENTIVE STOCK OPTIONS. The maximum
number of shares with respect to which Incentive Stock Options, Non-qualified
Stock Options, 

 

10

 

Stock Appreciation Rights
and Limited Stock Appreciation Rights may be granted to any one participant, in
aggregate in any one calendar year, shall be Two Million (2,000,000) shares.
Incentive Stock Options with respect to no more than the lesser of (i) One
Hundred and Fifty Million (150,000,000) shares (plus any shares acquired by the
Company pursuant to payment of the purchase price of shares under incentive
stock options by delivery of other common shares of the Company), or (ii) the
total number of shares reserved under paragraph 5 may be issued under the Plan.

 

20.                                TAXES. 
The Company shall be entitled to withhold the amount of any tax
attributable to any amount payable or shares deliverable under the Program
after giving the person entitled to receive such amount or shares notice as far
in advance as practicable, and the Company may defer making payment or delivery
if any such tax may be pending unless and until indemnified to its
satisfaction.

 

21.                                DEFINITIONS.

 

(a)                                  FAIR
MARKET VALUE.  Except as provided below,
the Fair Market Value of the Company’s common shares shall be determined by
such methods or procedures as shall be established by the Committee; provided
that, in the case of any Limited Stock Appreciation Right (other than a right
related to an Incentive Stock Option), the Fair Market Value shall be the
higher of:

 

(i)            The highest daily closing
price of the Company’s common shares during the sixty (60) day period following
the Change in Control; or

 

(ii)           The highest gross price paid
or to be paid for the Company’s common shares in any of the transactions
described in paragraphs 21(c)(i) and 21(c)(ii).

 

(b)                                 SUBSIDIARY.  The term “subsidiary” for all purposes other
than the Incentive Stock Option provisions in paragraph 6, shall mean any
corporation, partnership, joint venture or business trust, fifty percent (50%)
or more of the control of which is owned, directly or indirectly, by the
Company. For Incentive Stock Option purposes the term “subsidiary” shall be
defined as provided in Internal Revenue Code Section 424(f).

 

(c)                                  CHANGE IN
CONTROL.  A “Change in Control” shall be
deemed to have occurred on the earliest of the following dates:

 

(i)            the date any Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates) representing
20% or more of the combined voting power of the Company’s then outstanding
securities, excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (a) of paragraph (iii) below;
or

 

(ii)           the date the following
individuals cease for any reason to constitute 

 

11

 

a majority
of the number of directors then serving: individuals who, on the date hereof,
constitute the Board of Directors and any new director (other than a director
whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board of Directors or nomination for election by
the Company’s shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or

 

(iii)          the date on which there is
consummated a merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation or other entity, other
than (a) a merger or consolidation (I) immediately following which the
individuals who comprise the Board of Directors immediately prior thereto
constitute at least a majority of the Board of Directors of the Company, the
entity surviving such merger or consolidation or, if the Company or the entity
surviving such merger or consolidation is then a subsidiary, the ultimate
parent thereof and (II) which results in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary of the Company, at least
50% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities Beneficially Owned by such Person
any securities acquired directly from the Company or its Affiliates)
representing 20% or more of the combined voting power of the Company’s then
outstanding securities; or

 

(iv)          the date the shareholders of
the Company approve a plan of complete liquidation or dissolution of the
Company or there is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets, other than a sale
or disposition by the Company of all or substantially all of the Company’s
assets to an entity, at least 50% of the combined voting power of the voting
securities of which are owned by shareholders of the Company, in combination
with the ownership of any trustee or other fiduciary holding securities under
an 

 

12

 

employee
benefit plan of the Company or any subsidiary of the Company, in substantially
the same proportions as their ownership of the Company immediately prior to
such sale.

 

Notwithstanding
the foregoing, a “Change in Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of the Company immediately prior to such transaction or series of transactions
continue to have  substantially the
same proportionate ownership in an entity which owns all or substantially all
of the assets of the Company immediately following such transaction or series
of transactions.

 

For
purposes of this Program “Affiliate” shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act; “Beneficial Owner”
shall have the meaning set forth in Rule 13d-3 under the Exchange Act;
and “Person” shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

 

(d)                                 DISABILITY.  The term “disability” for all purposes of the
Program shall mean the participant’s disability as defined in subsection 4.1(a)
of the Abbott Laboratories Extended Disability Plan for twelve (12) consecutive
months.

 

22.                                ADJUSTMENT PROVISIONS.

 

(a)                                  If the
Company shall at any time change the number of issued common shares without new
consideration to the Company (such as by stock dividends or stock splits), the
total number of shares reserved for issuance under this Program, the individual
and aggregate limits described in paragraphs 11 and 19 on the number of shares
that may be granted or issued (as the case may be), the number of shares
covered by each outstanding Benefit and the purchase price of such shares shall
be adjusted so that the aggregate consideration payable to the Company and the
value of each such Benefit shall not be changed.  Subject to paragraph 22(c), the Committee
shall also have the right to provide for the continuation of Benefits or for
other equitable adjustments after changes in the Company or in the common
shares resulting from reorganization, sale, merger, consolidation, spin-off or
similar occurrence.

 

13

 

(b)                                 Subject to
paragraph 22(c), without affecting the number of shares otherwise reserved or
available hereunder, the Committee may authorize the issuance or assumption of
Benefits in connection with any merger, consolidation, acquisition of property
or stock, or reorganization upon such terms and conditions as it may deem
appropriate.

 

(c)                                  Notwithstanding
any other provision of this Program or the Prior Programs including the terms
of any Benefit granted hereunder, if the outstanding common shares of the Company
shall be combined, or be changed into, or exchanged for, another kind of stock
of the Company, into securities of another corporation, or into property
(including cash) whether through recapitalization, reorganization, sale,
merger, consolidation, spin-off, business combination or a similar transaction
(a “Transaction”), the Company shall cause its successor, acquiror (or ultimate
parent of any successor or acquiror), as applicable, to assume each stock
option, Stock Appreciation Right and Limited Stock Appreciation Right
outstanding immediately prior to the Transaction (or to cause new options or
rights to be substituted therefor). 
Pursuant to such assumed or substituted option or rights, participants
shall thereafter be entitled to receive, upon due exercise of any portion of
the option or right, (a) in the event of a Transaction in which the outstanding
common shares of the Company are combined, or changed into, or exchanged for,
solely another kind of stock of the Company or securities of another corporation
(disregarding, for this purpose, cash paid in lieu of fractional shares), the
securities which that person would have been entitled to receive for common
shares acquired through exercise of the same portion of such option or right
immediately prior to the effective date of such Transaction, and (b) in the
event of a Transaction in which the outstanding common shares of the Company
are changed into, or exchanged for, property (including cash) other than solely
stock of the Company or securities of another corporation (disregarding, for
this purpose, cash paid in lieu of fractional shares), securities the fair
market value of which immediately following the effective date of such
Transaction (as determined by the Committee) equals the fair market value (as
determined by the Committee) of the property which that person would have been
entitled to receive for common shares acquired through exercise of the same
portion of such option or right immediately prior to the effective date of such
Transaction.  In each case such assumed
or substituted option or right shall continue to be subject to the same terms
and conditions (including, without limitation, with respect to any right to
receive “replacement options” upon option exercise) to which it was subject
immediately prior to the Transaction.

 

Notwithstanding
the immediately preceding paragraph, upon a Transaction in which the
outstanding common shares of the Company are changed into, or exchanged for,
property (including cash) other than solely stock of the Company or securities
of another corporation (disregarding, for this purpose, cash paid in lieu of
fractional shares) and which constitutes a Change in Control, each participant
may elect to receive, immediately following such Transaction in exchange for
cancellation of any stock 

 

14

 

option
(other than an Incentive Stock Option granted prior to June 20, 2003), Stock
Appreciation Right or Limited Appreciation Right held by such participant
immediately prior to the Transaction, a cash payment, with respect to each
common share subject to such option or right, equal to the difference between
the value of consideration (as determined by the Committee) received by the
shareholders for a common share of the Company in the Transaction, less any
applicable purchase price.

 

(d)                                 Notwithstanding
any other provision of this Program or the Prior Programs including the terms
of any Benefit granted hereunder, upon the occurrence of a Change in Control:

 

(i)            All stock options then
outstanding under this Program or the Prior Programs shall become fully
exercisable as of the date of the Change in Control, whether or not then
otherwise exercisable;

 

(ii)           All Stock Appreciation
Rights and Limited Stock Appreciation Rights then outstanding shall become
fully exercisable as of the date of the Change in Control, whether or not then
otherwise exercisable;

 

(iii)          All terms and conditions of
all Restricted Stock Awards then outstanding shall be deemed satisfied as of
the date of the Change in Control; and

 

(iv)          All Performance Awards then
outstanding shall be deemed to have been fully earned and to be immediately
payable, in cash, as of the date of the Change in Control.

 

23.                                AMENDMENT AND TERMINATION OF PROGRAM.  The Board of Directors may amend the Program
from time to time or terminate the Program at any time, but no such action
shall reduce the then existing amount of any participant’s Benefit or adversely
change the terms and conditions thereof without the participant’s consent. Notwithstanding
the foregoing, except as provided in paragraph 22, the Company shall neither
lower the purchase price of any option granted under the Program nor grant any
option under the Program in replacement of a cancelled option which had
previously been granted at a higher purchase price, without shareholder
approval.  To the extent required for
compliance with Rule 16b-3 of the Securities and Exchange Commission, paragraph
13 of the Program may not be amended more frequently than once every six months
other than to comport with changes in the Internal Revenue Code of 1986, as
amended, or the rules thereunder, and no amendment of the Program shall result
in any Committee member losing his or her status as a “disinterested person” as
defined in Rule 16b-3 of the Securities and Exchange Commission with respect to
any employee benefit plan of the Company or result in the Program or awards
thereunder losing their exempt status under said Rule 16b-3.

 

24.                                EFFECTIVE DATE.  The Program was originally adopted by the
Board of Directors on October 13, 1995.

 

15

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